In a story that will become all too familiar as more Q2 results are released, Etihad Airways reported a record performance in Q1 of 2020, with the second quarter heavily impacted by COVID-19.
The airline’s half-year (H1: January-June) 2020 performance was well ahead of its transformation plan targets, with its best monthly results to date for February. This was prior to the impact of COVID-19, the subsequent closure of international borders, and the suspension of flights to and from the UAE from 24 March 2020.
“Etihad faced a set of enormous and unpredictable challenges in the first six months of the year. We started 2020 strong, and recorded encouraging results as part of our continuing transformation programme. This left us in a relatively robust position when COVID-19 hit, allowing us to act with agility, and to mobilise all available resources as the crisis deepened, taking major steps to reduce costs through a wide-reaching series of measures,” said Tony Douglas, Group Chief Executive Officer, Etihad Aviation Group.
“While we have revised our outlook for the rest of 2020 based on current realities, we remain optimistic that as international borders re-open, we will increase our flying and carry more guests securely and with greater peace of mind, supported by the Etihad Wellness programme and our new Wellness Ambassadors. By September, we aim to increase our worldwide flights to half our pre-COVID-19 capacity. Looking forward, we rest assured that the UAE is leading the way in the research for a vaccine against COVID-19. The incredible efforts Abu Dhabi is making to ensure the safety and security of its residents and visitors will soon enable us to welcome the world back to our amazing home. This commitment was successfully highlighted by the recent hosting of major UFC events in the capital.”
H1 2020 performance
Etihad carried 3.5 million passengers in H1 (H1 2019: 8.2 million), a reduction of 58% from the same period the previous year. Average seat load factor was 71%. Core operating loss for this period increased by US$ 172 million to US$ 758 million (H1 2019: US$ 586 million), driven by a 38% drop in revenues, which stood at US$ 1.7 billion (H1 2019: US$ 2.7bn). This was partially off-set by a 27% reduction in direct operating costs to US$ 1.9 billion (H1 2019: US$ 2.7 billion), and a 21% reduction in general and administrative expenses to US$ 0.40 billion (H1 2019: US$ 0.50), both driven by management cost containment initiatives and reduced operations. Available Seat Kilometres (ASK) reduced by 53% to 23.69 billion (H1 2019: 50.35 billion).
The core operating result for the first three months of the year improved by 34%, despite the onset of COVID-19, with a 12% reduction in passenger numbers, and a 9.5% reduction in ASK. Q1 seat load factor was 74% (January’s performance was significantly stronger than the same month in 2019, with a seat load factor of 81.9%), and yield at US$ 5.92 cents. Unit revenue in Q1 reduced by 3.3% to US$ 4.14 cents (Q1 2019: US$ 4.28 cents), offset by continuous focus on driving down unit costs, which were reduced by 2.4% to US$ 7.01 cents (Q1 US$ 7.18 cents).
However, the airline saw a significant decrease in Q2 operating revenues following COVID-19 flight suspensions, with 70% of its fleet grounded. This period registered a 99% drop in passenger numbers and a 95% drop in ASK compared to Q2 2019. Seat load factor for this period was 16%, mainly driven by the operation of special (repatriation) flights, and the resumption of a limited network of transfer services via Abu Dhabi in early June.
Etihad operated up to 40 of its fleet of 97 passenger aircraft in Q2, including Boeing 787 Dreamliners, 777-300ERs, and Airbus A320 family aircraft as belly-hold cargo freighters to complement Etihad Cargo’s operational fleet of six 777-200F freighters. Between 25 March and 15 June, over 640 special passenger flights were operated to 45 online and offline destinations, using the passenger cabins of these aircraft to fly foreign nationals out of the UAE, and to bring UAE nationals back home.
“This year started strong, riding on the positive momentum gained in 2019, and by the end of the first quarter, the airline was on track to achieve a 2020 EBITDA of US$ 900 million (2019: US$ 453 million). Etihad managed to maintain a satisfactory level of liquidity despite a major drop in revenues, while continuing to raise new liquidity facilities supported by local and international financial institutions,” said Adam Boukadida, Chief Financial Officer, Etihad Aviation Group. “This was supported by maintaining an ‘A with a stable outlook’ Fitch rating in April, at the height of the pandemic. Etihad was one of a small number of airlines to maintain its pre-COVID-19 credit rating.
“A greater emphasis is being placed on a drive towards increased cost optimisation and efficiencies across the entire business to face the hurdles placed in our way by COVID-19. Our suppliers and partners have also worked closely with us, including the arrangement of payment holidays with lessors and savings discussions with all of our supply chain, so we can re-emerge stronger together.”
IMAGE: Etihad Airways Boeing 787-9 Dreamliner
