James Hogan to step down as Etihad group CEO

Exit attributed to financial problems at Air Berlin and Alitalia, two airlines co-owned by Etihad

Etihad Airways group chief executive officer James Hogan is stepping down from the post after a decade at the helm that saw the Gulf airline stitch a global network through investment in seven airlines.

Hogan's colleague and group chief financial officer James Rigney too is quitting and the duo will join an investment company later this year, Etihad announced today. The airline management also said it is reviewing its growth strategy and said search is on to fill the two posts.

Hogan, an Australian national, joined Etihad from Gulf Air in 2006 and over the last decade oversaw the Abu Dhabi based airline's rapid growth fuelled by partnerships and acquisitions.

This included Rs 2054 crore investment for 24 per cent stake in Jet Airways in 2013. Hogan and Rigney represent Etihad on Jet Airways board.

Hogan's departure is attributed to financial problems at Air Berlin and Alitalia, two airlines co-owned by Etihad. The Gulf airline has been unable to turnaround these two European airlines and there have been reports of job cuts in Alitalia. Etihad too has shed some jobs amid a challenging business environment.

In contrast, Jet Airways has been a better performer, turning in a profit in FY16, its first in a decade. The airline reported its highest ever consolidated annual profit of Rs 1,212 crore in FY16 and achieved full-year profit a year earlier than the target set in its turnaround plan in 2014.

"Etihad's investment opened the doors of several Gulf banks for Jet Airways. Hogan was always vocal in meetings and decisive in thought," said a Jet Airways executive. An another executive added that Etihad's investment also brought in change of administration and business processes in the airline including a system of weekly reports.

Hogan is understood to have differed with Jet Airways chairman Naresh Goyal over the choice of an European hub. Hogan was keen that Jet fly to Dusseldorf (Air Berlin base) but Goyal stood his ground on Amsterdam where the airline flies twice daily from India.

Jet Airways and Etihad have earlier denied reports of strain in ties and have said they have a strong and healthy relationship.

"Having overseen a rapid period of growth, expansion and shift towards moving premium cabin offerings above that of its competition, Etihad is arguably well positioned to move forward. However, Etihad's piecemeal airline stake acquisition policy has been called into question on whether these investments will ultimately pay off. While Etihad has had success with Air Serbia and Air Seychelles, it has battled hard to try and turn around Air Berlin and Alitalia. Jet Airways has been a good investment as Etihad has garnered a bigger stake in the Indian market. And by virtue, Jet has been able to tap into Etihad's traffic flows out of Abu Dhabi," aviation analyst Saj Ahmad.

Mohamed Mubarak Fadhel Al Mazrouei, Chairman of the Board of the Etihad Aviation Group said "To position the company for continued success in a challenging market, the board and management team will continue an ongoing, company-wide strategic review. We must ensure that the airline is the right size and the right shape. We must continue to improve cost efficiency, productivity and revenue. We must progress and adjust our airline equity partnerships even as we remain committed to the strategy."

A Bloomberg report said Etihad's strategy review could push it further in the direction of one-time arch rival Lufthansa, with which it announced a code-share deal covering four routes in December following the Air Berlin lease agreement. Both parties have said that they may deepen ties further, though Hogan said last week in Dublin that Etihad had no plans to purchase a stake in its European counterpart.