Growth Through Co-Ventures: Etihad's Strategy in the Competitive Aviation Industry
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Case Code: BSTR485 Case Length: 19 Pages Period: 2003-2015 Pub Date: - Teaching Note: Available |
Price: Rs.600 Organization: Etihad Airways Industry: Airlines Industry Countries: Middle East, Global Themes: Business Strategy, Strategic Alliances |
Abstract Case Intro 1 Case Intro 2 Excerpts
Background Note
In July 2003, Etihad (Arabic word for 'Union') was established in Abu Dhabi through a royal (Amiri) decree that mandated that the new carrier needed to be safe and profitable and to strive for excellence. Owned by the Abu Dhabi government, it was considered to be the national airline of Abu Dhabi. Etihad was also expected to help transform Abu Dhabi into a global hub, by promoting it as a business and leisure destination. At the time Etihad came into existence, the UAE was in the midst of a growth spurt. From 2003 onward, UAE saw its GDP exceeding the world average and it had eight figure year-over-year trade surpluses.
In November 2003, Etihad began operations with a single aircraft that flew to a lone destination – Al Ain, another city in UAE 145 km from Abu Dhabi. Soon it added its first international destination – Beirut in Lebanon. In the first year of its operations, the airline mostly served regional destinations and catered to about 340,000 passengers. Within three years, Etihad expanded its fleet by acquiring 24 new aircraft, apart from increasing the number of destinations it served to 40.
During its early years, Etihad operated at a loss as it had low passenger load factors, poor yields, and undercapitalization that significantly reduced its financial flexibility. However, the airline overcame its tough financial situation thanks to the support it received from the Abu Dhabi government and the Abu Dhabi Airports Company (ADAC)...
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