Etihad Airways Reports strong start 2020 with second quarter heavily impacted by COVID-19
Etihad Airways (Etihad), has provided details of its half-year (H1: January-June) 2020 performance, which saw a strong start to the year, with the airline progressing well ahead of its transformation plan targets. This included its best monthly results to date for February, prior to the impact of COVID-19, the subsequent closure of international borders, and the suspension of flights to and from the UAE from 24 March.
H1 2020 performance
Etihad carried 3.5 million passengers in H1 (H1 2019: 8.2 million), a reduction of 58% from the same period the previous year. Average seat load factor was 71%. Core operating loss for this period increased by US$ 172 million to US$ 758 million (H1 2019: US$ 586 million), driven by a 38% drop in revenues, which stood at US$ 1.7 billion (H1 2019: US$ 2.7bn). This was partially off-set by a 27% reduction in direct operating costs to US$ 1.9 billion (H1 2019: US$ 2.7 billion), and a 21% reduction in general and administrative expenses to US$ 0.40 billion (H1 2019: US$ 0.50), both driven by management cost containment initiatives and reduced operations. Available Seat Kilometres (ASK) reduced by 53% to 23.69 billion (H1 2019: 50.35 billion).
Cargo revenues were US$ 0.49 billion, an improvement of US$ 130 million (37%) compared to the same period in 2019, with 254,345 leg tonnes of cargo carried. This was driven by an increase in demand and a spike in cargo fares.
The core operating result for the first three months of the year improved by 34%, despite the onset of COVID-19, with a 12% reduction in passenger numbers, and a 9.5% reduction in ASK. Q1 seat load factor was 74% (January’s performance was significantly stronger than the same month in 2019, with a seat load factor of 81.9%), and yield at US$ 5.92 cents. Unit revenue in Q1 reduced by 3.3% to US$ 4.14 cents (Q1 2019: US$ 4.28 cents), offset by continuous focus on driving down unit costs, which were reduced by 2.4% to US$ 7.01 cents (Q1 US$ 7.18 cents).
However, the airline saw a significant decrease in Q2 operating revenues following COVID-19 flight suspensions, with 70% of its fleet grounded. This period registered a 99% drop in passenger numbers and a 95% drop in ASK compared to Q2 2019. Seat load factor for this period was 16%, mainly driven by the operation of special (repatriation) flights, and the resumption of a limited network of transfer services via Abu Dhabi in early June.
Tony Douglas, Group Chief Executive Officer, Etihad Aviation Group, said: “Etihad faced a set of enormous and unpredictable challenges in the first six months of the year. We started 2020 strong, and recorded encouraging results as part of our continuing transformation programme. This left us in a relatively robust position when COVID-19 hit, allowing us to act with agility, and to mobilise all available resources as the crisis deepened, taking major steps to reduce costs through a wide-reaching series of measures.
“While we have revised our outlook for the rest of 2020 based on current realities, we remain optimistic that as international borders re-open, we will increase our flying and carry more guests securely and with greater peace of mind, supported by the Etihad Wellness programme and our new Wellness Ambassadors. By September, we aim to increase our worldwide flights to half our pre-COVID-19 capacity. Looking forward, we rest assured that the UAE is leading the way in the research for a vaccine against COVID-19. The incredible efforts Abu Dhabi is making to ensure the safety and security of its residents and visitors will soon enable us to welcome the world back to our amazing home. This commitment was successfully highlighted by the recent hosting of major UFC events in the capital.”
Etihad operated up to 40 of its fleet of 97 passenger aircraft in Q2, including Boeing 787 Dreamliners, 777-300ERs, and Airbus A320 family aircraft as belly-hold cargo freighters to complement Etihad Cargo’s operational fleet of six 777-200F freighters. Between 25 March and 15 June, over 640 special passenger flights were operated to 45 online and offline destinations, using the passenger cabins of these aircraft to fly foreign nationals out of the UAE, and to bring UAE nationals back home.
Adam Boukadida, Chief Financial Officer, Etihad Aviation Group, said: “This year started strong, riding on the positive momentum gained in 2019, and by the end of the first quarter, the airline was on track to achieve a 2020 EBITDA of US$ 900 million (2019: US$ 453 million). Etihad managed to maintain a satisfactory level of liquidity despite a major drop in revenues, while continuing to raise new liquidity facilities supported by local and international financial institutions. This was supported by maintaining an ‘A with a stable outlook’ Fitch rating in April, at the height of the pandemic. Etihad was one of a small number of airlines to maintain its pre-COVID-19 credit rating.
