Global Air Map Being Redrawn

According to Etihad Airways’ President and Chief Executive Officer, James Hogan, the global air travel map is being redrawn as new markets evolve, traditional markets decline and the airline industry reshapes itself to accommodate changing conditions.

Speaking in Abu Dhabi on Wednesday at the World Travel and Tourism Council Global Summit, Mr Hogan told more than 800 senior travel executives that legacy airlines were unlikely to progress unless they radically changed the way in which they did business.

In addition to the ongoing challenges of economic instability and uncertainty surrounding fuel prices and supply, Mr Hogan said the rapid growth of air travel in markets such as India, Africa and the Middle East meant airlines would need to reshape their networks to accommodate changing traffic flows.

He said one of the fastest-growing regions was the Middle East, where major new hubs including Abu Dhabi were developing to support rapid economic growth in the region and to connect both new and traditional markets.

In order to participate in the new world of air travel, Mr Hogan said the next generation of airlines would need “the vision and willingness to be different”, in order to cut costs, improve productivity and find affordable ways of accessing new markets.

“Airlines across the world need to adapt to ‘the new world’ and identify and tap into growth markets. The industry must source and train staff for this new growth, as well as explore cost-effective growth opportunities,” Mr Hogan said.

He said Etihad Airways’ had created a new three-pillared business model, based on organic growth, codeshare partnerships and minority equity investments in other carriers. This strategy was underpinned by development of Abu Dhabi as a new global air transport hub, connecting the networks of partner airlines.

Currently, Etihad Airways has 42 codeshare agreements in place, as well as equity investments in four airlines: airberlin, Air Seychelles, Virgin Australia and Aer Lingus.

These partnerships have brought considerable benefits to Etihad Airways’ financial results, with codeshare and equity partner revenue in Q1 of 2013 up 34% to US$182 million and partner contributions representing 20% of the total.

Mr Hogan said, “Our equity investment proposition ensures commitment and obligation from both airlines and streamlines our entry into new markets, affordably and within foreign investment limits. This strategy helps us avoid the drawn-out process which applies for mergers and larger investments, and enables our continued expansion via established and respected global brands, while delivering reciprocal benefits to our partners, including access to our growing network and significant savings through activities including resource sharing and joint purchasing.”

Mr Hogan said the Etihad Airways strategy was to focus on growth markets and continue to build “a new ‘Silk Road’ that connects markets via the Abu Dhabi hub.”