Breaking Travel News sits down with Etihad Airways chief executive James Hogan at the World Travel & Tourism Council Global Summit in Japan to discuss the airline’s recent break into profitability, a widening partnership strategy and its recent recognition as the World’s Leading Airline by the World Travel Awards.
Hogan will participate in a highly anticipated panel discussion on Wednesday 18th April, that will examine the changing role and ever-changing nature of Airlines. Breaking Travel News checks in to find out what is on the agenda for Etihad during the Summit and looking ahead to 2012 and beyond.
Breaking Travel News: You’ve just reported a 28 per cent rise in revenue to US$ 989 million for 1Q 2012 compared to the same period in 2011. Your passenger figures are also climbing steadily. To what do you attribute these record results?
James Hogan: Our business model of organic growth combined with codeshare partnerships and strategic equity investments is powering our business forward. We continue to outperform much of the global airline industry with spectacular growth in revenue, passengers flown and freight carried. At the same time we maintain a vice-like grip on costs. All this has contributed to our strong start to 2012.
BTN: What is Etihad’s most significant development this year?
JH: Hitting the numbers in Q1 was very satisfying as we met all our revenue targets and budget estimates in the first quarter, despite the challenging economic conditions confronting the international community. Last year we made our maiden profit (US$14 million), an incredible achievement for an airline just eight years old. In 2012 we are determined to do even better as our goal is sustained profitability. The mandate from my shareholder is run a safe airline, one that is best in class and makes money – and great airlines make money year after year.
BTN: You have announced plans for continued growth and expansion of Etihad’s network? Is this growth sustainable? What is your end goal?
JH: We have a policy of measured growth. We currently fly to 84 passenger and cargo destinations in 53 countries with a fleet of 67 aircraft. By 2020 we will serve more than 100 cities with up to 160 aircraft, including 10 Airbus A380s and 41 Boeing 787-9 Dreamliners. So we will be a mid-size airline.
But apart from this organic growth we also have codeshare partnerships with 37 airlines. Etihads Airways is also the single largest shareholder in airberlin, Europe’s sixth biggest airline, and has a 40 per cent stake in Air Seychelles. This strategic partnership also includes a five year management contract.
BTN: In what ways will your successful expansion in Asia help you expand into new markets in Asia and Australasia? In what ways will you need to change / adapt your strategy to ensure successful growth into new destinations?
JH: Each country in Asia has its own unique conditions, stakeholders, and overseas travel patterns so there’s no pan-regional strategy that we apply uniformly to the Asia Pacific and Australasian region. We employ local market experts with the know-how and contacts to guide our market entry.
Moreover, our continuing investment in sales, marketing and corporate communications in Asia and Australia helps us grow our brand footprint in these markets and provides a solid foundation for further expansion
We don’t have a one-size-fits-all approach to network development. The decision to add any new destination to our network is based on a comprehensive analysis of the competitive landscape, revenue potential and the segmentation profile we identify for each new market we look to enter.
BTN: How important is your partnership strategy? What are the main benefits of your new partnerships with Air Berlin and Air Seychelles? What do you look for when identifying potential partners?
JH: Our codeshare partnerships generated 18 per cent of our revenue in the first three months of 2012 so they are obviously crucially important to our bottom line.
Also, our equity investments in airberlin and Air Seychelles give us strong passenger flows to our global network and allow us to offer our customers a whole new world of choice.
Our partnership with airberlin, for example, connects the airlines’ extensive networks and frequent flyer programs to offer travellers 239 destinations across 77 countries. Also, the revenue and costs benefits from the synergies with each carrier is another factor underpinning our successful growth strategy.
We are always looking for investment opportunities but we must be invited in by a company run by like minded management and any deal must help us grow our network, maximise efficiencies and boost sales opportunities.
BTN: Is Etihad Airways embracing mobile technologies and social media? To what extent is this a priority for you? What types of initiatives do you have in place in these areas?
JH: Social media activity is a large and growing priority for Etihad Airways. In the last year, we made a significant push to develop our Facebook fan page following, which has grown by 400 per cent as a result.
On a day-to-day basis, the page is utilized to communicate brand news and respond to fan inquiries and feedback, though we’re also finding great success with interactive promotional contests and giveaways.
This year will see the launch of a brandwide Twitter handle, increased presence on YouTube and expansion into new social media platforms.
Mobile technologies – both Smartphone and tablet – are currently in the research phase.
This is a rapidly evolving sector, so we are examining how to leverage our new capabilities with Sabre to introduce something truly exciting and innovative. We will move into development phase later this year, likely launching our first applications in 2013.
BTN: What is your single biggest challenge for 2012? How are you tackling this?
JH: Ensuring we meet our profitability target.