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Ouch! Etihad posts massive loss: US$1.8 billion

July 31, 2017 Headline News No Comments Email Email

Etihad Airways has posted a net loss of USD 1.87 billion in 2016 – the first for the Gulf carrier since it started making money in 2011.

A group-wide strategic review is underway to improve performance. The loss compares to a net profit of USD 103 million in 2015. One-off impairment charges on aircraft and equity investments and fuel hedging did much of the financial damage – the performance of the core airline was solid.

“There was also a USD 808 million charge on certain assets and financial exposures to equity partners, mainly related to Alitalia and airberlin,” the Abu Dhabi-based carrier admitted in an issued statement.

Passenger revenues were steady on record passenger numbers and 79% load factors. An 11% reduction in unit costs helped offset pressure on yields – but yields still fell by 8%.

Etihad chief executive Peter Baumgartner said the airline worked “in an industry characterised by overcapacity, declining market sizes on key routes, and changing customer behaviour as a weak global economy affects spending appetite.

“Our answer to these challenges is innovation and reinvention, and this gives Etihad Airways a competitive edge as we seek to leverage opportunities offered to us by a changing environment.

“Operationally, we performed well in 2016. We maintained load factor levels even as we increased capacity. Yields were under pressure in all cabins, with Business Class impacted particularly as corporate travel policies continued to encourage flyers to downgrade to Economy.”

Baumgartner mentioned that Etihad was seeing “promising improvements in the contribution made by our ancillary revenue strategies, and we expect those to offset some of the yield declines”.

The core airline business achieved steady passenger revenues of USD 4.9 billion and 79% load factors while carrying a record 18.5 million passengers. Available seat kilometres (ASKs) rose by 9% to 113.9 billion.

Total impairments of USD 1.9 billion included a USD 1.06 billion charge on aircraft, reflecting lower market values and the early phase-out of certain aircraft types.

Legacy fuel hedging contracts also depressed performance in 2016. The airline expects this exposure to have less of a financial impact during 2017.

Written by Peter Needham

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