January 24, 2017 / 12:21 PM / 3 years ago

Etihad Airways says veteran CEO James Hogan to step down this year

ABU DHABI/FRANKFURT (Reuters) - The veteran chief executive of Abu Dhabi’s Etihad Aviation Group will leave this year, the company announced on Tuesday, but said it remained committed to his strategy of extending the airline’s reach through stakes in foreign airlines.

James Hogan, CEO of Etihad Airways, speaks during the India Economic Summit 2014 at the World Economic Forum in New Delhi November 6, 2014. REUTERS/Anindito Mukherjee

Australian James Hogan, 60, who over the past 10 years has developed Etihad Airways into an aggressive rival to Dubai’s Emirates and Qatar Airways, will step down as president and CEO of the group in the second half of 2017.

Etihad’s Australian chief financial officer, James Rigney, will also leave this year, the company said.

Chairman Mohamed Mubarak Fadhel al-Mazrouei said Etihad was continuing with a “company-wide strategic review” which could include adjustments to the network of equity partnerships with other carriers that Hogan used to engineer Etihad’s rapid growth.

Two of the major airlines in which Etihad invested, Air Berlin and Alitalia [CAITLA.UL], are losing money, adding to pressure on Etihad’s earnings caused by slowing growth in the Middle East’s aviation market.

However, Mazrouei said state-owned Etihad was not abandoning the equity partnership model, which along with code-sharing tie-ups had delivered 5.5 million passengers onto its flights in 2016.

“We must ensure that the airline is the right size and the right shape. We must continue to improve cost efficiency, productivity and revenue. We must progress and adjust our airline equity partnerships even as we remain committed to the strategy,” he said.

An Etihad spokesman told Reuters there was no link between the strategic review and Hogan’s departure, which had been planned for many months.

Etihad said it had started a global search for a new group CEO and a new CFO. It said it was grateful to Hogan and that he and Rigney, 49, would join a European-based investment company, which it did not name.

“Along with the board and my 26,000 colleagues, I am very proud of what we have built together at Etihad and of the company’s substantial contribution to the United Arab Emirates and to the development of Abu Dhabi,” Hogan said in a statement.

“The last decade has seen incredible results but this only represents a first chapter in the story of Etihad.”

INVESTMENTS

Etihad owns stakes in seven airlines around the world: Air Berlin, Alitalia [CAITLA.UL], Air Serbia, Air Seychelles, Etihad Regional in Switzerland, India’s Jet Airways and Virgin Australia.

In 10 years Etihad grew from being a 22-plane regional carrier into a global operation with 120 aircraft. Its growth helped attract visitors to Abu Dhabi as the wealthy emirate, seeking to diversify its oil-based economy, developed a tourism industry.

But in recent months a slowing regional economy, overcapacity in the airline industry and a strong U.S. dollar have hurt Etihad. In December, the group said it was cutting jobs in some parts of its business, but did not give a number.

An industry source familiar with matter told Reuters that Hogan’s departure was unlikely to mean any change to the current restructuring plan for Air Berlin, which had already obtained board approval.

“However if future injections of cash are needed, it may look very different,” the source said.

Alitalia, in which Etihad has a 49 percent stake, said on Monday that it planned to cut non-labor related costs by at least 160 million euros ($172 million) this year as it tried to become profitable.

Industry sources told Reuters that the Italian carrier’s restructuring might include up to 2,000 job cuts and the grounding of planes.

Etihad reported a consolidated net profit of $103 million for 2015. Abu Dhabi could easily finance any earnings slump at the airline but the emirate has been seeking to make many of its businesses more efficient in an era of low oil prices.

Etihad’s two main regional rivals, also state-owned, have adopted different expansion strategies. Emirates has not emphasized equity alliances, while Qatar Airways has made some investments but focused on financially stronger partners.

For example, it holds a stake of just over 20 percent in International Consolidated Airlines Group (IAG), owner of British Airways, Iberia, Vueling and Aer Lingus.

“We will look at other acquisitions of airlines but we look at airlines that don’t take the resources of Qatar, or attention of Qatar management, to fix issues. We will always go after goldsmiths, not scrap dealers,” Qatar Airways CEO Akbar Al Baker said in 2015.

(This version of the story was corrected to add dropped word “reach” in first paragraph)

Writing by Andrew Torchia; Editing by Mark Potter, Greg Mahlich

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