Etihad comes out of the cloud to return fire on Qantas

THE Middle Eastern airline Etihad has accused the head of Qantas, Alan Joyce, of attempting to deflect attention from Qantas's "own issues" after he attacked its profitability.

By InvestSMART · 1 Oct 2010

By InvestSMART ·
1 Oct 2010

Comments

THE Middle Eastern airline Etihad has accused the head of Qantas, Alan Joyce, of attempting to deflect attention from Qantas's "own issues" after he attacked its profitability.

Mr Joyce questioned the viability of Etihad's alliance with Virgin Blue on the Australia-Europe route, and said "even Emirates are now struggling" to turn a profit. He said Qantas had rejected Etihad's advances for a similar alliance because the "numbers failed to stack up".

Returning fire yesterday, Etihad's chief executive, James Hogan, said Mr Joyce was "trying to deflect attention from Qantas's own issues" and he was surprised to hear him commenting about its profitability because it was a private company which did not publish its financial results.

Mr Joyce had claimed that Etihad was "losing a fortune" and that Emirates had cut flights to Sydney.

"I was not aware that Alan had been through our books - but if he had, he would know that Etihad is on track to achieve its financial targets," Mr Hogan said. He also said "the numbers [for the Virgin alliance] not only stack up, they are compelling".

Etihad conceded that its flights between Abu Dhabi and Melbourne had a "bit of problem" early this year but said its overall services to and from Australia were operating with more than 80 per cent of seats full. Its alliance with Virgin Blue would also result in the two airlines increasing capacity further, it said.

Qantas released its own traffic figures yesterday which showed the group's international operations - including Jetstar - have continued to recover while domestic operations recorded only a modest improvement due to intense competition for leisure travellers. The group's domestic yields for the first two months of this financial year were 1.3 per cent higher, compared with the same period a year earlier, while international yields were up 12 per cent.

Analysts have warned that an increase in flights on domestic routes by Qantas, Jetstar and Virgin Blue could dampen a recovery in yields.

Virgin Blue's annual report, released yesterday, shows that its former chief executive, Brett Godfrey, pocketed a $1.8 million "termination benefit", which boosted his total pay to $2.18 million for the year to June, compared with $1.89 million in 2008-09.

Virgin Blue shares closed unchanged yesterday at 43.5?. Qantas shares rose 3? to a five-month high of $2.79.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

What is the public dispute between Etihad and Qantas about and should investors be concerned?

The spat centres on Qantas chief Alan Joyce questioning the profitability of Etihad and the viability of its alliance with Virgin Blue. Etihad CEO James Hogan hit back, saying Joyce was deflecting attention from Qantas’s own issues and noting Etihad is a private company that doesn’t publish full financials. For investors, it’s a reputational and competitive dispute to watch—focus on each airline’s reported traffic, yields and capacity moves rather than headline rhetoric.

Is the Etihad–Virgin Blue alliance commercially viable according to the article?

Etihad’s CEO James Hogan defended the alliance, saying the numbers for the Etihad–Virgin Blue partnership “not only stack up, they are compelling.” Etihad also said the alliance will increase capacity to and from Australia. The article presents this as Etihad’s view in response to Qantas’s scepticism.

What did Etihad say about its financial performance and load factors on Australia routes?

Etihad conceded it had a “bit of problem” early in the year on the Abu Dhabi–Melbourne route but said its overall services to and from Australia were operating with more than 80% of seats full. CEO James Hogan also said Etihad was on track to achieve its financial targets.

What traffic and yield trends did Qantas report that investors should note?

Qantas released traffic figures showing international operations (including Jetstar) continue to recover. The group’s domestic yields for the first two months of the financial year were up 1.3% year‑on‑year, while international yields rose 12%—useful metrics for assessing revenue trends.

How might increased capacity from airlines affect domestic airfares and yields?

Analysts warned in the article that an increase in flights on domestic routes by Qantas, Jetstar and Virgin Blue could dampen a recovery in yields. In plain terms, more capacity on the same routes can increase competition and pressure fares and revenue per passenger.

Did the article report any immediate market reaction in airline share prices?

Yes. The article noted Qantas shares rose about 3% to a five‑month high of $2.79, while Virgin Blue shares closed unchanged at 43.5 (as reported). These movements reflect investor sensitivity to traffic, yields and competitive news.

What executive pay or governance detail about Virgin Blue was mentioned that investors might care about?

Virgin Blue’s annual report revealed its former CEO Brett Godfrey received a $1.8 million “termination benefit,” which boosted his total pay to $2.18 million for the year to June, compared with $1.89 million the prior year. Executive pay can be a governance consideration for shareholders.

Was there any mention of Emirates in the article and how does that affect airline competition in Australia?

Alan Joyce claimed that Emirates had cut flights to Sydney, using that point when questioning competitor profitability. That claim was part of the broader competitive debate in the article. Any changes by Emirates or other international carriers can shift capacity and competitive dynamics on Australia routes, which investors should monitor.