Etihad Airways is planning a major investment to upgrade its first-class and business-class cabins to try to attract more top-paying passengers. The economy cabin is also in line for an upgrade, but James Hogan, the chief executive of Etihad, said commercial and business traffic were a priority to increase profits.
The capital investment plan comes after Etihad rapidly increased the size of its fleet while dealing with a sharp decline in air travel because of the global financial downturn. The airline, based in Abu Dhabi, has received the first of five new Airbus A330 wide-body aircraft with redesigned first, business-class and economy cabins. These include a business section that is 25 per cent larger than previous configurations and an economy cabin that features new interior finishes, power sockets in each seat, a 10.4-inch personal entertainment screen and a 33-inch seat pitch.
The airline also plans to retrofit nine of its larger Airbus A340s with the new cabins by December. The airline recently pushed its break-even target to next year from this year after seeing demand weaken because of the financial crisis and the H1N1 global pandemic. Mr Hogan said there was continuing pressure on the average price per ticket in the corporate travel segment - a crucial element to the airline breaking even.
"2010 is a year of consolidation for us," Mr Hogan said. "We are seeing the economy traffic coming back; it is about getting the commercial traffic, the business traffic, back." If the airline can charge prices this year that are at the levels of 2008 and see a slight improvement next year, "then we are on our way to break-even and profitability", he said. Since its launch in 2003, Etihad has become one of the fastest-growing airlines worldwide, increasing its fleet to 52 and more than 100 planes scheduled for delivery between next year and 2017. In addition to expansions by Qatar Airways and Emirates Airline, it has steadily added new capacity in a bid to transform the Gulf into a hub for travel between East and West.
The Gulf expansion is a driving factor in the Middle East continuing to top the world in air travel growth. Traffic rose by 16.5 per cent in November for Middle East carriers, compared with a 3 per cent decline in Europe and North America, the International Air Transport Association said. But this year, Etihad is making minimal additions to its network, fleet and staff after growing by 11 aircraft and eight destinations last year, including only its second US destination, Chicago. Three more destinations have been announced.
Etihad resumed services to Colombo this month after a three-year absence, will start flying to Nagoya next month and will add Tokyo in March, bringing its network to 60 destinations. It also plans to increase its service to the Philippines after receiving a new Boeing 777 wide-body aircraft last month. "Staff primarily follow the aircraft, so our staffing additions are minimal," Mr Hogan said. The airline believes it is well placed to withstand any further increase in oil prices due to its policy of pre-purchasing fuel through hedging contracts. Its hedging position is 79 per cent of its jet fuel needs for this year and 45 per cent for next year. Those fuel purchases were made at prices significantly lower than current spot prices, officials said.
Mr Hogan described last year as one of bleak operating conditions for any airline. "The global financial crisis and the [H1N1] pandemic put huge pressure on all airlines around the world," he said. "Companies cut back, people didn't travel. It was a real tightening-of-the-belt year. It was tough for us, too, because we are still growing and opening new markets and inducting aircraft right in the middle of the storm."
Etihad plans to announce its annual traffic results in the coming weeks, but Mr Hogan said the airline "got close to carrying the number of passengers that we expected". Its target was 7 million passengers, a 16.6 per cent rise from 6 million in 2008. @Email:igale@thenational.ae