Etihad Airways today reported a $1.9bn loss for 2016, as the company added “one off impairment” charges related to writedowns in aircraft and financial assets and to fuel hedging losses.
The Abu Dhabi carrier swung from a $103m profit in 2015 to a $1.9bn loss in 2016. Revenues fell from $9bn to $8.4bn.
Etihad said the majority of its loss was a result of exceptional costs related to a write-down in value and early phase-out of some aircraft types, as well as a $808m charge related to exposures to its “equity partners”, including Alitalia, which recently collapsed into administration.
But the airline also reported trouble in parts of its underlying business. Yields fell 8 per cent amid “market capacity pressures and the tough global economic climate”, while a slowdown in the cargo market put “increased pressure” on revenues and yield.
The results come after rival airline Emirates in May posted its first fall in profits for five years.
Etihad has for some time been re-evaluating its business plans following the July 1 departure of CEO James Hogan. Hogan led an aggressive multi-year buying spree that saw the Mideast carrier snap up stakes in airlines from Europe to Australia. The airline appointed Irishman Ray Gammell as interim CEO in May.
Last week, Etihad also sold its minority stake in Lugano based Darwin Airlines which had been rebranded as Etihad Regional. Etihad continues to hold minority stakes in six other airlines.
Etihad’s revenue fell 7.1 percent to $8.36 billion last year, even though it carried 18.5 million passengers, up 5.1 percent on the year. Load factor – or number of seats filled – was down slightly to 78.6 percent.
“This year is just as challenging for the global aviation industry and the ever-evolving competitive environment is likely to impact overall performance in 2017,” Gammell said in a statement.
Etihad has cut 4 percent of overhead costs through layoffs and other measures as part of its strategic review, he added.
The airline did not say how many jobs had been cut, though sources tell Reuters hundreds of employees have left positions since the start of the year.
After years of near unconstrained growth the middle east airlines are now facing the first serious challenge.
The size of the 2016 indicates the size of the challenges ahead,