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Etihad Heads Off Trump Tensions With Pledge Not to Grow in U.S.

Etihad Heads Off Trump Tensions With Pledge Not to Grow in U.S.

Old Feb 2, 2017, 5:01 am
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Etihad Heads Off Trump Tensions With Pledge Not to Grow in U.S.

Etihad Airways PJSC sought to head off the prospect of further clashes over its U.S. expansion now that Donald Trump is president, saying it has no plans to add destinations beyond those already served.

https://www.bloomberg.com/news/artic...to-grow-in-u-s
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Old Feb 3, 2017, 1:37 am
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Can't say I'm surprised. The UAE can't afford to do all what it was doing before for all of its aviation industry, so this is just another public play up on the advice of its lobbyists in DC. And given the US bans -- we probably haven't seen them all yet -- and all the uncertainty being unleashed by the new US Admin, demand for travel on the GCC3's route network won't be all that it otherwise would be. Add in that the UAE is in major kiss-up mode (and has always preferred the current US party in charge to its primary opposition), and, voila, we get this kind of stuff too.

Economic realities and political realities combine to make the international air travel world what it is. Hogan pretty much indicated that this announcement is not driven by merely apolitical calculations.

Last edited by GUWonder; Feb 3, 2017 at 1:43 am
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Old Feb 3, 2017, 1:53 am
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For EY it makes more sense to expand the business to China and even to Africa than expanding the business to the US. Trump is the main reason for that, but not the only one.
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Old Feb 3, 2017, 1:59 am
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Originally Posted by thbe
For EY it makes more sense to expand the business to China and even to Africa than expanding the business to the US. Trump is the main reason for that, but not the only one.
The timing might suggest so, but I really don't think this has anything to do with Trump.

Eithad is going through the first rough patch in its short history. For the first time ever - or at least in a long time - it has reduced the number of destinations it is flying to. It needs to take a pause and get its house in order - particularly as its own core business is now in trouble, together with the fact that it's been distracted for the last several years trying to resusciate both airberlin and Alitalia.

Of course, it is no bad thing NOT to antagonise Trump by launching new services right now. But Etihad is in uncharted territory at the moment.
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Old Feb 3, 2017, 2:06 am
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Originally Posted by irishguy28
The timing might suggest so, but I really don't think this has anything to do with Trump.

Eithad is going through the first rough patch in its short history. For the first time ever - or at least in a long time - it has reduced the number of destinations it is flying to. It needs to take a pause and get its house in order - particularly as its own core business is now in trouble, together with the fact that it's been distracted for the last several years trying to resusciate both airberlin and Alitalia.

Of course, it is no bad thing NOT to antagonise Trump by launching new services right now. But Etihad is in uncharted territory at the moment.
Any such corporate "pledge" would be all about the new US Admin. Such things are meant to make the POTUS happy by giving him an example of protecting US companies' US workers from foreign competition. If the current POTUS tweets about this, that will reveal a lot.

But EY is under pressure too from the economics of the business and its "investments" that didn't work out so well.

Last edited by GUWonder; Feb 3, 2017 at 2:12 am
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Old Feb 3, 2017, 2:25 am
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Originally Posted by irishguy28
The timing might suggest so, but I really don't think this has anything to do with Trump.

Eithad is going through the first rough patch in its short history. For the first time ever - or at least in a long time - it has reduced the number of destinations it is flying to. It needs to take a pause and get its house in order - particularly as its own core business is now in trouble, together with the fact that it's been distracted for the last several years trying to resusciate both airberlin and Alitalia.

Of course, it is no bad thing NOT to antagonise Trump by launching new services right now. But Etihad is in uncharted territory at the moment.
There are four reasons, why Trump is the main reason for EY's decision:
- the US economic will decrease on mid- and long-term. Less economic means less passengers.
- even if the UAE are not concerned by the ban (yet), it will effect the business.
- AA, UA and Delta want to stop the subsidies for EY. With Trump and "America first", they have better chances to get heard by the US government.
- the meaning of China as a reliable trading partner will increase, so there is a good alternative for investments (Africa is the second one).
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Old Feb 3, 2017, 2:54 am
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Originally Posted by GUWonder
Any such corporate "pledge" would be all about the new US Admin. Such things are meant to make the POTUS happy by giving him an example of protecting US companies' US workers from foreign competition. If the current POTUS tweets about this, that will reveal a lot.
It's not a corporate "pledge".

This is exactly what Hogan said:

Originally Posted by Bloomberg
We are not flying into any further points in the U.S.A.,” Etihad Aviation Group Chief Executive Officer James Hogan said Wednesday in an interview with Bloomberg Television. “We are very comfortable with our American network.”
I am not sure that an outgoing CEO could give a "corporate pledge" anyway, as the succeeding team is likely to have different ideas...so any "pledge" - not that there was one - could not be seen as having any effect after the departure of the CEO that gave it.

He also said that he stood by his investment strategy, but you can be sure that the airline will seek to exit as many of these as possible as soon as possible after he has gone.

Besides - this shouldn't have come as news.

Originally Posted by CAPA
For the first time in over a decade, a Gulf superconnector airline will reduce its annual capacity. Etihad is forecast to cut ASKs by 4% in 2017. Emirates and Qatar Airways will have their slowest growth expansion in a decade, but in terms of net capacity addition 2017's production increase is the slowest in about five years.

Etihad is contracting in all regions except Western Europe and Australia in 2017. The largest cuts will be in South America, North America and Southeast Asia, although this does not necessarily correlate to regional profitability. Despite the reduction Etihad's frequencies will be up 1% in 2017, mostly in Western Europe and South Asia.
.

