Etihad, Lufthansa and EU Nationals Control

The LBA on 16 October 2014 reversed a decision to cancel 34 code share flights of Etihad and Airberlin that was taken a few days earlier. The reason for the earlier cancellation was that these code share flights violated the traffic rights agreement between Germany and the UAE. A meeting later in the month between both governments to discuss the bilateral will clarify things for the future. Lufthansa blames these code shares for the overcapacity on the Abu Dhabi route and called them unjustified.

Lufthansa has lobbied the EU to reexamine the control issues of foreign equity stakes in EU carriers and has lobbied for the courts to block Emirates Milan/JFK flights earlier in April 2014; those flights are now operated on a temporary authority pending an appeal's court decision.

Lufthansa has been more vociferous than most regarding the 3 Gulf carriers expansion into Europe. The EU now is examining whether Etihad controls Airberlin and Alitalia through its equity stakes and is also looking at the Delta/Virgin Atlantic deal. This has prompted the Swiss authorities to look at Etihad's control of Darwin Airlines now branded Etihad Regional.

The issue of foreign investors having control of EU carriers is  becoming a thorny issue. There is a needed balance required between control and the investment risk of bailing out a European carrier and preserving jobs and airline services to communities. The major EU legacy carriers are coming under pressure from EU LCCs and apparently from the Gulf carriers that they are not willing to invest more but are looking to cut costs and curtail services. Air France/KLM declined to increase its stake in Alitalia and Lufthansa was not interested in a minority stake. Etihad worked very hard to get the unions and the creditors to accept its terms for its USD 750 millions direct investment for a 49% equity stake in Alitalia. The problems of Lufthansa and AF/KL are compounded by the mega orders from the Gulf carriers for Airbus aircraft with the associated economic fallout of order cancellations.

Etihad will modify its agreements with its equity partners to comply with the EU and Swiss regulators control requirements. Etihad did the same in India when the regulators questioned its control of the Jet Airways board. Etihad will not jeopardize its strategy for expansion; one that is based on equity partnerships providing access to new markets, cost savings in aircraft acquisition, maintenance and other services and more traffic through its Abu Dhabi hub.

The airline industry is more global than ever; the EU has to balance its requirements and need of EU nationals control of its airlines and the foreign investment in these airlines. These investments preserve jobs and services in Europe at a time when its economies are under pressure and their own carriers are not willing to invest.

ADAT, Moving Forward or ...

In early May 2014, Etihad Airways acquired or took over Abu Dhabi Aircraft Technologies (ADAT), formerly Gulf Aircraft Maintenance Company (GAMCO), from Mubadala except for the Engine Shop.

GAMCO was founded in 1987 as a partnership between the Government of Abu Dhabi and Gulf Air who owned a 40% stake, primarily to undertake the existing wide body and new technology aircraft (L1011, B767, A320, A330 and A340) fleets of Gulf Air. As Gulf Air's financial situation deteriorated in 1997, GAMCO expanded its third party business and aircraft maintenance capabilities beyond the Gulf Air requirements. As a result GAMCO expanded to become one of the top 15 MROs globally and number 1 in MENA (between Europe and Singapore) with more than seventy (70) customers ranging from North America through Europe and MENA all the way to the Far East. In early 2006, Gulf Air pulled its maintenance from GAMCO following the 2005 withdrawal of the Abu Dhabi Government from Gulf Air. The relationship between Gulf Air and GAMCO was at best very uneasy.

As a result the Abu Dhabi Government acquired Gulf Air's 40% share in GAMCO and turned it over to Mubadala, a government investment arm in the aerospace and technology sector. In 2007 Mubadala rebranded GAMCO as ADAT.

When Etihad was formed in 2003, GAMCO was entrusted with the total maintenance and support of Etihad's expanding fleet. Fast forward to the present; a decade later Etihad has withdrawn and brought inhouse a substantial amount of services leaving ADAT to perform airframe heavy maintenance and components/engines repair and overhaul activities.

Beyond the press releases and the great sentiments of moving forward there is an underlying desire for Etihad to take total control of its total maintenance activities for several reasons (punctuality, quality etc..) and to improve the synergies with its airline equity partners. The next step will be to bring in maintenance from Airberlin, Jet Airways, Air Serbia, Air Seychelles and who knows Alitalia in the future in order to reduce cost and safeguard its investment. As Etihad tightens the reins and demands more and more attention to its fleet and its partners fleets, other customers will shy away. The region has never been known for balanced relationship.

