Big cleanup at the Arabian carrier’s top deck: President and CEO James Hogan loses his post, as does CFO James Rigney. Etihad’s plug pulling comes after a series of bad investments into financially ailing carriers that burned billions of euros.
In a Dublin-held meeting last week, Hogan praised himself by saying that Etihad gained an additional 5.5 million passengers as a result of buying into carriers like Alitalia, Jet Airways, Air
Serbia, Air Berlin and others. According to him, it was a smart strategic move to form a system of financially dependent satellites named Etihad Airways Partners, revolving around Etihad as the
No doubt, 5.5 million passengers is an impressive figure. However, even more impressive – or as critics hold: frightening – is the enormous amount of money Hogan and his top shots had pumped into their equity satellites in recent years. Although, no official figures are available, market observers assume that ailing Air Berlin burned more than 1.2 billion euros contributed by Etihad since 2011 to prevent the airline biting the dust. It’s just one warning example.
Hard facts conflict warm words
A second one is Alitalia. The Rome-based carrier is chronically short of cash since decades, losing 1 million euros each day. It was kept afloat only through diverse cash injections of hundreds of millions by its Arabian stakeholder. Interestingly enough, in spite of this long-lasting precarious situation, Hogan trumpeted continuously that he aims at converting his Roman satellite into a premium flyer, able to operate profitably. An obvious misjudgment of facts by Hogan and his crew.
Which consequences Hogan’s and Rigney’s forthcoming departure will have for the members of the Equity Alliance is a subject of speculation. However, it can be assumed that Alitalia, Air Berlin
and others will have to tighten their belts since Etihad is facing a restructuring process involving axing hundreds of jobs, including a fundamental revision of their investment strategy.
EY is facing fundamental changes
Commenting on the situation, the Etihad Aviation Group board chairman Mohamed Mubarak Fadhel Al Mazrouei stated today (24 Jan): “We must ensure the right size and right shape of the airline. This needs continued improvement of cost efficiency, productivity and revenue.” He went on to say: “We must progress and adjust our airline equity partnerships even as we remain committed to the strategy.”
If this is the last word on the fate of the carrier’s satellite strategy, only the future will tell.
A future that will be determined in the second half of 2017 by new executives replacing Hogan and Rigney.