Tony Douglas, Group Chief Executive Officer, Etihad Aviation Group, says airlines must be ready to act at short notice to deal with a volatile operating environment
Including its network of 55 codeshare partners, Etihad’s reach extends to more than 400 destinations. But the Abu Dhabi-based carrier is intent on remaining nimble enough to seize new opportunities in a dynamic market. New strategies and new products are the order of the day.
Do you expect a positive 2019 for the airline?
We have built careful assumptions into what we predict for development in 2019 and forecast a year of cautious expansion in international travel and for the international market.
The continued transformation of Etihad has instilled a renewed sense of confidence both internally and externally with our customers and partners. This year has started off as a period of correction for us, and we are looking forward to steady and controlled year-on-year growth from 2020, keeping a very close track on the underlining GDP growth of the emirate of Abu Dhabi.
As a major enabler of commerce and tourism, we are intrinsically linked, as per our mandate, to the continued success of Abu Dhabi.
The airline is evolving to meet the opportunities and challenges of an industry and world in a state of constant flux, and this means having to be agile and mutable, ready to make fast decisions and to adapt at very short notice. This is the new reality, and you will see more and more major players who compete in the global market having to change or alter their operating model.
What are your plans for the airline over the next few years?
At Etihad we are focused on optimizing our network and fleet based on these ever-changing commercial realities, as and when they present themselves.
We are transforming the fleet to meet our requirements. We continue to receive more fuel-efficient, technologically-advanced aircraft, such as the Boeing 787 Dreamliner, while we phase out older types, which will bring long-term benefits to our operating results. Fleet rationalization will give us a sharpness of focus, to not only develop our guest proposition but also our training, the way service delivery is executed, and the way in which our ‘Choose Well’ brand refresh can be connected to every part of the guest experience.
We continue to lead change in the region and have been successful in moving away from being seen exclusively as an uber-luxury airline to become a fully inclusive full-service airline
We have an amazing range of products on offer, which can be tailored to each customer, whether it’s a family flying with children in economy, who benefit from a dedicated Flying Nanny and product and retail choices which meet their exact needs, or a guest staying in The Residence on board our Airbus A380 fleet, which is still the most exclusive and bespoke flying experience on a commercial airline.
With regards our global network, the main focus will be a push for greater point-to-point traffic from existing and emerging markets to and from Abu Dhabi. We continue to be a major connector through the hub to major points around the world, recently adding Baku and Barcelona to the network. While we continue to seek new growth opportunities, we have removed loss-making routes from the network. We are a commercial enterprise, and to operate consistently unprofitable services simply makes no business sense. If we see an opportunity however, we will act fast to evaluate and act accordingly, and there are exciting new developments on the horizon.
In 2019, focus will be on quality revenue and the increased yields associated with that to ensure we are the right size and in the right shape to grow.
Do you see your business model changing?
At 15 years old, Etihad is maturing on the international stage. We are accessing opportunities, including the prospects of joining an alliance or developing our own network to provide greater global reach through joint venture business alliances, or any other mechanism that achieves the original ambition of building a network with as big a global footprint as possible without carrying the liabilities we’ve had to in the past.
We move into the future as a world-leading and sustainable business built on innovation and a pioneering spirit. We continue to compete in a regional and global marketplace with long-established players, making us a challenger brand by nature. That means being ready to be think differently when it comes to our profile, growth and visibility, both regionally and internationally.
Have equity partnerships proved to be a viable way forward?
We were involved in an equity alliance strategy and the passage of time has proved that, in some cases, it did not work for us as planned—a case in point being our involvement in Alitalia and airberlin.
With others we enjoyed more success. That said, it is a strategy we do not intend to repeat. Being a shareholder, often without full control, but providing financial and human resource assistance in an environment where you cannot derive fair and reasonable benefit, simply does not work. I think there is a valuable learning point from it but the thesis that suggests Etihad just goes it alone is one that is equally flawed.
18,513 - Every week, Etihad places its EY code on 18,513 weekly flights beyond its own network with its codeshare airline partners
Moving forward, global network coverage requires us to join a number of “clubs.” We will not be too prescriptive as to precisely which club we should be entering into in the next stage of our journey. I use the plural as I think the world of alliancing has actually moved on in recent years.
