Etihad Airways registered its first loss since 2010 last year, due largely to “one-off impairment charges” including financial exposure to equity partners such as Alitalia and Air Berlin, the Abu Dhabi-based airline reported Thursday. Recording a fiscal year 2016 loss of $1.87 billion, Etihad took $1.06 billion in aircraft charges related to lower market values and early retirements of certain models. Charges related to losses associated with now bankrupt Alitalia and foundering Air Berlin totaled $808 million.

The airline also pointed to disadvantageous legacy fuel hedging contracts and increased pressure on cargo revenues and yields, even though it saw a slight improvement in freight carried during the 12-month period.

“A culmination of factors contributed to the disappointing results for 2016,” said Etihad Aviation Group Mohamed Mubarak Fadhel Al Mazrouei. “The board and executive team have been working since last year to address the issues and challenges through a comprehensive strategic review aimed at driving improved performance across the group, which includes a full review of our airline equity partnership strategy.”

Etihad Airways CEO Peter Baumgartner cited macroeconomic influences to which the airline must adjust to reverse its spiraling losses. “We are in an industry characterized by overcapacity, declining market sizes on key routes, and changing customer behavior as a weak global economy affects spending appetite,” he said. “Our answer to these challenges is innovation and reinvention, and this gives Etihad Airways a competitive edge as we seek to leverage opportunities offered to us by a changing environment.”

Etihad’s review of its equity partnership strategy recently resulted in a total divestment in its 33.3-percent stake in Swiss regional carrier Darwin Airline. Announced on July 20, the move came just weeks after former CEO James Hogan left the company as part of a “controlled restructuring” that will also see a modest reduction in headcount during the second half of the year. 

In early May Alitalia entered bankruptcy protection after Etihad refused to infuse further capital without steep concessions from employees. In a statement, Etihad expressed disappointment that the €1.4 billion investment it committed to Alitalia in 2014 proved fruitless. “We have done all we could to support Alitalia, as a minority shareholder, but it is clear this business requires fundamental and far-reaching restructuring to survive and grow in future,” Hogan said at the time. “Without the support of all stakeholders for that restructuring, we are not prepared to continue to invest.”

Although Etihad said its involvement in Alitalia delivered “significant improvements” to the Italian airline’s performance, increased competition from low-fare carriers and the effects of terrorism on tourism demand resulted in a need for further restructuring efforts.

Notwithstanding its pledge not to inject further funds into Alitalia, Eithad said it considers Italy an important market and that it would continue to work with the Italian flag carrier as a “commercial partner.”