Etihad looks to become profitable in 2023 even as passenger revenues fall by $3.6bln

Airline carried 13.3mln less passengers in 2020 compared to 2019

  
Etihad Airways 787 Dreamliner. Image used for illustrative purpose.

Etihad Airways 787 Dreamliner. Image used for illustrative purpose.

UAE’s Etihad Airways is looking to complete its turnaround strategy to be profitable in 2023 even after a turbulent year that cut passenger revenues by more than half.

The number of travellers that flew with the airline in 2020 plunged by 76 percent to 4.2 million, causing Etihad’s passenger business to lose $3.6 billion in revenues. Overall, it recorded a core operating loss of $1.7 billion in 2020, with the earnings before interest, taxes, depreciation and amortisation (EBITDA) turning to negative $0.65 billion.

Despite its performance last year, the airline said it is “ready to play a key role” as the industry attempts this year to recover from the devastating impact of the COVID-19 outbreak.

“COVID shook the very foundation of the aviation industry, but thanks to our dedicated people and the support of our shareholder, Etihad stood firm and is ready to play a key role as the world returns to flying,” said Tony Douglas, group chief executive officer of Etihad.

“While nobody could have predicted how 2020 would unfold, our focus on optimising core business fundamentals over the past three years put Etihad in good stead to respond decisively to the global crisis,” Douglas added.

Turnaround plan

The airline has been posting consecutive annual losses. It reported a $1.58 billion loss in 2017, $1.28 billion loss in 2018 and $870 million in 2019.

In 2017, the airline launched a five-year transformation plan, which includes cost-saving measures such as cutting jobs, restructuring aircraft orders and lowering overhead expenses, to become profitable in 2023.

In a statement released on Thursday, the airline said it is continuing to target a complete turnaround by 2023, citing that it has accelerated its transformation plan and restructured the organisation during the pandemic, turning the airline into a “leaner and more agile business.”

Last year, the airline managed to reduce overheads by 25 percent to $0.8 billion, an improvement from $1 billion in 2019, thanks to the airline’s cash and liquidity management initiatives rolled out during the pandemic.

Its finance cost also fell 23 percent through an ongoing focus on balance sheet restructuring.

Liquidity maintained

“Despite significant pressure on our cashflow, we maintained liquidity by focusing on cost control, maximising cargo revenue, enhancing our charter capabilities and raising innovative credit facilities such as the world’s first sustainability-linked transition sukuk,” said Adam Boukadida, chief financial officer of the airline.

Airlines have been among the worst hit by the coronavirus pandemic. Overall, the market remains challenging for the entire industry, with global travel demand plunging by 72 percent in January 2021. In the Middle East, demand fell by 82.3 percent.

The International Air Transport Association (IATA) warned on Tuesday that the airline business is expected to worsen before it starts to improve, as COVID-19 restrictions remain in effect in many countries worldwide.

“2021 is starting off worse than 2020 ended and that is saying a lot. Even as vaccination programmes gather pace, new COVID variants are leading governments to increase travel restrictions,” said Alexandre de Juniac, IATA’s director general and CEO.

Etihad’s total passenger revenues reached $1.2 billion in 2020, down by 74 percent from $4.8 billion in 2019. The airline blamed the fewer scheduled services and “drastically” fewer people travelling for the revenue loss.

The suspension of all flights into and out of the UAE from March until June 2020 was also a major contributing factor.

Improvement

Etihad noted that it was already ahead of the transformation targets prior to the coronavirus pandemic. It registered a 55 percent cumulative improvement in core results by the end of 2019. The momentum continued into the start of 2020, with a record first quarter that showed year-on-year improvement of 34 percent, the airline said.

Despite a decline in revenues in its passenger business, Etihad said its cargo operation had an “extremely strong” performance in 2020, with a 66 percent increase in revenue from 0.7 billion in 2019 to $1.2 billion in 2020.

This was due to a huge demand for medical supplies, including personal protective equipment and pharmaceutical products, coupled with limited global airfreight capacity. Cargo yield also posted an improvement of 77 percent.

(Reporting by Cleofe Maceda; editing by Mily Chakrabarty)

Cleofe.maceda@refinitiv.com

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