Eithad Airways, the Abu Dhabi-based carrier that recently canceled an order of seven Airbus A350 passenger jets, will reduce its original order with the plane-maker and substitute canceled planes to meet expansion targets, Etihad Chief Executive James Hogan told journalists in Beirut.“We are still committed to 10 options and 15 purchase rights. At the right time, we will take those aircraft,” Hogan said. Options and purchase rights are commitments that airplane manufacturers and their customers commonly enter into when agreeing on firm orders. Options and purchase rights can give jet buyers access to production slots and prices based on the agreements they negotiate with manufacturers. Hogan did not comment on the 12 remaining firm orders for A350 jets.
“I substituted to meet the growth strategy,” Hogan said, explaining that the carrier had ordered the 25 A350s plus placed additional 25 options and purchase rights back in 2008 “to meet our network expansion and expected them to come at a certain time.”
As the schedule for delivery of the A350s started sliding and the manufacturer was still working on the specifications of the A350-1000, “we took a view to reduce the firm commitments to 12 and canceled six in 2011 and seven in 2012. We still believe in the aircraft but we have bridged that with [Boeing] 787 [version]9 where we increased our order to 41. That’s business,” he said.
Etihad’s initial order for B787s, signed at the 2008 Farnborough International Airshow, was for 35 planes. The company said at the time that the total value of its order with Boeing, which also included 10 B777-300 planes, was more than $9 billion.
The original Etihad order for the 25 A350s, also signed at Farnborough in 2008, was part of a deal for 55 jets also including 10 A380s and 20 A320s with a value of approximately $12 billion, according to Etihad. Media reports put the value of the recently canceled seven A350s at $2.2 billion.
The cancellation of seven A350s was first reported earlier this month by Reuters, based on data from Airbus. Media in the United Arab Emirates this week quoted analyst speculations that Etihad would fully step away from the wide-bodied Airbus in favor of the competing 787 but Hogan said this is incorrect.
Airbus and Boeing have been intensely competing with their long-range, wide-bodied A350 and 787 model lines, both designed to become workhorses in the next generation of fuel efficient passenger aircraft. Each highly-touted model, however, also had shares of technical challenges to contend with.
Fleet purchases by Etihad in the carrier’s first years of operation have favoredAirbus jets . When asked if the shift to 787s signified an end of his love affair with Airbus, Hogan said, “I love both Boeing and Airbus, equally. In this business, you have to work with Boeing and Airbus.” He emphasized that Etihad has a considerable fleet of Airbus planes and in addition to the A350s, more A321s and 10 A380s will be added to its fleet in the next few years.
According to Hogan, Etihad will report a financial revenue performance of $5 billion, implying growth above 22 percent when compared with 2011 results of $4.1 billion. Last year was the first time the airline reported a profit as its revenue improved 36 percent on 2010.
On the sidelines of the press conference Hogan told Executive that Etihad will achieve the targeted ten-million passenger mark this year. In 2011, the airline reported passenger growth figures of 17 percentwhile registering a first quarter year-on-year increase in passengers by 27.4 percent to 2.36 million from 1.85 million, according to an April 4 announcement.
The Lebanese connection
Hogan came to Beirut to celebrate the success of Etihad’s eight-year service to the Lebanese capital, which commenced in November 2003. Beirut was Etihad’s first commercial destination.
According to Hogan the carrier’s strongest demand from Beirut-originating travelers is for flights to Sydney, followed by Abu Dhabi. In 2012, Etihad’s Beirut office has a revenue projection of $31 million, he added.
Joseph Chamoun, Etihad’s country manager for Lebanon, also told Executive that the operation is the airline’s top performing market in the Levant and Africa. In important long-haul services from Beirut to Australia and some Southeast Asian destinations Etihad’s share of the outbound Lebanese travel is above 40 percent, he claimed.
During the first quarter of this year Beirut airport saw 204,670 outbound passengers, according to Lebanon’s Civil Aviation Authority At the time of posting, statistics on the number of travelers to Oceania within that total were not available.
Etihad also anticipates that its network’s expansion intoLagos, Nigeria this summer and next year’s expansion to Brazil as the first Latin-American destination will be drawing in many travelers from the large expatriate Lebanese communities in those two nations, Hogan said. In previous press statements, Etihad had announced the start of its service to Latin America for 2013 but did not specifically say that it would serve Brazil as its first destination in the continent.