FARNBOROUGH // Bucking the gloomy mood of the global airline industry, Etihad Airways placed one of the largest aircraft orders in the history of civil aviation yesterday - up to 205 aircraft in the next two decades for a list price of US$43 billion (Dh157.94bn). The order included both of the major airframe manufacturers, Boeing and Airbus, and spanned all three aircraft categories - narrow bodies, mid-sized and extra-large carriers. With it, Etihad has shrugged off the prevailing market pessimism over high fuel prices and the credit crisis and issued a clear roadmap of its next two decades of growth.
The fleet expansion will see Etihad rise from an obscure startup, in November 2003, to one of the largest airlines in the world. The airline is betting on the continued growth of the Abu Dhabi economy to draw in new travellers, particularly tourists, in addition to flying to many new destinations in India and the Middle East, which are gradually opening as governments liberalise their airspaces. "With these orders we'll be able to build up our frequencies to the cities we serve from four times a week to daily, and from 10 times a week to double-daily," said James Hogan, the airline's chief executive. "We also will be able to reach secondary markets in Europe plus cities in the US, Australia, Korea and Japan."
The Etihad order included a commitment with Airbus for 55 aircraft, comprising 20 narrow-bodied A320s, 25 of the mid-sized A350s, and 10 of the double-decker A380 Superjumbos. The A350s will feature engines by Rolls-Royce in a deal worth $2.1bn at list prices. Etihad also secured options and purchase rights on 55 more planes with Airbus, including 10 more A380s. This will allow it to expedite the purchase of the additional planes when it sees higher demand. The value of the Airbus order was roughly $23 bn, even though bulk aircraft purchases are typically sold with discounts to the list price.
Etihad also ordered 45 aircraft from Boeing, placing commitments for 35 of the new 787 Dreamliners, plus 10 777-300ERs, an aircraft already in use by Etihad for long-haul flights to Asia. GE has been selected as the engine supplier for the 777s. Etihad secured options and rights to purchase another 50 Boeing planes. The entire Boeing aircraft order is valued at roughly $20bn at list prices. While 25 airlines have gone bust in the past six months, Gulf airlines are thriving.
Gulf countries were first viewed as refuelling stops for European airlines on long-haul flights, but regional carriers have gradually leveraged their geographical position straddling Europe and Asia, which has enabled them to catch up, and even supersede, their international competitors. Emirates is by far the largest of the Gulf airlines, but it is being challenged by Qatar Airways, Etihad and also Gulf Air, which is restructuring itself after several missteps. Budget carriers have also flourished, and a new start-up, FlyDubai, plans to launch next year.
The growth of the region's airlines has led to the collective purchase of hundreds of new aircraft and the extension of route networks across six continents. But they are also competing against each other, and analysts say this may be part of what is fuelling their growth plans. "Etihad doesn't want to be left trailing behind Emirates and Qatar Airways if its growth projections are accurate, and certainly won't want to give crippled Gulf Air - which is starting to regroup its forces - even the slightest chance of creeping back up the ranks," said David Kaminski-Morrow, the editor of Air Transport Intelligence.
Richard Aboulafia, an aviation analyst with the Teal Group, said: "The object is to leverage oil wealth and good geography to build a strong national airline. To a certain extent, this reflects a bit of commercial rivalry between Dubai and Abu Dhabi." Some analysts worry that record oil prices could damage Etihad's longer-term aspirations. Already, it has hinted that it may be forced to postpone its break-even target date to beyond 2010.
Diogenis Papiomytis, a consultant with Frost and Sullivan, said Etihad had hedged fuel at 75 per cent last year and 70 per cent this year, but only 40 per cent next year. "If prices remain at current levels or rise, this will have a huge impact on their costs and operations," he said. Mr Hogan said the fleet expansion would satisfy the airline's needs until 2030. The date is an important one for Abu Dhabi, also being the year that the emirate completes a 25-year revitalisation campaign. Etihad has a mandate to help fuel the emirate's economic growth.
The aircraft types ordered yesterday will allow Etihad to offer commercial service to nearly any destination on earth. The short-haul A320s from Airbus will be used as feeder planes throughout the Middle East and Indian subcontinent to deliver passengers onto its long-haul routes departing from Abu Dhabi, which will be serviced largely by the Airbus A350s and Boeing 787s and 777s. The A380s, which can seat up to 600 passengers, will be used on long-haul, trunk routes to slot-constrained airports, such as London Heathrow.
The orders will be delivered over a nine-year period beginning in 2011, and reflect a multi-phase growth that takes into account arrival dates for new aircraft types under development. For its immediate needs, Etihad chose the workhorses of the airline industry, the Airbus A320 and the wide-bodied, twin-engined Boeing 777, which will start being delivered in three years. Aircraft with higher fuel efficiencies and lower operating costs will be phased in as they are developed, such as the 787 from Boeing in 2014, and the mid-sized Airbus A350 in 2017.
Much of Etihad's current fleet, such as its A330s and A340s, will be phased out in the next decade. @Email:igale@thenational.ae