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Wed 1 Jun 2016 09:07 AM

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Etihad adds 'up to $9.6bn to Abu Dhabi economy' but yield pressures remain

Report by Oxford Economics reveals airline group’s contribution to local economy

Etihad adds 'up to $9.6bn to Abu Dhabi economy' but yield pressures remain

Etihad Airways and its equity partners will contribute up to $9.6 billion to the Abu Dhabi economy in 2016 and up to $18.2 billion by 2024, according to a report by Oxford Economics Group.

The study, commissioned by Etihad Aviation Group, found that ‘core’ economic activities by the airlines – global operations and capital investment in aircraft, cabin interiors and I.T. equipment – would contribute $7.4 billion to Abu Dhabi’s economy, while the group’s wider trade and tourism contribution would constitute a further $2.2 billion this year.

In total, the report said, the airlines would support 62,100 jobs through core operations this year, and a further 29,600 tourism-related jobs.

By 2024, the group’s economic contribution is expected to reach $18.2 billion – comprising a core contribution of $12.6 billion and tourism contribution of $5.6 billion.

The productivity boost to Abu Dhabi’s local economy from improved air connectivity is expected to reach $27.1 billion by 2024, the report said.

The vast majority of the impact is attributable to Etihad Airways itself. The airline is expected to account for around 85 percent of the group’s total core impact on Abu Dhabi’s GDP in 2016, according to the report.

Etihad on Tuesday said the figures demonstrate the success of the group’s equity investment strategy in terms of positive economic impact on Abu Dhabi.

According to Oxford Economics, core and tourism impacts from the equity partners will top $1.1 billion in 2016, growing to $1.7 billion by 2024, while the productivity boost from greater global connectivity is worth another $1 billion.

Etihad Aviation Group president and CEO James Hogan said: “As a major jobs creator and a major spender with local suppliers, Etihad Aviation Group has had an increasingly positive impact on the Abu Dhabi economy, year after year.

“These are long-term, sustainable jobs which make a long-term, sustainable contribution to GDP.

“As our equity airline partners continue to expand their connectivity with Abu Dhabi, we are seeing even great impacts on the local economy.”

However, Hogan told assembled media ahead of the IATA conference in Dublin that while air passenger demand has held up over the past year, there is a “huge pressure on yields”.

“We will hit our [financial] targets this year, but the costs to Etihad of offsetting that pressure will be considerable,” he said, while declining to put a figure on anticipated growth for 2016.

Hogan also said he was unable to comment on reports on Tuesday that Etihad’s holding in Virgin Australia would fall from 25.1 percent to 21.8 percent if China’s HNA Aviation buys a major stake in the airline as planned.

Under a proposed deal reported by Reuters, the largest private operator of airlines in China would invest A$159 million ($114 million) through an equity placement, giving it a 13 percent stake with plans to go up to 19.99 percent.

Hogan said he is not a board member of Virgin Australia and the deal had not yet been signed off.

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