Steve Creedy, Aviation writer From: The Australian April 26, 2011 12:00AM
ETIHAD's alliance with V Australia has already boosted interest from corporate customers and is expected to assist the Abu Dhabi carrier in the final leg of its journey towards profitability.
Etihad chief executive James Hogan remains bullish that the airline will move into the black next year after a strong first quarter delivered a maiden operating profit, despite high fuel prices, natural disasters and the political unrest in the Middle East.
The Virgin Blue partner did not reveal the size of the quarterly operating profit but said a 21.2 per cent increase in revenue, to $US770 million ($716m), and a 5.9 per cent reduction in unit costs, had pushed earnings before interest, tax, depreciation, amortisation and rentals into the black for the first time.
The result, despite a reduction in business and group traffic to some Middle East destinations, has left Mr Hogan quietly confident that the airline will break even this year ahead of the move into profitability.
"As you know, it's a little bit like Aussie rules, it's quarter by quarter," he told The Australian.
"But, you know, (in) the first quarter we're up on Collingwood, the second quarter I'm confident and then we'll start looking at the the third and fourth quarter."
Etihad's passenger revenues rose 15 per cent in the first quarter as passenger numbers increased by 10.6 per cent to 1.85 million.
A 2.4 percentage point fall in load factors, to 72.7 per cent, was attributed to unrest in the Middle East and the Japanese earthquake and tsunami.
But the airline's cargo revenues leapt forward with revenue up 44 per cent year-on-year on a 22 per cent capacity growth.
Mr Hogan said the unrest in Cairo and Bahrain had resulted in a slowdown in business and group traffic from Japan, China and Korea even before the earthquake in Japan occurred.
But unaffected areas had continued to build and the airline's network, involving partnerships with about 30 carriers, was attracting premium travellers. "For example, London is very strong for us so we are seeing key European cities, even though we have the austerity measures in Europe," he said.
"It's all business traffic coming out of Europe over the Gulf, same out of the Americas, and cargo continues to boom for us."
Mr Hogan said the airline's business was maturing and economies of scale were starting to kick in following the airline's rapid expansion.
"What we're seeing as the business matures is that we're getting the utilisation of the aircraft, we are getting (connecting) banks, we are getting crew productivity right, we're getting the depth into the network," he said.
"So we are starting to see the costs reducing. That helps us."
Eithad had also learned to hedge its fuel properly, he said.
It had a three-year rolling program and had entered the year 75 per cent hedged. This started to run down in the fourth quarter, so it was starting to hedge forward into next year and the year after.
Mr Hogan said he was happy with traffic out of Sydney, with Etihad running load factors of about 80 per cent in April and V Australia, the long-haul offshoot of Virgin Blue, at about 64 per cent and growing.
"Going into May and June the numbers are loading quite well for both of us outbound from Sydney," he said. "We're also winning corporate accounts with Virgin, we're cranking up our frequent flyer partnership -- earn and burn -- so the objectives we set as partners are coming through."
Etihad corporate accounts in Australia include KPMG, Astra-Zeneca and Transurban, and Mr Hogan said he expected more.
"You bet," he said. "We picked up a major one with Virgin."
