Etihad financial results. Bad and ok.

Etihad yesterday announced their 2016 financial results.  On the face of it, they’re awful, recording a net loss of $1.87bn.  Yes, that’s a loss of almost two billion dollars.

However as with all financial results, it’s worth looking a little bit more closely at the detail of what makes up the headlines.

Digging into the numbers, two particular figures jump out:

  • $1.06bn loss on changes to aircraft valuations on their books and due to the early phase out of certain aircraft types.  This isn’t real cash out of the door, more of an accounting change.
  • $808m charge mainly related to Alitalia and Air Berlin.

Adding both of these together makes up essentially the entire loss that they’ve reported.  If you’ve not been following the story of Alitalia recently (or over the past few years) they’re pretty much on the brink of bankruptcy. Again.

Etihad had poured huge amounts of money into both Alitalia and Air Berlin over the past few years, thinking they were able to turn their financial fortunes around, building a strong network of aligned European carriers.  It didn’t work.  Alitalia went from bad to worse and Air Berlin they’re trying to offload to Lufthansa.

A few months ago, their patience ran out, and their former CEO James Hogan who pioneered the strategy was relieved of his duties.  These results appear to be them getting all of the bad news out of the door in one hit.  I have no doubt that James Hogan will be squarely blamed.

However, things actually aren’t that bad.  In their press release they’ve got some more details on some of the KPIs.

Key Indicators 2016 2015
Passenger Revenue (US$ billion) 4.9 4.9
Cargo Revenue (US$ billion) 0.9 1.0
Total Revenue (US$ billion) 8.36 9.0
Net (loss)/profit (US$ million) (1,873) 103
Total passengers (million) 18.5 17.6
Revenue passenger kilometres (billion) 89.5 83.2
Available seat kilometres (billion) 113.9 104.8
Seat factor 78.6% 79.4%
Number of aircraft 119 121
Cargo tonnage (tonnes ‘000) 596 591

Overall, it’s actually not too bad.  Passenger revenue is broadly flat, although this was against a slight increase in passenger numbers.  Per kilometre it’s a better story, but their load factor was down a little.

From a passenger perspective, I’m a huge fan of their product, especially the one in their 787-9 and A380 aircraft; it is comfortably ahead of the US and European airlines.  However they have been cutting back on items like their chauffeur drive service recently and I’ve heard about cutbacks in their lounge product in Abu Dhabi too.

However it’ll be interesting to see how Emirates numbers compare, and even more so the ones from Qatar Airways, given the recent blockade.  Interesting times.

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