Etihad Airways was named Airline of the Year by ATW for its exceptional achievements and capabilities across operations, financial performance, customer service, safety, and labor relations. Under the leadership of James Hogan, Etihad has consistently delivered targets and innovated strategically. Its unique strategy of taking equity stakes in other airlines like Air Serbia, Air Seychelles, and Alitalia has delivered over five million passengers onto Etihad flights and leveraged partnerships for supplier contracts and crew training. Etihad also launched new aircraft, routes, and an upgraded cabin product while maintaining financial and environmental sustainability.
1. FEBRUARY 2016 | www.atwonline.com
SPECIAL ISSUE
ETIHAD
AIRWAYS
2016 ATW
ACHIEVEMENT
AWARD WINNERS
CEO INTERVIEW
Etihad’s James Hogan
AIRLINE
OF THE
YEAR
2. 22 atw | February 2016 | atwonline.com
Etihad
Airways
T
o win the ATW Airline of the
Year award, an airline must
demonstrate exceptional
achievements and capabili-
ties across operations, financial perfor-
mance, customer service, safety and
labor relations. Its executive leadership
must also clearly show innovation and
strategic thinking that sets the company
apart.
Etihad Airways, the national airline
of the United Arab Emirates, is clearly
an airline apart from the pack and one
that sets its own course.
Under the leadership of president and
CEO James Hogan, Etihad consistently
delivers against its targets and is always
thinking ahead (see interview, page 55).
Joint ventures between airlines have
become the trend in the last couple
of years, but for Etihad, equity stakes
in selected airlines has always been a
foundation of its business model. Its
equity partner airlines include airberlin,
Air Serbia, Air Seychelles, Alitalia, Jet
Airways, Virgin Australia and Swiss-
based Darwin Airline, trading as Etihad
Regional. Etihad has also created Etihad
Airways Partners, a new brand that
brings together like-minded airlines to
offer customers more choices and loyalty
benefits.
Together, these partnerships delivered
more than five million passengers onto
Etihad Airways’ flights, a 43% increase
over 2014.
The airline’s unique partnership
strategy is paying dividends. For ex-
ample, Etihad leverages its airline equity
partnerships in strategic contracts with
suppliers and in common training cen-
ters for crew and other employees.
The airline is also a strong codeshare
partner, with its most recent agreements
forged with Air Europa, JetBlue, Philip-
pine Airlines, GOL, SAS, Hong Kong
Airlines and Aerolineas Argentinas.
A New Alitalia
Typically bold and ambitious was Eti-
had’s taking of a 49% stake in Alitalia,
3. atwonline.com | February 2016 | atw 23
AIRline
OF THE
YEAR
a deal that Etihad describes as “a game
changer.”
The structure of the deal means a
“new Alitalia”has been created, shorn of
many of the legacy issues and debts that
previously held back the business. New
management, including senior second-
ments from Etihad, meant the new
business hit the ground running, within
months introducing a new brand, new
inflight product and new service stan-
dards—with hundreds of Alitalia staff
undergoing training at Etihad’s Training
Academy.
Most importantly, the process of net-
work integration has begun, with new
services linking Italy and European cities
to Abu Dhabi and the world beyond,
allowing Etihad and Alitalia to feed each
other’s networks with new custom-
ers. The integration is going further,
however, with the networks of Alitalia,
airberlin, Air Serbia and Etihad Regional
being more closely aligned.
Customer Service
Etihad is equally bold and innovative in
its customer products and services. The
company has launched unique Airbus
A380 and Boeing 787 cabin products
that include The Residence onboard
apartment—a suite of rooms with
concierge service.
Etihad carried 17.4 million pas-
Etihad Airways
Airbus A380
Hogan
Photos:EtihadAirways
4. 24 atw | February 2016 | atwonline.com
sengers last year, a 17% increase over
2014. Yet growth in passenger demand
continued to surpass the airline’s capac-
ity increase, underscoring the strength
of the airline’s long-term strategy.
Etihad also introduced six new
destinations to its global route network,
including Kolkata, Madrid, Edinburgh,
Entebbe, Hong Kong and Dar es
Salaam.
