By Max Kingsley-Jones
The rapid rise of Abu Dhabi’s Etihad Airways is currently being directed by the airline’s acting chief executive Geert Boven. He talks here about the ambitions of another gulf carrier phenomenon
Etihad Airways may be gearing up to be the “third force” in the Gulf’s burgeoning market of global network carriers, but until recently had been keeping its powder dry when it came to shouting about its plans. But the airline has been expanding rapidly in the last 12 months and will serve 35 destinations by the end of the year.
There were several reasons behind Etihad’s reticence to talk, not least of which was that the Abu Dhabi carrier – self-styled as “the national airline of the UAE” – has only recently introduced its long term product with the arrival of its new Airbus A340-500s and Boeing 777-300ERs. It should be no surprise that the airline is only now putting down its long-term markers as it launched operations with a fleet of leased widebodies just three years ago.
And then back in May, just as Etihad seemed ready to talk, the airline’s chief executive Robert Strodel was dismissed and replaced – on an acting basis for the moment - by the vice-president commercial Geert Boven.
The Dutchman found himself taking the reins of a galloping horse. “We’ll be serving 35 destinations by the end of 2006 – which means we’ve added an average of one city per month since we launched,” he says. “But we’ve actually been growing even faster than that because we didn’t really start expanding rapidly until around 18 months ago.”
Boven has a strong sales background having previously worked for KLM and Martinair in various executive roles, and was chief executive of Dutch tour operator OAD Group immediately prior to joining Etihad. He says that in his original commercial role at Etihad, which he took up last year, he had set about creating a worldwide sales and marketing operation around a regional concept with dedicated divisional managers based in Abu Dhabi.
“The sales operation is divided into four areas: UAE and Oman – which accounts for 40% of our business, Europe and America which is 30%, Asia, which is 17%, and the Middle East and Africa which is 13%,” says Boven.
The exercise to implement its long term product strategy started in earnest in February with the introduction of its first of five 777-300ERs equipped with a two-class business/economy cabin (dubbed “Pearl” and “Coral” respectively). The first three-class aircraft – an Airbus A340-500 – arrived in June incorporating the airline’s newly introduced “Diamond” first class cabin which sets new standards for premium travel. The 240-seater will be used to introduce daily direct flights to New York in October.
These new aircraft are part of the multi-billion dollar order the airline signed at Farnborough 2004 for 29 Airbus and Boeing widebodies – including four A380s. All the new aircraft feature Thales’ latest generation TopSeries in-flight entertainment system. To underwrite expansion plans, further orders are expected soon with the A350 and 787 under evaluation.
“We’ve now got 19 aircraft in the fleet, and employ over 3,300 people. The headcount is growing on average by 200 staff per month,” says Boven.
The airline is state-owned with the government making an investment of 500 million dirhams ($140 million) to help it get on its feet. But like its neighbour Emirates, it must quickly become a self-sustaining profitable business, says Boven. “The original plan was to be profitable in the third year, ie 2006. However the high oil prices have delayed this plan by 12 months.”
In its second year the airline carried one million passengers – or “guests” as Etihad calls them - and will add another two million during the current 12 months, says Boven. And growth looks set to continue at a high rate with the network planned to expand to 50 destinations by 2008 and to 70 by 2010.
Etihad’s expansion was given what Boven claims was an “unexpected” boost when Gulf Air decided to close its Abu Dhabi hub last year following the decision by the local government to withdraw from the airline and throw all its weight behind Etihad.
Gulf completed the Abu Dhabi pull-out in March, from where its operations included its all-economy brand Gulf Traveller.
“Gulf Air’s departure from Abu Dhabi was unexpected, so we had a temporary period of readjustment,” says Boven. “This was more of a logistical challenge – we had to shuffle aircraft and destinations.”
Gulf Air – once eligible to use the rights of its four national shareholders – lost out several years ago when Qatar withdrew to throw its weight behind Qatar Airways, and the issue recurred when Abu Dhabi exited.
“The majority of the route-rights have been taken by Etihad,” says Boven, who adds that it is such agreements, and aircraft capacity, which are the airline’s “main constraints to growth”.
Around 55% of Etihad’s traffic is Abu Dhabi originating or departing, and the target is to increase this to 60%. “Our ‘bread and butter’ is the third and fourth freedom traffic coming to Abu Dhabi from southeast Asia, the Levant and the Indian sub-continent,” says Boven.
He is also looking up the coast for more business with Etihad promoting its Abu Dhabi hub as a strong alternative to Dubai International airport for Dubai-originating traffic, particularly for passengers from south of the city of Dubai. The airline offers free shuttles from Dubai to Abu Dhabi airport, with journey times less than 2h.
Freight currently contributes 30% of Etihad’s revenue and the airline has a dedicated cargo arm – Etihad Crystal Cargo – which operates two Airbus A300-600Fs. The airline is looking to bolster this fleet and is evaluating the A330-200F and 777F with acquisition of up to five new freighters envisaged, says Boven.
In conjunction with Etihad’s growth plan, Abu Dhabi airport is undertaking a 30 billion dirhams expansion to transform it into a major hub. The existing international airport with its single runway and passenger terminal was designed to handle 3.5 million passengers annually. A parallel 4,100m runway will be completed by November next year, with a new midfield terminal complex that will also comprise new maintenance and cargo facilities to be ready by 2010. In the meantime an interim terminal is being constructed for the exclusive use of Etihad Airways.
The first phase of the expansion will boosting the airport’s annual passenger capacity to 20 million in 2010, with further expansion planned to ultimately grow capacity to over 40 million.
Despite the broad plan to grow the destination count, the airline’s network plan beyond the end of this year is still being evaluated, says Boven. “Shanghai will be our first Chinese destination early next year, and in the USA, the West Coast – Los Angeles - will be the next logical step,” he says.
In parallel with its global network ambitions Boven indicates that Etihad will remain faithful to neighbouring states: “I firmly believe in a Gulf regional network which will be operated by widebodies.”
Boven sees Etihad’s role being to provide connections for business traffic between Abu Dhabi and the world’s economic centres as well as to help the emirate grow as a leisure destination. But the airline’s executives are well aware that Dubai is already well-established as the region’s premier leisure destination and believe that Abu Dhabi, as the capital of the UAE, will be develop as the region’s cultural centre – a view supported by the fact that it is to get its own Guggenheim centre.
The airline has just launched its frequent flyer programme, and although it has some codeshares with airlines such as the UK’s bmi it is in no hurry to jump into bed with one of the alliances. “We need to establish our own brand and identity and will then look at possibilities,” says Boven.
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