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Etihad Airways registers $1.8bn loss in 2016 as cargo comes under pressure

Etihad Airways reported a $1.8bn loss in 2016 while air cargo came under pressure

Etihad Airways saw its cargo revenues drop by 10% last year despite an increase volumes, while the overall company slipped to a $1.8bn loss.

The Abu Dhabi-hubbed airline recorded cargo revenues of $900m in 2016 compared with a $1bn in 2015. This came despite a 0.8% increase in cargo volumes to 595,916 tonnes.

A results statement spoke of a “slowdown in the cargo market” which put “increased pressure on cargo revenues and yields”.

It was also a tough year for the overall airline as one-off impairment charges and fuel hedging losses pushed the airline to a loss of $1.87bn compared with a $103m profit during 2015.

Total impairments of $1.9bn included a $1.1bn charge on aircraft, reflecting lower market values and the early phase out of certain aircraft types.

There was also an $808m charge on certain assets and financial exposures to equity partners, mainly related to Alitalia and airberlin.

Legacy fuel hedging contracts also had a negative bearing on performance in 2016, though this exposure is expected to have less of a financial impact during 2017.

The company has implemented a “right size and shape” programme, including headcount reductions, to try and correct the situation. The programme is estimated to have generated total overhead savings of 4%.

Ray Gammell, interim group chief executive, explained: “We are focused on maintaining the solid performance of our core airline business – operationally and financially – even amid difficult market headwinds. At the same time, we continue to implement changes across the group as part of the comprehensive strategic review, with a focus on improving revenues and reducing costs.

“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.

However, our airline business remains strong and class-leading, and as an aviation group, we are in a stronger position.”

Gammell temporarily took over the top role on July 1 when James Hogan left the company.

Mohamed Mubarak Fadhel Al Mazrouei, chairman of the board of the Etihad Aviation Group, added: “A culmination of factors contributed to the disappointing results for 2016. The Board and executive team have been working since last year to address the issues and challenges through a comprehensive strategic review aimed at driving improved performance across the group, which includes a full review of our airline equity partnership strategy.”

The past year has also proved tough for Etihad’s UAE neighbour Emirates. The Group reported an AED 2.5bn ($670m) profit for the financial year ending 31 March, 70% lower the previous year’s record profit.

The cargo division reported a revenue of AED10.6bn ($2.9bn) down 5% over the previous year, although tonnage carried slightly increased by 3% to reach 2.6m tonnes.

Qatar Airways, meanwhile, saw cargo demand increase by 20.9% year on year to 1.15m tonnes. Cargo revenues for the period increased by 13.5% year on year to reach QR6.4bn.

According to IATA’s annual report, Emirates was the busiest of three airlines, followed by Qatar and Etihad behind its two rivals.


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