Etihad Announces Cost Cutting Including Reduction Of Jobs Amid Market Slowdown

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Etihad Airways surprisingly announced that they would cut between 1000-3000 jobs amid a slowdown of the aviation market that saw the Middle Eastern Carrier expanding rapidly in recent years.

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Etihad’s decision to step on the breaks could signalize a more conservative approach of the Gulf airlines that grew in both seat capacity and staff but might have to scale back in order to keep pace with the market.

No other region has seen such a rapid growth of mainline carriers in the past 10 years as the Gulf with their most potent airlines Emirates, Etihad and Qatar Airways.

While ordering massive amounts of aircraft, building modern airports and hiring staff in the ten of thousands it could be the time now to put on the brakes as the ME3 might have reached their ceiling.

Bloomberg (access here) reported about the decision of Etihad to cut up to 3,000 jobs across the board.

Etihad Airways PJSC will eliminate jobs across several units, highlighting the pressure on carriers in the Persian Gulf to adapt to slowing growth after years of aggressive expansion.

The Abu Dhabi-based company is undertaking “organizational reviews and restructuring” to “reduce costs and improve productivity and revenue,” an Etihad spokesman said Sunday in an e-mailed response to questions. This will result in “a measured reduction of headcount” in some parts of the business amid an “increasingly competitive landscape” and a weaker global economy, he said.

The cutbacks started in the last few weeks and will range from about 1,000 to as many as 3,000 jobs, according to people familiar with the plans, who asked not to be identified because the figure isn’t public. Several dozen people have already left the information-technology department and reductions are also planned in the human resources and commercial sales units, one person said. Cuts will also involve cabin crew and ground staff, another person said. The spokesman for Etihad, the third-largest Gulf carrier behind Emirates and Qatar Airways Ltd., declined to specify the number of employees affected.

Etihad is changing course with the job cuts. The company almost tripled its staff to 20,292 in the past eight years, as its fleet expanded to 122 aircraft from 42. It employs 26,769 when including subsidiaries and employees abroad. Its aggressive bid for growth included buying stakes in European carriers Air Berlin Plc and Alitalia SpA, which are both struggling. Air Berlin, which is cutting its core fleet in half, named Lufthansa manager Thomas Winkelmann on Sunday as chief executive officer, replacing Stefan Pichler, who lasted less than two years. …

Hit by the economic fallout of lower oil prices, Gulf airlines are facing slower growth and need to adjust after years of expansion. Emirates Group reported a 64 percent plunge in first-half profit, while Qatar Airways said demand from the oil and gas industry was softening during the drop in crude prices. Net income for airlines from the Middle East will drop to a combined $300 million in 2017 from $900 million expected for 2016, the International Air Transport Association forecast this month.

Of course slowing demand isn’t the only headache for Etihad at the moment. They have been very actively shopping around the world and especially Europe to buy into smaller carriers in order to open a door for landing rights and codeshares in markets that are usually quite restrictive.

Some of these shopping adventures (Air Berlin and Alitalia) have proven themselves very expensive, not being able to generate sufficient revenue (if any) and essentially being a money burning machine for the gulf carrier which also has to fight off competition within the ME3 group. And the competition between Emirates, Etihad and Qatar Airways is fierce.

Conclusion

Some of these shopping adventures (Air Berlin and Alitalia) have proven themselves very expensive, not being able to generate sufficient revenue (if any) and essentially being a money burning machine for the gulf carrier which also has to fight off competition within the ME3 group. And the competition between Emirates, Etihad and Qatar Airways is fierce.

Now the bills hit Etihad one by one and they indeed add up considering the disaster with Air Berlin at the moment. So much that the carrier now has to clean house at their own company to compensate for losses elsewhere. Even though growth is slowing down I don’t think it’s that much that it warrants the cut of up to 3,000 jobs out of the blue.

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