July 3, 2018 / 9:23 AM / 5 months ago

Etihad slims down as Abu Dhabi trims its air travel ambitions

DUBAI (Reuters) - Abu Dhabi has abandoned its goal of becoming a major air travel hub akin to Dubai and is instead reorganising its airline Etihad into a mid-sized carrier focused on direct flights in an attempt to return it to profit.

Etihad Airways Airbus A320-200 plane is seen at the National Airport Minsk, Belarus April 19, 2018. REUTERS/Vasily Fedosenko

Recently-appointed Etihad Airways Group Chief Executive Tony Douglas said on Tuesday the state-owned airline was becoming “more rational” and would not shy away from dropping routes that were commercially unsustainable.

After years of rapid expansion, Etihad plunged to a loss in 2016 following a slowdown in passenger traffic growth and failed investments in foreign airlines such as Air Berlin and Alitalia.

It has been restructuring since, and on Tuesday said it had reorganised into seven business units directly reporting to Douglas, as opposed to individual businesses operating under a group structure set up by his predecessor.

Some senior and mid-management employees will lose their jobs and others will be moved into new positions, Douglas told Reuters by phone, declining to disclose the number of jobs likely to be affected.

He said many thousands of people had left since the restructuring process began in 2016, but that job cuts were no longer a major focus for the group and that the reorganisation was about improving operational efficiency.

Etihad currently employs around 23,000 people.

The group also said Douglas had taken over direct responsibility of the airline business from Peter Baumgartner, who will continue to work with Etihad as an adviser.

KEEPING STAKES

Douglas joined in January from Britain’s ministry of defence, replacing veteran group CEO James Hogan who left months earlier as a strategic review got underway.

Under Hogan, Etihad spent billions of dollars buying stakes in other airlines as it sought to transform Abu Dhabi into a major hub like Emirates has done for Dubai 128 kilometres away.

Etihad is now focused on point-to-point traffic to destinations where passengers want to visit Abu Dhabi, and not just fly through it, Douglas said.

Abu Dhabi, the oil-rich capital of the United Arab Emirates (UAE), is hoping culture will attract tourists and last year opened a branch of the Louvre museum.

Etihad’s strategy of investing in other airlines unravelled last year with the collapse of Air Berlin and problems at Alitalia.

Douglas said, however, that Etihad would continue to hold its stakes in India’s Jet Airways, Virgin Australia, Air Serbia, and Air Seychelles.

The carrier issued $1.2 billion in bonds with some of the airlines it owns stakes in. After the collapse of Alitalia and Air Berlin those bonds have nosedived. Some investors expected Etihad or other Abu Dhabi entities to back the bonds.

FILE PHOTO: Etihad Airways Airbus A340-600 plane is seen parked at Abu Dhabi International Airport in United Arab Emirates, December 16, 2017. REUTERS/Amr Abdallah Dalsh/File Photo

Douglas said Etihad would continue to fulfil its obligations to the bonds, but declined to comment further.

Etihad is not legally obliged to back the bonds.

Reporting by Alexander Cornwell; additional reporting by Stanley Carvalho in Abu Dhabi; Editing by Jason Neely and Mark Potter

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