Etihad hits back on subsidies claims, says will repay gov't loans

Abu Dhabi airline's president and CEO James Hogan details financing structure for the first time
By Anil Bhoyrul
Sat 28 Jun 2014 03:50 PM

Etihad Airways’  president and CEO James Hogan has for the first time detailed the company’s financing structure, following growing claims that it receives subsidies from the Abu Dhabi government.

In an interview to be published in Arabian Business on Sunday, Hogan explains how Etihad has been financed, and also responds to allegations regarding the funding of its sponsorships and its Public Service Obligation (PSO) routes and Emiratisation programmes. 

“Our shareholder is the Abu Dhabi government, and as a shareholder they have invested in their airline via equity and start-up loans. Let’s be clear. These are loans/seed capital. We have used that money to place fleet orders and build the infrastructure of the airline. And there is a repayment schedule for the loans. We have also raised $9bn from 68 financial institutions, all without sovereign guarantees,” he said.

Asked whether Etihad had received government support for PSO routes, Hogan said: “We have 103 routes, and out of those, a total of just two, yes only two, are PSO routes. We had six to begin with but four of those routes have now moved into profitability. Within the next 24 months I would expect the other two to move out of PSO. Yes, we get a contribution towards the operation of those two routes, as do all major carriers that operate PSO routes. But again, let’s be clear here: this is for two routes out of 103.”

He also said that some of the company’s Emiratisation Programmes “are government funded schemes”, but added “as soon as these people come off these schemes, they come onto our payroll and they are 100 percent employed and paid by us.”

The Etihad boss also confirmed that its sponsorships are paid directly by the airline “coming out of the advertising and promotional fund.”

Etihad has faced a series of allegations,sparked in part by the leaking of confidential four year old documents. But Hogan said the documents “were misappropriated” and “never presented”.

He explained:  “In any business you continue to model different scenarios. You draft documents that are often never presented.”

Etihad has come under attack from European carriers such as Lufthansa, who claim the airline has an unfair advantage through state funding.  There have been calls for regulators to investigate Etihad’s strategy of taking minority stakes in a number of foreign carriers including Air Berlin.

Hogan explained in the interview: “We’ve always been very clear that in business you have to respect your competitors. We’re disappointed that these myths keep on being circulated. Our job is to deal with the appropriate stakeholders at government level in countries where we have investments, and continue to communicate our story and meet the regulations in those respective markets. We wouldn’t have been able to invest in these markets if we weren’t able to demonstrate that we are an investor first.  Within that investment we first see if the network fits. Where they need support we provide support. What’s wrong with that? In business, what’s wrong with that?”

* The full interview with James Hogan will be published on Sunday in Arabian Business magazine.

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