Connecting Abu Dhabi to the World From The Skies

[Music] okay ladies and gentlemen thank you so much for sticking around for this next session I'm Dan Murphy from CNBC and very pleased to be sitting alongside Mr antonaldo's the CEO of Eddie had Airway so welcome to the program and thank you so much for being with us today we appreciate it thank you then thank you for having us so last time you and I were together was actually only a few months ago and we were talking about the enormous transformation that Eddie had Airways has been on a $7 billion program to expand Roots upgrade the fleet and to essentially build out the economic contribution that the airline has in the UAE and in Abu Dhabi specifically just update us Anton Aldo where do we stand on that transformation effort today so um the compan is at the same time growing and expanding margins so um over the past five years I mean the company has been improving a lot not only on the um economic side the sustainability side right the economic sustainability side but also on the passenger side the customer experience side so the airline um in 2022 for instance was carrying 10 million passengers uh this year we're going to do probably about 19 million passengers so that's about 80 to 90% growth in only in only two years but at the same time margins are expanding and we just published our results and we delivered about $370 million $1.4 billion 1.4 billion in profit so the company is at the same time investing and uh improving customer service uh bringing more people to ababi and carrying more people across the globe so in a good shape a lot to do as you said we have to invest $7 billion in the next uh four to five years and I mean the multiplier effect in aviation is about 3.5 I would imagine that in a place like um emerging countries or in a place like Abu Dhabi that number is probably about four to five so we're talking about a massive contribution to the economy one of the other things we also speak about is that multiplier effect that you were talking about as well I was actually on a flight from Doha to Abu Dhabi last night and passed through the Magnificent new airport as well one of the things that was announced on board the aircraft was the fact that you can actually use your ticket stop to get discounts at attractions around Abu Dhabi and the UAE and I thought that was quite an ingenious move actually also acting as the economic multiplier so when you look at the overall contribution that the airline makes to the economy here not just from a trade and tourism perspective but from a GDP perspective what do we see and how do you see that growing in the years to come so uh when when when the airline Grows Right we hire so this year we are hiring 2500 people right and highly qualified individuals I mean a pilot can make up to I mean on average our Pilots are making $152 00,000 per year right so that's a lot of expense that com to the economy but as important as that I mean as we grow we bring more tourists to Abu Dhabi right but we also help Abu Dhabi better connect to the world I mean the capital of capital right needs connectivity so that people can come people can go and have meetings I mean I'm really pleased to see that we had Formula 1 during the weekend right and had people from all over the globe and people coming from New York on our 380s coming from Paris on our 380s coming from London our 380s I mean they tell look this is the best experience ever right and we want to make sure that we we keep coming and we keep enjoying that experience indeed maybe just a quick show of hands who actually flew here to be here at ABW Finance week excellent a few people a few people who flew on Eddie hat very good okay antonaldo's happy he's making money at least maybe a little bit a little bit in the room when you when you think about the uh broader economic contribution though talk to me about the role of Technology as well this is something that Eddie hat has also been actively investing in how are you going to utilize technology and invest in technology to enable that economic diversification driven by the airline one one of the key aspects uh of any airline in the world is the way you you you manage your pricing right um atad has been investing a lot over the past almost four years on on we don't call artificial intelligence in the industry but in the end is artificial intelligence right I mean algorithms to to Better Price and to make sure that we we we take all the opportunity that we have so let me give an example right before um before covid 2018 2017 EAD was flying like 75% load factors 77% load factors and our unit Revenue um was probably about 50% lower than what it is today right today we're flying about 87% load factors and our unit revenue is is is doing well right and um uh helping a lot our margin expansion program but this is only possible possible is technology right today we change our our prices in the system thousands of times per day right we have a very good I would say predictive system to forecast demand for all the ons origin destinations that we have and based on demand and and based on the supply that you find in the world I mean we automatically update prices of course there is human intervention but in the end we have algorithms running behind the scenes that they learn how the the customers are reacting to to price changes and and they propose thousands of price changes up and down throughout the day so wayi is an important tool for us and we are we are becoming I would say one of the best in the region in terms of technology to price so what underpins your pricing strategy in 2025 when you especially consider some of the macroeconomic factors uh influencing the aviation industry today what will determine how much you'll have to charge I mean it goes handing hand with uh Supply right I mean next year we're adding 10 new destinations we're going to be adding about 22 planes um we grew 40% 23 we grew uh we're growing 35% this year next year is going to be about 20% to give an understand of how important Supply is to pricing I mean this year um we're growing 35% and our unit price is going down every time in the industry right you had capacity um even if you have Supply coming I mean prices tend to go down right by a factor of 1 to three and um next year it's not going to be different we're going to be adding capacity again 20% and uh especially in Europe and Southeast asiia so 80% of the capacity that we're going to add next year is going to be actually not in the new destinations in the destination that we already serve so today we we have the ability to offer not only those 2 a.m.

