Managing a Hub-and-Spoke Network

Can we step back to 2008? You’re at Etihad in a strategic role. What were you focusing on? What were the core principles and factors you were really focusing on, once you’d realized you were going to survive and Etihad were going to be fine, because of the Gulf state and the oil?

In the beginning, it was just, how do we minimize this? We had a fleet of about 40 aircraft at that time; fortunately, it wasn’t too big. We had gone to the trouble of building a very effective hub and spoke network. So it was staring at it and, very quickly, coming to the conclusion of that paradigm that I was discussing earlier – if you cut a flight, where do you put it? It didn’t stack up. On top of that, we had a lot of extra aircraft coming in; almost one a month. They were three wide bodies for every one and a half narrow bodies. So we had to drive a long-haul network and the long-haul network had to feed itself.

I was obsessed with saying, when the next aircraft come on, I’ve got to put one onto Europe and one onto Asia. Or if I put one onto Australia/New Zealand or one onto America, I’ve got to balance it on the other side. I was just continually saying, where’s the strongest points of origin and where do they go? That was our obsession. The thing I’ve learnt from the very beginning is, just live in the data. Analyze it, understand real value, don’t get down into the grass roots too much, and we were just trying to do our best to get by.

We were price aggressive. We did have a strong marketing budget and we kept the marketing budget up and I think that was very important. But it shifted from brand to tactical. More price, today’s flight, hot destination, great deals, and we got out of it quicker than I thought and I was very pleased with that.

My experience in running a large British travel agent, for eight years, while it was on a tiny, tiny margin and had a massive volume, taught me that lesson. You had to really understand where value was and chase it all the time and live on it, day by day. That’s what I’d encourage anyone to do. Don’t fall into the trap of sitting around talking about what you think; live on your data. Do what you learnt at university. Go away and research and write papers, based on what the empirical information tells you. If you don’t do that, you’re going to get into a lot of hot water and it’s a lot harder and a lot more expensive to get out of it than you can imagine.

How did you approach managing your fleet, when you were trying to manage demand and manage these orders that you had committed to?

One of the really big things in an airline is, you’ve got multiple aircraft types. In those days, we had the 777-300ER, which had about 360 people on it and we used that for the big people routes, down to Manila and Bangkok, where there were huge volumes of traffic and it was a small business class and a big economy. We had some aircraft that we configured with three classes that we’d use, for example, for Heathrow. A big first class, a very big business and a smaller economy. It was very much a case of trying to match the right aircraft with the right product, for the right market and make sure that what it connected to could carry it.