Etihad Airways registers $1.8bn loss in 2016 as cargo comes under pressure

Etihad Airways saw its cargo revenues drop by 10% last year despite an increase volumes, while the overall company slipped to a $1.8bn loss.
The Abu Dhabi-hubbed airline recorded cargo revenues of $900m in 2016 compared with a $1bn in 2015. This came despite a 0.8% increase in cargo volumes to 595,916 tonnes.
A results statement spoke of a “slowdown in the cargo market” which put “increased pressure on cargo revenues and yields”.
It was also a tough year for the overall airline as one-off impairment charges and fuel hedging losses pushed the airline to a loss of $1.87bn compared with a $103m profit during 2015.
Total impairments of $1.9bn included a $1.1bn charge on aircraft, reflecting lower market values and the early phase out of certain aircraft types.
There was also an $808m charge on certain assets and financial exposures to equity partners, mainly related to Alitalia and airberlin. 
Legacy fuel hedging contracts also had a negative bearing on performance in 2016, though this exposure is expected to have less of a financial impact during 2017. 
The company has implemented a “right size and shape” programme, including headcount reductions, to try and correct the situation. The programme is estimated to have generated total overhead savings of 4%.
Ray Gammell, interim group chief executive, explained: “We are focused on maintaining the solid performance of our core airline business – operationally and financially – even amid difficult market headwinds. At the same time, we continue to implement changes across the group as part of the comprehensive strategic review, with a focus on improving revenues and reducing costs.
“This year is just as challenging for the global aviation industry and the ever-evolving competitive environment is likely to impact overall performance in 2017. However, our airline business remains strong and class-leading, and as an aviation group, we are in a stronger position.”
Gammell temporarily took over the top role on July 1 when James Hogan left the company.
Mohamed Mubarak Fadhel Al Mazrouei, chairman of the board of the Etihad Aviation Group, added: “A culmination of factors contributed to the disappointing results for 2016. The Board and executive team have been working since last year to address the issues and challenges through a comprehensive strategic review aimed at driving improved performance across the group, which includes a full review of our airline equity partnership strategy.”
The past year has also proved tough for Etihad’s UAE neighbour Emirates. The Group reported an AED 2.5bn ($670m) profit for the financial year ending 31 March, 70% lower the previous year’s record profit.
The cargo division reported a revenue of AED10.6bn ($2.9bn) down 5% over the previous year, although tonnage carried slightly increased by 3% to reach 2.6m tonnes.
Qatar Airways, meanwhile, saw cargo demand increase by 20.9% year on year to 1.15m tonnes. Cargo revenues for the period increased by 13.5% year on year to reach QR6.4bn.
According to IATA’s annual report, Emirates was the busiest of three airlines, followed by Qatar and Etihad behind its two rivals.
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