“A greater emphasis is being placed on a drive towards increased cost optimisation and efficiencies across the entire business to face the hurdles placed in our way by COVID-19. Our suppliers and partners have also worked closely with us, including the arrangement of payment holidays with lessors and savings discussions with all of our supply chain, so we can re-emerge stronger together.”
|H1 2020 results||Q1||Q2||H1 total|
|Passenger Revenue (US$ billion)||0.95||0.06||1.01|
|Cargo Revenue (US$ billion)||0.17||0.32||0.49|
|Operating Revenue (US$ billion)||1.23||0.44||1.67|
|Core Operating Result (US$ billion)||(0.24)||(0.52)||(0.76)|
|Total passengers (million)||3.43||0.03||3.47|
|Available seat kilometres (billion)||22.45||1.24||23.69|
|Seat load factor (%)||74%||16%||71%|
|Cargo tonnage (leg tonnes ‘000)||143.3||111.1||250.5|
Etihad is gradually resuming services to more destinations across its global network. This follows the easing of travel restrictions by UAE regulatory authorities on outbound and inbound travel for citizens and residents. All travel remains subject to the entry and health regulations set by the UAE authorities, and those at the end destination.
Throughout August and September, subject to the lifting of international restrictions and the re-opening of individual markets, the airline aims to fly to 61 destinations worldwide from its Abu Dhabi hub, operating approximately 50 per cent of its pre-COVID capacity.
Subject to the applicable government approvals, Etihad’s summer schedule will feature a wider network and increased frequencies to the following destinations from, to, or via Abu Dhabi:
Middle East & Africa: Amman, Bahrain, Beirut, Cairo, Casablanca, Dammam, Jeddah, Kuwait, Muscat, Rabat, Riyadh, Seychelles Europe: Amsterdam, Athens, Barcelona, Belgrade, Brussels, Dublin, Dusseldorf, Frankfurt, Geneva, Istanbul, London Heathrow, Madrid, Manchester, Milan, Moscow, Munich, Paris Charles de Gaulle, Rome, Zurich Asia: Ahmedabad, Baku, Bangkok, Bengaluru, Chennai, Colombo, Delhi, Hyderabad, Islamabad, Jakarta, Karachi, Kochi, Kolkata, Kozhikode, Kuala Lumpur, Lahore, Male, Manila, Mumbai, Seoul, Shanghai, Singapore, Thiruvananthapuram, Tokyo Australasia: Melbourne, Sydney North America: Chicago, New York JFK, Toronto, Washington, D.C.
To protect its customers, Etihad launched ‘Etihad Wellness’, a comprehensive health and hygiene programme, building on the stringent measures already put in place to deal with COVID-19, and which is now a major component of the airline’s long-term customer strategy. The launch of the programme was championed by the introduction of specially trained Wellness Ambassadors, a first in the industry, who provide essential travel health information and care online via webchat, at Abu Dhabi International Airport, and in-flight, so guests can fly with greater peace of mind.
The global response to many aspects of the programme, including the game-changing Wellness Ambassadors and wide-ranging travel health and hygiene protocols, has been overwhelmingly positive. The airline is taking the opportunity to develop Etihad Wellness as a key differentiator for customers when purchasing a premium product which can guarantee them genuine care and effective health and safety measures, and deliver a world-leading service and hospitality offering.
Etihad Wellness initiatives are being communicated through an easy-to-use online guide focusing on the high standards of cleanliness, and health and hygiene being applied at every stage of the customer journey. This includes culinary hygiene at the airline’s catering facilities and food testing laboratory, aircraft cabin deep-cleaning, check-in, health screening, boarding, inflight experience and product, crew interaction, arrival, and ground transportation.
In June, Etihad also launched a partnership with Austria-based healthcare technology company, Medicus AI, to launch a COVID-19 risk-assessment tool that will empower guests to make informed decisions about travelling.
