‘You can’t shrink an airline to profitability’: James Hogan unplugged
The former Etihad Airways chief reveals untold secrets of his reign in Abu Dhabi, frustration over the trashing of his legacy and why he won’t work in Australian aviation again.
James Hogan is back in the town and country of his birth.
Sitting in his suave Melbourne apartment, the man who controversially piloted the Abu Dhabi-based Etihad Airways for 11 years – and who has spent the past three-and-a-half decades living outside Australia – declares he will always be a “proud Aussie”.
His mother, who died after suffering a stroke at age 63 when he was in his early 30s, came from the tiny town of Manangatang in northwestern Victoria.
His father, who lived to 95, served in the Royal Australian Navy for two decades and was a champion sportsman.
Hogan grew up in Melbourne suburbia and attended Ivanhoe Grammar School, where he captained the First XVIII football team. His brother played VFL for the Essendon Bombers.
“I love coming back here a couple of times a year. I’m a proud Aussie. I support Australian teams,” he says.
“Where I can, I help Australia. It is a great country. But I’m an international person. Now I probably bring a different perspective here, not living in Australia for many years.”
His Australian-born wife would love nothing better than to return down under after decades spent abroad.
Yet Hogan the businessman has long left his homeland behind. This current visit is short lived.
The dual Australian and British citizen splits his time between work in Europe, Africa and the Middle East, and his properties at Windsor, outside London, as well as Monaco.
The consulting group he established out of Malta in 2017 with his former chief financial officer at Etihad, the Australian born and bred James Rigney, also has offices in Abu Dhabi and Geneva.
Their Knighthood Global group, named after the legendary Knights of Malta, provides business advisory and capital-structuring services in aerospace, aviation, travel, and tourism and hospitality.
Since leaving Etihad in mid 2017, Hogan has noticeably mellowed.
Famed for being a hard taskmaster and, at worst a bully with a volcanic temper when he lets loose, the Hogan of today looks and sounds relaxed.
But there is one topic which gets him wound up like no other: reflecting upon his legacy at Etihad.
Given this is his first interview with a journalist from his homeland in more than eight years, I put to Hogan the view from some quarters in Australia – and a bunch of critics globally – that his time at Etihad was a failure. He doesn’t flinch.
Controversial moves
“Etihad wasn’t a failure. I created one of the most successful airlines in the Middle East. I retired a year and a half before I left,” he replies resolutely.
“What I can’t control is what happens after me. After I left, they downsized the business. Now they are back on a growth strategy, and the growth strategy reflects my strategy.”
The current CEO of Etihad is Brazilian Antonoaldo Neves, who is pursuing the “Etihad Airways 2030” strategy, a seven-year plan to almost treble the size of its operations.
After slashing its fleet size between 2019 and 2022, Etihad is bringing back big jets such as the Airbus A380, the Boeing 787 and the Boeing 777, and paying billions of dollars more for them that it would have before the Covid-19 pandemic.
It wants to have 160 aircraft in the air by 2030.
It marks a return to the growth strategy undertaken by Hogan which, after his departure in 2017, was largely ditched by his successor, Tony Douglas.
What was truly unique and controversial about Hogan’s Etihad tenure was his equity alliance strategy. He thumbed his nose at the powerful Oneworld and Star global aviation alliances and went about buying his own.
Etihad made investments in German carrier airberlin, the Dublin-based Aer Lingus, Jet
Airways in India, Air Seychelles, Air Serbia, Virgin Australia and Italy’s national carrier, Alitalia.
It is on the topic of these investments – in what his detractors long called ailing airlines he could never control – where Hogan enthusiastically delves into areas he has, until now, carefully avoided talking about publicly since he left Etihad.
“Everything I did was agreed by the board; everything. Whether it be buying aircraft, whether it be investing in other airlines. Now, some I wanted to do and some I didn’t want to do,” he reveals.
Etihad spent €560m buying a 49 per cent stake in Alitalia in 2014 in a bid to secure better access to European and North American international air travellers.
But Hogan never was able to exercise control over the Italian carrier to tackle its crippling legacy labour cost issues, because of European Union labour policies capping foreign ownership in European airlines below 50 per cent.
Alitalia declared bankruptcy in 2018.
