Interesting Insights From Etihad’s CEO

It’s always interesting to learn what the CEOs of various airlines are really thinking. Etihad’s CEO, James Hogan, was in New York this past week for the official opening of the Etihad Lounge JFK, as well as the launch party for the Etihad A380.

Etihad-Lounge-JFK

Skift had the chance to sit down with him while he was in town, and had an interesting interview with him. It’s worth checking out the entire interview, but I figured I’d hit on some of the things I find most interesting. Let me start by saying that while I don’t completely understand Etihad’s business model, James Hogan is a brilliant, well spoken, and level headed guy, so I find his insights on the industry to be especially interesting.

Etihad could open a lounge at LAX & fly the A380 to Paris

Hogan explains why Etihad opens their own lounges in select markets, and how they hope to open one in Los Angeles next year:

New York is flagship route. The A380 is operating out of London, New York and Sydney. Next year it goes into Melbourne. It’s also coming to Paris and will go to Bombay. We have lounges in America in Washington. We’ll build one next year, I’m hoping, in Los Angeles. Two flights a day, an A380 and a 777. There’s enough demand. A part of the experience with Etihad is from pickup at home to arrival at the airport, through the lounge, on board the aircraft, and as seamless as it can possibly be.

There are two interesting insights there — Etihad wants to open a lounge at LAX, and also plans on flying the A380 to Paris, which hasn’t yet been formally announced.

I totally get why they want to control as many aspects of the guest experience as possible, especially in New York, where passengers previously had access to the horrible Wingtips Lounge.

Etihad-Lounge-New-York-JFK
Etihad Lounge JFK

The LAX lounge is a bit trickier. As far as I know, Tom Bradley International Terminal doesn’t have any more available lounge space, so they’d have to switch terminals at LAX. While I can appreciate them wanting to insert their “special touch” into the lounge, the reality is that Etihad passengers already have very good lounge access at LAX, to the Star Alliance First Class and Star Alliance Business Class Lounges.

Star-Alliance-First-Lounge-LAX-15
Star Alliance First Class Lounge LAX, which Etihad first class passengers have access to

Rumor has it that Qatar Airways will be operating out of Terminal 2 at LAX when they launch service in January, because they want to be able to open their lounge. That’s not necessarily good news, since the Qantas First Class Lounge and oneworld Business Class Lounge are already excellent.

Qantas-Lounge-LAX - 13
Qantas Lounge LAX, which oneworld Emerald members have access to

Thoughts on Etihad’s The Residence

Certainly the most talked about aspect of Etihad’s A380 is The Residence, which is a three room suite with butler service. It’s priced high, but in many ways is brilliant:

  • Whether it sells or not, it gets people talking
  • The area where the bedroom is located is otherwise somewhat wasted space, in the sense that you can’t put seats there, since there are no windows; so it’s a creative use of that space

Etihad-A380-First-Class-24
Etihad A380 The Residence living room

Etihad-A380-First-Class-25
Etihad A380 The Residence bedroom

Etihad-A380-First-Class-27
Etihad A380 The Residence bathroom/shower

In the interview, Hogan is asked if that space couldn’t have been used otherwise, to which he responds as follows, regarding their shower:

Yeah. We’ve got one shower in there. One of our competitors has a shower on each side. What we saw with the utilization was the shower was really low. People don’t really want to have a shower. Having one shower was enough for everybody else quite frankly.

I actually don’t think he’s that far off. While it’s a nice gimmick and I love showering on planes, the reality is that the average business traveler doesn’t value it as much. If they’re getting off an ultra longhaul flight, chances are that they’re not going straight to the office. And if they’re on a shorter flight, chances are they value the additional sleep over a shower.

On the flights I’ve taken, I’ve actually found the shower utilization rate on Emirates to be fairly low.

Emirates-Shower
Emirates A380 first class shower

Part of Etihad’s low shower utilization might have to do with the fact that it’s not nearly as spacious or inviting as the Emirates shower spa.

How well is The Residence selling? Hogan is pretty realistic about it, indicating that it sells 2-3 times a week on their London route, which is served 2x daily by A380s (typically):

Well, look, we have had eight bookings in New York in the last week. We have out of London. We get two or three bookings a week out of London and two or three bookings coming up out of Sydney.

But as Hogan points out, there’s a halo effect, whereby it’s promoting their product as a whole:

The halo effect has been extraordinary on social media, on this product, which has enabled us to promote everything else. It’s been fantastic. We don’t have the spend of our competitors but people know about the Residence.

Hogan’s perspective on the Open Skies debacle

There has been a huge ongoing battle between the US carriers and Gulf carriers. Of the three Gulf airlines involved, Emirates and Qatar have probably been most vocal about this. Emirates’ CEO called the Open Skies battle “a fight to the death.” Qatar’s CEO called Delta’s CEO weak, unpatriotic, and unethical. 

Meanwhile Etihad’s CEO seems a bit less fazed by the whole situation, and just views it as a regional dispute, which they face everywhere:

You know, I run a global airline based in Abu Dhabi and we operate in six continents in the world. We’ve have challenges in every continent. Quite frankly, we’ve tackled this. We’ve addressed it properly and thoroughly and I’m more focused on the day-to-day issues at a point in time. The administration, State, Commerce, and Transport have all said they’ll come out with the appropriate guidelines.

