Etihad Airways is hoping to report a better net result this year as its strategic investments in partner airlines continue to boost revenues, chief financial officer James Rigney says.
Second quarter revenues increased 30% year-on-year to $1.25 billion, while interim 2012 revenues have risen by 30% to $2.2 billion. Some $281 million has been sourced from partner airlines which have channelled 800,000 passengers into Etihad's network over the first six months of 2012.
Rigney states that Etihad's strategic equity investments are part of a 20-year network plan, which started in 2008 with a large fleet order underpinning the airlines' early organic growth. At the time, Etihad had two codeshare partners which contributed to 1% of the carrier's revenues. Today, Etihad has 35 codeshare agreements contributing to 19% of the total revenues.
"Our mergers and acquisitions strategy is one of the fundamental drivers of our business plan," he tells Flightglobal.
"We looked at the history of mergers and acquisitions; what airlines have done with their investments; and how successful they were. Each investment has its own uniqueness but the fundamentals remain the same - putting passengers on Etihad aircraft and increasing our revenues."
Etihad's revenue growth outpaced capacity growth during the first half of this year. Load factor also increased for the second quarter - up by 4 percentage points year-on-year to 77% - and the carrier remains disciplined on the cost-side.
A three-year fuel hedging programme is in place with 22 financial institutions, Rigney notes. For the first five months of 2012, Etihad hedged 85% of its fuel requirement at $100 a barrel, delivering significant savings against market prices.
For the second half of this year, Etihad has approximately 70% of its fuel requirement hedged. "We do not hold any hedging positions greater than $105 a barrel," says Rigney.
Revenues in the second half are likely to further increase with the addition of a stake in Virgin Australia Holdings.
Last month the Abu Dhabi-based carrier increased its equity stake to 4.99% by acquiring more shares on the open market. Rigney says Etihad is looking to increase its shareholding further, targeting up to 10% of the Australian airline, subject to relevant approvals.
"We are interested in building a larger stake in Virgin Australia, but our philosophy will always be to remain a minority shareholder," he says. Etihad is working on the process, Rigney confirms, and is waiting for the Australian authorities to approve the transaction.
He continues: "Etihad is cementing its relationship with Virgin Australia. We have a 10-year strategic partnership and Virgin Australia is one of our most important partner revenue contributors.
"Moreover, Virgin Australia gives us access to the whole Australian continent, which would otherwise be restricted to a few cities based on our own rights."
Last year, Etihad managed to post a net profit of $14 million partly by reducing its non-fuel costs, resulting in savings of $188 million. In 2012, the carrier's objective is to stay in the black at net levels and to beat last year's performance. "The first half showed that we are on track to achieve this," states Rigney.