Etihad cuts Perth and Edinburgh to boost profits

by Geoffrey Thomas and Steve Creedy
2923
April 11, 2018
Etihad Airways cuts Perth
Etihad Airways cuts Perth

Etihad Airways has announced it is withdrawing from its daily service to Perth, Western Australia, and Edinburgh, Scotland, as part of a significant restructure aimed at boosting profitability.

The carrier said the cancellations were among several adjustments it was making to its network in 2018 “to improve system profitability”.

This includes the announcement Wednesday that the airline would add an additional weekly service to Morocco from May 1 using its three-class Boeing 787-9 Dreamliners.

It is understood the Perth and Edinburgh decisions are the most significant of the changes but there will be other small capacity adjustments, mostly across Europe.

The airline was pitted in both of the axed markets against aggressive neighbor Qatar and in Perth, it also competed against Dubai-based juggernaut Emirates.

Read: Etihad sells the good life in economy

Both moves are effective from October 1 and follow last year’s massive loss of $US1.87 billion, caused mainly by a fleet write-down and one-off charges related to troubled airline investments under its previous management.

The airline launched services to Perth in July 2014, with 262-seat Airbus A330-200s and upgraded the service to 299-seat Boeing 787-9s in June 2016. It has been flying to Edinburgh for three years.

Last year, Etihad Airways chief executive Peter Baumgartner warned that “we are in an industry characterized by overcapacity, declining market sizes on key routes, and changing customer behavior as a weak global economy affects spending appetite.”

An Etihad spokesman said the decision to cancel the Perth service was part of a continuing review of network performance.

“Along with our travel agency partners, we will work closely with impacted guests to notify them of the changes to their itineraries and accommodate them on alternative flights,” he said.

Earlier this month, Etihad Airways said that partner Virgin Australia remains important but declined to comment on renewed speculation it may sell its stake in the Australian carrier.

Pundits have been conjecturing that Etihad might quit its stake of just over 20 percent in Australia’s number two carrier since it pulled its financial support for troubled European carriers Air Berlin and Alitalia.

Australia’s national newspaper, The Australian, reported over Easter there was renewed speculation in the market over the intentions of Virgin shareholders “with some pondering whether Etihad is about to stake an exit”.

Asked about the speculation, Etihad said: “We don’t comment on rumor or speculation, but we continue to work closely with Virgin Australia as they are an important partner for Etihad Airways.”

The airline said this week it remained committed to markets in both Eastern Australia and the UK, where it flies to London Heathrow and Manchester. It is understood it also moved to assure Virgin Australia this was the case.

“Etihad Airways is committed to the Australian market and continues to offer regular schedules to its key gateways across Australia through Sydney, Brisbane and Melbourne, all of which are major markets for the airline,” the spokesman said.

There has been a view that Etihad is looking to unravel the network of investments made by former chief executive Hogan as it seeks to bolster its bottom line after recording a $US1.87 billion loss in 2016.

Much of the loss was due to a $US1.06 billion charge for a fleet write-down and a $US808 million charge related to Air Berlin and Alitalia. But it was also hit by lower oil prices, overcapacity and the impact of terrorist attacks in Europe.