"How do they do it?" That's the first question any student of business management will ask when you show the performance charts of the "World's Leading Airline". In less than eight years, Etihad Airways has taken the global airline industry by storm; it has won a wide variety of awards and accolades, including the World Travel Awards' prestigious title of "World's Leading Airline" that it has been bagging for the last two years.
But perhaps the biggest achievement is that this acclaim has not come at the cost of commercial viability. With the youngest fleet in the skies, the airline achieved break-even at EBITDAR level in 2010, and is committed to full break-even this year. "We are the fastest growing commercial airline in the world's aviation history; what we have achieved in seven years has taken others much longer," says Peter Baumgartner, Etihad's Chief Commercial Officer.
This stellar performance has come without any kind of state-subsidy or other kind of 'free lunch'. Baumgartner stresses that the key lies in a unique management ideology that keeps customers at the centre of every decision and by leveraging the strengths of a young airline.
'APPLE' OF THE SKIES "We believe that we have found the approach, the recipe to be the 'Apple' of the airline industry," says Peter, while referring to the notion that "Apple (Computer) doesn't have customers; it has fans". Like Apple, "our brand positioning allows us to be a quality brand - accessible to every section of consumer segmentation," he told journalists in Abu Dhabi last month. "We have the opportunity to reinvent travelling at every touch point of the entire customer travel experience," he added.
Baumgartner contended that the times are over when a frequent flyer used to judge an airline based on its on-board product and service experience, adding that contemporary travellers consider a whole host of factors when choosing their preferred air carrier; ranging from online booking to in-flight and even post-flight experiences. In this context, Etihad's "total experience management" strategy appears to be flying miles above competitors.
Quite interestingly, however, the commercial chief insisted that Etihad's leading competitors are not his source of inspiration. "Emirates, Singapore, Qatar or Lufthansa (airlines) are all great airlines no doubt...but none of these are my benchmarks," said Baumgartner.
Instead, the UAE national carrier has different benchmarks for each service areas of its business. "For example, for our food and beverage on board, the benchmark may be my favourite hotel in my hometown Zurich, or my favourite restaurant in Karachi," he said. Similarly, for website service Etihad's quality benchmark might be Amazon.com or for airport pick-up services, the quality benchmark might be Hertz, the global rent-a-car giant, and so on.
"Part of our brand strategy is how to deliver superior service across customer segmentation, be it religious travel, business travel, luxury travel, high-end luxury travel, student travel, we have to make sure that we deliver adequate access to our superior brand premium," he said.
INSPIRED SERVICE How does this brand strategy transpire into customer services? Well, "internally, it's called 'inspired services', and the "innovation to reach out to your benchmark," says Peter. For instance: when Etihad talks about being inspired by any 5-star hotel/restaurant for its food/beverage services, it hires the services of a food/beverage manager, who has had experience of a 5-star hotel/restaurant and therefore can deliver that in an airline environment.
"This thinking has been incorporated at every stage of product and service development - to benchmark ourselves with whatever the world has to offer; innovate by transforming that into airline environment," says Peter. At the same time, Etihad invests heavily on consumer research, before embarking on a project. "We have invested in a lot of consumer research across the consumer segmentation," said Peter.
Quoting an example, he added that at least 80 percent of the innovation Etihad will deliver in the future, especially in its upcoming A380 aircraft, will be directly derived from the consumer research that they did around the world.
FUTURE PLANS Etihad's future is in sync with the growth and development of Abu Dhabi master plan of 2030. The aviation giant is working very closely with Abu Dhabi's tourism authority, making it an integral part of Abu Dhabi's economic diversification plan.
The synergies of having the same agenda and same maturity stage of our development life cycle are enormous, said Peter, adding that the firm's expansion plans are on target. "We are looking forward to 2014 because it will be an opportunity to demonstrate our brand strategy of being inspired by the best the world has to offer and see how that works in an airline environment to demonstrate the strategy to deliver for us," he said.
The airline had announced the largest aircraft order in commercial aviation history at Farnborough International Air Show in 2008, for up to 205 aircraft - 100 firm orders, 55 options and 50 purchase rights.
"The first aircraft of that order will arrive in quarter four of this year. The order comprises the aircraft of both Boeing and Airbus, says Peter who is very much looking forward to breakthrough technology of aircraft of Boeing 787 in 2014. Over the next 10 years, Etihad plans to take delivery of: three Airbus A330s by the end of 2011; 20 A320s between 2011 and 2015; 10 Airbus A380s from 2014; 25 A350s between 2017 and 2020; 35 Boeing 787s between 2014 and 2020; and 10 Boeing 777s between 2011 and 2013, according to the airline's website.
Although, the firm has kept its option open, it is in no mood to grow inorganically. "It might not be the right thing to subordinate our master plan to an alliance," said Peter when asked if Etihad was looking to merge or acquire with any other airline. "Code sharing in the form of bilateral commercial agreements is the right thing to do now," he said.
Armed with up to 30 code share agreements with other airlines, including Virgin Blue and America airlines, Etihad is looking to increase its market from 7 million today to 25 million by 2020. "We are getting into a growth pattern where growth will be exponential and not linear and it's because of the critical mass and the network we now offer to the corporate market," says Peter, who is also eyeing the booming economies of China and the Indian sub-continent.
Baumgartner believes Abu Dhabi is ideally placed to "efficiently connect" Europe, the US and North America with the east. "Abu Dhabi is in the heart of Arabia; if anyone arrives at the world from space, looks at the world map, and consider - where do I build that ideal air bridge to connect the eastern and the western hemispheres; you will point out at Abu Dhabi".
He expects great demand from the Sub-continent as well as from China, "which is not yet exploited". "These opportunities are a part of our 10-year plan, and since they are at our doorstep, we can leverage that as an airline" he said. Peter, who says he has developed a liking for Pakistani music band Strings, also sees Pakistan as an important market in terms of growth opportunities. Pakistan is already "one of the top ten markets in terms of sales" for Etihad, and he contends that the airline is committed to expanding its presence not just for the short-term but also in the long term.
NO LEGACY But for all said and done, at its heart, perhaps the success of Etihad lies in its flexibility to innovate and meet the challenges of a 21st century consumer whose wants and behaviour are quite often, fickle. "We don't suffer from any legacy restrictions; we want to move the industry from the accepted standards towards star hospitality, and we want to spearhead that transformation," asserted Baumgartner.
And being young gives Etihad that opportunity, as ensuring flexibility can go a long way in maintaining the growth rate through continuous innovation. "Having a young fleet helps you manage your costs efficiently," said Peter, adding that when you start from scratch you are better "fit for the future" than your peers.
Etihad's ability to penetrate Far Eastern markets will rest squarely on the airline's ability to provide low-cost, frequent coverage with augmented services, the likes of which are already being catered by Air Asia and a host of smaller, regional players.
Whatever the eastern horizons may have in store for Etihad airways for its part, the carrier appears eager to stretch its wings in pursuit of new highs.
===============================================
ETIHAD AIRWAYS: KEY INDICATORS
===============================================
Today In 2020
===============================================
Staff 8,000 17,000-18,000
Number of airplanes 60 150
Destinations 66 100
Passengers served 7 million 25 million
-----------------------------------------------
Source: Interview, Company factsheet
===============================================
Comments
Comments are closed.