Etihad CEO James Hogan to Step Down -- Update
January 24 2017 - 4:11AM
Dow Jones News
By Robert Wall and Nicolas Parasie
Abu Dhabi said it would review the strategy of Etihad Aviation
Group and announced the departure of its architect, Chief Executive
James Hogan, in the latest sign a prolonged slump in oil prices has
exposed the rapidly expanding state-owned Middle East carriers to
belt tightening.
Mr. Hogan, who led Etihad Airways for over a decade before last
year establishing the aviation group that also manages investment
in other carriers, will leave the company in the second half of
this year. Chief Financial Officer James Rigney also will depart
this year. A global search for their replacements has already
begun, the company said Tuesday.
"We must progress and adjust our airline equity partnerships,"
Etihad Aviation Group Chairman Mohamed Mubarak Fadhel Al Mazrouei
said, even as he signaled to stick with the principals of the plan.
The size and structure of the company would be reviewed and belt
tightening measures considered, he said.
The move is the latest example of the oil-rich Persian Gulf
states tightening the leash on their vast holdings amid the energy
price slump that began in mid-2014. Abu Dhabi has been conducting a
review of its main state entities in a bid to cut costs, reduce
inefficiencies and create larger local and international champions.
The state recently merged two of its sovereign-wealth funds and is
also combining two of its banks.
Etihad Airways is one of a trio of rapidly expanding Middle East
airlines that include more established Emirates Airline and Qatar
Airways. They have invested heavily in new Airbus SE and Boeing Co.
planes to funnel traffic through their hubs. European and U.S.
carriers have accused the airlines of unfairly benefiting from
state subsidies, a charge they all have denied.
Mr. Hogan invested in a series of other airlines to help drive
traffic and catch up with older Mideast rivals. Those investments
include minority stakes in Alitalia, Air Berlin PLC and India's Jet
Airways.
The investments have helped drive traffic to the Abu Dhabi hub,
but have come at a cost. Air Berlin, Germany's second-largest
airline, has required repeated capital injections but continued to
lose money. Mr. Hogan, as late as last week defended the strategy:
"We are committed to our equity partner strategy."
"We are regularly approached by airlines that want to become
part of this model," he said in Dublin.
Etihad Airways late last year also announced job cuts. The
airline had deferred some planes deliveries amid growing pressure
on ticket prices. The Mideast carriers have been hit by softening
demand for their premium seats from the drop in oil prices in the
second half of 2014.
Rival Emirates also is slowing expansion. It last year agreed
with Airbus and engine-maker Rolls-Royce Holdings PLC to delay
delivery of some A380 superjumbos. Emirates President Tim Clark
last month also said he is holding off on placing an order for
further Airbus or Boeing jetliners because of market weakness. The
airline has begun charging for seat assignments for some buying its
cheapest tickets and plans to introduce premium economy seats to
boost sales in response to falling ticket prices.
Write to Robert Wall at robert.wall@wsj.com and Nicolas Parasie
at nicolas.parasie@wsj.com
(END) Dow Jones Newswires
January 24, 2017 03:56 ET (08:56 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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