Etihad Airways, the national airline of the United Arab Emirates, has announced its strongest annual financial results to date, with a net profit of US$ 103 million on total revenues of US$ 9.02 billion.
The performance, which marked the airline’s fifth consecutive year of net profitability, also saw earnings before interest and tax (EBIT) of US$ 259 million, and earnings before interest, tax, depreciation, amortisation and rentals (EBITDAR) of US$ 1.4 billion, representing 16 per cent of total revenues.
James Hogan, Etihad Airways President and Chief Executive Officer, said: “Our mandate is to build a sustainably profitable airline. A fifth year of net profits, with our best annual financial performance to date, shows that we are delivering against that goal.
“Our profitability clearly demonstrates the success of our business strategy, based on organic growth boosted by our partnerships. As well as operating profitability, we are building enterprise value across the airline and its many additional business streams.”
Etihad Airways’ financial statements are audited by Deloitte and are in accordance with International Financial Reporting Standards (IFRS).
Strong operational performance saw improved load factor, as passenger volumes outpaced capacity increases
Etihad Airways carried a total of 17.6 million passengers in 2015, an increase of 18.9 per cent year-on-year. The growth in passenger volume continued to exceed Etihad Airways’ capacity increase and outperformed regional market growth, which has seen a decline in load factors since mid-2014.* Revenue Passenger Kilometres(RPKs), which measure passenger journeys, increased 21.3 per cent to 83.2 billion, while Available Seat Kilometres(ASKs), which represent capacity, grew by 21.0 per cent to 104.8 billion.
In total, the airline operated 97,400 flights covering 467 million kilometres. The average network-wide seat load factor was 79.4 per cent for 2015, compared with 79.2 per cent in 2014.
Six new destinations were added to Etihad Airways’ global network – Kolkata, Madrid, Hong Kong, Entebbe, Edinburgh and Dar es Salaam – and capacity increased on 16 existing routes with bigger aircraft, more frequency and improved seat occupancy.
Etihad Airways’ fleet increased by 11 aircraft to a total of 121 at year end. With an average age of 5.8 years, Etihad Airways’ fleet is one of the youngest and most environmentally friendly in the industry. The additions included four A380-800 and four Boeing 787-9 Dreamliner aircraft, while further leased capacity was also added.
The A380 was rolled out on the Sydney and New York routes, and inducted on a second daily flight to London Heathrow, while the 787 began commercial operations between Abu Dhabi and Zurich, Brisbane, Washington DC and Singapore.
Partnership strategy delivered five million passengers and $1.4 billion in direct revenues, as well as significant cost synergies
Etihad Airways’ partnership strategy, based on almost 50 codeshare agreements and its strategic minority investments in selected airlines, remained a key driver of its growth in 2015.
A new codeshare agreement was introduced in 2015 with Pakistan International Airlines (PIA), while Etihad Airways’ existing codeshares with Air Serbia, American Airlines, flynas, Jet Airways, Korean Air, NIKI and S7 Airlines were significantly expanded. As a result, Etihad Airways now offers a combined passenger and cargo network of nearly 600 destinations through its 197 interline and 49 codeshare partnerships.
Etihad Regional was the latest addition to Etihad Airways’ equity partner network, which also includes airberlin, Air Seychelles, Jet Airways, Air Serbia, Alitalia and Virgin Australia. Etihad Airways’ stake in the latter increased to 25.1 per cent in 2015. Combined, the equity partners comprise the seventh largest global grouping of airlines, together flying more than 100 million guests worldwide.
The strategy has contributed to a large increase in sales across Etihad Airways’ global network, delivering revenues of US$ 1.4 billion – an increase of 22.1 per cent on 2014 figures – and more than five million passengers onto Etihad Airways’ flights. In addition, the airline and its equity partners have been able to identify and develop significant business synergies and cost savings.
Mr Hogan said the airline’s return on its equity investments into the seven airlines was many times more than the money it had spent.
“For an investment smaller than the cost of three new aircraft, we have been able to build our global network, attract five million new customers and $1.4 billion of revenues, and share massive cost synergies. That’s smart business,” Mr Hogan said.
“This is a two-pronged approach. From a strategic level, we are looking for the equity partners to bring network connectivity, generate additional revenues and create economies of scale. All our partners are delivering on this level.
“Each partner then has a P&L goal, which is the responsibility of its own management and Boards of Directors. Many of these, such as Air Serbia, Air Seychelles, Jet Airways and Virgin Australia, are now delivering on this level too.
“Even with an investment such as airberlin, where it has taken longer than expected for the airline to reach sustainable profitability, we are seeing incredibly strong returns directly into our business, far in excess of our original expectations.
“We have already received more than US$ 500 million in direct revenues to Etihad Airways and airberlin today delivers more than US$ 150 million a year in direct revenues, as well as wide-ranging cost synergies which have already reached more than US$ 100 million. In addition, the airberlin relationship is delivering a contribution of more than US$ 630 million a year to the Abu Dhabi economy. This is why we remain committed to the restructuring of that business as it moves forward.”
Global financial community continued to recognize success of Etihad Airways’ strategy
During the year, Etihad Airways was instrumental in securing a US$ 700 million financing transaction to fund expansion for the airline, its subsidiary Etihad Airport Services and five of its seven airline equity partners within Etihad Airways Partners (EAP).
Mr Hogan added: “This ground-breaking transaction was the first of its kind in the airline industry, and its success highlights the high level of confidence and support from institutional investors for our unique business strategy. It was a vote of confidence not just in Etihad Airways but in our partners too.”
In 2015, Etihad Airways was assigned the rating of ‘A’ with a Stable Outlook, by Fitch Ratings. Fitch Ratings, one of the world’s largest credit ratings agencies, issued the Long-term Issuer Default Rating (IDR) following a detailed independent analysis of Etihad Airways’ business, its commercial performance and its equity alliance strategy.