Etihad to invest nearly $1bn to retrofit Boeing jets and will beat 2023 profit this year

Abu Dhabi airline posts 66% increase in nine-month profit on higher passenger and cargo revenue

Etihad Airways' total revenue rose 21 per cent year-on-year to Dh18.4 billion in the first nine months of 2024. Photo: Etihad Airways

Etihad Airways plans to invest nearly $1 billion to retrofit its older Boeing 777 and 787 Dreamliner aircraft and is on track to exceed last year's annual profit, its chief executive has told The National.

The investment in the retrofit programme is on top of plans to plough $7 billion by 2030 into new aircraft and other capital expenditure (capex), Antonoaldo Neves said, after the airline reported a 66 per cent increase in its nine-month profit.

“It's $7 billion in new aircraft and capex, not including the retrofit programme,” he said. “The retrofit is almost $1 billion.”

Retrofitting the older Boeing wide-bodies will start in 2026, the earliest Etihad can get new seats from the manufacturers, Mr Neves said in September. The move is aimed at capitalising on strong air travel demand amid a shortage of new jets. Etihad has a fleet of nine Boeing 777 passenger aircraft and 43 Boeing 787s, according to its website.

The airline placed an order for the newer Boeing 777X model in November 2013 but the US plane maker has delayed the aircraft’s debut until 2026, from an initial schedule for commercial flights in 2020. Asked about its 777X plane order, Etihad Airways said: “While we retain the option to purchase 777Xs, we also have the flexibility to acquire additional 787 Dreamliners.”

The airline said that the 777X does not currently feature in its five-year plan. “We continue to evaluate our fleet requirements and will make decisions that best align with our operational needs and market conditions,” it said.

Etihad Airways' nine-month profit increase follows robust summer travel demand and growth in its cargo business during the third quarter after rearranging its route network.

Profit after tax grew to Dh1.4 billion ($368 million) in the January to September period, up from Dh814 million during the same period last year, driven by strong revenue growth and continuing operational efficiencies, the airline said.

Total revenue rose 21 per cent year-on-year to Dh18.4 billion in the first nine months of 2024. Passenger revenue increased by 21 per cent to Dh15.2 billion, driven by the airline's strategic network expansion and increased flight frequencies.

Cargo revenue reached Dh3 billion, up 21 per cent on an annual basis, driven by increased capacity, higher volumes and improved yields, Etihad Airways said. The airline carried 482,000 tonnes of freight, up from 422,000 tonnes in the nine-month period last year.

The financial performance comes despite a tough operating environment for airlines with Israel's wars in Gaza and Lebanon, aircraft shortages, constrained capacity and a recently-resolved, seven-week labour dispute at Boeing that presented headaches for the industry.

Despite these bouts of turbulence for the cyclical sector, subdued oil prices have been a big help as jet fuel is one of the industry’s largest costs.

Etihad Airways is pressing ahead with plans to triple passenger numbers to 33 million and double its fleet to 150 planes by the end of the decade. The airline is also preparing for a potential listing – a first for a major Gulf airline – as part of its growth plans.

Etihad carried 13.6 million passengers from January to September, 35 per cent more than the same period a year ago. Capacity, measured in available seat kilometres, increased 31 per cent year-on-year. Passenger load factor – a measure of how many seats are filled on planes – inched up to 87 per cent in the nine-month period, from 86 per cent from the same time in 2023.

It operates a fleet of 95 aircraft, including five freighters, as of September 30. The airline flies to 83 destinations, up from 72 in September 2023. In October, it announced the launch of flights to Al Alamein, the gateway to Egypt's northern coast on the Mediterranean, with the “promise of several more to come” before the end of the year.

The airline's unit costs are declining, with its cost per available seat kilometre, excluding fuel expenses, down 8 per cent, it said without providing a figure.

2024 outlook

Etihad Airways is on track to exceed last year's annual net profit in 2024 of Dh525 million after a strong third-quarter performance, Mr Neves said.

“As of Q3, we're 66 per cent higher than last year in terms of profits of Dh1.4 billion … So it's going to be much better than last year and we're excited about this. The investment in strategy is paying back,” he said.

“Demand is holding strong for us. The network bets that we made are paying back. And we have been investing a lot in our customer experience,” he said citing the airline's revamped website, “competitive” ticket prices, reintroduction of its Airbus A380s into the fleet, new Boeing 787s going into service and smoother operations from its new hub at Terminal A in Zayed International Airport.

Its cargo business has also undergone a “reshuffling” to ensure that the capacity deployed matches market demand, he said. Airlines are also benefiting from rising e-commerce demand amid continuing capacity limits in maritime shipping.

“E-commerce from South-east Asia is booming, and because we have seamless integrated operations between our freighters and our belly-hold [on passenger jets] to Europe, we are taking advantage of the market. We can say that we are outperforming the market.”

Fleet planning

As Etihad Airways forges ahead with plans to double its fleet size by the end of the decade and add about eight to 10 new destinations every year, the airline is “done in terms of its aircraft needs” until 2030, Mr Neves said.

“We don't need incremental planes until 2030 because we spent a lot of time last year trying to make sure we get those planes. We have left inside our fleet plan some flexibility if there's a need to cut capacity, because we have some planes that will come off lease, but we're operating on the other side of that.”

“Right now, we're trying to identify, if we want to go beyond doubling capacity in 2028, 2029, 2030, how would we do that? But it's just an exercise. It's our obligation to constantly analyse what we have in the market.”

Beyond 2030, “we will of course need planes” but the airline will not make large orders, he said.

“We're going to approach plane orders in a very conservative and agile way. I'm not going to come to the market and put a 100-plane order, I don't think that's useful actually,” Mr Neves said.

Any potential orders in the future would be in smaller clusters of five to 10 planes, he added.

“We have to plan for 2030 and beyond, but we're going to do that in a measured way and constantly,” the airline boss said. “If I do five planes every year, then in five years it will be 25 planes.”

Over the last year and half, the airline has committed to more than 60 aeroplanes, in a combination of exercising options for aircraft in its order book, new plane orders and aircraft leases, he said.

“We have a fleet plan that is going to be delivering about 20 planes every year for the next five years and that's the order book,” Mr Neves said, adding that the airline is in constant talks with Airbus and Boeing about slot positions.

“We ordered three brand new aeroplanes two weeks ago from one of these two manufacturers,” he said, declining to provide further details.

The airline has an appetite for a couple of freighter planes but the market prices are currently too expensive, he said. “If we get a freighter at a decent price, we will take it … I could take now up to two freighters.”