After Huge Loss, Will Etihad Merge With Emirates?

In a pandemic or out of a pandemic, Etihad cannot make money. While it plans to downsize its way to growth, perhaps the wiser move is finally convincing Emirates to merge. But I increasingly view a merger as unlikely.

Etihad Reports Major Loss In 2020

Etihad just reported a massive loss for 2020 totaling $1.7 billion. Revenue dropped from $5.6 billion in 2019 to $2.7 billion in 2020, as the pandemic severely depressed demand for air travel. But it’s not like the pandemic is fully to blame. Since 2016, Etihad has lost $7.3 billion. In 2017 it also lost nearly the same amount while most carriers profited.

One big problem stemmed from Etihad’s investment in airlines around the world, none of which worked out well. But even its own brand was not profitable.

To address the continued losses, Etihad slashed routes, reduced salaries, laid off workers, cancelled aircraft orders, and sold existing aircraft.

But is emerging from the pandemic as a much smaller airline the path forward?

The Difficult Question Of An Etihad – Emirates Merger

Prestige counts for something. The ongoing competition between Abu Dhabi and Dubai cannot be dismissed. Abu Dhabi residents also don’t want to drive to Dubai International Airport (or even Dubai World Central) or fly WizzAir.

Emirates has repeatedly said there will be no merger. Truly, Emirates would rather see Etihad just go away (and that may be the long-term game plan). But what does Etihad hope to accomplish?

On paper, Etihad planned for a complete turnaround and profitably by 2023. The pandemic likely will push that goal by at least two years.

Its latest “transformation plan” is high on fluff and light on details. Etihad currently has a fleet of 103 aircraft, including 39 Boeing 787 Dreamliners. It also notes that “Etihad is continuing to gradually resume services and grow its global network as international borders reopen.”

I used to be a big proponent of merger (see below). Part of me still thinks that a merger is inevitable because the overlap between Emirates and Etihad is simply unnecessary, especially with current demand.

But increasingly I think that Etihad is determined to go it alone. Certainly, prestige and convenience for Abu Dhabi residents play into this calculus. But I also sense a determination to make it work that goes beyond pride. The innovations at Abu Dhabi International Airport and investment in the onboard product suggest not only that Emirates doesn’t want to merge, but Etihad doesn’t either.

CONCLUSION

Etihad continues to lose money, but believes it is on the right track. While a merger seemed likely in 2020 and is still logical, I no longer see it happening.

> Read More: Etihad, Can You Just Merge With Emirates Already?

image: Etihad