So joining an alliance is not on the cards?
Our evaluations may well see us choose to join an alliance, be it one of today’s established groupings or whatever evolves tomorrow as the next generation of alliances or joint ventures.
However, whatever option we choose, we will participate as an active, forward-thinking leader as opposed to a passive follower. Etihad’s growth on the world stage will require that as another key pillar of our strategy moving forward.
As our industry continues to evolve, we are exploring new approaches and alternatives to conventional bilateral partnerships. We do of course have many very successful codeshare agreements already in place. Every week, Etihad places its EY code on 18,513 weekly flights beyond our own network with our codeshare partners. These have fed millions of passengers into our hub Abu Dhabi (more than 8.5 million in the past two years), representing an important share of total passenger traffic and revenue (more than $6 billion over the last five years). Most importantly, they have created a wider choice for air travelers around the world.
Is the customer experience all about technology?
Digitization is absolutely crucial to how we will fulfill our customer proposition. We’ve already put disproportionate effort into that space.
Being able to present it through a smart app is quite frankly the easy part. Once we know exactly how each customer on each flight has been ticketed, being able to provide the service onboard is not difficult. How you connect one end to the other through global distribution systems, how ticketing is confirmed and paid for, and how that gets into an order fulfillment cycle is a digital revolution and an innovative approach to these things is going to require our every focus and effort.
As part of our Digital 2020 plan, we are developing our capabilities in four main areas of the business including a sophisticated hub for data science; new digital touch points, including a completely redesigned website platform with an advanced open-tech booking engine; an offer management platform with a merchandizing engine based on business rules that can be created within minutes and increasingly replaced by machine learning and artificial intelligence; and new marketing platforms to manage the digital guest experience and generate personalized messages and offers.
Is cargo important to your bottom line and what improvements would you like to see in the cargo sector in general?
Yes. Cargo is a hugely important and essential commercial and operational function of the Etihad Aviation Group, as with other successful areas of the group such as our MRO division and Etihad Airways Engineering. Both are enjoying an upward growth curve, reporting robust performance and results.
Beyond the passenger business, Etihad Cargo is a major catalyst in the development of Abu Dhabi’s ambitious logistics strategy. The last 12 months have seen Etihad Cargo implement a major transformation. We’ve had to define and play to our strengths while introducing new ideas, redefining our commercial approach to market, and getting closer to our customers. We are taking advantage of new technologies by betting heavily on digitization and streamlining our freighter operations and service delivery. All of these have combined to create a more efficient enterprise that delivers a better value proposition to our partners and clients.
What opportunities and challenges do you see in your region?
We continue to lead change in the region and have been successful in moving away from being seen exclusively as an uber-luxury airline to become a fully inclusive full-service airline.
Our customers can expect greater personalization with a strong focus on the inflight retail offering, the unbundling of services and fares, and the installation of new seating products such as Economy Space on much of the widebody fleet. We will also take advantage of this critical mass to introduce smarter seating on the short-haul A320 and A321 fleet beginning in the second quarter of 2019.
It is critical that Etihad continues to be seen as a true flag carrier, supporting Abu Dhabi’s economic vision 2030. But the regional market itself has been relatively flat and shrinking over the last couple of years, so we are unlikely to see the significant growth enjoyed until recently.
8.5m - Etihad’s codeshares have fed millions of passengers into our hub Abu Dhabi (more than 8.5 million in the past two years), an important share of total passenger traffic and revenue (more than $6bn over the last five years)
How will the airline encourage diversity?
We have an unwavering commitment to create a culture of inclusion. A Leadership Development program has been created for employees, managers and leaders to enhance our behavioral competencies and values as we increase inclusive leadership at all levels of Etihad.
Great emphasis is placed on supporting diverse talent to maximize their engagement, contribution, and advancement, as well as creating targeted development programs to accelerate the advancement of women. In addition, we are establishing a framework for gender diversity at all levels and throughout all divisions of the group. We are proud to have 150 nationalities working in harmony at Etihad.