From Serbia to the Seychelles, Etihad Airways Chief Executive Officer James Hogan has been greeted as a savior for his willingness to bail out cash-strapped airlines. Since 2011 the Australian has arranged stakes in seven carriers, from Aer Lingus Group on Europe’s western fringe to Virgin Australia Holdings on the shores of the Pacific, to help funnel passenger traffic through Etihad’s desert hub in Abu Dhabi. His next rescue may be the boldest yet: Italy’s Alitalia, dogged by bloated payrolls, state meddling, and chronic losses.
Hogan’s investment in a clutch of ailing airlines over which he has limited managerial control comes a decade after a similar strategy led to the collapse of Swissair. Leading airlines now favor global alliances of independent carriers. What sets state-controlled Etihad apart is funding from an oil-rich government eager to match the growth of Qatar Airways and Emirates, the No.?1 international airline, which is based less than 100 miles away in Dubai. “Swiss, back in the day, also acquired a lot of ailing carriers,” Deutsche Lufthansa Chief Financial Officer Simone Menne said at an event last October. “But Etihad has much deeper pockets.”
Hogan says his investments in airlines that serve minor markets or are overshadowed by major carriers in bigger ones will lift Etihad’s passenger tally and secure economies of scale needed to make his ragtag empire profitable. “This is a long-term play,” says Hogan, who became CEO in 2006 after running Gulf Air. “This isn’t for 12 months; this is for the next 20, 30, 40 years.”
10/04/14 Deena Kamel Yousef and Christopher Jasper/Business Week
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Hogan’s investment in a clutch of ailing airlines over which he has limited managerial control comes a decade after a similar strategy led to the collapse of Swissair. Leading airlines now favor global alliances of independent carriers. What sets state-controlled Etihad apart is funding from an oil-rich government eager to match the growth of Qatar Airways and Emirates, the No.?1 international airline, which is based less than 100 miles away in Dubai. “Swiss, back in the day, also acquired a lot of ailing carriers,” Deutsche Lufthansa Chief Financial Officer Simone Menne said at an event last October. “But Etihad has much deeper pockets.”
Hogan says his investments in airlines that serve minor markets or are overshadowed by major carriers in bigger ones will lift Etihad’s passenger tally and secure economies of scale needed to make his ragtag empire profitable. “This is a long-term play,” says Hogan, who became CEO in 2006 after running Gulf Air. “This isn’t for 12 months; this is for the next 20, 30, 40 years.”
10/04/14 Deena Kamel Yousef and Christopher Jasper/Business Week
