Etihad Airlines, Abu Dhabi’s state carrier, has long been struggling to sustain itself in the rigorous middle eastern market. On Tuesday, February 4, 2020, Etihad said in a report that it would sell 38 aircraft to an investment firm and a leasing company in a deal valued at $1 billion in a cost-cutting measure by the airline.
In line with what Etihad calls ‘third year of its transformation program’, the carrier would sell 38 total aircraft — 22 Airbus A330s (both A330-200s and A330-300s) and 16 Boeing 777-300ERs — in the deal with investment firm KKR, and leasing firm Altavair AirFinance. KKR said the Boeing 777-300ERs shall be leased back to Etihad upon purchase in early 2020, while the Airbus A330s will go to international clients.
Etihad Airbus A330-300. Image Credits: Airliners.net
The airline said: “The deal offers us flexibility while ensuring we stand by our sustainability targets and maintain a fleet of the most fuel-efficient, technologically advanced aircraft.”
On their website, Etihad now says they have a fleet of 102 aircraft, with no A330s in the list, as the airline shall start phasing out those soon. Since 2016, Etihad has posted a loss of $4.75b as it began working on its strategy of aggressively buying stakes in airlines from Europe to Australia, however, this has exposed the company to major losses. The airline reported revenues of $5.86b in 2018, down from $6b in 2017.
Selling off aircraft helps airlines in two ways, firstly, maintenance and fuel expenses drop substantially. And secondly, when one needs to focus money-making routes, other non-profit routes can be chopped off without worrying about parking fees for the grounded aircraft. While having more aircraft in the fleet can increase revenue (as goes the textbook rule), sometimes, having less helps increase profitability! In the coming months, Etihad shall be acquiring newer and more efficient aircraft like the Boeing 787, Airbus A350s and Boeing 777x, and hence, clearing off the older fuel inefficient aircraft makes sense. It will be clearer in the future on how this strategy works for Etihad’s performance.
What are your thoughts on this latest move by Etihad? Is it a sign of desperation to stay afloat, or is it a smart move to curb losses? Let us know in the comments!