Whether this is really moving forward or a case of Deja Vu, only time will tell

The Saga of Abu Dhabi's CBP Pre-Clearance Facility

Finally on Friday, 24 January 2014 the US Customs and Border Protection Pre-Clearance facility opened in Abu Dhabi International Airport. A4A, Pilots' Associations and of course the ever present Delta spearheaded the opposition to open the facility. So the UAE government, more likely the Abu Dhabi Government, paid up 85% of the cost includingy the salaries of US CBP officials. There were a lot of reasons cited opposing the facility; the investment could have been used to alleviate congestion in US international gateways and unfair competition to US carriers, who by the way do not serve Abu Dhabi.

Personally, I would have preferred the facility in Dubai, where there are more flights to the USA including Delta and United.

To put things in perspective approximately 180 million international passengers pass through US International Airports of which 58% are carried by US carriers and 42% by international carriers. Of these passengers 6 million come from the Middle East of which 41% (2.4 million) are carried by US carriers and 59% (3.6 million) by international carriers. At this time Etihad operate to JFK, IAD and ORD. 2014 will see a double daily to JFK and operation into LAX and DFW. All things considered Etihad will probably carry around 750 thousand passengers who will go through the pre-clearance facility, out of a total of more than 90 million passengers, less than 1%. The investment in the facility is minimal and will hardly dent the congestion problem.

Delta and others screamed about unfair competitive advantage, well they do not operate to Abu Dhabi, and it is unlikely that anyone will travel from Europe or Israel to fly Etihad just to avoid congestion. If anything Emirates, Qatar Airways and maybe Royal Jordanian, Saudia and Kuwait Airways should have lobbied against the facility. They are more affected by it than any US carrier.

The CEO of Norwegian lately said US carriers are afraid of competition, I tend to agree, but then this is another story.

Etihad's Anniversary Splash

Etihad celebrated its tenth anniversary with a splash.

• The Jet Airways 24% equity deal was finally approved by the Indian Cabinet setting the stage for expansion into India. 
• Air Serbia 49% equity deal setting the stage for expansion in Central Europe

All this is old news. Dubai Airshow was the stage of its splurge on aircraft orders:

• Fifty (50) A350s;
• Thirty Six (36) A320NEOs;
• One (1) A330F;
• Twenty Five (25) B777X (launch customer for the -8)
• Thirty (30) B787s (bringing the total Boeing orders to 1000 aircraft and becoming the largest operator of the type);
• One (1) B777F.

All these aircraft are not intended for Etihad's fleet only, some will be used for their equity partners.

On a quieter note Etihad announced the launch of its new route to Zurich in June 2014 and almost in the same breath announced the launch of Etihad Regional, not in the Gulf or MENA but in Europe. Darwin Airline in Switzerland, Etihad acquired a 33.3% equity stake in the regional airline. The idea is for Darwin Airline, which will be rebranded as ETIHAD REGIONAL is to feed traffic to Etihad and its equity partners' hubs in Europe for onward travel. Eihad Regional will add 21 new routes and 18 new destinations by mid 2014 to Etihad gateways in Europe (Geneva, Paris, Amsterdam, Dusseldorf, Belgrade and Zurich). Will this be the only regional airline equity acquisition or just the first in many more to come.

If the aircraft orders upset some US carriers and A4A, the European response to Etihad Regional has been almost non existent. 

Time will tell how this will evolve for now Happy Anniversary Etihad...

Anniversaries

It appears that everything I was involved with in my professional life has an anniversary and a milestone this year.

• Royal Jordanian (RJA) is celebrating its 50th Anniversary
• Air Arabia (ABY) is celebrating its 10th Anniversary
• Etihad (EY) is celebrating its 10th Anniversary
• Al Jaber Aviation (AJA) celebrated its 5th Anniversary

My involvement with each organization varied but I always managed to learn  and contribute.

I joined RJA at a time when the airline was expanding its fleet with new B727s, B747 and L1011s. A new cycle of  B707 heavy maintenance (D) checks was starting and the decision was made to bring the capability inhouse. The planning was done and the new hangar at QAIA was used before the airport was completed. It was an exciting time, then capabilities for B727 and L1011 was developed, it felt like routine. The next milestone was the introduction of the A310s and A320s into the fleet.

