Etihad is Starting to Sound More and More Like a Low Cost Airline: “Everyone Has a Preference”

When an airline upgrades its luxury chauffeur drive service by launching a partnership with Mercedes Benz, you wouldn’t normally think of comparing that airline with a low-cost carrier.  But recently the language and actions of Etihad Airways are certainly very similar to the LCC’s that have been so disruptive to the business models of premium airlines.

The Abu Dhabi-based airline couldn’t, on the face of it, be compared with a low-cost airline – like say, Norwegian or Wizz Air.  After all, its fleet of Airbus A380’s feature a luxury three room ‘Residence’ and one of the largest First Class suite’s in the world.  For the most part, Etihad has sold itself as a premium and even bespoke airline.

It couldn’t be further from the mass market appeal of low-cost airlines that tempt customers with ultra-low fares, could it?  The LCC’s work on a model of providing a cheap base fare which can then be ‘customised’ with added extras – they say you only have to pay for what you want and save money on services that you don’t need.

But that’s exactly the same argument Etihad has started to pedal – they’ll give you a decent base service which can then be “enhanced” through a range of paid-for services.  The problem Etihad has in selling this idea to passengers is it comes at the same time the airline is cutting a range of services which used to be free.

Take the chauffeur drive service as an example – Etihad used to offer this popular complimentary service at its outstations worldwide.  That was until last year when the airline suddenly announced passengers would be expected to pay for the service except for in Abu Dhabi.

Explaining the decision, Mohammad Al Bulooki, Etihad’s commercial vice president explained the decision had been made to “provide increased choice and to ensure fares remain as low and as competitive as possible.”

Or how about Etihad’s recent decision to sell a range of amenity items in Economy Class?  In that case, passengers can purchase a pair of Christian Lacroix branded pyjamas for $35 – even after the same product was withdrawn from the Business Class product offering.

Again, Etihad said it was all about providing more choice and value.  Linda Celestino, vice president for guest experience, said the products would give passengers “more power and control over their experience.”

Some of the products on offer certainly set Etihad apart from the low-cost airlines – like the pyjamas or even the co-branded amenity kits.  A cold brew coffee and premium champagne option are also nice options but what about Etihad’s plan to sell snack boxes – now that really is delving into LCC territory.

If, and it’s a big if, Etihad can pull this strategy off, then passengers may really be able to see value in the airline’s increasing push for ancillary revenue.  No doubt, there are plenty of passengers who have taken advantage of Etihad’s offer to pay for access to its network of lounges – a service offered already offered by many of Etihad’s competitors anyhow.

But many passengers see this strategy as inexplicably linked to Etihad’s radical cost-cutting measures – like a recently amended (and reduced) luggage allowance or the devaluing of awards for premium passengers.

It’s hard to imagine Etihad offering this “choice” or “value” if it wasn’t having to contend with a serious financial crisis – just a few days ago, we learnt that Etihad had grounded its fleet of Boeing 777-200LR passenger aircraft due to waning demand.  That follows a recent move to also ground its Airbus cargo aircraft.

No doubt Etihad still offers a great base-product but many observers wonder whether the airline has not only lost its edge but is slashing costs and increasing fees without any meaningful long-term strategy or awareness of the impact it might have on its business.