Top job at Etihad requires constitution of steel

Handelsblatt, the leading German business daily, has been the source of some pretty sensational headlines about the aviation industry in the Arabian Gulf.

The paper — via its English global edition — reported accurately last year that James Hogan, chief executive of Etihad Airways, was stepping down from that role after 10 years in the Abu Dhabi airline’s hot seat.

It followed that with a “scoop” that claimed that “sheikhs” in the UAE were considering the merger of Etihad with Emirates, its bigger and longer established rival in Dubai. That notion was quickly and emphatically rubbished by Sir Tim Clark, Emirates’ president.

So with a track record like that, how do you treat the Handelsblatt news story on Wednesday claiming that Etihad was lining up Christoph Mueller, Emirates’ chief digital and innovation officer, to replace Hogan?

Maybe Handelsblatt is right this time, maybe not. Etihad said in response that the search for Hogan’s replacement was ongoing, both internally and externally, which suggests no final decision has been taken. There is a lot of talent, in the UAE and the global aviation industry, and Etihad wants the best.

But Mueller certainly has the pedigree for a big job in the global aviation industry, with a track record as a turnaround specialist at Aer Lingus, the Irish airline, and Malaysia Airlines.

At the former, he successfully trimmed losses and repositioned the airline to meet the challenge from the no-frills operators.

At Malaysia Airlines, he was called in as troubleshooter after the airline’s “annus horribilis” in 2014, when the loss of two planes in tragic circumstances sparked a crisis that threatened its very existence. In Kuala Lumpur, he earned himself a reputation as a tough, no-nonsense operator who was prepared to take difficult decisions on cost cutting and repositioning.

He achieved much in a short space of time, but left Kuala Lumpur after less than a year, citing “changed personal circumstances.”

His hiring at Emirates was regarded as something of a coup for the Dubai airline. Clark was known to be thinking of a change of role at the airline, having served it brilliantly during more than 40 years of expansion. Mueller’s appointment was seen as part of the essential succession-planning necessary for such a major change.

In normal circumstances, Mueller would certainly figure in the succession at Emirates. But some analysts claim to have detected a cooling of the Mueller-Clark relationship. So perhaps the vacancy at Etihad comes at a good time for him.

Crunch week for Alitalia

There is no doubt as to the magnitude of the task for whoever ends up running the Abu Dhabi carrier. The strategy of global alliances Hogan forged in his decade there has had some success, notably in the booming Indian air travel market.

But it also faces critical challenges in its two biggest and highest profile partnerships in Europe, with Airberlin and Alitalia. Both have helped drive traffic on the Etihad network, and provided a considerable boost of the economy of Abu Dhabi.

But in both cases, that has come at a price that has led some to question the viability of the entire strategy.

In Italy, the latest evidence of the challenge facing Etihad and other investors in Alitalia came this week, when a strike grounded more than half of the Italian airline’s services. The strikers are unhappy about the terms of the latest attempt to restructure the loss-making airline, which would lead to the loss of as many as 2,000 jobs and see some services outsourced beyond the labor-heavy airline.

Another industrial protest is planned for two weeks’ time, but Alitalia’s fortunes may already have been decided before then. Investors — there are two Italian financial backers as well as Etihad — along with management and the Italian government are due to give their verdict on the latest restructuring plan by the end of next week.

There is a very real possibility that the financial backers will baulk at the prospect of stumping up another €2 billion without a genuine commitment by workers’ representatives to the long-term rescue plan on offer. In the absence of a deal, the possibility of administration looms, which would mean Etihad and the other backers could walk away from Alitalia completely.

Airberlin results loom on horizon

The other problem, Airberlin, has been ameliorated to some degree by Etihad’s deal with German airline Lufthansa and the leisure operator TUI, which reduces Etihad’s exposure. But that deal is still subject to final approval from the German authorities, and could face legal challenge from the likes of Ryanair, which sees it as an anti-competitive stitch-up by the big carriers.

Results from Airberlin toward the end of this month will be an opportunity to assess the airline’s progress, but will also likely paint a pretty black picture of its finances in 2016.

Added to those specific problems is a long list of other challenges: the US laptop ban, the simmering “open skies” row, the fiercely competitive state of the Gulf aviation market, and structural changes in the global industry, are some of the urgent issues sitting in the CEO’s inbox.

Whoever gets the Etihad job will have to be a problem solver with a constitution of steel.