Of course there were other challenges some good others not so good. The development of third party contract maintenance that went a long way to cover the Maintenance and Engineering Department costs. Then the first Gulf War that shut down the airlines for four (4) months; but every challenge is an opportunity we performed a B727 D check and B707 D check for a customer. RJ has a pioneering spirit, it was always a tad bureaucratic, but when the chips were down everyone came together and made things happen, a real can do attitude.

At the age of 50 the airline still has this attitude, it has the ability to rebound from challenges; most of them global geopolitical (wars, uprisings, financial crisis, etc.).

RJ brought home the value of "if there is a will there is a way" and doing great things on a budget. I spent eighteen (18) years there and made life long friends.

Start ups are messy affairs. They are hard work and require focus, perseverance and resilience, and all that before first flight. Once operations start it is even messier.

I was at GAMCO now ADAT at the time Air Arabia and Etihad started. I was tasked to ensure an MCC and a scheduling unit are operational at the time the airline begin operations. Both airlines started within a week of each other, ABY on 28 October and EY on 5 November 2003. Small beginnings leading to greater things.

Working for an LCC is a life changing experience. I joined Air Arabia on November 1, 2004, a year after commencing operations. An LCC is a way of life that looks at value for money, efficiency and productivity in a way no legacy airline ever does. I worked for RJA and we were frugal, ABY took that to a higher standard.

Legacy airlines ignored ABY at first as a flash in the pan and an experiment that is bound to fail. Until they felt the heat and then we felt the pressure. Ten profitable years later, ABY is there to stay, true to its business model when others came and failed or changed.

I joned Al Jaber Aviation in October 2008 going from an LCC to a VVIP Corporate Jet Operator. Getting an AOC must be one of the most challenging things a person can do. I heard stories in ABY of working out of a few offices in Sharjah Cargo Building. Well at AJA it was a few offices out of Al Bateen Airport when it was still an air base. Having GCAA inspections while still building offices and  getting manuals approved and licenses accepted before starting operation requires staying power. The first aircraft, an Embraer Legacy 600 was delivered three weeks before the AOC was issued. The proving flights and final GCAA inspections were performed and the AOC was delivered on June 1, 2009 at the time of the second Legacy 600 delivery. The AMO Certificate was issued on 28 May 2009. Operating business jets is totally different than scheduled carriers. There is no schedule and flights are launched at relatively short notice, because even planned flights change at short notice as clients' change plans.

Thirty Five years later, I am starting all over again. Start ups are still messy and require focus, staying power and resilience.

Well 2013 is definitely a year of challenges and milestones. These four (4) airlines regardless of their age still face challenges some are internal but most are external. They all need to look internally and determine what is needed for them to thrive in the next decade. What brought them so far may not and probably is not what will take them forward. After all, successful companies fail because they insist on doing what made them successful in the first place, ignoring the ever changing environment they operate in. Things change and so should organizations.

For now, Happy Anniversary to all four airlines and to my friends and colleagues who are still there, moved on or retired. We all shared experiences, challenges and yes good times. Looking forward to the continued success of Royal Jordanian, Air Arabia, Etihad and AJA.

Simply India

"I don't see any major problem for the deal" quoting India's Civil Aviation minister as the JetIhad deal was put on hold by the Foreign Investment Promotion Board (FIPB) and the Securities and Exchange Board of India (SCIB). Both have requested more details on the deal in terms of how much control Etihad will have in Jet Airways relative to its 24% stake. The issue seems to be all about effective management and control. Etihad and Jet Airways will meet both regulators requirements, it is not in their interest no to.

After the approval of the FIPB, the issue will be presented to the Cabinet Committee on Economic Affairs for final approval. 

It is not that the various regulators require clarifications that is a problem in India. It is the fact that one regulator approves the deal and things start moving along before the others clear it. One would think that there is a well thought out process for approving FDI, having talked about it so much, obviously not. 

Thoughts on Emirates Response to Jetihad

This post was first published in Bangalore Aviation as a part of a guest post titled Three-way Analysis: How does Emirates respond to Jetihad? written in collaboration with Devesh Agarwal and Vinay Bhaskara of Bangalore Aviation. This blog has been enhanced with their insight of the Indian aviation industry and government dynamics.

