An Award-Winning Approach to Global Transaction Banking

By Adam Boukadida, Acting Group Treasurer, Etihad Aviation Group

In 2016, Etihad Aviation Group (Etihad) was awarded the coveted Treasury of the Year in TMI’s Corporate Recognition Awards, with particular reference to initiatives in banking and cash management, technology and collateralised loan obligation (CLO). In this feature, Adam Boukadida, Acting Group Treasurer of Etihad Aviation Group, describes the project and its outcomes in more detail.

Project background

At 13 years old, Etihad Airways is still young in corporate terms, and treasury was only established a decade ago, as a key strategic corporate function. Asa young business with an historic average annual growth rate of above 20%, establishing a formal or structured approach to banking and cash management had not been a priority in the past. As we expanded our geographical reach and complexity over the years, we built up over 100 bank relationships, with too many accounts, and disparate commercial terms and service levels.

In 2016, Etihad engaged in a multi-year change programme to transition from an airline to an aviation group. This process is now well advanced, and has included a complete re-engineering of our banking and cash management across the 71 countries in which we operate. Reviewing and rationalising our bank relationships has been an important aspect of this re-engineering project. Although we had been through formal selection and evaluation projects for other aspects of our treasury business, we had not done so for global transaction banking in the past. 

Evaluation and selection

We approached 14 banks with whom we had existing relationships that had the capabilities to support our transaction needs. We considered each one carefully against a rigorous set of criteria, including each bank’s depth of cash management solutions, commercial terms, footprint, service levels, technology, integration and straight-through processing (STP) capabilities. Based on this scoring, we conducted workshops with shortlisted banks and ultimately made the decision to appoint First Abu Dhabi Bank (FAB) and Citi as our primary banking partners for our Middle East and global business respectively. In addition, we continue to engage other banks selectively in a few locations.

We connect to our banks via SWIFT wherever possible, which is important from a security, scalability and process automation perspective. In addition, SWIFT provides us with a single infrastructure both to connect to our existing banks, and support our banking needs and relationships as these evolve over time. We are now rolling out SWIFT across our footprint, including other equity partners wherever possible.

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Project outcomes

We have now migrated a large number of bank accounts to Citi and FAB, so the number of bank relationships and bank accounts that we manage has already declined by 50%. As a result, we are already experiencing year-on-year benefits in the reduction in fees and charges. Banking fees, for example, have reduced by 70%. We are able to leverage cash management structures, such as automated pooling and sweeping more extensively, which in turn has improved yield generation as we can invest consolidated cash balances. 

It is far easier to gain visibility of cash across our business, while payment processes and file formats are simpler and more standardised. With fewer interfaces between internal systems and our banks, the flow of information is more consistent, so we can identify and resolve problems more quickly as our banks better understand our cash dynamics and wider business. By taking control of our bank relationships centrally, we are able to manage accounts, including signatories, more consistently. 

Future plans

We are now continuing with the rollout to rationalise and centralise our banks and bank accounts further, and looking at opportunities to influence our equity partners in their banking and cash management strategies. Both FAB and Citi are our established supply chain finance and transaction banking partners. As we have moved to ‘business as usual’ for cash management, we will look to extend our supply chain finance programmes further.

In addition, our treasury team continues to evaluate, review and refine all aspects of our treasury policies, processes, technology and data as we seek to achieve best-in-class performance. For example, we replaced our treasury management system and implemented SWIFT in parallel with our cash and banking project, and put in place an innovative financing strategy, whilst dealing with the effects of significant volatility in both the financial and commodity markets. To balance these competing priorities with limited resources effectively, we maintain a disciplined approach to project management and governance, with clear visibility and oversight, and maintain proactive and structured communication with our internal and external stakeholders.