‘Cut me in half, I’m still Etihad’

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When I arrive 20 minutes early for lunch at Shanghai Me in the DIFC’s Gate Village, James Hogan is already there, poring over his phone, beneath a stylised portrait of Mao Zedong.

It is an incongruous sight – an Australian leader of the global aviation industry who spent the bulk of his career in pursuit of elite standards of luxury air service, alongside a hot pink version of the drab olive-green tunics worn by hundreds of millions of bicycle-riding workers during Mao’s tumultuous decades as chairman of the Chinese Communist Party.

But I’ve chosen Shanghai Me for several reasons. Hogan loves Asian food, his aides told me, and spends some time these days as a visiting lecturer on the MBA course at Tsinghua University in Beijing.

And, as I discovered, he has some pertinent views on the importance of China in the global aviation market.

“I thought the traffic would be worse,” he says to explain his timing, “and I hate being late for anything.”

This lunch has been a long time in the making.

Hogan has given few full media interviews since his departure from Etihad Airlines in 2017, after a transformational 11 years as chief executive.

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Over those years Abu Dhabi’s flagship carrier went from being a $300 million startup to become a diversified travel group with more than $6 billion in revenue, pulling in nearly $10 billion for the emirate as a result of the economic “multiplier” effect of a major aviation hub.

Despite this strategic success, he saw his legacy ripped apart by subsequent policymakers – the fleet shrunk, destinations dropped, international alliances canned – in a long programme of retrenchment compounded by the pandemic-induced recession.

Only now, with Etihad on a revived growth trajectory under CEO Antonoaldo Neves and even looking to launch an initial public offering of shares, is the airline getting back to where it was in 2017.

I knew that Hogan wanted to talk about the slings and arrows of what had happened at Etihad, but also realised it was still a sensitive subject.

So, what better than a pleasant lunch, away from the office, to get to the bottom of it?

And where better than Shanghai Me? This is the first lunchtime I’ve been to the restaurant, part of the Fundamental Hospitality group run by Russian businessmen Evgeny Kuzin and Maxim Vlasov. And it is a far more relaxed version of the glitzy, sybaritic night-time experience.

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Some businesspeople having quiet discussions, a few couples wrapped up in close conversation, and a bubbly table of half a dozen Emirati “ladies who lunch” – these comprised our co-lunchers, all under the twinkling gaze of Chairman Mao.

The set business menu looked good, so we both went for it. Although I did point out to Hogan that under the rules of engagement he could order whatever he wanted from the extensive à la carte menu, with AGBI picking up the bill.

The other rule is that the conversation is on the record and recorded – unless he decides he wants to go off the record, in which case I promise to respect that. In fact, he “goes off” quite a lot over the next couple of hours.

I order a deliciously spicy Virgin Mary, James sticks to water – for now.

We rattle off our choices – miso soup, prawn toast and spicy chicken with egg rice for me, hot and sour soup, green salad and sizzling beef for him. With that feast on the way, the Etihad post-mortem can wait until later. What is he doing now?

“Well after 16 years as a CEO at Gulf Air and then Etihad, which was pretty full on, I just felt it was time to do something different. So we created Knighthood Global,” he explains.

“We” is a team of aviation experts, some from the Etihad stable like CEO James Rigney, but all with extensive experience in the global aviation business under Hogan’s chairmanship.

Knighthood – with offices in Abu Dhabi, Geneva and Malta – offers top-level consulting and advisory services in all aspects of aviation, from leasing, financing and restructuring through airport design and finance right down to aircraft maintenance and repair.

Over soup, mine accompanied by delicious mini-mushrooms, he talks enthusiastically about Knighthood’s work in the global airline business.

His clients do not always want to be identified, but he can say that he has been involved in airline restructuring in the notoriously over-regulated and unionised European sector, as well as startups in Africa and elsewhere. Malta has taken up a lot of his time.

“Malta was initially a major project for the government in creating an aviation finance industry similar to Dublin and Singapore, the two major centres in world aviation finance. Malta was very successful in aircraft registration and shipping registration. But this was taking it to a new level, of how could you create a financial centre,” Hogan says.

This project – still in progress – has expanded into a plan to restructure Air Malta, the island’s carrier.

He talks about the “Middle East model” in aviation as a new template for the rest of the world to follow.

He is still very much involved in the aviation business in Abu Dhabi, both through Knighthood clients in the region and through his seat on the board of Sanad, an Abu Dhabi aerospace company owned by wealth fund Mubadala.

The week before we met for lunch, he was a guest of Abu Dhabi at the FA Cup final in London, where the UAE-affiliated team, Manchester City, lost. And a few days after our lunch he was inducted into the Air Transport World Hall of Fame in recognition of his time at Etihad.

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“You cut me in half, I’m still Etihad,” he says later. 

“The national economic strategy is the hub of the nation, whether it’s the 2030 strategy in Abu Dhabi or the Vision 2030 strategy in Saudi Arabia. It goes back to the Singapore Airlines strategy, where they built a very good airline. But they did not have the population, and the technology of long-range aircraft has changed,” he says.

