Name of the Company: Etihad Airways
Business Sector: Aviation
Operating Geography: Middle East, Global
About the Company: Etihad Airways established in 2003 is the national carrier of United Arab Emirates and one of the largest airlines in the Middle East. Headquartered in Abu Dhabi, UAE it has a modern flet of 124 aircraft and has over 26,000 employees as of 2017.
Revenue: US $9.02 billion– FY ending Dec 2015
Competitive Analysis of etihad airways
|1. Strong operational performance|
2. Support from the Emirate of Abu Dhabi
3. Strong and geographically diverse equity partner network
4. Worldwide route network with a young, modern and efficient fleet
|1. Operational challenges in subsidiaries - airberlin and with Alitalia
2. Non-disclosure of financials and limited transparency
|1. Strategic technology investments to deliver long term cost benefits|
2. Growth potential in air cargo segment
|1. Formidable competition in Middle East and Europe
2. Accusations by rival airlines in the United States
3. Increase in conflicts and terrorist threats across Middle East
4. Low oil prices increases price competition from rival legacy carriers
1. Strong Operational Performance: Etihad clocked a strong operational performance in FY15. Its 2105 net profit stood at 103 million US$, up 41% from FY14, while revenue was at US$ 9.02 billion up by 19.5%. Etihad also carried a total of 17.8 million passengers in 2015. Fitch has also assigned Etihad Airways with an ‘A’ rating and a Stable Outlook.
2. Support from the Emirate of Abu Dhabi: Etihad being the flag carrier of UAE enjoys strong support from the government, both in financial and administrative areas. Etihad also had an access to an interest-free $3 billion loan from the Abu Dhabi royal family according to a Reuters report.
3. Strong and geographically diverse equity partner network: Etihad boasts of a strong and geographically diverse equity partner network across the globe. It is the single largest shareholder with 49% stake in the Italian carrier, Alitalia. It also has a 29% stake in AirBerlin, 24% stake in Jet Airways, 20% stake in Virgin Australia which are major carriers in their respective geographies. Etihad further holds 49% stake in Air Serbia, 40% stake in Air Seychelles and 33% stake in Etihad Regional (Swiss regional carrier). Thus combined with its partners Etihad has a global reach and is the seventh largest airline group globally. Further though its equity partners Etihad has been able to identify and develop significant business synergies and cost savings. Etihad further has 188 interline relationships and 54 codeshare agreements with carriers globally.
4. Worldwide route network with a young, modern and efficient fleet: Etihad directly serves more than 120 destination globally and more than 600 destinations through its codeshare partners. It also clocked an high 79.4% network-wide seat load factor in 2015. Etihad also boasts of an young, modern and efficient aircraft fleet which helps in operating and environmental efficiency and helps in delivering best-in-class customer experience. Etihad also has 10 and 14, Airbus A380 and Boeing 787 Dreamliners respectively in its fleet which are the world’s largest and most modern widebody aircrafts.
1. Operational challenges in subsidiaries - airberlin and with Alitalia: Etihad is facing challenges with its two major European subsidiaries - airberlin and Alitalia. Both of these airlines are operating in a tough competitive environment. Alitalia was facing financial woes when Etihad bought 49% stake in 2014. The subsequent restructuring plan proposed by Etihad resulted in lienating Alitalia's workforce and was ultimately rejected. Also without a majority stake in Alitalia and the powerful labor unions at Alitalia who prevented Etihad from making the desired changes, Etihad’s influence was restricted and ultimately Alitalia lost further ground to rivals such as Ryanair and EasyJet. Air Berlin was also operating under losses and has a 1.2-billion-euro debt in its books and will need a major financial and operational restructuring for a turnaround.
2. Non-disclosure of financials and limited transparency: Etihad being a state owned enterprise does not disclose its financial accounts which brings into question its corporate governance practices. The carrier just releases a summary of its annual performance which does not represent a detailed picture of its accounts. Rivals in united States have accused Etihad of receiving financial assistances which violate Open Skies policy. Unless proper and transparent accounting policies and standards are followed, and annual statements disclosed Etihad cannot claim to be a truly transparent organization which follows proper corporate governance practices.
|1. Support from the Emirate of Abu Dhabi|
2. Terrorism and civil unrest and political uncertainty across Europe, Middle East and African (EMEA) markets
|1. Trade protectionist policies of new U.S. administration
2. Low oil price environment increasing competition
|1. Etihad - a strong force in UAE's Emiratisation program||1. Implementation of Customer Relationship Management (CRM) solution
2. Acquisition in ancillary travel technology firm
3. Strategic technology investments for cost optimization
|1. Ban on carrying electronic devices to U.S bound flights||1. Modern and environmentally efficient fleet
2. Water consumption and recycling
1. Implementation of Customer Relationship Management (CRM) solution: Customer relationship and loyalty plays a critical role in Etihad's global strategy and technology has a key role to play in the same. Etihad’s CRM technology solution is acting as the backbone of its four loyalty programs and helps its customers by offering a personalized experience driven by data and analytics. Etihad's Global Loyalty Company (GLC) crossed a membership of more than 20 million in 2017 through its four loyalty programs - Etihad Guest, MilleMiglia, JetPrivilege and topbonus.
2. Acquisition in ancillary travel technology firm: Etihad Airways acquired a 51 per cent stake in Amadeus Gulf which primarily is a provider of Global Distribution System (GDS) for travel industry and also provides technology consulting and support in the area of sales, marketing and distribution to travel and tourism related firms. The acquisition strengthens Etihad's entry in travel technology ancillary services domain and also implement the same technology internally across the organization.
3. Strategic technology investments for cost optimization: Etihad has a several technology partnerships which will help in cost optimization and operating efficiency for the carrier. Etihad’s deal with IBM will help it build a cloud data center in Abu Dhabi. In other notable partnerships, Cognizant is implementing the next-gen Digital Guest Experience platform and Accenture will help Etihad undergo a business transformation program and provide strategy and consulting services to streamline Etihad's corporate functions. Accenture will also work closely with SAP which is Etihad's technology partner for the transformation program which is based on SAP® HANA platform.
The unpublished sections of the entire Etihad PESTLE / PESTEL analysis is available in the 'Complete Report' on purchase.
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Etisalat SWOT and PESTLE analysis has been conducted and reviewed by senior analysts from Barakaat Consulting.