What’s Etihad’s strategy for suspending more flights to the US?

November 2, 2017 5:39 pm


In a statement, Etihad Airways said that it suspended its Abu Dhabi – Dallas/Fort Worth (DFW) route effective 25 March 2018, as it will become commercially unsustainable, following American Airlines’ unilateral decision to terminate its codeshare agreement with the airline.

Peter Baumgartner, Etihad Airways Chief Executive Officer, said: “The unfortunate decision by American Airlines to terminate a commercial relationship that benefited both carriers has left Etihad with no choice but to suspend flights between our Abu Dhabi home and Dallas/Fort Worth.

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“The cancellation of the Dallas route is one of several adjustments that we are making to our US network in 2018 in order to improve system profitability. Further changes are possible as we monitor the full impact of the American Airlines codeshare cancellation on summer 2018 bookings.”

More than 235,000 travellers have flown on the route since its 2004 launch, and almost half of Etihad Airways’ DFW customers connect on US codeshare flights operated by American Airlines.

Etihad Airways currently operates 42 non-stop flights a week to five US gateways – Chicago, Dallas/Fort Worth, Los Angeles, New York and Washington.

However, the trend moves towards reducing flights not increasing them, so why is this happening?

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Hard pill to swallow

Saj Ahmad, Chief Analyst – StrategicAero Research, said that Etihad’s decision to drop the Dallas run was not an easy one.

“Given that American Airlines had nixed the commercial arrangement between the two airlines, as well as partnering up with United and Delta to continually complain about GCC airlines, Etihad likely felt that continuing this route would not be viable given that its previous agreement with American Airlines effectively de-risked the route thereby allowing it to be worth flying.”

“Despite the allure of a US Preclearance facility at Abu Dhabi International, flights to Dallas Fort-Worth were not pulling in the numbers Etihad had hoped. That said, given the growth of its fuel efficient 787-9 fleet, there is future opportunity for Etihad to re-examine all of its US touchpoints as the carrier looks to get back into the black after its heavy losses reported earlier in the year,” he adds.

Ahmad argues that suspending the Dallas route makes far more sense than keeping it going at a loss and that it’s moves like this one that will eventually bolster Etihad’s financial position.

“With that in mind, it is not out of the realm that Etihad could approach the likes of Southwest Airlines or indeed, another US carrier to see whether the DFW sector could be re-established.”

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San Fran was the first casualty

Reuters reported in June 2017 that Etihad was suspending flights to San Francisco starting October 29, 2017, due to low load factors, which have reduced the route’s profitability.

“This follows a decision by Etihad earlier this year to reduce the frequency on the route to three times a week, after the carrier launched the Abu Dhabi-San Francisco route in November 2014 as a daily service.

“Lower-than-planned yields and load factors have significantly reduced the route’s profitability.” Etihad said in a statement and added that the airline remained committed to its other US services, which are performing at or above commercial targets.

Tough times all around

The suspension announcement in June 2017 by Etihad followed Emirates’s own declaration that it would be reducing flights to the US, following US visa restrictions and crackdown on electronic devices in aircraft cabins.

In March 2017, the US government imposed restrictions on electronic devices carried by travellers coming to the US from ten airports mainly in the Middle East and North Africa, in response to unspecified terror threats.

Abu Dhabi’s Etihad Airways has reported a net loss of $1.87 billion for 2016, after posting $8.36bn in revenues carrying 18.5 million passengers during the year.

Emirates Airlines reported an 82 per cent drop in its annual profits last year.

There was a speculation that the two carriers could merge to consolidate and cut costs , but Emirates Airlines’s President Tim Clark told Reuters recently that the matter was “unlikely”.

From its Abu Dhabi base, Etihad Airways flies to, or has announced plans to serve, more than 110 passenger and cargo destinations in the Middle East, Africa, Europe, Asia, Australia and the Americas.

The airline has a fleet of more than 120 Airbus and Boeing aircraft with firm orders for 71 GE-powered Boeing 787s and 25 Boeing 777Xs.

 

 

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By Hadi Khatib
Hadi Khatib is a business editor with more than 15 years' experience delivering news and copy of relevance to a wide range of audiences. If newsworthy and actionable, you will find this editor interested in hearing about your sector developments and writing about it.



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