Etihad Airways: Partnering For Success
Extending Network Scope Through Strategic Partnerships
One of Etihad Airways’ main instruments for success is its innate ability to partner with the right airlines in the most lucrative markets. These partnerships have been a mainstay for the ever-successful carrier.
Running an airline is nothing short of an intricate, complex undertaking. Airlines must not only understand the direction of the industry at a macro level, but they must also be able to readily access, assess and comprehend the smallest detail to achieve sustainable growth and profitability.
Achieving sustainable profitability depends on many factors; however, it all boils down to an airline’s ability to increase its revenues while reducing costs. More often than not, one of the ways airlines have been effective in doing this is through cooperative partnerships with other carriers. While these partnerships take many forms such as a joint venture, business agreement or equity stake, many partnerships are supported by some form of codesharing agreement, which results in several positive benefits for all parties.
At its core, a codeshare allows an airline to expand its network with minimal investment of resources; however, other benefits also come with that expansion. For example, airlines may increase their presence in regions beyond their own. Moreover, they may also receive incremental revenue support for new or “thin” markets that may not be profitably served by the operating carrier alone.
From a sales perspective, codesharing may increase a carrier’s preferential screen display in the plethora of global distribution systems and internet sales channels. This generates additional revenue, giving the airline a crucial competitive advantage.
Since its inception in 2003, Etihad Airways has remained one of the fastest-growing airlines in commercial aviation. Its route map is reflective of natural organic network growth, codeshare partnerships and minority equity investments in other airline entities. As a result of its sound business strategy, the airline’s off-line network now boasts award-winning services to nearly 500 destinations across the globe and doesn’t appear to be slowing growth anytime soon.
“When we established this airline, we were not interested in duplicating the business strategies seen in other airlines,” said Greg Kaldahl, senior vice president of network management for Etihad Airways. “We’ve always seen ourselves as a disruptor in the industry, and we challenge the common business practices as much as we can. In that fashion, our strategic use of codesharing partnerships and minor equity investment has become, more or less, a signature of Etihad Airways. Our partnerships and equity investments have essentially allowed us to extend our network’s scope and reach beyond what we could achieve through true organic growth.”
Etihad Airways has always taken a collaborative approach when building its business. From the very beginning, codeshare agreements were identified as an effective and efficient way to fundamentally help build the network. To that end, the airline has been steadily increasing the number of its codeshare partners over the years as part of its overall business strategy.
Today, the airline has codeshare agreements with 51 airlines that provide additional service to hundreds of airports and transports millions of passengers worldwide across its strong virtual network.
As a result of the codeshare partnership between Etihad Airways and Avianca Brazil, travelers can now purchase tickets from Colombia to and from Abu Dhabi, London and Madrid on flights operated by both airlines.
Etihad Airways carried 17.4 million passengers in 2015, a 17 percent growth in passenger numbers versus the previous year, and accounted for 75 percent of total travelers who flew in and out of its Abu Dhabi hub. If the equity partners of Etihad Aviation Group are included in the equation, the number jumps to 84 percent of all Abu Dhabi traffic.
Overall, equity partnerships and codeshare agreements delivered more than five million passengers to Etihad Airways’ flights last year, a 43 percent increase versus 2014.
Clearly, this strategic approach has proven successful by providing convenient connections for passengers to thousands of markets worldwide. Moreover, it has significantly bolstered revenue generation.
“Codesharing has become an important tenant in our overall network plan,” Kaldahl said.
“Approximately 29 percent of Etihad Airways’ revenues are directly generated through strategic partnerships where the airline is either the operating or marketing carrier,” said Walid Aryan, alliance processes manager for Etihad Airways. “It is undeniable that our approach has added hundreds of millions of dollars to our bottom line.”
Today, Etihad Airways continues to strengthen its dominance in the global marketplace by expanding and deepening its virtual network. It recently announced a newly formed codeshare partnership with one of Latin America’s leading airlines, Avianca Brazil, which will help boost Etihad Airways’ reach in South America.
While tangible benefits of partnering with so many airlines can clearly be seen, it doesn’t come without challenges. The number of codeshare partners means the degree of coordination required between so many airlines can be staggering. Managing codeshare associations and network coverage, as well as tracking the valuable resource of marketing-flight-number allocations is too time consuming to complete manually without an automated and logical rules-based system.
To monitor and achieve the best impact from these partnerships, a large amount of effective modelling and reporting is necessary. When changes are made to either Etihad Airways’ or a partner’s operating schedules, the impact needs to be immediately ascertainable. Identifying network coverage and network connectivity changes are fundamental to this exercise, as well. Network coverage examines how well a partnership extends the network reach to either meet or stimulate demand while network connectivity examines how well Etihad Airways and its partner airlines connect at major cities.
Sabre AirVision Codeshare Manager provides Etihad Airways the means to automate marketing-flight-number synchronization between operating and marketing airlines. It also offers an array of useful reports while affording the ability to automate many repetitive jobs.
As part of the Sabre AirVision Marketing & Planning suite, Codeshare Manager facilitates the necessary automation while incorporating integration with the seamless transfer of schedules between and among Etihad Airways’ partner airlines. This automation enables the airline’s staff to focus on alliance priorities while maintaining a high standard of efficiency.
Through Codeshare Manager, Etihad Airways can now maintain its extensive codeshare relationships with multiple airline partners in an easy and efficient manner. Additionally, the system determines the best connecting flights so the airline can quickly identify and take advantage of new or alternate codeshare flight opportunities as associated operating schedules change over time.
Etihad Airways, because of its codeshare agreements with 51 partner airlines, offers service to hundreds of airports and provides air transportation to millions of travelers around the world. Its route map includes natural organic network growth, codeshare partnerships and minority equity investments in other airline entities. These partnerships have delivered more than 5 million passengers to the airlines flights last year, a 43 percent increase versus 2014.
Codeshare Manager has effectively empowered Etihad Airways to become the leader it is today by helping remove the complexity of codeshare synchronization through advantageous automation and schedule alerts. Key benefits of the system include:
- Increased revenue by determining the best connecting flights so the airline can quickly identify and take advantage of new or alternate codeshare flight opportunities;
- Reduced costs by ensuring that marketing flights match operating flights (partnering airlines are alerted about changes in the schedule that could result in passenger-connection problems);
- Reduced time required to set up and publish codeshare flights by automating most aspects of the codeshare-management process;
- Detecting changes in the operating carrier’s schedule more quickly and automatically updating marketing flights within the parameters of the partnership.
“Etihad Airways has built an admirable business through partnering with other airlines and has seen real value in partnering with Sabre in guiding the direction for new features in Codeshare Manager,” Aryan said. “A good example of this strategic partnership is the Codeshare Manager dashboard, which allows users to quickly track and manage the status of the many codeshare partnerships managed by the system.
“Sabre’s Codeshare Manager gives us the ability to monitor schedule changes and quickly adapt to them, ensuring that the associated marketing flights are synchronized. We use the tool not only to build marketing flight associations but also to boost our efficiency. Codeshare Manager’s built-in automation and reporting tools help us monitor our codeshare coverage and assess passenger connecting opportunities across the off-line network. The efficiency gains allow us to maintain focus on our codeshare agreement priorities and help us maintain a high product standard for our customers.”