Has Etihad been very shrewd?

The announcement that Etihad had picked up a 24% share in India’s Jet Airways was generally seen as a coup for Etihad. Jet is probably the best of India’s airlines and the only one capable of being a credible international partner. The Indian government also agreed to an increase in the bilateral agreement which allows seats between India and Abu Dhabi to increase from 13,300 a year to 50,000 in the next three years.

India’s laws regarding foreign ownership of companies are hugely complicated. As part of the deal, and a way of ensuring their sway over Jet amounts to rather more than the stated 24%, Etihad have also purchased Jet’s Heathrow slots and leased them back to the airline. They have also taken a majority stake in the airline’s frequent flyer programme.

They did something rather similar with Air Berlin last year. When the German airline was running out of cash again, they generously bought a majority stake in their frequent flyer programme. Many people thought this was just a way of circumventing EU rules on overseas ownership and ignored Etihad’s comments that they were serious about building a worldwide loyalty programme based around their airline and its partners.

The Gulf airlines like to talk about the profit they make – or are close to making – but making a longterm profit in the airline industry is incredibly hard. On the other hand, the loyalty card business is booming and hugely profitable. Qantas was memorably described as a profitable loyalty scheme with an unprofitable airline attached and there are many other airlines where the same applies.

India is surely ripe for a massive growth in the general consumer loyalty business. AirBerlin’s loyalty scheme is already fairly strong and capable of much more. Add in a few more countries and some investment (a pittance compared with the cost of running an airline) and you could suddenly have a very powerful worldwide loyalty scheme.

Etihad have surely accepted that they will never beat their neighbours, Emirates, in the airline business but they might have the last laugh. Owning the world’s largest consumer loyalty programme is a much more attractive proposition than owning the world’s largest international airline.

Etihad putting eggs in too many baskets

The state of British Airways before its privatisation is often used as a classic example of a company that had grown in a hopelessly disorganised way. It was said that the company had so many different subsidiaries because they worked on the principle that “since we serve tea on board and tea needs milk, we had better have our own herd of cows.” I am not sure whether they actually had the cows but they did own a huge variety of unnecessary businesses all of which had to be disposed of before and shortly after privatisation.

That story came back to me when I read the news last week that Etihad have just bought 200 hens and 3 beehives so they can produce their own organic eggs and honey for their First Class passengers.

Etihad have been very busy recently with investments. They are now the largest shareholder in Air Berlin, have a 3% share in Aer Lingus, 40% of Air Seychelles and nearly 4% of Virgin Australia. They are said to be keen to increase their holding in Virgin Australia and are also rumoured to be looking at other investment targets.

Etihad lives very much in the shadow of Emirates. Abu Dhabi has much more cash than its flash neighbour, but Dubai got into the airline business first. Many doubted that Etihad would survive its first few years and there are still those who question whether it has a longterm future. Maybe it is understandable that they think they have to be different to succeed. They do not want to join an alliance so building their own alliance through shareholdings might look an attractive option.

The trouble is that not all the investments will provide an adequate return on capital and they will require a huge amount of management time which is bound to create a strain on the main airline.

Of course, the hens and bees are very much a side-issue. Maybe they just thought it would make an amusing Press Release. But they will still need managing and the appropriate entry in the balance sheet. Those eggs could be some of the most expensive their First Class passengers will ever eat.

One of the purposes of Etihad is to fly the flag for Abu Dhabi. This little PR gimmick has actually told the world that food producers in Abu Dhabi are unable to supply the airline with sufficiently high quality food so they have been forced to go it alone. 

That is not quite the message they intended, is it?

 

Pprune -what are Etihad frightened of?

Just over a month ago, the airline crew website, PPrune, banned all further mention of Etihad on its forums. This was presumably after legal threats from Etihad. To my knowledge, Etihad is the only airline of any size that has taken such action.

All internet forums can attract malicious posts and PPrune is no different. Every airline has its implacable critics from within its own ranks as well as aggrieved ex-employees. Some of these people do step over the line of what is either reasonable or honest.

Most large companies now have procedures for monitoring internet posts about their company and will take disciplinary action against employees when necessary. Responsible websites, such as PPrune, will also remove posts and ban posters when approached by an aggrieved party.  Any sensible airline knows how to handle this.

There is much of value for airline crew on PPrune and by no means all the posting about Etihad has been negative. Prospective crew use the forum to compare airlines – not just in terms of pay but in matters like crew scheduling, staff accommodation and staff travel. Pilots also use the forum to discuss safety and airline incidents. Whilst some of the comments might be foolish or uneducated, it is fairly easy, even for outsiders, to distinguish between malicious posts designed to trash an airline’s reputation and those that wish to discuss an event sensibly and learn from any mistakes. Now pilots and cabin crew can look at comments on Emirates, Qatar, Gulf and virtually every other airline in the world – but not Etihad.

There are three obvious reasons why Etihad might have taken such draconian action:

- They have something they want to hide about the way they treat staff

- They have something they want to hide about either one or several safety issues

- They are simply inept and do not understand their action is likely to do their reputation more harm than good.

I suspect the answer is a mixture of all three – but mostly the third.

Safe, well-run airlines have nothing to fear from being open. This issue does not just affect airline staff. If an airline wants to keep things hidden, it is a very good reason for passengers not to fly with them.

 

 

Very silly Etihad

Yesterday, an Etihad Airbus had to be escorted into Stansted (the designated airport for handling possible terrorism and aircraft hijackings) by two RAF Typhoon jets.

It is understandable that an airline would want to downplay the seriousness of such an incident but Etihad’s statement to the press was particularly foolish.

“It was a question of inappropriate comments made on the flight and a disruptive passenger. There was no threat to the safety of the aircraft or the passengers.”

I beg to differ.

The point of sending the RAF Typhoons to “escort” the aircraft to Stansted was so that, if necessary, they could blow up the aircraft if it was in danger of being used in a 9/11-type incident.

Unfortunately, passengers cause disruption to flights almost every day and, normally, the aircraft’s Captain makes a decision either to continue to the destination with the passenger in some form of restraint or he decides to land at the next suitable airport to unload the miscreant.

The Etihad aircraft was heading to Heathrow so it was only a few minutes away. There can only be two possibilities:

- The Pilot gave an exaggerated description of the problem to ATC who decided to be ultra-cautious and scrambled the jets.

- There was some form of genuine threat.

Arab airlines hate any form of negtaive publicity and, some of them, have been known to “avoid” discussion of safety problems. I rather thought Etihad was more westernised in its approach but it appears not.

It would be quite understandable if an airline said that the diversion was ultra-cautious and stressed that the landing was perfectly normal and all the passengers were safe but to say this was just a harmless incident caused by a drunk passenger is an insult to the intelligence and suggests that Etihad have a lot to learn if they wish to be regarded as a sophisticated airline.