flights that we had in the past to Europe for instance but we also have 9:00 a.m. and 11:00 a.m. flights which are very very convenient for people that are traveling uh for tourism just an example right and you can see today because of that incremental capacity you can find great deals on ajihad in in the morning bank because it's a bank that we're building so I mean if you buy an advance and you can find I mean uh um times that are are are with less demand you're going to be able to find great deals one of the other things we often hear just given the state of the industry today is that prices have gone up but that's also an issue of Supply as you say a lot of the carriers aren't able to get those aircraft from the aircraft manufacturers because of the supply chain issues that we've seen unfold postco and a number of other factors through the the course of the last few years so how do you see the cost environment also shaping up we' spoken about your pricing strategy would you say cost pressures within the aviation industry are building or are they easing now so on on on average they're building if you go and see unit cost in Europe unit cost in the US going up year on year I mean very few airlines in the world are reducing cost not only because of inflation pressure Especial Especially in labor right um and and also a little bit in catering and handling which is linked to to labor right um but the only way to to keep cost under control is by becoming more efficient so we we're lucky I mean that had two years in a row our unit cost is down 8% year on year 8% and then 8% again because we we actually added a lot of capacity right and by doing that we actually not only reduced um our our unit cost by be having better uh ability to negotiate bigger volumes right but by also by diluting fixed costs right at the same time investing the product so at you have is one of the few cares in the world that is at the same time improving net promoter score improving customer satisfaction and reducing unit cost this is not going to happen next year at the same Pace next year we we believe it's going to be about 2% to 1% lower unit cost because of the 20% growth that we expect next year but I mean it it's a big challenge I mean there are no planes in the market I mean we are planning to bring our new new planes in in the first half of next year but they're delayed to the second half so it's it's a big big big Challenge and I think I mean the oems they they they they really need to to to cover that Gap right because in the end I mean it's not the case um here in our network uh but in most of the places in the world um unit unit prices right um are going up and just given the state of the industry as well what is your assessment for 202 five what should we expect I mean I think the industry is going to keep growing right the industry is really much linked to GDP so if you go to mature economies um it's about one time GDP so GDP in the usest is coming very strong um so you should expect the industry to go uh to grow because uh GDP is going to grow this year in regions like where we are today which you have a lot of space for the industry to grow I mean you should expect two times gcp so I would say that the industry in our region right including not only the Middle East but also the Indian subcontinent is probably going to be growing by 10% next year that's our expectation and NAD is probably going to be growing two times of that so we expect growth coming next year and India will be a core Focus for you oh yeah yeah we we double the capacity in India in the past year right we added about 70% not double uh more capacity into India uh and it's a very important market for us I mean um number one visitors uh tourists to Abu Dhabi is coming from India and aad is B big part of that throughout through the Partnerships we have with DCT we're able to um improve our stopover program it's extraordinary well I mean we're doing about three times more tourist to Abu Dhabi in the stop over the last year and India is a big component of that I also have to ask you because we are at Abu Dhabi Finance week there's a lot of capital allocators in the room people who are taking more than a passing interest in the world of Finance you and I have spoken a lot about Eddie Hat's Capital Market activities and the potential to see an IPO of which you'll be guided by the shareholder but what should we expect next year and in the years to come when it comes to edad own financing requirements I mean edad is in in a very strong position right it's been four or five years under the leadership of adq and throughout this period the company has deleveraged a lot I mean one of the most important things in an airline is to have a strong balance sheet um Dr ypp was mentioning here how important it is to to be financially viable right the NAD today has one of the best leverage ratios in the world but as important as that I mean as we we look forward right this $7 billion that we we need to invest in capital two billions is already paid for right because we bought some planes and they're paid for and and the REM remaining five billion I mean it's coming directly from our cash flow generation so the the airline is generating about $1.

4 billion for in cash flow so I mean we're pretty much in in very good shape so we're going to be further deleveraging the airline over the next 5 to seven years and growing at the same time which is very unique I don't know any other line in the world that is in such a sweet position as that had today in terms of balance sheet and the ability to invest absolutely fascinating okay we are out of time so we'll leave it there Anton Aldo safe flying thank you so much for all the conversations this year we appreciate it thank you very much [Music]