Etihad in strongest bid yet to quash ‘Big Three’ subsidies claims

The airline has submitted a 60-page document to the Obama administration detailing why it believes allegations by American, Delta and United airlines are false
Etihad in strongest bid yet to quash ‘Big Three’ subsidies claims
By Sarah Townsend
Tue 02 Jun 2015 11:50 AM

Etihad Airways has filed a detailed report to the US government refuting claims made by the ‘Big Three’ US carriers that the Gulf airline has received billions of dollars of subsidies and violated Open Skies policies.

In a 60-page submission to the US Department of State, Etihad gives its strongest rebuttal yet of the allegations made by American, Delta and United airlines.

It claims it is required to repay money to the Abu Dhabi government, and that, in any case, US Open Skies policies intended to prevent unfair competition do not prohibit airlines from receiving shareholder loans.

Since 2003, the government has invested $14.3 billion in Etihad Airways. Of this, $9.1 billion was provided in equity funding and a further $5.2 billion was provided in shareholder loans, the submission states.

These financial commitments were made on the basis that the airline would operate commercially, deliver a long term return on investment, repay shareholder loans and achieve ongoing profitability, it says, adding that approximately $5 billion of the airline’s borrowings have been repaid since 2003, including $800 million in 2014.

The Big Three carriers’ allegations therefore “are not supported by fact, logic, law or treaty – Etihad Airways receives no government subsidies or sovereign guarantees and, contrary to the claims of some competitors, it does not receive free or discounted fuel or airport services in Abu Dhabi,” the airline said in a statement issued alongside the report.

Etihad also seeks to dissuade President Obama from revisiting longstanding aviation agreements between the US, the UAE and Qatar. The US carriers claim Gulf airlines’ rapid growth has driven down prices and forced some competitors out of the market, which, they say, constitutes a breach in Open Skies policies and threatens US jobs.

But Etihad “categorically” refutes such claims in its submission. It says: “While Etihad competes vigorously for all passengers, it does not charge artificially low fares.”

It also cites a study it commissioned from Oxford Economics, published last month, which found Etihad’s operations would support 23,400 American jobs this year and almost double that by 2020.

“Etihad causes no actionable harm to the Big Three carriers, and actually provides them with significant commercial benefits in terms of connecting passengers onto their networks.”

Other complaints by these airlines "take a very condescending view of non-U.S. law," Etihad added.

The submission also makes reference to a report by the Risk Advisory Group, published on May 15, which documents $70 billion of government “benefits” allegedly received by Delta, United and American over the years.

Chief executive James Hogan said: “Our story is that of an airline that has chosen to challenge the status quo, bringing new competition to markets that have for too long been dominated by the major legacy airlines.

“In many markets, airlines react to our new competition by improving their own offer to consumers. It is ironic that in the home of free competition, a market in which we account for only a tiny fraction of one per cent of international departures we have instead been attacked.”

On May 28 the Partnership for Open & Fair Skies issued a statement calling on the Gulf carriers to “open their books” in response to Etihad’s 2014 financial summary claiming it earned $73 million in net profits for the year.

“Etihad continues to claim that it is profitable, but it refuses to open its books because it knows the subsidies it receives from the treasury of the United Arab Emirates are in direct violation of Open Skies policies,” said Jill Zuckman, chief spokesperson for the Partnership for Open & Fair Skies.

“The Partnership for Open & Fair Skies again calls on Etihad and the other state-owned Gulf carriers to release their financial statements,”.

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