Etihad Airways selling aircraft in $1 billion deal

Etihad Airways is selling two of its widebody fleets in a $1 billion transaction as it struggles to return to profitability.

Investment firm KKR and Altavair AirFinance, which specializes in commercial aviation finance, will acquire Etihad’s owned fleet of Boeing 777-300ERs and its Airbus A330-300s and -200s. As part of the transaction, Etihad will lease back the 777s and continue to fly them. KKR and Altavair will take delivery of the A330s over the next 22 months and will lease them to other operators for passenger operations or to be converted into freighters, the companies said in a press release.

The number of aircraft being acquired by KKR and Altavair was not specified in the release, but media reports put the number at 38 planes.

Etihad operates a mixed fleet of about 100 Airbus and Boeing widebodies and narrowbodies. In addition, it flies a handful of 777 freighters. Etihad Cargo carried 682,000 metric tons of cargo across all aircraft types in 2018.

“We have made great strides in optimizing our fleet structure over the past year,” said Etihad CEO Tony Douglas. “This deal will ensure we stand by our strategic and financial sustainability targets by replacing aircraft with the most technologically-advanced and fuel-efficient fleet types,” he said in the release, adding that it provides the carrier with the flexibility to respond to future growth requirements.

Etihad is working to transform itself into a smaller, more focused airline. The airline posted a $103 million net profit in 2015, its fifth consecutive year of net profits, but since then has lost billions. In 2016 it suffered a net loss of $1.87 billion, which included an $800 million charge related to ill-fated investments in Alitalia and airberlin.

The company reported core losses, excluding extraordinary or one-time items, of $1.52 billion in 2017 and $1.28 billion in 2018.

Part of the airline’s strategy has been to rationalize its fleet. The airline operated 121 planes, including 10 freighters, in early 2016. Since then it has gotten rid of its A340s and its A330Fs and canceled or restructured orders for numerous new aircraft. As it has retired other aircraft, Etihad has continued to take 787s and now operates 38 of the widebodies.

Etihad’s cargo revenue declined to $827 million in 2018 from $877 million the year before, and its cargo volume fell to 682 metric tons in 2018 from 853 metric tons in 2017.

Separately, Etihad Cargo has renewed its warehouse cargo handling agreement with Worldwide Flight Services for another three years, and added Frankfurt, Germany, and Madrid to the six stations already handled by WFS. The Madrid warehouse operation opened in November, and Frankfurt will be added on Feb. 15.

The other six airports are Washington Dulles, New York Kennedy, Bangkok, London Heathrow, Paris Charles de Gaulle and Brussels Airport.