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Etihad Airways records its first annual profit

Etihad Airways announced today that it made its first ever profit in 2011 despite the challenges of the global financial crisis, high oil prices, and the Arab Spring.

The Abu Dhabi-based carrier, which launched operations eight years ago, reported a net profit of $14m as revenues climbed 36% to $4.1bn. The record result exceeded the airline’s 2011 target, which was to break even.

James Hogan, Etihad’s president and CEO, said: “Five years ago we said we would be profitable by 2011. Despite the global financial crisis, continued high oil prices, regional instability and natural disasters, we have delivered. The mandate from our shareholder was to create an airline that is best in class, operates to the highest safety standards, and makes money – and we have achieved this mandate.”

He said the airline is aiming for strong growth again this year, with a goal of increasing its passenger traffic from 8.3 million last year to 10 million in 2012.

Hogan said Etihad Airways’ successful partnership strategy intensified, with its first equity investment in another carrier – airberlin, Europe’s sixth largest airline, which was announced in December 2011.

“This was a game changing move for Etihad Airways, adding 157 destinations and giving us access to 35 million new passengers. The airberlin deal will be our most important catalyst for growth in 2012. It has given us instant access to Europe’s largest travel market, and will have a major impact on revenues in 2012, with an expected contribution of up to $50m.

“And of course, 2011 marked the first full year of Etihad’s strategic partnership with Virgin Australia, which offers 45 destinations in Australia and the Pacific, and boosted revenue by 700% over what we achieved with our previous Australian airline partner,” he said.

“We will continue to look at opportunities in 2012. Already this year we have announced a second equity investment, in Air Seychelles, which is an important step towards growing our operations in the increasingly popular leisure markets of the Indian Ocean and Africa.”

Hogan said cost control had been a significant contributor to the airline’s profit, with costs per available seat kilometre (CASK) excluding fuel being cut by 4.6% in 2011 and 16.6% over the last two years, representing annual savings of more than $187m.

“While we deliver an exceptional full service product, our management culture is that of a low cost airline. We have a forensic focus on cost control in every area of the business, aggressively targeting operational efficiencies.”

Etihad hedged more than 80% of its fuel costs last year, helping protect it from volatility in oil prices, and has a 75% hedging plan in place for 2012, the carrier said.

“We remain a business that is investing heavily in new routes, in new aircraft and in new infrastructure,” said Hogan. “In 2012, we will add seven aircraft and have already announced plans to extend our network in Asia and Africa.”

“In January, we commenced operations to Tripoli, and Shanghai and Nairobi will follow – all in the first quarter. In July, we will add an additional African destination – Lagos – and will continue to announce new destinations in the coming months.”

Etihad now serves 83 passenger and cargo destinations in the Middle East, Africa, Europe, Asia, Australia and North America, with a fleet of 65 Airbus and Boeing aircraft, and 100 aircraft on order, including 10 Airbus A380s, the world’s largest passenger aircraft.

Further growth expected this year

“Etihad’s profit shows that it has not just surpassed its goal of breaking even, but more importantly, it shows that demand is continuing for flights to and through the GCC and ultimately this will mean future rises in earnings growth, driving profitability,” said Saj Ahmad, chief analyst at StrategicAero Research.

“Added into the mix with more fuel efficient airplanes like the 787-9 and 777-300ER, the airline is growing while slashing operational costs. And with their newfound relationships with Air Berlin and Air Seychelles, we can certainly look to see Etihad outperforming next year too.”

Ahmad added: “All in all, it proves that critics who claim there isn’t enough demand in the region to support the big three Arab airlines are flat out wrong.”

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