It probably suits the airline to have people think "oh, they are pausing their growth because of Trump" - but there is no reason to think this is the main reason. Qatar announced service to Las Vegas after the election, and confirmed the date a few weeks ago. Emirates announced service to Newark - via Athens, Greece 2 weeks ago.

The real reason behind Etihad's pause has far more to do with their current financial problems.

Originally Posted by GUWonder
But EY is under pressure too from the economics of the business and its "investments" that didn't work out so well.
Indeed. Etihad's biggest problem right now is to solve the airberlin and Alitalia messes, which have been draining resources (losing money and tying up staff). They hope that they have managed to stem the losses at airberlin, thanks to the arrangement with Lufthansa and TUI, which was recently cleared by the Bundeskartellamt but which may face further scrutiny from European regulators. Alitalia is reportedly losing more than €500,000 a day and they urgently need to solve that problem.

The fact that their own business is in trouble - with restructuring, job cuts, network shrinkage and the CEO and CFO leaving the company means that there are - as shown above - no immediate plans for growth.
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Old Feb 3, 2017, 3:01 am
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Originally Posted by thbe
There are four reasons, why Trump is the main reason for EY's decision:
- the US economic will decrease on mid- and long-term. Less economic means less passengers.
- even if the UAE are not concerned by the ban (yet), it will effect the business.
- AA, UA and Delta want to stop the subsidies for EY. With Trump and "America first", they have better chances to get heard by the US government.
- the meaning of China as a reliable trading partner will increase, so there is a good alternative for investments (Africa is the second one).
Those are all potential future outcomes.

However, Etihad is currently grappling with - and responding to - immediate, ongoing and far more threatening problems in its current operations.

Originally Posted by Forbes

According to a spokesperson for the airline, it is embarking on a restructuring exercise to cut costs and improve productivity “against a backdrop of weakened global economic conditions”. The airline hasn’t said how many jobs will go, but it has described it as “a measured reduction of headcount in some parts of the business.”

The most recent figures from the airline show a slight reduction in the number of destinations it flies to, from 116 at the end of last year to 112 in October this year. Growth in its fleet has almost stalled in 2016, with the number of planes rising by just one over the first ten months of the year to 122.

The announcement of job cuts comes in the wake of falling passenger numbers at Eithad’s Abu Dhabi base. Other warning signs in recent weeks have included huge losses announced by its Dubai-based rival Emirates.
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Old Feb 3, 2017, 3:42 am
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Let's see. If EY goes on expanding in China and/or Africa, I'm right. If EY stops to expand everywhere, you are right.
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Old Feb 3, 2017, 3:45 am
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Originally Posted by thbe
Let's see. If EY goes on expanding in China and/or Africa, I'm right. If EY stops to expand everywhere, you are right.
No-one is saying that Etihad will never, ever expand again.

But they are certainly paused for 2017.

Originally Posted by CAPA
For the first time in over a decade, a Gulf superconnector airline will reduce its annual capacity. Etihad is forecast to cut ASKs by 4% in 2017. Emirates and Qatar Airways will have their slowest growth expansion in a decade, but in terms of net capacity addition 2017's production increase is the slowest in about five years.

Etihad is contracting in all regions except Western Europe and Australia in 2017. The largest cuts will be in South America, North America and Southeast Asia, although this does not necessarily correlate to regional profitability. Despite the reduction Etihad's frequencies will be up 1% in 2017, mostly in Western Europe and South Asia.
There you go. No expansion in China or Africa in 2017. Contraction in all regions except Western Europe and Australia in 2017.

It's not at all that Trump is causing them to put any potential growth they were planning into other regions. They are simply not planning on growing at all in 2017. Even if had been a Clinton administration, which with its first act tossed out the "Airlines For America" claims and rolled out the red carpet for the Middle Eastern Airlines, Etihad is not currently in a position where it would likely have been able to add US capacity.
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Old Feb 3, 2017, 5:36 am
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In your quote I can find Western Europe, Australia, South America, North America, Southeast Asia and South Asia.

For you it's a prove about something about China and Africa. Interesting.

Btw: I thought, that Trump is ellected for at least four years. You focus on 2017. Do you have any breaking news about that, you like to share?
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Old Feb 3, 2017, 6:24 am
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Originally Posted by thbe
In your quote I can find Western Europe, Australia, South America, North America, Southeast Asia and South Asia.

For you it's a prove about something about China and Africa. Interesting.
I am not sure which part of the following sentence is not clear: "Etihad is contracting in all regions except Western Europe and Australia in 2017."

Neither China nor Africa are in Western Europe or Australia.

Originally Posted by thbe
Btw: I thought, that Trump is ellected for at least four years. You focus on 2017. Do you have any breaking news about that, you like to share?
Airlines are not yet planning route launches or destinations much beyond 2018. If you think that many, or all, airlines have firm, unalterable plans laid out for networks right up to 2020, then you are mistaken. Too much can happen in between to change such plans. Some airlines announce a new route with a year's lead in or more (such as Qatar's announcement of Auckland, since delayed on numerous occasions, and Qantas's announcement of London-Perth more than a year ahead of planned launch). Others announce a new route with only a few weeks/month's lead in (such as Emirates' announcement of Auckland, in response to the Qatar announcement, which they managed to start within 2 months or so from the announcement). Others announce new launches which never happen.

Anything planned for 2018, 2019 or 2020 is, for now, merely provisional. Market forces, aircraft deliveries, and many other factors can affect plans so they are not made that far in advance.
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