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Etihad Airways is the national airline of the United Arab Emirates (UAE) and one of the fastest growing airlines in the
world, carrying 14.8 million passengers on its fleet of 110 aircraft in 2014. Although the airline has been established
for just 11 years, it has rapidly gained a reputation for operational and treasury excellence. A recent focus of the
treasury team has been to improve cash visibility and work on various working capital initiatives.
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In 2014, Etihad Airways sought to support its global supply chain by offering its
suppliers the option to receive early payments related to their receivables and
by making finance available to them at a lower cost than they would usually
be able to borrow at themselves. By doing so, Etihad Airways continued to
deepen its relationship with its suppliers as part of efforts to strengthen its
supply chain. The airline also hoped to use the implementation of a SCF
programme as a way to achieve process benefits, such as automation of
invoices, and to improve cash flow and working capital.
Finding the right bank to create, implement and operate a pilot for the
solution was critical, given that SCF is relatively new in the Middle East
and no airline outside the US had introduced a programme at that time.
Etihad Airways conducted a lengthy analysis process, exploring various
opportunities with key transactional banking partners. The airline decided
to work with Citi for the SCF programme. Etihad Airways and Citi have
enjoyed a strong strategic relationship for many years and were able to
demonstrate their strength in the international SCF marketplace. Citi
also provides cash and banking services to parts of Etihad Airways’
global network, which meant that the airline had to undertake only minor
system integration in order to implement a SCF programme. This was
an important factor since Etihad Airways’ group treasury is also heavily
involved in numerous other initiatives, such as replacing the company’s
global centralised treasury and risk management infrastructure.
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The SCF solution leverages Etihad Airways’ solid financial credentials and
Citi’s role as an intermediary to provide finance to the company’s suppliers
at a cost lower than they would usually be able to achieve. The solution
is fully automated from end-to-end for Etihad Airways, its suppliers and
Citi, and offers complete flexibility. Etihad Airways approves the supplier
invoice and electronically instructs the bank to pay the supplier on the
maturity date. The supplier is then notified that the invoice has been
approved via email – this is also shown on the Citi portal. Suppliers can
elect to receive payment immediately for individual invoices or can opt to
be paid early for all invoices. Each element of the programme, including
discount rates, payment dates and other information is transparent and
accessible online. Etihad Airways can easily monitor the programme
using a dedicated SCF platform with host-to-host connectivity.
Citi worked with Etihad Airways to analyse its supplier base to identify which
companies would benefit most from the SCF programme and which would
deliver the greatest benefits to Etihad Airways. It was discovered that some
suppliers were unfamiliar with SCF so an important part of the solution was
educating suppliers about the practicalities of the programme and its benefits.
Comprehensive on-boarding support was also provided for suppliers.
To implement the solution, Etihad Airways needed to make changes to
its treasury management system and invoice approval processes. Etihad
Airways is a rapidly growing company and limited additional treasury
resources were available to implement the SCF solution. However, clear
communication between Etihad Airways and Citi, and a well-defined
timeline, ensured that the project was implemented on time with no
impact to business as usual.
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Etihad Airways’ SCF programme is one of the first in the UAE and the
Middle East, and is the first for an airline outside the US. Given its ground-
breaking nature – and the fact that Etihad Airways is just 11 years old – the
scale of the solution, which spans the US, Europe, Asia and the Middle
East, is impressive.
Most SCF solutions focus on the relationship benefits of providing lower cost
financing, the potential process efficiencies, or the cash and working capital
benefits. Etihad Airways’ solution comprehensively addresses all three
areas and has delivered convincing results. Etihad Airways’ suppliers have
welcomed the opportunity to gain access to early payment and low cost
funding and appreciate the company’s efforts to support them and deepen
supplier relationships. By fully automating the solution – and launching with
a ‘big bang’ approach – Etihad Airways has streamlined payments and
benefited from considerable improvements in working capital.
K
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Cost savings.
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ROI.
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Time taken to implement solution and realise benefits.
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Productivity gains.
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Process efficiencies.
David Aldred, Citi and Adam Boukadida, Etihad Airways
HIGHLY COMMENDED WINNER
Best in Class Treasury Solution
in the Middle East
Etihad Airways
Adam Boukadida, Deputy Treasurer
treasurytoday
Adam Smith Awards © August 2015 | 19