Etihad bullish as rivals scale down operations

FARNBOROUGH, England (CNN) -- James Hogan is the CEO of Abu Dhabi-based airline Etihad. MME caught up with him at the Farnborough International Air Show this week to discuss the airline's future expansion plans as it struck one of the biggest deals in aviation history after placing orders worth more than $20 billion.

The five-year old airline placed one of the biggest orders at the Farnborough Airshow this week for 100 fuel efficient jets with Boeing and Airbus.

James Hogan explains to MME's Jim Boulden why the company is in such a buoyant mood, while some competitors plan to scale down operations.

CNN - On Monday we thought the airshow might be really boring, and then you came along and made a big announcement. You're really sticking your neck out here aren't you?

JH-- Well it was a great announcement, but no we're not sticking our neck out. When you look at a deal of this size, which is well over 100 firm aircraft and another 105 options of purchase rights, that's all built about a plan, and we have a strategic network plan out to 2030.

This gives us the opportunity from the end of 2011 to 2020 to bring in aircrafts aggressively to meet that plan. So a year and a half of detailed negotiations, analysis, making sure we made the right decision to grow our business and to grow our business on a commercial platform.

CNN-- Even your competitor Emirates airlines said this week that they were not going to make any orders for a while, just to slow down a little bit and see how things will progress this year. What makes you so confident?

JH-- Well, I think one has to remember, these aircraft do come in from 2011 through to 2020 so the 380s come in 2012, we have 320s in 2011, the 787s in 2014 and the 350s in 2017. Watch interview with Etihad boss »

Now in our part of the world, our catchment area is in the Indian subcontinent, Middle East, South Asia and of course the Gulf and their markets are still not liberalized. As those markets liberalize, we've got the flexibility with short haul aircraft to service India and the Middle East, and the narrow bodies to also build that air bridge we have in Abu Dhabi between Europe, Australasia, China and the Americas.

So we believe that planning makes sense, achieve the aircraft we need to grow and enable us to build the business in a fairly structured way.

CNN-- Etihad is part of a larger plan for Abu Dhabi, what is that?

JH--Well Abu Dhabi is the capital of the United Arab Emirates and you are seeing a wide range of programs to move away from oil related industries of the past.

They're still there of course but the diversification is into tourism, real estate, hospitals and services. In excess of $200 billion will be invested over the next ten years to drive that activity. Now this activity brings traffic and that's why we're so bullish about the figures moving forward.

The IATA figures for the Middle East are 15% growth over the next 3 years, Europe's 4% growth. So we're bullish, the business is there and the market is opening up.

JB --Now you have the high oil price of course and so I think some people will think twice about traveling. Do you not think there may be a bit of a slowdown for a while and how are you affected by the high oil price?

JH-- Well we're operating on a commercial mandate like any airline, we embarked on a very aggressive hedging program at the end of 2006 where 70% hedged in 07, we were 80% hedged in 2008 as we go into 2009, at this stage we are 40% hedged. Lets see what happens over the next six months. We're passing through the fuel surcharges and we are pricing to mitigate that risk.