Dubai: Etihad Airways’ joint venture carrier - Air Arabia Abu Dhabi – is off to a good start after being ‘fully profitable’ in its first year of existence.
“We are very proud because within the broader Gulf region it’s the first AOC (air operator certificate), to our knowledge, that went fully profitable from year one,” said Etihad Airways’ CEO Tony Douglas during an Aviation Week podcast. “That’s testimony to Air Arabia’s ability to run a very tight ship indeed.”
Air Arabia Abu Dhabi, which was launched in July 2020, added seven new routes last year. Recently, the carrier announced plans for more Indian destinations such as Chennai and Jaipur.
In 2021, Air Arabia also announced the signing of an agreement with the Armenian National Interests Fund (ANIF) to launch Armenia’s national airline ‘Fly Arna’. Another joint venture is with Lakson Group, one of Pakistan's leading business conglomerates, to launch ‘Fly Jinnah’ a low-cost airline based in Pakistan.
“They are the standout business model within the Middle East region in terms of knowing how to operate a low-cost proposition in a very efficient way,” Douglas said.
Not a big deal
Douglas also said the Russia-Ukraine conflict and the spike in jet fuel prices are just a “short-term blip” in the “grand scheme of things”. “There's a lot more optimism in place, but I don't think anybody would be naive enough, given the many other challenges that are out there,” Douglas said. “We've all managed to be able to navigate through them and I don't see this as being anything other than a relatively short term blip in the greater scheme of things.”
Average jet fuel prices in the third quarter could range from $165 a barrel to $225 if tensions between Russia and Ukraine escalate further.
Q1-22 profit
During the CAPA airlines summit last week, Douglas said Etihad had a profitable first quarter, helped by high load factors. “The first quarter has been extremely strong for us - it's probably the most profitable quarter in the history of the company,” Douglas said. “First of all, the demand continues to grow and the yield is still there in the ticket price.”
Etihad, which was in the midst of a turnaround before the pandemic began, recorded a sharp drop in losses in 2021 at $476 million compared to a loss of $1.70 billion in the year-ago period. “We created our own crisis in 2016,” he said. “We had to go through a complete restructure, change of operating model, what I would describe as an open heart surgery with our balance-sheet.”
The CEO said that recovery began in earnest in 2021 when Abu Dhabi relaxed travel restrictions. “What we saw after that was an incredible increase in demand - people characterize it as revenge tourism.”