Etihad bought stakes in failing airlines to build a network — and wrote down $1.87B

From the mid-2000s, under chief executive James Hogan, Etihad Airways of Abu Dhabi built its network by buying stakes in other airlines. Rather than fly every route itself, it took non-controlling positions in carriers including Air Berlin, Alitalia, Jet Airways and Virgin Australia, intending to feed traffic through its Abu Dhabi hub and turn the partners around.

The partners did not turn around. Air Berlin and Alitalia both collapsed into administration in 2017, and Jet Airways followed in 2019. Etihad had kept weaker airlines aloft with cash and support, but its stakes were too small to force the restructuring those airlines needed.

The bill arrived in Etihad's own accounts. For 2016, Etihad Aviation Group reported a net loss of $1.87 billion on revenue of $8.4 billion. Impairment charges totalled about $1.87 billion — roughly $1.06 billion on aircraft and about $808 million on assets and financial exposures to equity partners, mainly Alitalia and Air Berlin. Hogan and his finance chief departed.

Etihad later made a payment of more than €300 million to settle a legal dispute tied to Alitalia, and the equity alliance — Hogan's signature strategy — was reviewed and unwound. The lesson was structural: a portfolio of minority stakes in weak partners meant Etihad absorbed their losses without ever holding the control that could have prevented them.