Last year also saw Etihad take
delivery of its first Boeing 787-9
Dreamliner, which entered commercial
service on routes to Washington DC,
Zurich, Singapore and Brisbane. The
Airbus A380 network, meanwhile,
was expanded with a second service to
London Heathrow and new flights to
Sydney and New York.
And at a time when cargo is a chal-
lenge for much of the industry, Etihad
saw strong cargo volumes for 2015, with
a four per cent increase year-on-year.
The airline accounted for 88% of cargo
imports, exports and transfers at Abu
Dhabi International Airport last year.
Hogan and his team also maintained
the high road in the industry controver-
sy over the Gulf carriers and US open
skies last year, consistently defending
Etihad’s business model without resort-
ing to personal digs or campaign rheto-
ric. This stance won Etihad particular
praise from the ATW editors.
“Many stones were thrown at us,
but we responded calmly and with
facts, showing that we bring new com-
petition to markets,” Hogan noted.
“The equity investment and sharehold-
er loans we have received—and which
is expected by our shareholder to
deliver a return far faster than almost
any other national airline in history—
are dwarfed by the handouts, bailouts
and incentives given to legacy carriers
around the world.”
Good Citizen
Etihad is also a good citizen, as an em-
ployer and as an eco-aware company.
Etihad describes its more than
25,000 employees from 144 countries
as “our family.” Some 2,500 of those
employees are UAE nationals and the
airline has embarked on a program to
grow its local workforce and to provide
careers for UAE national women. More
than 600 UAE nationals hold key posi-
tions in the airline, having graduated
through UAE National Development
programs.
Etihad takes the well-being and
safety of its people very seriously, ensur-
ing a healthy and balanced lifestyle.
This includes an onsite medical center,
five fit2fly gyms, nutritional, dental and
cancer screening services, a 24/7 ambu-
lance service and a variety of awareness
campaigns with family wellness fairs.
Employees are also supported with a
24/7 corporate security number, 24/7
HR duty managers and a dedicated
welfare CARE team. Top of the range
accommodation is provided for 8,333
Etihad’s
Residence
Class
EtihadAirways
5. atwonline.com | February 2016 | atw 25
employees with onsite supermarkets,
swimming pools and gyms. Etihad
opened the first aviation themed onsite
nursery, operated by a leading British
childcare provider, prioritizing 100
places for female employees.
Work/life balance is encouraged
through monitoring annual leave bal-
ances with a clear policy that leave must
be taken in the year it is earned, com-
munications campaigns, and an annual
leave ticket for self and family. Etihad
has a variety of initiatives that encour-
age teamwork and relationships outside
of work. For example, the iVolunteer
group has 500 volunteers and provides
employees with a database of charities
and community organization where
staff can volunteer.
Sustainability Focus
One of Etihad’s highest priorities is
the protection and sustainability of the
environment. Its Fuel Saving Steer-
ing Committee initiates and tracks
many of the efficiency-saving initia-
tives. Significant reductions continue
to be achieved through efforts such
as single-engine taxi, working with
airspace providers for improved routes,
continuous descent approaches and
improved weather data and analysis
systems.
In March 2015 the Boeing 787, one
of the most fuel-efficient commercial
aircraft operating today, started the
Abu Dhabi-Washington route. When
this route operated with an Airbus
A340-600 (316 seats), it burned ap-
proximately 130-132 tonnes of fuel.
Operating with a 787-9 (235 seats), the
fuel burn is 75-76 tonnes resulting in
nearly 300kg-carbon emissions reduc-
tion per seat.
Since 2006, the airline has achieved
a 24% reduction in emissions per
passenger-kilometre across the pas-
senger fleet. For the cargo fleet, a
31% improvement in emissions per
freight tonne-kilometer (FTK) has
been achieved. Across the entire fleet,
efficiency improvement of 14% per
tonne-kilometre has been achieved
since 2008, more than double the
industry-wide target of 1.5% efficiency
improvement per year.
Etihad is also a partner in the
pioneering Integrated Seawater Energy
and Agriculture System (ISEAS) proj-
ect led by the Masdar Institute with
funding partners that also include
Boeing, UOP Honeywell, Safran and
GE. ISEAS is an effort to develop a
novel form of agriculture, producing
food and fuel on traditionally non-
arable desert land irrigated with seawa-
ter. With seawater comprising 97% the
world’s water supply, it has potentially
high sustainability credentials in a
water constrained region.
