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Tough times set to continue in aviation industry

Last year was tough for global aviation and, like many in this sector, there’s not much I wouldn’t give for a crystal ball to see what 2017 has in store.

Having said that, the consensus is that we can expect more of the same, with the wide range of macro challenges that beset the world in 2016 continuing.

War and regional conflicts are ongoing and the ever-present threat of terrorism cannot be overlooked.

The outlook for the Eurozone and emerging economies remains weak. There is uncertainty surrounding a post-Brexit Europe and also in the US ahead of President-elect Trump taking office.

Overall, world gross domestic product (GDP) growth in 2016 was estimated at 2.2 percent — the slowest pace since 2009. The forecast for 2017 is marginally better at 2.6 percent — but that is a cut from previous estimates.

Closer to home, oil price instability has impacted economies in the Middle East region substantially and, while we have seen some recovery in prices, we are unlikely to return to the previous highs.

In aviation, average airfares worldwide have now reached their lowest point since 2011. Global capacity has outgrown demand, pushing down load factors and putting further pressure on fares.

While lower oil prices have a fuel cost benefit for airlines, they have also led to accelerated capacity expansion globally. Airlines have also reduced fares to capture market share and price wars will continue.

While low airfares are great for the consumer, this in itself is not enough to stimulate business and leisure demand in times of uncertainty. IATA predicts that in 2017 passenger capacity will grow ahead of demand at 6.8 percent versus 6.2 percent — the highest capacity growth over the past five years.

What does all this mean for Etihad Aviation Group?

We are used to competing in extremely competitive landscapes and, like all airlines, Etihad Airways will need to fight hard to win the custom and ongoing loyalty of each and every passenger.

We will continue with a forensic focus on costs. Like any prudent business, that demands constant attention and is not just something for leaner times.

We will also leverage our unique equity partnership model, working closely with Alitalia, Air Serbia, airberlin, Air Seychelles, Etihad Regional operated by Darwin Airline, Jet Airways and Virgin Australia.

Our equity partners provide unparallelled access to key markets and together, we offer a very strong service proposition into Europe, Africa, India, and Australia. In fact, the Etihad Airways network alone grows to more than 600 destinations with equity and codeshare partners.

A great example of the benefits of our strategy is the partnership with Jet Airways. Combined, we offer 40 flights per day — 280 weekly frequencies — between Abu Dhabi and India. Together, we are the market leaders in India with the highest combined market share on UAE-India services and the total Indian international market.

In 2017, Etihad Airways will primarily focus on adding depth through frequency increases and we will exercise strong tactical capacity management to optimise the network.

We have worked hard for more than a decade to reimagine flying with style and flair, with innovation for our guests always a core principle. It’s why we are Air Transport World’s Airline of the Year and a Skytrax certified Five Star airline.

So while we will maintain strong cost control, we also remain fully committed to providing quality service and differentiation to ensure that we remain a relevant, viable and profitable enterprise.

In short, the 2017 outlook remains extremely challenging. We cannot predict every eventuality but we can be more productive, efficient and ready to react to what 2017 brings.

James Hogan, president and CEO at Etihad Aviation Group.

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