COVID-19 has brought unprecedented challenges for all airlines, with demand for travel significantly reduced, and Etihad continues to do all it can to support its world-class family of employees during this difficult period. However, due to the severity of the situation facing the industry, the airline has been forced to redesign the organisation around the need to make redundancies from its workforce across several areas of the business to ensure future continuity. Temporary company-wide salary sacrifices of 25% to 50% were also introduced.
Mr. Douglas adds: “Etihad, like all major airlines, has had no choice but to embrace the ambiguity of the situation it has been thrown into, and with much sadness, we have had to make some extremely difficult decisions to reduce the size of the workforce by several thousand. Those who have departed Etihad have done so with incredible dignity and their contribution has been immeasurable.
“We are tremendously proud of each member of the Etihad family, every one of whom has gone above and beyond in extremely difficult conditions to keep Etihad’s image held high, while maintaining superior levels of service. Etihad flew into the COVID-19 era with uncertainty but is re-emerging resilient, if a little battle-scarred, with a renewed focus on its core values. We are retraining our people throughout the organisation to deliver a new product for a new reality, based on the development and delivery of Etihad Wellness well into the foreseeable future.”
Etihad and Etihad Cargo operated special humanitarian services to 60 cities around the world, 40 of which are not currently served by the airline’s passenger or cargo network of flights. These included Addis Ababa, Antananarivo, Auckland, Bamako, Banjul, Barbados, Bhubaneswar, Bishkek, Bogota, Bucharest, Buenos Aires, Conakry, Dushanbe, Erbil, Freetown, Grozny, Harare, Havana, Kabul, Kiev, Kinshasa, Kish Island, Larnaca, Lima, Lucknow, Makhachkala, Moroni, N’Djamena, Niamey, Nouakchott, Podgorica, San Jose, Santiago, Santo Domingo, Sofia, Tirana, Wuhan, Yerevan, and Zagreb.
Extensive maintenance programme
With most of its passenger aircraft on the ground throughout April, May and June, Etihad embarked on the biggest aircraft maintenance programme in its history. The airline’s MRO division, Etihad Engineering, performed maintenance work on 97 passenger aircraft including 29 Airbus A320 and A321s, 10 Airbus A380s, 39 Boeing 787s, and 19 Boeing 777-300ERs. This ranged from minor maintenance tasks, such as seat repairs and updates to inflight entertainment systems, to bringing forward scheduled engine changes and modifications on several aircraft, reducing the need to withdraw them from service when scheduled services resumed. The extensive programme was additional to the routine maintenance which is carried out at regular intervals.
Etihad continues to be a leader, together with its partners in the UAE and around the world, in pioneering new and effective ways of mitigating aviation’s environmental impact. The sustainability strategy of the Etihad Aviation Group is aligned to the 17 Sustainable Development Goals of the United Nations. In January, in the presence of the EU Commission Etihad announced our commitment of zero net carbon Emissions by 2050 and halving of 2019 emissions by 2035.
Following the launch of the Greenliner programme in partnership with Boeing in November 2019, Etihad in January took delivery of a specially branded Boeing 787-10 aircraft, wearing a special ‘green’ livery to highlight its role in sustainability research activities, to drive innovation and sustainability into the operational space. To celebrate Ireland’s National Day, Etihad deployed the Greenliner from Abu Dhabi to Dublin. An optimised route profile reduced the journey time by 40 minutes, cut fuel by 800kgs, and CO2 by three tonnes.
In the same month, when Etihad announced its sustainability commitments in Brussels, the airline operated a Boeing 787 EcoFlight from Abu Dhabi to the home of the EU. The flight had an optimised routing by Eurocontrol; minimum single use plastics; and other fuel efficiency initiatives including the use of electric tractors at the Abu Dhabi hub, reducing APU usage, and optimising potable water levels.
“The clear focus moving forward is on adapting our transformation plan to reflect new market conditions, but without changing our overall objectives or sustainability goals and commitments. We anticipate some continued volatility for a while to come, as the world strives to put an end to COVID-19, and as testing methodologies and protocols evolve to become the new norm.
“We know that markets are certain to rebound and the world will rediscover the wonder of flying once more. When it does, our guests will value the Etihad Wellness proposition more than ever, and we are best positioned to deliver the security, assurance, and best-in-class experience they have come to expect from Etihad as a true full-service airline”, concludes Mr. Douglas.