And among its many other eco
initiatives, Etihad has created a garden
using recycled items sourced from
within the company, such as the tires
used in the rammed earth wall, the
bottles that form the “dry river bed,”
and the pipes for the fountain. The
energy for the water feature is provided
by the solar panel. Water regulators
control how much water the cycad tree
needs, preventing overwatering. The
plants are climate appropriate and in
many cases indigenous to the region.
All of the plants have some important
use whether it’s medicinal, edible or
beneficial in some way to wildlife,
people and the environment.
Summing up Etihad’s achieve-
ments, Hogan said, “2015was a year
in which we went further than ever
before. We caught the imagination of
travelers everywhere with the launch
of The Residence and along the way
we introduced new aircraft, a new
livery, new uniforms and a fantastic
new global ambassador in Nicole
Kidman.”
In everything it does, Etihad shows
there is a different way and a way to
differentiate. The company holds to
its philosophy that it’s not about being
the biggest, it’s about being the best.
And for being the best, the 2016
ATW Airline of the Year Award most
deservedly goes to Etihad Airways.
Etihad
Boeing 787
Boeing
6. atwonline.com | February 2016 | atw 55
Etihad is a young airline, but one that has grown
rapidly to become a world-class, global player.
Talk about the company’s strategic thinking as
you formed this airline and worked out how to
create a niche from a market base where another
airline was dominant?
I think what people forget is that our fiercest competi-
tors are in our own back yard. They are two strong
airlines, Emirates [Airline] and Qatar [Airways]. So
when we established this airline, being the youngest of
the three, it wasn’t about replicating their strategy. We
were very clear with the mandate that it was about
safety, which is the best thing for us. Also, it was
about making an economic contribution to the UAE
in terms of jobs and spending. And it was about sup-
porting the aviation aerospace sector, which is a key
area of UAE development and employment. And we
had to make money.
From an aviation point of view, the Gulf is
truly a crossroads. Within three hours flying time
you have the Gulf, the Middle East and the Indian
subcontinent. That’s a strong market regarding pas-
senger flows.
When you think back to where we were in 2008
and then in 2013, talking about our strategy and
where we wanted to be by 2018, it was always about
having a four-bank structure in Abu Dhabi with the
opening of the new terminal.
And now we have the right fleet mix to take
advantage of the short-haul, mid-haul and ultra-long-
haul markets. What fundamentally drove that fleet
purchase was connectivity.
Partnerships, especially your equity partner-
ships with other airlines, are an Etihad signature.
How did this develop?
When we started, we met with all the global alliances.
We met with oneworld, Star and SkyTeam. We actually
went a long way in talks with Lufthansa about working
with them. And we entered into codeshares initially
with them and then with others because that gave us
the ability to stretch our network on the back of our
organic growth. In our macro-network plan, we were
only going to operate into major cities and not into
secondary or tertiary cities.
Codeshare then became an important pillar.
We’ve got 49 codeshare partners today and that’s
given us huge network stretch worldwide.
But then we sat down and saw that there were
key places in the world where there were not open
skies, they were bilaterally constrained, but there
were important passenger flows. So our first impor-
tant relationship was with Virgin Australia and that
gave us Melbourne and Sydney. It was important
Etihad Airways is the 2016 ATW Airline of the Year (see page 22). BY KAREN WALKER
interview:
James Hogan
President & CEO, Etihad Airways
The
Partner
“The equity strategy has
enabled us to build a
virtual global network and
to complement our own
investment.”
7. 56 atw | February 2016 | atwonline.com
to have that domestic market. At
that stage we had a relationship with
Qantas, but it was very narrow. We
wanted to have a broader relationship,
but at that point in time they thought
it was better to focus on Asia and
China and they were not prepared to
give us the depth we needed in the
Australian market. Nor were they
interested in flying into our hub and
using Abu Dhabi. So we invested in
Virgin Australia and that gave us the
ability to achieve immunity within
the market. Most important, it gave
us access to 45 cities in Australia
and New Zealand and we now fly to
Perth, Brisbane, double-daily into
Melbourne and Sydney with A380
service, and that connectivity with
Virgin has worked. Quite frankly, we
don’t need to expand into the Austra-
lian marketplace, nor do we have any
intention to.
