22 Apr 2016 09:30
The partnership approach adopted by Etihad Airways offers a new model for airline competition, said President and CEO James Hogan, speaking at The Wings Club in New York yesterday.
In an industry dominated by legacy airlines, and with
such high barriers to entry, no new network carrier could hope to compete effectively
in its own, he said. Yet without new competition, consumers around the world
Delivering the keynote address at the monthly Wings Club
meeting, Mr Hogan said:
“Global air travel is
a business with incredibly high barriers to entry – not just in terms of cost,
but in market access, infrastructure requirements and the challenge of
competing against such entrenched mega-carriers.
“The highest barrier
is network. You can’t build a global network overnight – in fact, you’d need
decades, and billions of dollars, to build networks that could compete against
the major airline groups.
partnership comes in. From day one, we’ve taken an open partnership approach,
working with scores of airlines on codeshare agreements. Then we took that a
step further with minority equity investments in strategically important
“Together, we have
been able to create a new competitive choice for air travellers in key markets
around the world. That’s good for consumers, good for tourism and good for
Mr Hogan said Etihad Airways’ equity investment strategy
was a key element of that approach.
“We have a
two-pronged approach. From a strategic level, we are looking for the equity
partners to bring network connectivity, generate additional revenues and create
economies of scale. All our partners are delivering on this level.
“That has helped to
create the seventh largest airline group in the world and is delivering
hundreds of millions of dollars to our business.
“Each partner then
has its own business plan, which is the responsibility of their own management
and Boards of Directors. Many of these, such as Air Serbia, Air Seychelles, Jet
Airways and Virgin Australia, are now delivering on this level too. We are supporting the restructuring of
businesses that require it, such as Alitalia and airberlin.”
Mr Hogan said Etihad Airways’ entry into the United
States market had also brought major benefits to the country.
“We are a tiny player
in the US air travel market, with less than 0.01 per cent of daily
international departures. However, we have been able to offer major benefits to
the United States.
“We connect the US,
through our hub in Abu Dhabi, with scores of markets which are simply not
served by other carriers. That means we are feeding hundreds of thousands of
travellers, leisure and business, into the US. Hundreds of thousands of those
get fed onto the US carriers.
“We’ve also been a
close business partner with US corporations – most obviously with Boeing and
other aerospace suppliers, but we’ve also created major partnerships with
Sabre, Honeywell, IBM, Adobe and many others.
“Our total impact on
the US economy is more than US$ 440 million a year.”
Mr Hogan said he believed much of the issues raised about
Etihad Airways by the Open Skies campaign stemmed from a lack of understanding
of the airline’s business model.
“There are many myths
about our business. But the truth is that we run as a commercial organisation,
with a shareholder that demands a clear return on its investment. We get no subsidies or state support. We have a well remunerated, highly satisfied
“What we have had is
the investment required to compete in such a capital-intensive business. That’s
a smart investment when you consider the many advantages Abu Dhabi offers as
the focus for a global network airline – as long as there is a return. That’s where our unique partnership model