Etihad Airways: Financial and operating results for 2020

Etihad Airways

Etihad Airways recently unveiled its financial and operating results for 2020 and unsurprisingly reported a 76 per cent drop in passengers carried throughout the year.

The Abu Dhabi based airline carried 4.2 million passengers last year compared to 17.5 million in 2019, due to the pandemic.

Total passenger capacity was reduced by 64 per cent in 2020 to 37.5 billion Available Seat Kilometres (ASKs), down from 104 billion in 2019, with the seat load factor declining to 52.9 per cent, 25.8 percentage points lower compared to 2019 (78.7 per cent).

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The airline recorded $1.2 billion in passenger revenues in 2020, down by 74 per cent from $4.8 billion in 2019, due to fewer scheduled services and drastically fewer people travelling. A contributing factor to this was the total suspension of passenger services into and out of the UAE from the end of March until early June 2020, enforced to limit the spread of the virus in line with a UAE government mandate. More than 80 per cent of total passengers carried in 2020 were flown during the first three months of the year, highlighting the tremendous drop in demand as the global crisis deepened.

On the other hand, the carrier’s cargo operation was strong, with a 66 per cent increase in revenue from $0.7 billion in 2019 to $1.2 billion in 2020, driven by huge demand for medical supplies such as Personal Protective Equipment and pharmaceuticals, paired with limited global airfreight capacity. Cargo yield saw an improvement of 77 per cent.

Operating costs decreased by 39 per cent year-on-year, from $5.4 billion in 2019 to $3.3 billion in 2020, due to reduced capacity and volume-related expenses, as well as a focus on cost containment initiatives.

Overheads were reduced by 25 per cent to $0.8 billion (2019: $1.0 billion) in this timeframe, despite their fixed nature, owing to cash and liquidity management initiatives during the crisis, while the finance cost reduced by 23 per cent through an ongoing focus on balance sheet restructuring. Overall, this resulted in a core operating loss of $1.70 billion (2019: $0.80 billion) in 2020, with the EBITDA turning to negative $0.65 billion (2019: positive $0.45 billion).

Prior to the Coronavirus hitting, Etihad Airways was ahead of its transformation targets set in 2017, having registered a 55 per cent cumulative improvement in core results by end-of-year 2019. This momentum continued into the start of 2020, with a record first quarter that showed year-on-year improvement of 34 per cent. The airline is targeting a complete turnaround by 2023.

CEO, Etihad Airways, Tony Douglas explained: “COVID shook the very foundation of the aviation industry, but thanks to our dedicated people and the support of our shareholder, Etihad stood firm and is ready to play a key role as the world returns to flying. While nobody could have predicted how 2020 would unfold, our focus on optimising core business fundamentals over the past three years put Etihad in good stead to respond decisively to the global crisis. We have taken bold action to protect our people and our guests, develop an industry-leading health and hygiene programme, and restructure our business to better position us for recovery. As the world’s first airline to vaccinate all our operating pilots and cabin crew against COVID, we are ready to welcome back travellers to experience best-in-class travel with Etihad Airways.”

Also commenting was chief financial officer, Etihad Airways, Adam Boukadida: “We started the year on a firm footing by surpassing our transformation targets for Q1 and were looking forward to a strong performance for the year ahead – and then the pandemic took hold. As passenger revenues nosedived, we took immediate action to secure Etihad’s long-term financial health, with a wide range of measures to mitigate the impact of COVID on our business. Despite significant pressures on our cashflow, we maintained liquidity by focusing on cost control, maximising cargo revenue, enhancing our charter capabilities and raising innovative credit facilities such as the world’s-first sustainability-linked transition sukuk. This was supported by Etihad retaining an A with a ‘stable outlook’ credit rating by Fitch, making it one of a handful of airlines to maintain a pre-COVID rating.”