Etihad CEO cites airline's smarter growth path

WASHINGTON — Despite a political dispute with U.S. airlines, the CEO of Etihad Airways told Paste BN on Tuesday that the airline is demonstrating a new way of building a network by investing in other airlines and by offering luxuries such as $20,000 suites on some flights.

"It's a smarter way of building a network," James Hogan said of the business and innovation choices, after speaking at the U.S. Chamber of Commerce aviation summit.

The conference came two days after Etihad began Boeing 787 service Sunday between Abu Dhabi and Washington Dulles. An advertising campaign started Sunday featuring movie star Nicole Kidman with the theme "flying reimagined."

But Hogan said the growing airline, which began in 2003 and had 14.8 million passengers last year, has "nothing on the drawing board" to add U.S. destinations beyond service to New York, Chicago, Dallas, Los Angeles and San Francisco.

"We're actually very focused on consolidating on those routes," Hogan said.

The Washington service features the Boeing 787-9 Dreamliner. Etihad is among the largest buyers of the -9 and -10 versions of the plane, with 69 on order. Hogan called the composite plane, which is lighter and uses less fuel than comparable aircraft, a "game changer" for operating costs. Etihad also plans to buy Airbus A350-1000.

"From a financial perspective, the 787 is a game changer," Hogan said. "We've been very pleased."

Part of Etihad's business strategy is that it bought stakes in a variety of other airlines, including nearly half (49%) each of Alitalia and Air Serbia, 29% of Air Berlin, 22% of Virgin Australia, 24% of Jet Airways and 4% of Aer Lingus.

But the U.S. Transportation Department rejected in January 2014 an application from the predecessor to Air Serbia to serve as a code-share partner with Etihad, finding the arrangement wasn't "consistent with the public interest."

"There's a lot of criticism that we take business out of the markets," Hogan said. "To the contrary, we have saved European jobs and started to reposition European airlines."

Hogan said the equity stakes provide Etihad better access to travelers, with pricing and marketing united under German and Italian partners, for example. And it means reaching cities beyond the gateway of Milan, such as Bologna, he said.

With Dreamliner service to the USA, Etihad is flying Airbus A380 planes from Abu Dhabi to London with $20,000 suites, each with a living room, a bedroom with a double bed, a shower room and the services of a private butler.

He said it compares favorably with the $60,000 cost of a comparably-equipped private jet for a flight between the Middle East and London — and offers a better ride.

"The Residence enabled us to take advantage of what is usually dead space on those aircraft," Hogan said. "It gave us the opportunity to build something that was innovative, creative."

The novelty generated 140 million impressions on social media, Hogan said. He said the service is sold out to London, whether from high-net-worth individuals, couples celebrating anniversaries, families or businessmen who need "a bit of space."

Hogan said 380 service will expand in June to Sydney and in the fourth quarter to New York City.

"New York, here we come," he said.

Even before the subsidy dispute, the Department of Homeland Security's decision to open a preclearance facility in Abu Dhabi riled Etihad's rivals.

Customs and Border Protection has preclearance facilities at 15 airports, mostly in Canada, Ireland and the Caribbean, to screen passengers before they get on planes, to avoid long lines for passengers arriving in the USA. Federal officials say it also boosts security by screening passengers while they are still overseas.

But U.S. airlines and unions blasted the move as an unfair foreign advantage because no U.S. airline flies directly from Abu Dhabi.

Hogan said reports of long lines were just kinks in the first year of service, but that U.S. Customs agents working under three- and four-year contracts are "outstanding" and becoming part of the community.

"It's teething," Hogan said. "Today it works perfectly."

If a traveler is pulled aside for secondary screening, and it could delay a flight, the airline bumps the traveler to the next day's flight, Hogan said. About 450 out of 290,000 travelers screened at the facility have been denied boarding, according to the department.

"In terms of investment, for the Department of Homeland Security it's been a very wise move," Hogan said.