The Indian government has the knack of making interesting decisions like encouraging Air India to dump prices to gain market share causing mayhem in the market place and increasing Air India’s losses or Allowing Air Asia to invest in Indian aviation by approving a JV with the Tata and Bhatia group, creating an LCC that will put pressure on Indigo and SpiceJet. The latest was quadrupling the number of seats between India and Abu Dhabi which will benefit mostly Jet Airways and Etihad or Jetihad. 

In a Bangalore Aviation recent blog (http://www.bangaloreaviation.com/2013/04/infographic-airline-wise-share-of.html ) on International Traffic Share in and out of India showed Jet Airways share at 16.01%, Emirates at 13.04% and Etihad at 1.95%. The India market is important to the GCC carriers it provides feed to MENA, Europe and North America, a market that is being developed by these carriers with a station starting almost every month, the latest is Qatar Airways to Philadelphia. The latest India/UAE bilateral will almost double the allocated per week seats of Jetihad over Emirates.

Dubai has unofficially asked for a doubling of the per week seat allocation but requested an increase from 54200 to 72400 seats per week. 

Emirates can opt for an FDI in one of the LCCs and collect the prize of added capacity, an unlikely option after their earlier experience with SriLankan.

One option is for Emirates to code share with one of the large domestic players like Indigo or SpiceJet in order to increase its India feed and encourage them to operate into Dubai. Emirates currently code share with Jet Airways on the Mumbai and Delhi daily flights to Dubai. Flydubai flies only to three destinations Hyderabad, Ahmedabad and Lucknow and would like to increase its India destinations (which is less than 2% of its capacity). Flydubai is capable to fly to smaller secondary airports providing feed to Emirates through the link on their respective websites.

Code sharing is a short term solution. Ultimately, the real solution has to be through the India-UAE bilateral. Emirates needs the increased capacity for itself and Flydubai. Emirates can leverage Dubai’s position as a global hub and destination for Indians. Indians are the top expatriate investors in Dubai property (9 Billion AED) and the UAE is the second trading partner of India and has billions of dollars in investments. Add to the mix, almost two (2) million NRIs living in the UAE, a good proportion affluent. Dubai can also leverage its stature in the UAE to push the boundaries of the bilateral. Jetihad has shown that Air India and indeed the airline industry interests can be put aside by the government if the stakes and overall benefits are framed correctly. 

How Emirates and by extension Flydubai and indeed Air Arabia will frame their argument remains to be seen. Regardless, with the lack of a clear India Aviation Policy, the government will react to a properly framed request.

April, A Month of Surprises and Controversies

April has been an interesting month for Etihad and the region. No surprises, well maybe a few small ones.

The big news is Etihad's 24% equity stake in Jet Airways for $379 million, no surprises here.
This will increase Etihad's reach in India which was only 2% of India's international traffic in 2011/2012. It will also provide Jet Airways with an international hub in Abu Dhabi. The equity stake will come with the usual joint fuel purchases, insurance, maintenance and ground handling, etc. to save both airlines money.
 
The surprise is, two days later, the Indian Government signing an agreement with the UAE allowing for 50,000 seats weekly for each side from the current 13000 between India and Abu Dhabi phased in over 3 years. A move that miffed Indian carriers, and Jet airways wants 41600 seats (its current share is 4285 seats). So far so good, except Air India is now faced with a problem much bigger than Emirates. A GCC airline with a tremendous Indian market reach and feed. Air India is expected to get its act together and start competing, ah well more likely they will ask for more government subsidy, at a cost to the taxpayer which is much more than Etihad's FDI.

FDI was intended to inject foreign investment in the existing airlines to allow them to expand.
Well maybe not, earlier the Indian government approved a joint venture between Air Asia and the Tata Group, Air Asia India. A low cost airline that will compete with Spice Jet and Indigo. The two airlines least affected by the Etihad/Jet Airways deal. That will keep the aviation market in India in a state of flux.

Another surprise is a code share agreement between Air Canada and yes Etihad. Two years back a request for additional frequencies and destinations for Etihad and Emirates had Air Canada up in arms to the point that it strained diplomatic relations to the point the UAE government revoked the entry visa at arrival for Canadians among other things. Things have been improving and Canadians got their visas on arrival privileges back. It seems Air Canada realized there are Canadians living in the UAE.

Abu Dhabi was in the center of some controversy, a DHS proposal for a US Immigration and Customs pre clearance arrangement in Abu Dhabi. This had US Carriers, A4A and others complaining, putting it mildly, that this will provide an advantage to a foreign carrier in a city where no US carriers operate. Well, that prompted Dubai to put itself forward as an alternative, after all both Delta and United operate to Dubai and Emirates has more USA frequencies. I am sure we will be hearing about this in the coming few weeks.

