Almost six months ago, I exclusively revealed that Etihad Airways were preparing to make a major cut to its large Airbus aircraft order, amid ongoing financial struggle at the flag carrier airline of the United Arab Emirates. The airline is continuing with its aggressive cutbacks in a bid to overcome mammoth $3 billion losses, and reputable independent rating agency ‘Fitch’ have said Etihad Airways will continue losing money until at least 2022. In response, the carrier has also sold airport lounges worldwide, cut key routes, redueced flight frequencies, and scaled down its worldwide operations.
Now in early 2019, Etihad Airways has confirmed a major cut to its aircraft order book. In an email from Etihad Airways management to staff seen by Aviation Analyst, the airline admitted the only way it will be able to “compete in the constantly changing economic landscape” is by committing to take a small percentage of its original order.
Etihad Airways confirmed the carrier will take delivery of 5 of its 62 ordered Airbus A350 XWB aircraft into the fleet — representing just 8% of its total A350 order. The debt-ridden UAE flag carrier airline has cancelled plans to take delivery of the remaining order of 57 Airbus A350s.
However, it’s not just Airbus that will feel the effects of Etihad Airways’ declining finances — the airline has confirmed it will also cancel the majority of its Boeing 777X aircraft on order. Etihad has committed to taking delivery of just 6 of its order for 26 Boeing 777X jets, an aircraft set to become the new Boeing flagship.
Sulaiman Yaqoobi, vice present for flight operations at Etihad, recently admitted that the economy is “extremely challenging” and that Etihad Airways must slash operating costs as much as 10% in order to reflect shrinking capacity. As expected, the airline will keep its order for A321neo aircraft.
Etihad Airways will use a common cancellation practice known as ‘deferring’ with its A350s, whereby the carrier will not formally cancel the aircraft, but instead indicate that it has no current intention to proceed with the order, and hence will continuously ‘push-back’ production, until forced to make a technical cancellation. A similar technique was recently used by Qantas, who have had more A380s on order for a number of years, but would continuously defer deliveries, until forced to formally cancel — which it did just a few days ago (prior to the announcement of the end of A380 production).
The aircraft cuts are the latest in a string of sizeable cuts at the Abu Dhabi-based carrier, which include laying off pilots and asking others to take voluntary leave. The airline will look to reposition its focus on point-to-point flights instead of the hub and spoke airline model it currently adopts, meaning the ‘ME3‘ (the global connecting Middle Eastern 3 Gulf carrier airlines: Emirates, Etihad Airways & Qatar Airways) are quickly becoming the ‘ME2‘.
With executives at Etihad admitting the carrier must slash operating costs as much as 10%, they described the pilot cuts as a “small reduction” out of a total of 2,065, of which 160 are “surplus.”
Etihad Airways is continuing to seek to raise debt to help finance upcoming deliveries of Boeing aircraft on order worth more than $1 billion, and the carrier has approached Abu Dhabi banks in order to ask for a loan to finance the remaining Boeing 787 Dreamliner aircraft on order.
More than 4,150 employees have been removed from the airline over the last 28 months, and fewer passengers are travelling with the UAE national carrier than in recent years. While its Gulf neighbours witness passenger growth, Etihad Airways’ numbers haven’t grown in line with Middle Eastern air travel growth expectations.
Elsewhere, Etihad Airways is being sued over the decision to cut financial support for Air Berlin. Insolvency administrators are actively seeking €500 million from Abu Dhabi, plus damages.
UAE’s Etihad Airways have taken another major step in withdrawing from the global airline race by committing to a very small percentage of its original Airbus and Boeing orders.
The state-owned company has gradually declined following poor investment decisions in (now ex-) partner airlines, and major aircraft order cuts are just part of management’s attempt to reduce one of the largest airline debts ever accumulated in Middle Eastern aviation history.