As far as Etihad’s relationship with American goes (given that they’re on opposite sides of this battle), it seems like Hogan isn’t really bothered by the perspective of American’s CEO:

I think (American Airlines CEO) Doug (Parker) has been very clear. Doug said it’s a political issue which they as an industry are tackling but then he’s got a commercial relationship with us and we continue with the commercial relationship.

Bottom line

Hogan is a really smart guy, and strikes me as one of the most level-headed guys in the airline industry. While Etihad has somewhat of a radical strategy in owning stakes in so many foreign carriers, I at least always understand where Hogan is coming from. Check out the entire Skift article for more, as it has some really interesting insights, in particular towards the end, where he talks about how he sees all the “Etihad Partner” airlines coming together.

Did anything in the article jump out to you as especially interesting?

Comments

  1. Does EY actually have enough A380s on order to fly to CDG and LAX?
    Or are they going to cut some of the existing A380 routes for CDG/LAX?

  2. @ Tom — That’s how I read it at first as well, but after reading it again I think they’re saying they have an A380 and a 777 to JFK, and not that they plan on operating it to LAX. Tricky wording, though.

  3. I reread that LA quote several times trying to figure out the A380 portion as well. Agree he jumped back to talking about JFK without making it clear. Had my hopes up for a second thinking that was the real news here.

  4. I find it interesting that the Residence has so low utilization, but if it`s just taking up otherwise wasted space, then it`s like free money for Eithad everytime they have a resident

  5. I’ve seen Hogan speak before. He’s all about the facts, and less about emotion (as opposed to other CEO’s in the space). And I would agree, he is a very good speaker.

    I will add however, I’m not surprised that he’s seeing the shower utilization rate so low on Etihad A380’s, my 2nd flight enroute from Sydney, I almost didn’t, however the butler offered up 10 minutes of water… I couldn’t very well turn that down.

  6. Just a note: If Trump gets elected then these guys are going to face some challenges since Islam people won’t be able to travel to the US. I know it’s a political thing but I wouldn’t be surprised if the US would make this move to make their country safer for their citizens.

    Anyways, interesting. Etihad’s first class is second to none for sure.

  7. Could the OpenSkies dispute be why no premium cabin award space out of the US seems to be available with them? Seriously, I haven’t been able to find a single Business/First Class seat leaving the US (I’ve found some coming back, but not very many.) any time in the next year. James Hogan said that the “commercial relationship” with AA will continue but I’ve heard the guys at FlyerTalk bringing up the possibility that it is to stop AAdvantage redemptions. Sorry if you’ve already written about this, although I don’t recall seeing anything.

  8. Glad I didn’t miss much from the Wingtips lounge at JFK. I was supposed to have access via Priority Pass, and then they denied me entry saying they were “too full” but the place looked almost empty.

  9. @ Aquarius

    Don’t worry about it, it will never happen. Not only is it illegal, but banning Muslims from our country based on the fact that they believe in Islam completely goes against our country’s values.

  10. I actually think the LAX part means that he wants to bring an A380 to LAX. I think it’s the “there’s enough demand” part, and he’s still talking about LAX.

  11. I’m surprised why they’d all want to make their own lounge. I get that it’s supposed to improve the passenger experience, but when the lounge is so solid anyway, I have trouble seeing how passengers will prefer a possibly smaller lounge in a worse terminal.

    Now, on airports that NEED the lounge, how about Jakarta?

  12. I was at LAX TBIT in May. As far as I could tell, there’s two floors above the KAL lounge, and the very top floor is empty space. I think there may also be some space directly above KAL, next to the ‘International’ shared lounge.

  13. I wish that EY had a lounge in GVA, but I’m not too surprised considering that they only put a (very luxurious) A330 on the route. Still, I’m very surprised that — despite the UN traffic and the city’s place in world politics — the lounge offering is limited to the Dnata Skyview Lounge. Even the CS Agents are embarrassed to send F Class guests there.

  14. I think one of the main reasons Etihad opened a lounge at JFK is because of the competition. Emirates have had a lounge there ever since they started flying the A380 to JFK back in 2008. In the EK lounge, it’s even possible to directly board the plane from the lounge. That’s pretty cool! 🙂
    I don’t want to say Etihad is a copycat but it needs to stay competitive amongst its competitors, which seem to be mainly Emirates and Qatar. Though I wasn’t a fan of the US Preclearance facility in AUH at first, I just went through it a week and a half ago and really enjoyed the experience. It’s great to arrive at JFK Terminal 4 without having to go through customs! 🙂 I do think that’s a competitive edge Etihad has against its competitors.
    I do hope both Etihad flights to JFK will eventually be A380s (replace that Jetihad aircraft!!!) 😉
    I agree that the shower utilization rate tend to be low. After all, it’s only 5 minutes of running water and all my female friends with long hair will give you the ‘eye’ look if they find out they only had 5 minutes of running water to wash their hair! 😉 I actually value the shower at the arrivals lounge more after experiencing it on Virgin Atlantic in LHR. It’s a real shower and they tend to provide ironing services especially on redeye flights from USA.

  15. Was at LAX last night and saw signage for Qatar Airways at Terminal 2, I was surprised because I thought they would go in the new TBIT…which is far nicer than old T2. But this article confirms what I saw.

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