Of course the old complaint of EXIM bank financing of foreign airlines' aircraft purchases came up again. Delta and others do not like it, according to them it affords foreign competitors owned by governments an undue advantage. These days competing aircraft are almost technically and operationally similar, so financing tips the balance. Europe has ECA to support Airbus, go figure Delta. Considering that US carriers don't even consider the MENA market worthwhile, taking the amount of direct flights to the region as an indication, the only thing it will achieve is loss of jobs at Boeing and their suppliers. US carriers have to learn to compete on service, I mean service comparable to GCC and Asian airlines and of course it would help if they increase the frequency from a daily flight to Dubai to a few other destinations in the region.

Last but not least, Qatar is demanding and Canada is resisting a request to move the ICAO headquarters from Montreal, where it has been since 1947. The reasons are location (too far for Europe and Asia), harsh winters, high taxes and of course visas, Canada makes it hard for delegates to get visas. Qatar proposed Doha as an alternative and is ready to build the new head quarters and fund the UN agency's running costs starting from 2017 (the lease for the HQ ends at the end of 2016)

On the lighter side of things passenger traffic increased in MENA and a few airlines were profitable!

ETIHAD, FDI And India

The Indian government introduced Foreign Direct Investment (FDI) to support the airlines who were suffering from over capacity and low yields. The demise of Kingfisher helped alleviate the capacity problems but showed the depth of the banks' exposure to the sector especially for Air India and Kingfisher. FDI was meant to provide needed cash that cannot be obtained from stretched banks.

This prompted Etihad to look at Jet Airways with a view of purchasing a 24% stake for about 400 million USD (ETIHAD And India). Etihad negotiated and completed its due diligence, when the  deal slowed down over Etihad's fears of government policy changes that will force it to exit the investment (Gulf Air and Kuwait Airways, the original shareholders in Jet Airways were forced to divest their investment in Tailwinds, the holding company in October 1997). The Indian government has since given assurances to the UAE government and Etihad that the investment is safe and investing in India in general is safe and profitable.

However, on 27 February 2013 Etihad announced the purchase and lease back of three pairs of Jet Airways slots at London Heathrow for 70 million USD, an indication that the deal is still ongoing.

Speaking of Indian government policy, Air Asia has applied for a joint venture with Tata Sons Ltd and Bhatia's Telestra Tradeplace PVT Ltd to start Air Asia India. While the JV is not outside the FDI rules, it does add capacity to the market and will in the short term destabilize it. 

2013, The Fun Begins

Barely a week into the new year and developments in the GCC and MENA have already started.

It was only yesterday 7 January 2013 that I blogged about 2013 A Game Changer , only to read today 8 January 2013 reports regarding Etihad, possibily buying an equity stake in Alitalia SpA from Air France-KLM who own 25% of the Italian carrier. Nothing unusual about that, Etihad expands through acquiring equity stakes in airlines, except for the fact that Etihad and Air France-KLM have recently signed a code share agreement. How accurate this is remains to be seen!

Similarly, competition and choice in the Saudi Arabia market is on the rise with Flydubai starting  a twice weekly service to Ha'il next February, Qatar Airways already launched yesterday a four weekly service to Gassim and finally Emirates added a third A380 service to Jeddah, for four days in January, in support of the Dubai Shopping Festival.

ETIHAD And India

Stories ( click here for story ) are circulating that Etihad is eyeing a 24% stake in Jet Airways worth Four hundred (400) millions USD. This will mark the first FDI in Indian Aviation in a long time, even though it is well below the allowed 49% by the latest government FDI rules. Etihad signed a code share agreement in 2008 with Jet Airways and is listed as an Etihad Partner on Etihad's website www.etihad.com

Jet Airways is a candidate to join Star Alliance along with Air India. It is to be noted that Air India was refused entry for not meeting Star Alliance requirements. ( click here for story ). This will give Etihad a  linkup with all three major alliances; Airberlin in Oneworld, Jet Airways in Star Alliance and the share code agreement with AF-KLM in Skyteam, without actually joining any of them.

Another first for Etihad.....Kudos

Left Out.....

The last few months and certainly weeks have seen mega activities by the Global Airlines of the Gulf.
It seems the critics and adversaries of yesterday are the partners of today. A fact all airlines should heed.

