Reach for the sky

Ricky Thirion has been with Etihad Airways since 2007 and oversees the Group Treasury, comprising the corporate treasury, corporate and structured finance, insurance, and payment solutions functions. He holds a Master’s Degree in Mechanical and Aeronautical Engineering and various financial and business management related qualifications. Along with his team at Etihad Airways, Thirion is an Adam Smith Award winner and is also an Honorary Fellow of the Association of Corporate Treasurers.

What are the qualities needed to be a great treasurer? Most people in the know would say that he or she must be strategically minded. An analytical, fact-based approach and willingness to deal with problems at a very detailed, objective level are also often thought of as must-have characteristics.

Although engineering might not be the most obvious background for a treasury leader, the field is concerned with conceptualising complex problems and finding ways to solve them, so it’s a natural fit. “I certainly come from quite a different perspective from the average finance employee in a corporate environment,” says Ricky Thirion, Group Treasurer at United Arab Emirates-based Etihad Airways. “I take more of a risk management and process mind-set: an engineer’s view on life. And that works very well in treasury.”

But how did this qualified engineer come to find his niche in the corporate treasury profession in the first place? After finishing his Master’s Degree in Engineering his first job was in a major information technology firm which focused on delivering web integration for legacy business platforms. Some of the most interesting projects, he found, were for financial services firms and corporate treasuries.

I take more of a risk management and process mind-set: an engineer’s view on life. And that works very well in treasury.

“I was building an intranet front-end for a corporate treasury system that deployed to the company’s group of 150+ companies,” he says. The year was 1996, and no project of this kind had ever been attempted before. After this initial baptism into the world of treasury and then a treasury role at GoldFields (one of the world’s biggest gold mining companies), he ended up working for, and later becoming the Managing Director of, a corporate treasury outsourcing company, Andisa Treasury Solutions, which was then a wholly owned subsidiary of the Standard Bank Group. “At this point it became clear to me,” he says. “Corporate treasury was where I would focus my career and I wanted to be the treasurer of a large company.”

After a subsequent spell as Group Treasurer at South African Airways, Thirion further pursued his ambition when, in 2007, an opportunity presented itself to join Etihad Airways. At this point in time, the company had no formal treasury operations – the award-winning airline only commenced operations in 2003 – and Thirion’s first priority was setting up a fully-fledged treasury capability supported by all the appropriate policies, processes, people and technology. As the treasury capabilities fell into place, thanks in no small part to his efforts, the business also really began to take off. “Since that time the company has grown roughly tenfold and currently continues to grow between 20% and 30% per annum. We have to date raised over $9 billion in fleet financing and we are now one of the largest hedgers of jet fuel exposures in the world.”

Such a rapid expansion poses frequent challenges from a treasury perspective; challenges which regularly put Thirion’s engineering approach to problem solving to the test. “Infrastructure needs to be put in place on the ground such as transaction banking relationships and other facilities like receipt of payments,” says Thirion. At a strategic level, this support also involves funding the capital requirements as you take on more aircraft and other assets that support the fleet expansion and supporting infrastructure, he adds. The growing capital requirement has led treasury to become more creative in the financing space. Last year the team won an Adam Smith Award in the Judges’ Choice category for an innovative asset-back lending solution executed on behalf of one of its partner airlines, Jet Airways, that utilised take-off and landing slots at London Heathrow as collateral.

Etihad Airways’ rapid expansion has not been wholly organic. A significant share of it has also come through strategic investments and partnerships. Of these there are many. As it currently stands the airline holds equity investments in airberlin, Air Seychelles, Virgin Australia, Aer Lingus, Air Serbia, Jet Airways and Alitalia, along with investments in several other aviation businesses including travel management, handling, maintenance and loyalty.

A lot of Thirion’s work today therefore revolves around supporting this partnership group of airlines. “I speak to multiple partner airlines on a daily basis,” he says. “I continue to play a strategic bank relationship role, so I have a lot of engagement with their bankers wherever they may be across the globe. And that of course is connected back to our own bank relationship management because many of those counterparties are part of a bigger banking group common across Etihad Airways and our other business interests.”

A turbulent spell

Close monitoring of bank counterparties was something Thirion had to ensure was in place almost as soon as he had his feet comfortably under the desk at the airline: it had been barely a year since he joined the company when Lehman Brothers filed for bankruptcy. Given that the nature of the airline industry makes it particularly vulnerable to global economic downturns (air travel is often one of the first things people cut back on), the next couple of years would prove to be very testing indeed for Etihad Airways’ treasury. Volatility in key financial exposures such as energy prices, foreign exchange and interest rates mushroomed, which in turn also had an impact on counterparty risk and, in certain markets, funding sources.

As the treasury capabilities fell into place, thanks in no small part to his efforts, the business also really began to take off.

