Etihad Airways, one of the Middle East’s three largest carriers, plunged to a $1.9bn loss last year, hit by impairments on aircraft and investments in troubled European airlines.
The loss, which compares with a net profit of $103m a year earlier, was the first for the Abu Dhabi-based airline since it started making money in 2011.
Middle Eastern airlines have seen growth slow over the past two years as regional travel budgets tightened due to lower oil prices and a wave of militant attacks in Europe and Turkey weakened east to west traffic flows.
With fares also under pressure from stiff competition, Emirates, the region’s largest airline, reported in May its first decline in annual profit in five years,
State-owned Etihad is undergoing a period of change, with long-serving CEO James Hogan departing on July 1. The 14-year-old airline appointed Irishman Ray Gammell as interim CEO in May.
Hogan oversaw a rapid expansion in part by buying minority stakes in other airlines as Etihad raced to catch up with Emirates and Qatar Airways.
That strategy seemingly began to unravel in April when Italy’s Alitalia, Etihad’s most high profile investment, filed for special administration for the second time in less than a decade after workers rejected a rescue plan.
Last week, Etihad also sold its minority stake in a European regional carrier, the first divestment since launching a strategic review last year. It continues to hold minority stakes in six other airlines.
Etihad booked one-off impairments of $1.9bn for 2016 that included $1.06bn on aircraft and $808m on “certain assets and financial exposures to equity partners, mainly related to Alitalia and Air Berlin,” it said on Thursday.
Legacy fuel hedging contracts also impacted the 2016 performance, it said, adding they were expected to have less of an effect this year.
Etihad’s revenue fell 7.1 per cent to $8.36bn last year, even though it carried 18.5 million passengers, up 5.1 per cent on the year. Load factor – or number of seats filled – was down slightly to 78.6 per cent.
“This year is just as challenging for the global aviation industry and the ever-evolving competitive environment is likely to impact overall performance in 2017,” Gammell said in a statement.
Etihad has cut 4 per cent of overhead costs through layoffs and other measures as part of its strategic review, he added.
The airline did not say how many jobs had been cut, though sources tell Reuters hundreds of employees have left positions since the start of the year.