It is official and in spite of Mr. Al Baker's earlier denials, Qatar Airways is joining Oneworld. Qatar Airways is a massive addition to the Oneworld network, considering that the airline has massive aircraft orders which usually translate into additional destinations.

Etihad has just signed with Air France - KLM a code share agreement. Airberlin also signed a similar  code share arrangement. There is also discussions about joint procurement and closer cooperation. 

Etihad seems to be working equally comfortably with both Oneworld and SKYTEAM alliances.

Emirates and Qantas, a Oneworld member, signed a code share agreement that has Qantas shifting its Singapore base to Dubai and terminating a long term agreement with BA its Oneworld partner.

Currently Qatar Airways has several code share agreements with Star Alliance airlines (Lufthansa, United and ANA among others), but nothing on the scale seen above (equity stakes, alliance joining and long term agreements).

Is Star Alliance (the largest of the three in terms of member airlines) being left out by design or just a coincidence? Only time will tell...

All Happening in the UAE

The United Arab Emirates Aviation sector is by far the most dynamic and vibrant in the region both the GCC and the wider MENA. No day passes without an amazing activity.

Emirates Airlines is the most valuable airline brand in the world for 2012, ahead of Singapore Airlines and Lufthansa at USD 3.7 Billions. The airlines continues as the role model and bench mark for its regional competitors. The airline signed a 10 years code share agreement with Qantas, an agreement that has far reaching implications in Asia and to oneworld.

In Seattle, Tim Clark said that Emirates will buy another 40 A380s to bring the total to 130 aircraft. One problem is space at Dubai Airport. The airline will become the largest airbus customer. On the same note Emirates started its A380 service to Melbourne this Thursday, 27 September 2012. He also told Boeing that the first B777-300ER will be retired by 2017 and the airline would like to replace the fleet with a new updated B777. It was a good time to start "bellyaching" to get a new jet started.

On the domestic front, Rotana Jet started its double daily flight to Al Ain from Abu Dhabi Thursday,
27 September 2012, bringing its domestic network to four (4) destinations. Ten (10) days after the inauguration of its daily flight to Fujairah. Rotana Jet is planning flights to Sharjah, Ras Al Khaimah and Al Ruwais.

Air Arabia will fly to Erbil on 14 October, its second Iraq destination. Not to be outdone Flydubai is launching new destinations to Bucharest on 1 October 2012 and Skopje from 18 October 2012.

Etihad Airways announced an increase to daily flights to Istanbul starting 1 January 2013. Two (2) weeks ago Etihad CEO led a team of Etihad Airways and airberlin executives to Boeing to look over the B787.
Both carriers are integrating their B787 programs and streamlining their infrastructure and purchasing activities. Etihad has forty one (41) and airberlin fifteen (15) B787s on order. Etihad has nine (9) B777s
to be delivered in the coming fifteen months.

To top it all the GCAA announced that August 2012 had almost sixty (60) thousands air traffic movements
a 6.9% increase over 2011.

Qantas, Hard Times Ahead

It all started when Etihad acquired a 4.99% stake in Virgin Australia. Etihad has petitioned and obtained approval, earlier in the week from the Foreign Investment Review Board to raise its holding to 10% in Virgin Australia. Etihad acted in a very transparent manner similar to its actions in regards to the investments in Airberlin, Aer Lingus and Air Seychelles.

Qantas hit back with accusations that Etihad is the plaything of oil rich Sheiks.

This is not the first time Qantas resorts to similar tactics, it has accused Emirates of being an unsafe airline after the March 2009 incident with an A340-500 aircraft that failed to climb properly due to erroneous performance data entered.

Qantas had its fair share of unsafe incidents with the A380; incidents not attributed to its own actions. The airline was shutdown last October 2011 over a dispute with the labor unions over jobs. The airline like the rest of the industry suffered from high fuel prices. It is expected that Qantas profits are down by 90%.

Qantas is not unlike the legacy airlines of developed countries, that consider the preservation of their home market share as a national priority and are willing to limit the tourist potential of the country to their capability. They fail to consider that competition that increases the market brings in revenues and creates jobs. Usually, more jobs in different sectors of the economy that far outweigh potential losses at the airline.

There are economic and political considerations that go beyond an airline. A prime example is the Canadian government that blindly backed Air Canada's position over traffic rights for Emirates and Etihad and now is working hard mending fences. Vancouver is still under served by Air Canada while Seattle reaps the benefits of Emirate's daily flights.