Thirion looked at what was happening in the banking sector and quickly realised that treasury would never be the same again. Asked how his approach to treasury evolved in the wake of the banking crisis he explains that the biggest change was around how he perceived the safety of counterparties, particularly in the case of the banks. “As you enter into a global crisis, you ask yourself fundamental questions about risks you are facing, especially with financial institutions where it profoundly changed people’s views on credit risks. I think for many of us that will, in our lifetimes, be the biggest thing we remember about that time.”

In the post-Lehman world, companies not only had to manage sources of funding and lending very carefully, but also keep a close eye on counterparty risk. Fortunately for Etihad Airways, the company had strengthened its focus on both issues since 2007, broadening its access to lenders and hedging banks, in addition to putting in place strict counterparty risk limits. This ultimately meant that the airline did not suffer any losses due to failures in financial services firms and were able to continue to hedge and fund the business.

A series of unfavourable natural events, such as the Icelandic ash cloud that grounded flights over Europe for a week in April 2010, served to compound the difficulties facing airlines further. Together with the fall-out from the banking crisis, circumstances conspired to create what is quite possibly one the most testing environments the industry has ever faced.

Thirion recounts that he too was one of the people who became stranded that week. The tale he tells is one that people might look back on and see the funny side of years later. At the time, however, the situation was pretty serious.

“I had flown out for an awards ceremony and I only had the clothes I was wearing and a tuxedo, so I ended up spending five days in London with a tuxedo and one change of clothes,” he says. “Many members of our senior management were affected as well, but we all pulled together and wherever we were we tried to assist the passengers who were stranded with us.”

Easing the load

From environmental headwinds to economic ones, Thirion has successfully navigated Etihad Airways’ treasury through some tough times, thanks in no small part to the strength of his senior treasury team. He has six direct reports in a total team of 45 people across all functions under his responsibility who help him manage the ever expanding list of responsibilities that comes with being a treasurer at one of the world’s fastest growing airlines.

The majority of Thirion’s time these days is split between guiding his treasury team, bank relationship management, risk management, strategic funding and providing strategic support for the group’s various partnerships airlines. These are not the things which can be easily automated and, as such, creating and filling new positions including the recent addition of a Deputy Treasurer and a Head of International Treasury – has been crucial in helping him stay on top of the growing volume and complexity of his duties.

In addition, Thirion says that the company is about to hire a dedicated compliance manager in treasury in order to relieve some of the regulatory strain on the department’s middle office. In recent years, treasury has had to contend not only with changing processes around trade confirmations, under new rules such as the European Market Infrastructure Regulation (EMIR), for example, but also a growing amount of basic administration when providing information to banking partners. “Compliance activities related to banking and financial markets regulation tend to take up an ever increasing amount of time and we are adapting our structure and deploying dedicated resources to better deal with this challenge,” he says.

As one might expect of a man who began his career working on web integration for business legacy platforms, Thirion has a strong appreciation of the role that technology can play in freeing up more time and resources from day-to-day manual undertakings. He says that the company is now in the process of reviewing the new TMS solutions on offer in comparison to its current system, as well as looking at a number of other automation and efficiency projects.

“Technology is fundamentally important to our operations,” he notes. “We are continually looking at ways to introduce new technology, make processes more automated and efficient, and to remove manual processing so that we are able to handle our increasing volumes more effectively so that our staff can focus on value adding activities.”

As you enter into a global crisis, you ask yourself fundamental questions about risks you are facing, especially with financial institutions where it profoundly changed people’s views on credit risks.

That Thirion and his team have the time to focus on such activities is of fundamental importance, especially in light of the treasurer’s continually evolving role within the business. Like many of his peers, Thirion sees the treasurer’s future role as being of a less operational nature and more around helping the Board to take well informed, timely decisions. “Treasurers are coming into their own as strategic players in the corporate landscape and as advisors to the CEO, CFO and Board,” he says.

Practise what you preach

An example of one of the more strategic projects Thirion and his team will be working on in the coming months and years concerns the group’s funding diversification efforts. This endeavour began in 2007, just slightly prior to the global banking crisis, with the company preparing itself to access alternative sources of funding including the export credit and Islamic financing markets and, later on, the Japanese leasing market.

There is still much work to be done, however. Right now the company is focused on preparing for entry into the capital markets alongside a focus to continue to diversify and broaden access to other global funding sources.

Ultimately, the goal is to get the company rated and able to issue debt publicly. But this will not be realised overnight, he acknowledges. It must be precision engineered. After all, the strategy at Etihad Airways is still in the process of being bedded down and for such a young company to get the rating it feels it deserves, the strategy will need to illustrate proven delivery. Apart from preparing for capital markets we are also evolving our treasury capability, structure and infrastructure to better support our growing group, with a strategy to be able to deliver strategic advisory and support services, outsourcing, and systems hosting solutions from our centralised Group Treasury based in Abu Dhabi.