Etihad slims down as Abu Dhabi trims its air travel ambitions

Etihad Airways Airbus A320-200 plane is seen at the National Airport Minsk, Belarus April 19, 2018. (Reuters)
Updated 03 July 2018
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Etihad slims down as Abu Dhabi trims its air travel ambitions

  • Top official says the state-owned airline was becoming “more rational” and would not shy away from dropping routes that were commercially unsustainable
  • Etihad plunged to a loss in 2016 following a slowdown in passenger traffic growth and failed investments in foreign airlines

DUBAI: Abu Dhabi has abandoned its goal of becoming a major air travel hub akin to Dubai and is instead reorganizing its airline Etihad into a mid-sized carrier focused on direct flights in an attempt to return it to profit.
Recently-appointed Etihad Airways Group Chief Executive Tony Douglas said on Tuesday the state-owned airline was becoming “more rational” and would not shy away from dropping routes that were commercially unsustainable.
After years of rapid expansion, Etihad plunged to a loss in 2016 following a slowdown in passenger traffic growth and failed investments in foreign airlines such as Air Berlin and Alitalia.
It has been restructuring since, and on Tuesday said it had reorganized into seven business units directly reporting to Douglas, as opposed to individual businesses operating under a group structure set up by his predecessor.
Some senior and mid-management employees will lose their jobs and others will be moved into new positions, Douglas told Reuters by phone, declining to disclose the number of jobs likely to be affected.
He said many thousands of people had left since the restructuring process began in 2016, but that job cuts were no longer a major focus for the group and that the reorganization was about improving operational efficiency.
Etihad currently employs around 23,000 people.
The group also said Douglas had taken over direct responsibility of the airline business from Peter Baumgartner, who will continue to work with Etihad as an adviser.

KEEPING STAKES
Douglas joined in January from Britain’s ministry of defense, replacing veteran group CEO James Hogan who left months earlier as a strategic review got underway.
Under Hogan, Etihad spent billions of dollars buying stakes in other airlines as it sought to transform Abu Dhabi into a major hub like Emirates has done for Dubai 128 kilometers away.
Etihad is now focused on point-to-point traffic to destinations where passengers want to visit Abu Dhabi, and not just fly through it, Douglas said.
Abu Dhabi, the oil-rich capital of the United Arab Emirates (UAE), is hoping culture will attract tourists and last year opened a branch of the Louvre museum.
Etihad’s strategy of investing in other airlines unraveled last year with the collapse of Air Berlin and problems at Alitalia.
Douglas said, however, that Etihad would continue to hold its stakes in India’s Jet Airways, Virgin Australia, Air Serbia, and Air Seychelles.
The carrier issued $1.2 billion in bonds with some of the airlines it owns stakes in. After the collapse of Alitalia and Air Berlin those bonds have nosedived. Some investors expected Etihad or other Abu Dhabi entities to back the bonds.
Douglas said Etihad would continue to fulfil its obligations to the bonds, but declined to comment further.
Etihad is not legally obliged to back the bonds.


China’s Xi promotes building initiative amid debt worries

Updated 26 April 2019
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China’s Xi promotes building initiative amid debt worries

  • Xi says Beijing wants “open, green and clean cooperation” with “zero tolerance for corruption”
  • High costs have prompted complaints some are falling into a “debt trap”
BEIJING: President Xi Jinping has promised to set high standards for China’s Belt and Road infrastructure-building initiative, seeking to dispel complaints the many billion dollars in projects leave developing countries with too much debt.
Xi avoided mentioning debt complaints in a speech opening a forum attended by leaders from some three dozen countries to celebrate his signature foreign initiative. But he said Beijing wants “open, green and clean cooperation” with “zero tolerance for corruption.”
Developing countries welcome the initiative to expand trade by building roads, ports and other facilities across Asia and Africa to Europe. But high costs have prompted complaints some are falling into a “debt trap.”
The United States, Russia, Japan and India also worry Beijing is trying to build a trade and political network centered on China and expand its strategic influence at their expense.
Xi’s government is trying to revive the initiative’s momentum after the number of new projects plunged last year. That came after Chinese officials said state-owned banks would step up scrutiny of borrowers and some governments complained projects do too little for their economies and might give Beijing too much political sway.
Countries including Malaysia and Thailand have canceled or scaled back projects while Ethiopia and others have renegotiated debt repayment.
Xi noted China’s finance ministry on Thursday issued guidelines for assessing debt risks for borrowers. The ministry said those “debt sustainability guidelines” are based on the standards of the International Monetary Fund and other international institutions.
The president tried to allay complaints about lack of economic benefits and political influence, saying Belt and Road is “not an exclusive club” and promotes “common development and prosperity.”
“We need to pursue open, green and clean cooperation,” Xi said. “Everything should be done in a transparent way and we should have zero tolerance for corruption.”
His audience at a Beijing conference center included Prime Ministers Aung San Suu Kyi of Myanmar, Lee Hsien-Loong of Singapore and Adiy Ahmed of Ethiopia and leaders or envoys from Greece, Serbia and Malaysia.
Xi said Beijing also wants to expand the scope of its initiative by encouraging cooperation among Belt and Road countries on health, water resources, agriculture and science and technology. He promised to fund scholarships for students from Belt and Road countries.