Qantas faces tough choices on how to deal with what it perceives as a major threat. There were earlier rumors that Emirates wants to cooperate with Qantas to further develop its Australia network. Of course, Qantas can always work closer with Oneworld partners to improve its position, but then that means expansion which seems to go against the grain with legacy carriers that believe in capacity control.

2012 is a tough year, it presents multiple challenges and risks but also great opportunities for the visionaries and the brave.

First Air Canada now Qantas.

It was Air Canada claiming that additional frequencies by Etihad and Emirates will cause the shedding of 10,000 jobs. Now it is Qantas complaining to the government that they will go under if Etihad is allowed to raise its stake from 3.96% to 10% in Virgin Australia. The reason is they might undercut Qantas by reducing domestic fares.

If Etihad and Virgin Australia wanted to reduce domestic fares they can do it anytime and without an equity stake. Qantas is complaining against "government owned" Etihad and Singapore, at least Emirates was spared this time.

Qantas suffered from rising fuel prices, labour strife that has grounded the airline for two days and of course A380 troubles. Qantas warned of a slump in profits. These problems are not the work of competitors. Still Qantas claims its international operations are suffering because they are being undercut by Singapore and Etihad.

The real issue for Qantas is for the government to remove the limit on foreign investment in the airline imposed under the Qantas Sale Act which dictates that the airline remains majority Australian owned.

It appears that legacy carriers find it easier to blame their problems on high visibility airlines like Etihad and Emirates than finding solutions.

Etihad, The Pressure is On

In the news this week Etihad added half a million passengers to 2.4 million passengers an increase of 26% in Q1 2012, pushing revenues to US$ 989 a 28% increase making it the best Q1 ever (click here for details).

On the other hand Abu Dhabi hotels revenue rose by 1% and occupancy went down by 6% on the back of new properties coming on line. In absolute terms the number of guests increased by 17% over the same period in 2011 (click here for details).

The numbers are great in absolute terms, but they put pressure on the Abu Dhabi Tourism and Culture Authority and Etihad to fill the additional capacity. Etihad needs to increase the percentage of passengers who have Abu Dhabi and the UAE as their final destination.

Failure To Communicate

The weather has not been very good in Abu Dhabi in the last few days and it wreaked havoc with Etihad Airway's schedule with delays and cancellations.Happens, mother nature can be capricious if not outright bitchy sometimes.

Airlines do their best to cope. These days the use everything they can get their hands on to ease the impact of the disruption on their passengers. Not Etihad, it seems they never heard of the word "COMMUNICATE".

They can figure out ways to expand their network or provide additional services on board or on the ground. What they have failed to grasp is the need to advise their passengers of how their flights have been affected.

A quick look at their Facebook page shows several comments by passengers complaining about extensive delays but not a single entry by Etihad explaining or apologizing. These comments were later deleted. Their website is business as usual. I tried to check in on the website for my Jeddah flight back to Abu Dhabi and all I got was a message "your flight is not open for check in". 

I never got a message from them informing me there is a delay and the website did not have any message regarding these disruptions. Basically a massive failure to communicate coupled with an inadequate Emergency Response Plan (ERP). ERP is not about crashes and accidents it is also about massive disruptions and how to recover.

In all fairness the airport staff in Jeddah, were at hand and interlined some connecting passengers with other airlines to their final destinations and offered the remaining passengers food and refreshments. 

However, Etihad as an organization did not rise to the occasion and failed dismally. If you want to be credible you have to perform. All these awards don't mean a thing to passengers stranded for 9 or 10 or 11 hours. They only prove that when you have good PR you can get any award you want. 

Etihad should look at their Response Planning and how to embrace the available means to minimize disruptions and keep passengers engaged and happy.

The Joys Of Flying With Etihad

I have travelled with Etihad Airways before, they were short trips and in Business. This time I travelled to Chicago, a 15 hours plus flight going and a 13 hours plus coming back on an AA code share ticket. Of course being an AA frequent flyer did not mean anything in this case.

 It is one thing calling your passengers "GUESTS" another thing meaning it. The flight to Chicago started all wrong, the itinerary said Terminal 1, but it really was Terminal 3, meaning a nice walk across the airport pulling luggage, a good exercise before a long flight.

