There is a grand theory of physics that says everything is speeding up. Aviation, on the other hand, is an industry that tries to defy many of the great rules of physics, including one with the strictest of all provisions, gravity. Not only do those huge, heavy things get off the ground, and stay off the ground, they also manage to stop in that tiny space called a runway.
Just as the rules of physics seem not to apply to airlines, students of the history of aviation might think that the rules of economics too do not apply. Airlines continue to lose money, continue to show up all the rules of good governance and, generally, write the textbook on how to finger point and blame shift when things do not go right.
Given that, it is interesting to think about Etihad Airways. Either, they too continue to defy gravity, thus showing up one of the classic rules, or everything is indeed speeding up. If everything is speeding up, the rule book might need rewriting to adjust to the new velocity.
Which is as good a place as any to start when one considers Etihad Airways.
I have said before that the Gulf carriers are new generation airlines, using new generation equipment to offer services to new generation customers and I stand by that analysis. What that also means is that we are seeing business models that are being tested, are evolving and are being proved more quickly than ever before in the history of the airline business. That makes for exciting times.
Right place
Yes, the Gulf itself is in the right place between the new centres of growth, including Africa, China, Asia and, whisper it, Europe, but being in that place would be nothing without the airports and the aircraft needed to join those points up.
Yes, Boeing and the B777 aircraft rewrote the rule book about what could be done in an aircraft with two engines, opening markets that no one knew were there for the taking. As a result of that, we have seen a frenzy of airframe competition and development between Boeing and Airbus, and indeed other airframe makers that have given savvy airlines never-to-be repeated opportunities to enter the market or negotiate prices.
And yes, those remarkable centres of growth, including Africa, China and Asia, opened up at exactly the right time to need service as those external factors — new aircraft types served by better airports in the right place — came together.
You might call that luck. Then again, Napoleon was clear about the sort of generals he wanted — lucky ones.
It was not luck, or if it was luck, for the Gulf carriers, it was luck built on canny thinking and unrelenting management. There comes a time when that is not luck, it is management. As Etihad celebrates its 10th year of operations, it might be time to start to look hard at the luck:management ratio a little more closely.
Supportive owners
On the luck side, in addition to the geography and timing issues above, there is no disputing that Etihad management is blessed with supportive owners. That shows up in a number of ways, for all of which, chief executive James Hogan and his team have to thank their lucky stars. They have probably had access to more capital, at better rates, than any airline managers in world’s history.
Secondly, given that the airline’s owners have a deep and abiding interest in the airport, they have had less need to argue with airport investors about what might be the best way to address airport capacity issues.
Finally, because Etihad is surrounded by other airlines in very similar positions to themselves in Emirates and Qatar, there has been remarkable competition in the market place. Do not underestimate the value the daily competition has brought to all aspects of the various Gulf carrier service, product offering and pricing.
Luck aside, Etihad has focused on operational excellence and has been incredibly served by its operational team. When it comes to ops, luck is not part of the picture.
So what of the future? Here is where my increased velocity element comes into play. No airline has grown so fast and expanded not only its own network but also its array of allies as Etihad has in 10 short years. Low-hanging fruit are getting harder to spot, both in terms of partners and routes.
The Etihad strategy is built on passenger feed into its network. If the number of new passengers is increasingly limited, it will be necessary to find synergies and operational savings instead. But to assume that the number of new passengers is limited is to write off a slowly recovering world economy and Etihad’s ability to position itself.
To do that, you need a supportive platform, a sound network and lucky generals. Do not write off Etihad.
— The writer is managing director of the Europe-based strategic advisory, government and public affairs firm, Aviation Advocacy.
