The flag carrier and national airline of the United Arab Emirates, Etihad Airways is in the midst of aggressive cutbacks, in a bid to overcome a mammoth $1.52 billion annual net loss announced just last year. Reputable independent rating agency ‘Fitch’ have said ‘Etihad Airways is expected to continue making losses through to 2022′, and it’s been established that the Abu Dhabi airline has “very weak” financials and lower unit revenues than its Gulf and European competitor airlines, despite having cost advantages.
The UAE national airline has continued to cut key international routes, including to the US, and has now sold ownership of its major lounges worldwide, including closing its own London Heathrow First & Business Class lounge — (a huge blow to its premium-paying passengers) opting to sell the lounge space to a third party, pay-to-use lounge company ‘No.1 Lounge.’
In what is set to be the latest and largest cut at the Abu Dhabi airline, and after talks with six credible sources, I can now exclusively reveal that Etihad Airways will be cancelling a ‘significant amount’ of its existing Airbus order — with cancellations set to hit the UAE carriers’ Airbus A350 order, for 62 A350 XWB aircraft, consisting of 40 Airbus A350-900s, and 22 Airbus A350-1000s.
While a relationship between Etihad Airways and Airbus will be maintained, the upcoming cancellations come as the Abu Dhabi airline will look to reposition its focus on point-to-point flights instead of the super-hub airline model it currently adopts, meaning the ‘ME3‘ (the global connecting Middle Eastern 3 Gulf Carriers: Emirates, Etihad Airways & Qatar Airways) are set to become the ‘ME2‘.
The A350s set to be cancelled were originally ordered when Etihad Airways was pursuing an expansion strategy to keep pace with neighbouring rivals Emirates and Qatar Airways, who lead the super-connector airline sector via their respective Gulf hubs in Dubai, United Arab Emirates, and Doha’s Hamad International Airport, State of Qatar.
In January this year, Etihad Airways CEO Tony Douglas hinted the airline is considering cancelling new aircraft, but only after a completed ‘wide-ranging strategy review’.
Back in 2012, Etihad Airways became the first airline in the world to cancel A350-1000s — cancelling six of the aircraft type.
The carrier is continuing to seek to raise debt to help finance upcoming deliveries of Boeing aircraft on order worth more than $1 billion and has approached Abu Dhabi banks, in order to ask for a loan to finance the remaining Boeing 787 Dreamliner aircraft on order.
Etihad Airways are also currently dealing with a group of creditors who say they were ‘misled’ on its commitments to support part-owned carriers, two of which are now insolvent. Air Berlin, one of Etihad’s biggest investments, ceased operations last October, and Alitalia, the most high profile, will not take any aircraft as its insolvency proceedings continue since Etihad pulled the plug on the Italian flag carrier. Etihad Airways took an $808 million hit from these airline investments.
In June this year, Etihad Airways arranged for some pilots to be transferred over to Dubai-based Emirates, given Etihad’s cuts are ongoing, and Emirates need the crew amid a pilot shortage, due to a period of mass resignations over poor working conditions.
Reports also surfaced again last month that Emirates is in talks for a potential acquisition of Etihad Airways, but there have been no further developments.
More than 4,150 employees have been removed from the Abu Dhabi carrier over the last last 24 months. Since April — Etihad has also been encouraging its pilots to take 1-year unpaid leave, amid an attempt to reduce salary overheads.
In terms of passenger growth, fewer passengers are travelling with the UAE national carrier — and whereas the world’s passenger traffic has been rising steadily with at least 6% growth each year (according to IATA), the number of passengers Etihad Airways are carrying has been almost static for the last two years.
With Etihad Airways set to cancel a significant amount of its Airbus order, the airline move closer to retiring its ‘super-connector’ airline status, amid the continuous stream of major cuts at the debt-ridden Gulf carrier.
For Airbus, any cancellation or indefinite deferral is a blow to the manufacturer, but A350 XWB orders stand strong at 890 firm orders, from 46 airline customers worldwide.
Just this week, Kuwait Airways (a Gulf neighbour to Etihad Airways) signed a revised purchase agreement for Airbus A350 XWB’s and A330neos, in order for the Kuwaiti carrier to expand and strengthen its fleet. Kuwait Airways’ new investments come at a time where its UAE neighbour Etihad Airways winds down its operations and aspirations of being the dominant Gulf carrier airline it once intended to be.