“Here in the Middle East the first mover was Emirates and Dubai and today it’s a major hub. That’s because it has a long-term vision, and that is key – having a strong mandate from the top, from the government.”

Hogan breaks off to praise Sheikh Ahmed bin Saeed Al Maktoum, founder of Emirates and architect of Dubai’s aviation strategy (“an outstanding man”). And for a while the two of us reminisce about some of the giants of global airline strategy, notably the three Lords – King, Marshall and Bishop – who transformed British aviation in the 1980s and 1990s with BA and British Midland.

Moving towards the end of the starter courses, we chat about friends in common in the aviation business, the declining standards of aviation media (“the sad thing is the calibre of journalists isn’t at that level any more”), families – Hogan and I both have daughters who live in Los Angeles – and the joys of grandfatherhood.

I sense the lunch is drifting towards a trip down memory lane, and also realise I have so far failed in my hospitality duties. I haven’t offered Hogan a glass of wine.

“If you’re having one,” he replies, so we go for two glasses of house, his a Mud House sauvignon blanc, mine a Seresin pinot noir, both from New Zealand. (In the buzz of conversation, I didn’t check the price – mine turns out to be a chunky AED145.)

Back to aviation. He began his career at the Australian airline Ansett, then went off for a stint at car rental giant Hertz, which had “a big focus on the customer”.

He admires the way that Ryanair (“our Irish friend”) has transformed the economics of airline travel and the no-nonsense approach to getting people who may never have travelled before from A to B.

“But for the full service, the Gulf and Asian carriers have done a great job. It’s just that focus on the customer,” he says.

The excellent Alina Khakova, Shanghai Me’s VIP customer service executive, visits to check that all is well with our meal. I assure her it is, and turn to the core of the lunch: what happened at Etihad?

He explains how, from the beginning in 2006, Etihad was regarded as a core element of the 2030 strategy to diversify the UAE economy. That involved building an airline and the huge support systems it required – airports, fleet, trained staff, support services, retail spin-offs like duty free – virtually from scratch.

“We had a board, OK? So like any business, there’s a mandate, there’s a board of directors, and there’s a management and very strong governance in the business. Our greatest challenge was how we expanded,” he says.

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Big aircraft deals in 2008 and 2013 ensured the fleet was big enough to serve Abu Dhabi’s ambitions, while purchasing landing slots around the world developed the network.

But the most controversial aspect of the Hogan years at Etihad was the “equity alliance” strategy of taking stakes in other international carriers with a view to “stretch the network”, as he explains.

Under Hogan’s watch, Etihad took equity stakes in Air Berlin, Air Seychelles, India’s Jet Airways, Air Serbia and Alitalia.

“As Etihad went through the 11 years that I was there, all those phases were reviewed or validated or presented and agreed upon,” he insists.

It was a way to accelerate growth via access to passengers, slots and codeshares in the face of surging competition from Emirates and Qatar, both on Abu Dhabi’s doorstep. For a while it worked very well.

But by 2017 a series of regulatory, labour and ownership issues came to a head in a perfect storm for Etihad. Losses in that and the subsequent year – long after Hogan’s departure – totalled $2.8 billion through a mix of write-offs, operating deficits and other red ink.

Hogan does not want to quibble publicly with the declared figures and does not respond when I suggest that new management often wants to “kitchen sink” the bad news into the financials. Instead, he chews thoughtfully on his spicy sizzling beef.

He does, however, insist that there was significant residual value in the global network he had built up, as well as future potential. He points to the latest revival strategy under CEO Neves as evidence that it was a mistake to shrink Etihad so aggressively, even before the pandemic accelerated that downsizing.

“I’d have stuck with it. I'm very proud of an airline brand that was the fastest full-service airline startup in aviation history, of where we started and where we got to – especially the programme of training up young Emiratis at the airline. I’m immensely proud I supported the partnership model with other carriers,” he says.

“If I look at what my critics say, which is probably a good way to look at it, I believe the investments, what was expected in regard to market access and their contribution into Abu Dhabi more than covered the cost to those investments and I would have stuck with the strategy. But I finished my mandate, I resigned and I moved on,” he adds. 

By now, we’ve finished our main courses and both decline desserts, though the menu looks delicious.

To wrap up, Hogan gives some broad brush opinions on some of the big aviation issues of the day, such as the fast-growing Indian market: “I’d be concerned about the competitive threat from Air India and Indigo on long haul.”

On the challenges facing Boeing, he says it is “an outstanding company, but obviously something has gone wrong with the process that led to the issues with the Max and other issues. I’ve no doubt they’ll come out strong.”

But Western manufacturers will face strong competition from Comac, the Commercial Aircraft Corporation of China, especially in the fast-growing markets of Asia and Africa, he believes.

I think I detect a little wink from Chairman Mao over my shoulder.

As I pick up the surprisingly modest bill – even with my pricey red wine – and prepare to leave Shanghai Me, something still rankles about the Etihad years. “When you resigned, did you regard it as ‘mission accomplished’? I ask.

“Turn the phone off” are the last words on the transcript of our conversation.