“If you take Alitalia, for example, I didn’t agree with Alitalia. There was a strategic reason they (the Abu Dhabi regime) wanted to do Alitalia. I said, ‘Well, based on my experience and my knowledge of the Italians, I don’t recommend we do this and I don’t agree with the deal’. They said, ‘Okay, go back and make the deal work’,” he says.
“So I negotiated with the Italians and with the Italian government. They gave us some commitments and condition precedents that they didn’t deliver on, which led to Alitalia moving into administration.”
In 2011 Etihad had become airberlin’s largest single shareholder, giving it access to 33 million new passengers in Europe. Yet after struggling for many years, in August 2017 the German carrier filed for bankruptcy after Etihad withdrew its financial support.
“One of the reasons I had such a long notice period at Etihad was that I had agreed to sell airberlin to (German national carrier) Lufthansa and (the German leisure airline) TUIfly. A great deal,” he says.
“In hindsight, it was a big mistake by the people that came after me not to complete it. Today they would be part of Star Alliance, and but they are not.”
Jet Airways in India filed for bankruptcy in June 2019, while Air Seychelles went through an administration process in October 2021 before returning to service a year later.
Royal connections
Hogan claims he never lost favour with the powerful Crown Prince of Abu Dhabi, Sheikh Mohamed bin Zayed Al Nahyan, despite the failures of Alitalia and airberlin.
“If there was something that I had done that the shareholders had not agreed with, I would not be in Abu Dhabi today,” he quips.
Hogan still serves on the board of Sanad, a global aerospace engineering and leasing solutions group wholly owned by the Mubadala Investment Company – an investment vehicle of the Abu Dhabi government run by one of the royal family’s most trusted advisers.
“I’m on the aerospace board in Abu Dhabi. I’ve said that I’ve never left Abu Dhabi,” Hogan says.
“What I can’t control is what people say. If you look at my mandate – and my mandate was to create an airline from scratch, best in class, safe, part of their 2030 vision and part of nation building – it was a success.”
Regarding the equity investments, he still believes that what was expected by the regime on market access and their contribution to Abu Dhabi more than covered their cost.
“I had a mandate from the top. At the end of the day, the shareholder wanted to do Alitalia. So my job was to ensure we did it to the best of our ability,” he says.
“As much as we put into the equity airlines, we got out of the equity airlines. So it was a wash.”
Yet what seems to irk Hogan most is what happened after his departure. On this topic he doesn’t mince words.
“I was at Etihad a long time. When you resign people see an opportunity to develop their own positioning. They want to progress … (But) I think a sign of weakness, when you take over a business, is after six to 12 months to blame the past. I think that’s what happened here,” he says.
After Hogan, Etihad became a boutique airline focused primarily on serving passengers flying to and from Abu Dhabi.
His plan to take a delivery of 98 planes from Boeing and Airbus was scrapped. Thousands of jobs were cut.
In July 2022, Tony Douglas said: “We’ve made some pretty fundamental mistakes earlier on in our teenage years.”
Etihad reported losses of $US1.873bn for 2016 and $US1.52bn for 2017. In the first set of results, it booked a $US1.06bn charge for a fleet writedown and a $US808m charge related to airberlin and Alitalia.
“Well, I wasn’t involved in those sets of accounts. I was surprised at those numbers. That’s all I’ll say,” Hogan replies after a long pause when I ask about the losses.
But eventually he goes further, with a parting shot at what he seemingly sees as the trashing of his legacy.
“I don’t agree with what they did after I left, because you can’t shrink an airline to profitability,” he snaps.
“You can’t throw everything but the kitchen sink at the results and use a change for your re-engineering of the business.”
Future focused
Hogan is now looking to the future, firmly focused on the operations of Knighthood Global, and its ongoing consulting jobs in Europe, India and Africa.
Last year the Maltese government hired the firm to assist in closing down its flag carrier, Air Malta, after it fell into bankruptcy, and to help launch a new national airline, KM Malta Airlines.
Knighthood has also worked on a strategic plan for the Zimbabwean government to jump-start the country’s aviation industry.
“Africa is, from an aviation perspective, the next major global market. The huge population is still growing, but aviation is in pretty bad shape. What you have are fantastic airports but small or failing airlines.” Hogan says.
He says the point of difference for Knighthood is that it is led by three former C-suite airline executives.
In addition to Rigney, Hogan’s other business partner is Camiel Eurlings, a former CEO of
Dutch national carrier KLM and a former transport minister of the Netherlands.
