05 Nov 2015 11:30
New competition in global air travel must not be stamped out by the entrenched interests of the legacy carriers, said James Hogan, President and Chief Executive Officer of Etihad Airways, in a speech last night.
Delivering the 2015
Brabazon Lecture at the Royal Aeronautical Society in London, Mr Hogan said the
global industry should learn from the British, one of the first markets to
embrace true competition and one in which innovation and new approaches could
still be seen.
Mr Hogan said that
air travel, which contributes so much to global trade, was stuck with a
regulatory system which limits consolidation, competition and consumer choice.
“Air travel is the
lifeblood of the modern economy. But
while the modern globalised economy has seen trade and tourism jump forward in
leaps and bounds, the structure of our industry has shuffled forward only a few
“This is an industry
which cries out for new competition, across many different markets; but it is
one in which smaller operators can only operate in niche environments.”
To become a
competitive global network carrier today is incredibly challenging, said Mr
“More than ever
before, scale is the single defining factor behind success for a network
“Scale means a
network which can compete against the networks of legacy carriers, built up
“Scale means the
ability to reach consumers with a brand promise across many different markets –
profile and visibility that will deliver customers.
“And scale means the
ability to strip down costs to competitive levels, through economies of scale
“That means this is
an industry which requires a massive cost of entry to compete.”
Mr Hogan outlined
Etihad Airways’ innovative model for growth, which has supplemented investment
in organic growth with strategic equity partnerships. As a result, Etihad Airways has been able to
compete against its much larger competitors, which have received decades of
investment and government support.
He warned, however,
that legacy carriers such as the ‘Big Three’ US airlines and Lufthansa, were
doing their best to stifle new competition.
“Currently, the US
carriers are investing tens of millions of dollars to attempt to stifle
competition, and we have seen similar moves by some the larger European legacy
“The victim here is
“The cost is
“The way for aviation
to flourish is through innovation. Innovation creates new ways of getting
through the obstacles of a regulated, shackled industry. Here in London, you have many of the great
aviation innovators on your doorstep – what BA is doing today, what EasyJet and
Ryanair have done over the last 15 years and what bmi did over much of its
“This industry needs
to encourage that innovation for the benefits it brings to customer choice and
to real competition.
“New approaches will
help this industry flourish into the future. We should not allow those new
approaches to be stamped out by the entrenched interests of the legacy