So what happened in Europe, where
you have an equity partnership with
airberlin, now the second largest car-
rier in Germany?
We actually shook hands twice with
our friends at Lufthansa, but it was
overruled at the board level. And that’s
fair enough. But Germany is a very
important market, so that’s why we
started looking at airberlin. Airber-
lin carries over 30 million passengers
and when we invested, our number
one market was the UK and now our
number one market is Germany. So
entering the German market was very
important because while we flew into
Frankfurt and Munich, at that time the
bilaterals did not allow us to go into
Berlin, Dusseldorf and other cities. The
airberlin investment gave us a number of
things—it meant we could go and talk
to companies together. On the leisure
side, they are a very strong tourist side.
In the cruise market, for example, we
have been very successful linking with
the port of Abu Dhabi.
On the cost side, we’ve signed a
deal with IBM. That’s actually a deal
that applies to all our equity partners
with the exception of Virgin Australia.
Germany has been good for us.
Where the challenge has been is where
we have invested in airberlin, as much
has been taken out in airport taxes at
Dusseldorf. If the airport tax wasn’t there,
airberlin would be profitable today.
Among your most recent equity
deals—and some would say the most
bold—is the taking of a 49% stake in
Alitalia. What was the attraction?
We were approached by the Italian gov-
ernment and were asked to invest in Ali-
talia. So we looked at the network from
a macro level and it was unconstrained.
We could see it could work. The
problem was that for many years there
had been a lack of investment, changes
in owners, there was no clear direction
and there were new entrants. This made
it very tough. So in the conditions of
the deal, we wanted to make sure that
Alitalia had the ingredients to win. Italy
is another major market. In the north of
Italy, we saw huge traffic flows coming
down between north Italy and Germany
and they were dominated by Lufthansa
Group and low-cost carriers.
But on an unconstrained level, we
said this airline can work. So among
the deal criteria we set was that the
debt was written off, and the social law
was changed so that we could make
people redundant.
There’s a three-year turnaround
plan and we reached the end of year
one [in December]. Top line—we’ve
changed our position on revenue out
of Italy, Alitalia has moved to Sabre
and is also part of the IBM deal. We
are starting to tackle unit costs, we’re
integrating the networks, and we have
a big focus on cost synergy. What you
will see in April is 90%-100% of the
Alitalia fleet having new interiors.
By April, they will be ready to fight
back and we have no doubt—Italy is a
great market and Alitalia is an iconic
brand.
There have been lots of questions
about whether Alitalia will stay in
SkyTeam?
We don’t mind that they are part of
SkyTeam and the Air France-KLM
joint venture, just as we don’t mind that
airberlin is part of oneworld. But it is
important that Alitalia is treated fairly.
Another important market, of course,
is India and you have equity partner-
ships with Air Seychelles and Jet
Airways.
Before the Jet deal we had 2% of the
market; now we are at 21%, which is
a huge change. That airbridge between
Abu Dhabi and India is huge. There are
13 cities we are connecting today with
Jet and it continues to grow. Jet has just
had two consecutive quarters of record
profit. Yet you don’t see US airlines in
that market.
With the Seychelles, it’s a great
high-yield market out of Europe.
How would you sum up the advan-
tages of the Etihad equity partner-
ship strategy?
The equity strategy has enabled us to
build a virtual global network and to
complement our own investment. We
are Sabre’s largest account. Etihad has
about 150 aircraft, but today, with the
equity partners, we operate about 700
aircraft. So when we talk to Boeing or
Airbus, that’s a more meaningful discus-
sion. As an airline group, we’ve been able
to create value as a family, so to speak. It
also goes to technology and innovation;
we share, where appropriate, how to use
technology. It’s a power that lets us come
together and work smarter.
How would you describe your leader-
ship style?
I’ve been in multi-national roles for a
long time. You have to be able to take
the people with you and to do that,
there has to be a belief in the vision of
the business. I have always been very
clear on our vision and values. Our
internal communications are very
strong; I talk to all our staff on a
quarterly basis. We have a major
conference each year where we reward
performance. We have a strong score
card culture; if you are in the bottom
3%, you leave the company, with
respect. We are demanding, but we have
a just culture and we are open. What we
represent is best-in-class.