“What we are not is your traditional management consultant, advisory or restructuring firm, because we’ve actually been involved in business most of our lives in the aviation sector. So what we bring to the table is a very clear understanding of aerospace, aviation and airports,” Hogan says.
“We are very focused on how we engage with the board and the management. Our role is to obviously achieve the mandate from the board, but we are very focused on how we work with the management on the process.”
Before their time together at Etihad, Rigney worked with Hogan at Gulf Air, and was also previously employed at Ansett Australia and KPMG. Like Hogan, he hails from Melbourne suburbia.
Many have long wondered why they have seemed inseparable. But Hogan gives a simple reason: “We trust each other.”
“The great thing about James is that you can trust him and he is hard working. He’s very good at what he does. I’ll look at the strategy, I’ll look at what we can do with the business. He’ll look at the financials, the network and the aircraft. Then we put it all together.”
Hogan believes that he and Rigney are respected as “no bullshit” characters.
“I think one of the greatest attributes of Australians as business people is that we are honest and hardworking. We say it as we see it. It is part of my character. It has been good for me and it has been bad for me too sometimes,” he says.
Yet while he and Rigney are good friends, they don’t “live in each other’s pockets” and have a defined line between business and the personal.
Virgin CEO role
Hogan reveals he has been asked to run airlines since he left Etihad, but has always been determined to not take a role in the Middle East, in order to avoid competing head on with his old employer.
So would he run one elsewhere in the world, if asked?
“For the right opportunity, I would,” he replies enthusiastically, before adding that “everything comes down to the mandate”.
“What does the shareholder want to achieve? Any role that you look at anywhere in the world, it’s about the mandate. Do you fit that mandate and can you win?”
So what of the Virgin Australia chief executive role being vacated by Jayne Hrdlicka?
Hogan is initially coy before declaring, categorically, that he has not been approached about the job.
His last aviation role in Australia, in 2001, was to oversee the Tesna consortium led by Lindsay Fox and Solomon Lew, to acquire Ansett from administration. The billionaires eventually abandoned the deal.
“I seriously have never considered, after Tesna, coming back to Australia and that remains the case,” he vows.
“It is always difficult for Australians offshore to come back.”
During his time at Etihad, Hogan crossed swords with then Qantas boss Alan Joyce, who described the Middle Eastern carrier as the plaything of oil sheiks bent on destroying Australia’s national airline. Hogan labelled Joyce’s comments as “un-Australian”.
So does he now have sympathy for Joyce, whose legacy has also been roundly trashed?
Can Qantas be saved?
“Shareholders, the board, and the senior executives, everybody is around the table; Qantas is a tough gig, a national icon,” he muses.
“Alan did a great job at Jetstar. He moved to the Qantas role. For the shareholders, that delivered huge value over time.
“So when you look at the metrics of a listed company, he ticked those off. What I can’t answer, because I’m not close enough to it, is maybe he stayed too long.
“Only he can answer that. I made a decision to step out, and maybe sometimes you need to call the time you step out. He was CEO for 15 years. That’s a long gig.
“But I believe he did what was expected of him by his board and by his shareholders. The real question for them to ask is probably of the board.”
So does Hogan think the tarnished Qantas brand is resurrectable?
“Of course it is. It’s a great brand. It’s a global brand, not just an Australian brand,” he says.
Hogan also has sympathy for his ex-business partner, former Virgin Australia boss John Borghetti, who for many years fought Qantas head-on in a capacity war partly funded by Etihad. But Borghetti’s legacy has been tarnished since the airline collapsed in 2021.
“We are good friends and I think John did a great job,” Hogan says.
“Look, as a CEO, you own it. But there are many circumstances also outside of your control and you don’t work in isolation. There’s a board, there’s shareholders, there are objectives. Time enables you to answer the critics.”
Just over seven years after leaving Etihad, Hogan now clearly feels more comfortable speaking his mind when reflecting upon his legacy.
His critics will accuse him of rewriting history and of window-dressing the disasters of the past. But in his eyes, so be it.
“Everyone is an expert on airlines. You go to a dinner party with an airline CEO and someone sitting at the table has got a story,” he says with a grin.
“But would I do it again? Yes. Do I have any regrets? No. I’m very proud of what I and my team achieved.”
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