Equity partnerships – skin in the game – is the way forward for Etihadas it builds a road map towards global growth based on building a hub, brand and profitability.

President and CEO of the Abu Dhabi-based airline, James Hogan (left), who identified the three pillars of growth as organic growth, codeshares and partnerships and equity investments, made it clear during his talk at the CAPA World Aviation Summit in Hong Kong that he preferred equity partnerships, versus alliances, as the way forward.

The Australia-born airline chief, recognised as Aviation Executive of the Year by CAPA, likened alliances to “sitting at the family table” where certain members were seated further down and found it hard to get into the conversation. And he predicted that “alliances won’t be the same five years from now – over the next five yeas, alliances will change and some will fracture.”

The airline, which moved into profitability for the first time last year on revenues of US$4.1 billion and a profit of US$14 million, has stakes in four airlines – 29% in Air Berlin, 40% in Air Seychelles, under 3% in Aer Lingus and 10% in Virgin Australia.

The airline earned US$281 million revenues from partnerships in the first half of 2012. Together, the partners fly over 72 million passengers, have 9.5 million frequent flyer members (not including Aer Lingus FFP), a fleet of 379 aircraft and a network of 384 destinations.

He sees these partnerships as creating a new spine for global air traffic and said Etihad would invest in other airlines – he declined to comment on talks that Etihad was considering a stake in India’s Jet Airways.

“We will take further equity investments if it’s the right opportunity, right partner, right market, right price. It’s not about control, but growth.”

Partnerships, he said, produced economies of scale – cost savings, cooperation on fleet orders, deliveries and management, joint purchasing, shared maintenance programmes and joint deals on inflight entertainment “we couldn’t do on our own”.

At the same time, Etihad would continue to invest in its own business. “Outside of safety and performance, my priority is guest focus at every point of contact,” he said.

On February 12, 2013, it will make the big switch from Amadeus  to Sabre Airline Solutions aimed at “enhancing guest experience, increasing revenue and streamling work processes”. Training for 6,700 users across the network is now underway in Abu Dhabi.

At nine years old, Etihad is the youngest of the big three Middle East carriers – Qatar, 16 and Emirates, 18. It has grown from an airline that was making US$3.5 million a year to the projected US$5 billion in 2012. It wants to double revenues by 2017 on a total of 21.7 million passengers. It now serves 10 million guests and has 10,000 employees from 125 nationalities.

Further expansion is planned in the next 18 months with flights to Washington DC, Ho Chi Minh City and Sao Paolo, among new routes. It operates 41 codeshares and has a combined network of 327 destinations.

Its first codeshare was Virgin Australia “which worked extremely well for us,” said Hogan.

“How do you ensure a network that plays into the GDS strategy?” he said, saying that GDS were responsible for 25% of revenues today.

Codeshares meanwhile represented 18% of total passenger revenues in Q3 2012. Its new Air France-KLM strategic partnership “opens up many new markets and reinforces importance of commercial partnerships as key enabler for accelerated network”.

Hogan said that the Etihad model worked because it started with a blank sheet of paper “with no legacy airline baggage”.

The idea is not to be the biggest but best in class and a new centre for connecting – what Singapore Airlines and Emirates did for Singapore and Dubai, Etihad is doing for Abu Dhabi.

Said Hogan, “In everything we do, we ask, how can we improve unit cost, extend network, be the best in class and make money?”