Etihad Airways chief James Hogan has transformed the airline in his 10 years in charge. He spoke to Ian Taylor
When Etihad Airways group chief executive James Hogan joined the carrier in 2006, the Abu Dhabi-based airline was barely on the aviation map. Today it is a $25 billion group. Yet despite rapid growth Etihad remains smaller than close neighbours Emirates and Qatar Airways.
Hogan is unconcerned, saying: “It has never been our strategy to be the biggest. When I was asked to be chief executive, it was clear we had two very strong competitors nearby.
“The business plan was about right shape, right size. What was important was that we establish a strong safety culture, develop a strong brand, develop a competitive network, build a sustainably profitable business and, as a by-product, support Abu Dhabi’s diversification from energy.
“We evolved the model along the way. In 2006, we had nothing. We worked out of a Portakabin. We had to employ engineers, pilots, crew, admin staff. We built from scratch.
“By 2009, we had a strong foundation and we presented an ‘enriched business’ model to develop a group with Etihad Airways as the core airline investing in other airlines and building a global network. We felt it wasn’t about the number of aircraft you operated but the network you offered.
“We developed a strong cargo and engineering business and created a company called Hala offering holidays, a frequent flier programme, destination marketing and business travel management.
“Yes, we’re a considerable airline, but we’re half the size of our nearest competitors. We stretched our network through partnerships. We have 700 aircraft with our equity partners and 50 code-share partners, which give us global reach. Yet our investments in other airlines cost us the equivalent of three Airbus A380s, so we felt it was smarter.”
Along the way, Etihad set new standards with its premium cabins, most spectacularly with its apartment, the Residence, on its fleet of 10 A380s.
It was the order for the A380s and 71 Boeing 787s in 2008 which put Etihad on the map. Hogan says: “When I signed the deal not too many people knew of Etihad, but we had a roadmap. We held focus groups in London, New York, Sydney, Abu Dhabi, Bombay and put together a design consortium.
“We were focused on the fact we could do things with the product but we had to get the seat count right, the costs right, the weight right to get the range of the aircraft. We did a huge amount of work on the design.
“The A380s fly flagship routes – London-Sydney, Abu Dhabi-New York. We wanted people to have space on these long flights, so we looked at studios and spent time understanding our competitors.
“In a workshop I said ‘What about a penthouse?’ That evolved into The Residence. Then we said, ‘Why not a butler?’ We have the same number of cabin crew on that aircraft as any other airline, but we differentiated with a chef, with a food and beverage manager and then with a butler. It’s all about brand.”
The Gulf carriers have come under fire in the US, with the major US airlines alleging they have received state support and complaining of unfair competition. Hogan is unimpressed, saying:
“Three carriers raised a complaint with the Department of Transportation and the three Gulf carriers independently responded. We’ve been able to demonstrate that under the [US-Gulf] open skies agreement we’ve not damaged the US carriers at all.
“In every market in the world you have entrenched interests. We’ve seen American carriers go through Chapter 11 and become stronger. That is fine. The US carriers have received a range of subsidies. That is fine.
“We only fly to six American cities, but we provide outstanding access for a huge community from the US to the Indian subcontinent and we put considerable business on American carriers. We’ve submitted our documents and it’s business as usual.”
He is more concerned about Europe and the balance of supply and demand. Hogan says: “Europe is the toughest market at the moment. There has been a shift in traffic. There are different drivers – what is happening in Turkey and North Africa. In Germany there has been a slowdown. You have the uncertainty in the UK.
“But the one thing the consumer doesn’t do is surrender their holiday. They may book later, and we’re seeing that. Corporates also tighten their belts in times of uncertainty and we’ve seen that. There is a lot of capacity, and for the consumer that is good.”
Etihad operates three A380 flights a day from Heathrow, with two daily services from Manchester and one a day from Edinburgh. Hogan would increase frequencies from Heathrow if he could obtain the slots, saying: “It’s all about access.” What if there was an additional runway? “That is going to take a long time,” he says.
Yet he is unfazed by the prospect of further delays to UK airport expansion, saying: “You have to work with what you have. I know the pressures of the UK. I focus on my airport.”
He also says Etihad has no plans to expand to other UK airports, insisting: “We have no other major UK cities on the horizon, but we’re keen to see Alitalia improve its footprint towards Italy.”
Hogan likewise insists he has no plans to invest in other carriers, explaining: “We have two types of equity investments. We have Alitalia, Air Serbia and Air Seychelles where the governments approached Abu Dhabi and said, ‘These airlines are broke. Would you be willing to invest?’
“We set the conditions – writing off the debt, downsizing, restructuring. Air Serbia has been profitable for two years. Air Seychelles is in its fourth year of profitability.
“Then we have Virgin Australia which gave us access to 45 cities in Australia and New Zealand. Jet Airways gave us access overnight to the Indian market. Air Berlin gave us access to Germany, Austria and Switzerland. Alitalia is going to be a good business for us.”
However, the core of Etihad is its Abu Dhabi hub. Hogan says: “There are over one billion people within three hours flying time of the Gulf. It’s a cross roads, a major population base and a great destination, and Abta is coming for its Convention which is fantastic.”