Did Mr Bean compile the US airlines report into subsidies?

The much-vaunted ‘Restoring Open Skies’ revealed little that wasn’t already in the public domain.
By Anil Bhoyrul
Thu 12 Mar 2015 01:46 PM

It starts off as a blockbuster. “Evidence gathered during a global, two-year investigation – including newly obtained financial statements and other records – shows that those three state-owned carriers have received $42bn in quantifiable subsidies and other unfair benefits from their respective governments in the last decade alone,” says last week’s “Restoring Open Skies” report.

Put together by American Airlines, Delta and United, this mega long publication was meant to be proof beyond any doubt that Etihad, Emirates and Qatar Airways are all government funded. This is all grossly unfair, and they should be prevented from expanding in the lucrative US markets once and for all. Let’s be fair, let’s protect US jobs.

Really? I think the most telling part of the report is in the “Endnotes” – the sources of all this incredible information. Point 4 of Slide 14 refers to Qatar Airways boss Akbar Al Baker’s dramatic quote in which he says “We have already shown a desire to open up new destinations in the US.”

Proof - surely - of the airline’s hidden agenda. This, the report tells us, came from an Arabian Business story published on June 17 2013, headlined “Qatar Airways signs  $2.8bn deal to buy Boeing 777s.”

Now I would love to claim this story and quote was the product of our own two-year investigation, but in fact it was from a press release sent out by, erm, Qatar Airways.

In fact, the more you read the “Endnotes”, you soon get the full picture: this report is not an investigation, but instead a cut-and-paste job of epic proportions. It stinks of sour grapes trapped inside a dodgy dossier. Half the information has come from financial reports actually produced by Emirates and Etihad themselves.

Even more absurd are some of the claims as to how this $42bn figure is reached. Etihad Airways, we are informed, received $18bn of government subsidies. A huge chunk of this - $6.3bn – the report claims is from “equity infusions” and $4.63bn from “interest-free loans with no repayment obligation.”

It’s a shame the US airlines didn’t read Etihad boss James Hogan’s interview in Arabian Business last year, when he was asked exactly this question. He replied: “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 are not subsidised. This is not a subsidy, these are shareholder loans, and the shareholder loans will be paid back in time. It has a fixed repayment schedule.”

As for Emirates, the report is even vaguer. No claims of government loans, but for example “If Emirates’ home hub were Chicago O’Hare its costs would be $1.4bn more per year.”

Well, guys, this is a UAE airline, that’s why the hub is in Dubai and not Chicago.

The report also states that Emirates has benefited by nearly $2bn because of a “union ban resulting in below market labour costs.” How can this possibly be classified as a subsidy?

The fact that US airline workers are always on strike is not because they have unions, it is because they are fed up with poor working conditions. Emirates and Etihad staff can’t go on strike. But they can quit – and they choose not to.

Both Emirates and Etihad have provided a far better service than US competitors, and far greater choice. They should be applauded for that, and looking at the capacity on their US routes, the consumer is doing exactly that.

This the issue the US carriers need to face up to: how to better their product. Not how to derail the competition. If they were smart, they would hire both James Hogan and Sir Tim Clark for advice on how to build and run a great airline. Because the US airline bosses clearly have no idea, and are starting to look desperate.

As for the much-vaunted report published last week, and the results of this two-year investigation, we were expecting a supergrass of Edward Snowden proportions. What we got was Mr Bean.

For all the latest transport news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Last Updated: Thu 26 Jan 2017 01:27 PM GST

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.