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Fri 22 May 2015 01:15 AM

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Etihad says to file subsidies dispute response to US gov't by end-May

Abu Dhabi airline hits back in ongoing row with US carriers with new report debunking claims that it is harming competition

Etihad says to file subsidies dispute response to US gov't by end-May

Etihad Airways has confirmed that it will file its full response to the US Government by the end of May in the ongoing dispute with US carriers over alleged subsidies.

The three largest US airlines - United, Delta and American - accuse Emirates, Etihad and Qatar Airways of having received $42 billion of government subsidies, which, they allege, has helped the Gulf carriers to gain unfair market share over the past decade and represents a violation of Open Skies polices.

But in a new twist to the escalating row, a report undertaken by US-based consultancy Edgeworth Economics said pricing by Etihad Airways on routes on which it competes with the three major US carriers and their global alliance partners is competitive and is not harming the market.

The Edgeworth Report, commissioned by Etihad Airways, contradicts the claims by Delta, American and United that the Abu Dhabi-based carrier's fares are anti-competitive.

It also disproved their claims that Gulf carriers have put “excessive capacity” into the market, finding that the markets in which Etihad Airways operates have much higher average rates of economic growth than the global average, which in turn, drove a higher demand for air services.

The research added that services introduced by Etihad Airways and other Gulf carriers to the US have increased competition and consumer choice.

Commenting on the Edgeworth Economics findings, Etihad Airways’ chief strategy and planning officer, Kevin Knight, said: “The claims made by the three US carriers that Etihad Airways and other Gulf carriers are damaging their business and taking 'their' passengers, are not only false, but also arrogant.

"They do not ‘own’ these passengers, nor do they do have a right to them. At Etihad Airways, we believe we must earn the business of our guests by offering the best value and product for their money, along with the most convenient service.”

Knight said that in 2014 Etihad Airways fed 182,000 passengers onto US carriers, including American Airlines. Delta Air Lines and United Airlines, with the number forecast to grow by 65 percent to approximately 300,000 passengers in 2015.

“The US Open Skies policy has been hugely successful for American carriers and has also allowed airlines like Etihad Airways to connect passengers to the US who otherwise would not be able to travel.

"It has forced the Big Three carriers and their global alliance partners, which between them control over 50 percent of global passenger traffic, to be more competitive. It is therefore disturbing that these same carriers are now seeking to roll back Open Skies and the huge benefits it brings for competition and consumers.”

The Edgeworth Report said Etihad Airways’ growth was not “excessive” as claimed by the three US carriers and was the result of increasing demand for high quality air services in emerging markets.

The report highlighted the fact that US airlines and their European partners gained 223,000 new passengers on Indian Sub-Continent routes alone since 2009.

Edgeworth also analysed claims made in a recent economic report published by Compass Lexecon on behalf of the US carriers.

The report found that the Compass Lexecon Report was “fundamentally flawed” and “ignores key evidence” as it contains two unsupported assumptions - that Etihad Airways and other Gulf carriers have received subsidies, a point which has merely been asserted by the US carriers; and that the Big Three essentially “own” traffic on existing routes and Gulf carriers are only entitled to compete for traffic if they can prove they have “stimulated” this traffic.

It said the Compass Lexecon report also establishes no “causal link” between any alleged subsidies and any claimed harm to the US airlines.

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