Wednesday, January 18, 2017

Etihad defends equity investment strategy

NEWS FLASH


Air Serbia's part-owner, Etihad Airways, has defended its strategy of investing in a number of airlines, noting that the policy has delivered revenue and synergy benefits. The President and CEO of Etihad Aviation Group, James Hogan, said the Emirati carrier is already seeing a return on investment from Air Serbia, among others. “Our investments had an immediate impact on the revenue side, delivering hundreds of millions of dollars in additional revenues and allowing us to fill our onward connecting flights. Those benefits have been replicated in all our minority investments – in Air Berlin, Alitalia, Jet Airways, Virgin Australia, Air Serbia, Air Seychelles and Etihad Regional", Mr Hogan said yesterday. He added, "We have had some strong results but we also face some significant challenges. Jet Airways, Air Serbia, Air Seychelles, Virgin Australia and Etihad Regional have all used our capital investments to help structure their businesses into more efficient and profitable operations. In those cases, our long term investments are already delivering a return. However, we have faced greater challenges with Air Berlin and with Alitalia. Both are operating in very tough competitive environments, and need to address long-standing issues facing their businesses. I believe Air Berlin’s strategy is now on track and Alitalia is finalising a business plan to address its issues". Mr Hogan reiterated that Etihad is committed to its equity partner strategy, noting that, "Some of those airlines need to react to the market pressures they face, and we are supportive of that process". Etihad's strategy of investing in fledgling carriers across the world has been under scrutiny recently with ongoing financial issues at Air Berlin and Alitalia. Etihad yesterday rebuffed speculation it was in talks of taking a 30% - 40% stake in Lufthansa. Late last year, the Emirati carrier also denied rumours it would disinvest from Air Serbia, noting it was "fully committed" to the partnership.

14 comments:

  1. Alitalia was always in the red. That thing is losing money no matter the amount (or lack) of competition
    They had one year of profits since 1946

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    1. True indeed. Makes you wonder why Hogan thought he could change anything.

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  2. Hogan is facing though time due to huge loss he generated. There are opinions that he will survive at the helm, due to past "miracles"he did for EY. If so, it will be first time in history that someone in commercial aviation is pardoned after burning down 2.5 billion $. Regarding JU it's true EY instantly started to gain return on investment, but that has nothing to do with the commercial conditions. It came from subsidies.

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    1. can you exactly explain how it gained from the subsidies? almost all subsidies were in form of JU not paying airport tax (JU, not EY), so what are we talking about here?

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    2. It's obvious: JU got state support trough subsidies, claimed profit, EY took its share of the profit, i.e. immediate return on investment. Clear and simple. Now Hogan has a case, saying not all European investments were dubious. He emphasizes JU as a profitable investment with immediate profit. In reality, profitability was provided by the Serbian taxpayers.

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    3. So all this fuss about a couple of millions of profit that went so far to EY? To EY, which has tens of billions of state support. Does not make much sense, anon. 5.30. Nothing clear and simple there. Or in real life for that matter.

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    4. It's not how large the profit is. He is using JU as a case to show profitability is possible in Europe. That's where he is manipulating. Because JU is not a proper example, since the profit comes from state subsidies. He has no other example in Europe. All EY's European investments failed (including JU), because the income per seat-kilometer is three times less than in US. That's why European legacy airlines are struggling. That's why in restructuring of AB and AZ Hogan is talking on future focusing on long-haul. But, the big picture is more complicated, even for Hogan's survival.

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    5. Anonymous January 18, 2017 at 5:30 PM
      +1

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    6. Anon. 19.21
      Conspiracy theorists are the easiest targets for con artists. To them, everything seems clear and simple. Con artists just love that.

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    7. Anon 9:01 pm

      Nothing about conspiracy. All data mentioned in post 7:21 are public. It's clear and simple. Hogan failed in Europe, but he had no other choice, since no US airline is on sale. He probably knew there is no profit in Europe, but he didn't care: he was burning UAE money, not his own.

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    8. @5.30
      the level of information that flies around here is critical. how can you write about the stuff you don't even understand?

      what EY share of profit? there were no dividends ffs!
      if there were no creative accounting this company would be burning ~20mil€/y

      only upside that hogan mentions is addition of pax, and incoming revenue, however the man is forgetting to mention are these pax profitable? obviously not.
      entire these boasting looks like a swan song.

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  3. Has Hogan left EY or is he still the CEO?

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    1. Like it says in the text he is President and CEO of Etihad aviation Group.

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    2. It was reported in December that he would leave by the end of January,confirmed from several independent sources to Handelsblad. The Australian reconfirmed and claimed he would be joined by CFO James Rigley (both members of JU board). But, it seems Hogan is working hard to keep his position, so at least one international report couple days ago stated he might stay.Basically, that's the purpose of this news we are commenting - to defend his position. His arguments are: yes, I lost 2.5 billion $, but these poor investments brought EY hundreds of thousands new passengers from AB and AZ, so the loss is much lower. Hogan likes the argument of "indirect" income. Every three months he orders new research from Oxford Analytics to show the indirect contribution of EY to various economies, including Serbian. Of course, he is manipulating many figures, like in case of the profitability of JU.

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