Check in at Abu Dhabi was slow and in Chicago extremely slow with only 3 agents at check in, granted it was basically for connecting passengers, it took almost an hour before things started moving along. The staff in Abu Dhabi were "Firm" almost to the point of rudeness.

In Chicago I had the dubious honourof having my boarding pass endorsed with "SSSS". This means that the airline is asking the TSA to perform extra security checks on yours truly; probably because I asked if it was possible to change seats. In all fairness to the TSA, the extra security check went smoothly, I had an extra pat down, not very invasive, and my laptop and carry on luggage were tested for explosive traces. Needless to say, I passed with flying colors.

The boarding, both times was long. Hand luggage which was weighed prior to check in at Chicago was reweighed at boarding, or so it was announced.

The cabin crew did not smile much but were courteous but not very approachable.

This has not been my worst experience but definitely not the best. Would I do it again, probably not.  

Etihad and Airberlin More Than a Partnership

Etihad Airways has boosted its stake in Air Berlin from 2.9% to 29.21% and signed an extensive code share partnership that covers all Airberlin's extensive European operation and Etihad's extensive global network.

The deal provides Airberlin with needed cash and Etihad access to Germany and Europe.

Not wanting to read too much into this, one cannot but wonder about a few things:

- Etihad already code shares with AA, Malev and S7 who are Oneworld partners and now Airberlin who     

  will join Oneworld in early 2012, an interesting alignment with the alliance.

- This arrangement will place Etihad in the backyard of Lufthansa, Air Canada's partner in Star Alliance and 

   one of the greatest critics of the GCC global carriers (Emirates, Etihad and Qatar Airways). Remember the 

   spat between the UAE and Canada over additional traffic rights to Canada; well, maybe just maybe, this is  

   Etihad's quiet way of paying back. Between Emirates A380 services to Hamburg and Munich and this  

   partnership, Lufthansa is surely uncomfortable, to say the least.

Regardless of all the speculation, this is a win win deal with both partners benefiting and almost 

makes Oneworld the preferred alliance in case Etihad is interested in joining. 

Etihad Airways Eighth Anniversary

This is not meant to be a chronological history of the airline, but my impressions as someone who was involved with the starting of the airline.

Etihad Airways flew on 5 November 2003 from Abu Dhabi to Al Ain and then on 12 November flew its frst commercial flight to Beirut. At the time the airline had Beirut, Damascus and Amman as destinations. Etihad Airways has expanded at a relatively faster rate than its competitors Emirates Airlines and Qatar Airways. The airline started with 2 Airbus A330s leased from TAM and an A340 leased from Boeing to a fleet of 63 aircraft (100 on order) serving 63 destinations in 43 countries and a cargo operation serving 14 destinations.

Very few people know how Etihad Airways started. The Amiri decree forming Etihad Airways was issued in July 2003, also appointing HE Dr. Sheikh Ahmed Bin Saif Al Nahyan as the first Chairman of the airline. He also was the Chairman of GAMCO now ADAT.

GAMCO's commercial, legal, contracts and finance resources were mobilized to set up the initial business plan and proceed with the AOC. Two aircraft were leased from TAM and then one A340 ex Singapore Airlines from Boeing. An MRO team of engineers and technical personnel had to become the start up team for the airline. A building slated to be the training center became the head office of the airline and the team handled functions like recruitment, purchasing of catering and commercial  equipment. At the time Air Arabia was starting and GAMCO was called upon to provide full maintenance and engineering support for it and Etihad which was not a problem for an MRO. One challenge was to set up airline functions like scheduling and maintenance control from scratch. GAMCO had extensive experience performing these functions for Gulf Air using GF's facilities, eventually that function was tuned over to the airline.

The airline was set up between July and November 2003 with aircraft leased and delivered and all commercial and cabin equipment provided. One challenge was the IFE system which was from Rockwell Collins a system that was not very popular in the region. Collins was called on to provide support and ensure a greater than 95% dispatch reliability of the system. A task that they performed efficiently.

Another challenge, that I was personally involved with, was providing logistics support for the A330s and the A340 at short notice. A support package was prepared and acquired from AJ Walter Aviation. The agreement was made during the 2003 Dubai Air Show.

Etihad Airways is an airline that a lot of us are proud to have been associated with it and believed in the vision that now is a world class airline spanning the globe.

Finally, everyone is dazzled with the performance of the airline that they all forget that it all began in an MRO by a bunch of engineers and technical people.