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Industry sources indicate that Christoph Mueller is likely to be appointed as the CEO of Etihad. The appointment comes at a time when the airline is facing severe challenges specifically — a rising cost base and declining yields that resulted in the departure of its previous CEO James Hogan along with several other members.
A turnaround expert
A no-nonsense and extremely direct person, Mr. Mueller is a labelled as a turnaround expert. He has effected three successful turnarounds till date including Daimler-Benz Aerospace, DHL Worldwide and Aer Lingus. The Aer Lingus turnaround was widely publicized and he was subsequently handpicked to lead Malaysian Airlines which at the time was grappling with significant challenges including two widely publicized fatal crashes. At Malaysian he implemented a series of measures including fleet rationalization, cost cuts and renegotiation of majority of contracts that helped the airline stabilize in what was an untenable situation. As a part of the rationalization, he cut most of the non-Asia international routes choosing to partner with Emirates to carry Europe and North America traffic. It is likely that during this time he came into extensive contact with Sir Tim Clark who then suggested that Mueller join Emirates directly. In a strange way, this worked well because in spite of a turnaround of Malaysia Airline, his style of extreme accountability and quick implementation rubbed many the wrong way (including the Malaysian Government).
An indication of a possible merger/alliance
Christoph Mueller’s appointment is also interesting as he joined Emirates only a few months earlier as the Chief Digital and Innovation officer. Industry sources indicate that he was widely seen as the next CEO to take over from Sir Tim Clark. His unwavering discipline and focus on costs was clearly visible at Emirates which has started its own series of rationalization measures. Etihad though was always seen as a threat (even though smaller in size and volumes) and eating into the profits of Emirates (both were targeting a similar passenger base offering a similar product and network). Arguably the pre-clearance facility at Abu-Dhabi has helped Etihad significantly in the recent months but that does not overshadow the extreme pressure on revenue and costs that the carrier is facing. One of the possible way to alleviate this would be a merger or partnership of sorts with Emirates so the combined entity can focus on how to attack macro and global challenges without worrying about eating into each others profit (that affects margins at both airlines). Based on this, the appointment of Mueller is further fuelling speculation that the appointment is a first-step towards a possible and until now unfathomable combination of Emirates and Etihad.
Etihad challenges
At Etihad, Mueller will come into an airline that has scaled rapidly using the “equity alliance” strategy which has started to show severe strains given the large losses at Air Berlin and Alitalia. Mueller will have his work cut out for him as the Middle East and the MEB3 are grappling with challenges on all fronts including the decline in oil prices that have impacted the economy of the entire region; the onslaught of Low Cost Carriers including low-cost-long-haul which will eat into the most profitable segments; falling demand due to the flat growth in Europe and North America; and an extremely competitive environment. The equity stakes would also have to be re-evaluated as it may not make sense to continue to absorb such large losses (especially in cases where turnarounds are near impossible). But one cannot underestimate the hard-driving Mueller and perhaps he may attack the challenges in a different way. That remains to be seen.
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We wish Mr. Mueller well. We will break news on more appointments to the Etihad team as and when available.
Stay tuned.
