Jim Callaghan, general counsel and executive vice president of legal at Etihad Airways, tells Ryan Harrison that the carrier is flying high despite the downturn.

In 2000, he was hired as the legal backbone of Ryanair and helped create Europe’s largest low-cost airline. Nine years on, and Jim Callaghan is in Abu Dhabi backing Etihad Airway’s dramatic growth story.

Brought onboard in May as general counsel and executive vice president at Etihad, Callaghan was charged with providing the legal flexibility for CEO James Hogan’s aggressive expansion plans. Most recently these include a US$750m investment package to spend on its workforce, fleet, in-flight service and planning and resourcing systems.

It’s expected that the carrier’s passengers will quadruple to 25 million passengers by 2020, taking in 100 destinations and increasing its staff from 7,000 to 27,000. Hogan forecasts revenues of US$3bn in 2009 despite the worst economic downturn in memory, but says Etihad won’t reach profit until 2011, a year later than initially projected.

Flying high
Callaghan says: “Etihad is a very different product to Ryanair in terms of the service offering, but it’s very similar in its commercial drive. When I joined Ryanair in 2000, we were carrying just six million passengers, which is what Etihad carried last year. Ryanair will carry about 67 million passengers this year, so a phenomenal growth story.”

Callaghan says he was first struck by Etihad’s boldness at the UK’s Farnborough Airshow in July 2008, which saw the UAE flag carrier place an order worth US$43bn, the largest in civil aviation history. “That’s really what attracted me, the challenge of starting again with a growth airline,” he says.

His first undertaking at Etihad has been to overhaul the system that handles new contracts, which can cover anything from advertising deals to special offers on tickets, to new agreements with travel agencies. Because the majority of these contracts are fairly repetitive in nature, installing a set of workable templates can speed up transactions, a vital tool for a young, nimble airline.

“The current systems can’t handle the growth we anticipate in the coming years. There are areas where you’re getting similar issues so you can have a contract that requires very few changes,” Callaghan explains. “It’s crucial to have a robust contract management process in place because an airline is an incredibly complex business with huge numbers of contracts going through the system,” he continues. “To react quickly, you must have a system that’s solid in terms of ensuring corporate governance, but that allows the business to get to the market fast.”

The move is part of a wider shake up in the way Etihad’s seven-strong in-house legal team deals with its growing global client base. Callaghan ditched the previous approach, which had lawyers assigned by region, and has instead allocated them practice areas, such as aircraft financing, litigation, commercial, corporate and property.

Specialisms are assigned according to lawyers’ previous roles and areas of expertise at Etihad. Clients in any jurisdiction, with any grievance, will now be clear on who their go-to-guy is, Callaghan says.

“The difficulty dealing with issues on a country-by-country basis is you could have various lawyers dealing with property issues in Australia, the UK or the US and sometimes for the user departments it’s hard to know who the property guy is in the legal department,” he believes. “So we’re focusing our attention on specialisation in those areas so that there’s a very clear understanding of who does what.”

Callaghan adds that it also gives lawyers a chance to familiarise themselves with the different jurisdictions so they don’t get bored. The system will be rolled out in early 2010.

To support his in-house team Callaghan outsources work to private practice lawyers with Abu Dhabi expertise and to law firms with local knowledge of Etihad’s foreign markets. “We obviously try to do as much in-house work as possible. But areas such as aircraft finance,  you would require some outside counsel to deal with the banks. For property, there would be local issues where you would bring in local counsel that would have relevant expertise,” he says.

He’s also formalising a panel arrangement on which prominent law firms can sit and receive regular work from Etihad. Letters have been sent to legal practices outlining the airline’s terms and billing requirements.

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