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Sun 26 Jan 2014 12:00 PM

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US gov’t blocks Etihad codeshare request

US carriers had lobbied intensely against deal with equity partner Air Serbia

US gov’t blocks Etihad codeshare request

Authorities in the US have rejected a request by Abu Dhabi’s Etihad Airways and equity partner Air Serbia to codeshare on services to the country following intense lobbying by US airlines.

Air Serbia formally petitioned the US Department of Transportation in September last year for the rights to serve the US through codesharing partners. Etihad acquired 49 percent of Air Serbia, then known as JAT Airways, shortly before, and the plan would have seen Air Serbia place its code on services to JFK, Chicago and Washington Dulles that went via Belgrade.

The US industry lobbying group Airlines For America (A4A), whose members include American Airlines, Delta Air Lines and United Continental, quickly opposed the request, claiming the routings were not viable for consumers and highlighted the absence of a bilateral deal with Serbia.

Flying from Belgrade to New York via the UAE capital adds an additional 4,000 km to the journey and A4A argued that Etihad and Air Serbia may undercut US competitors on ticket prices in order to attract passengers.

“It is highly unlikely that a rational consumer would seek out itineraries via Abu Dhabi unless fares were artificially low, i.e. unless JAT and Etihad plan to engage in capacity dumping at below market fares,” argued airline Delta.

The US Department of Transportation also expressed concerns over the ownership of Air Serbia. In the absence of a formal bilateral agreement between the US and Serbia, the department said it must use its own discretion to decide whether Air Serbia’s request was in the public interest. Etihad completed its acquisition of 49 percent of Air Serbia in January, which also includes a significant cash injection into the loss-making carrier.

Delta had argued that a five-year management contract awarded by Air Serbia to Etihad would give the Abu Dhabi airline de facto control over the former.

Based on publicly available records, the Department of Transport said “that notwithstanding Serbian retention of majority ownership in JAT and representation in its organisation structure, Etihad will likely nevertheless wield extensive control over JAT’s day-to-day operations”.

It added that when pressed on the matter, Air Serbia had “merely responded with generalities and reiterations of earlier assertions that do not adequately refute these allegations”.

Airlines in North America and Europe have frequently accused Gulf operators of being at an unfair advantage, as they are often owned by their respective government and benefit from fuel subsidies and other generous policies. In the case of the UAE, the illegality of trade unions also means that they can drive down labour costs.

Etihad, which competes with Dubai carrier Emirates Airline and Doha’s Qatar Airways, has steadily been building up equity stakes in carriers around the world. These include 29 percent of Air Berlin, 40 percent of Air Seychelles, 10.5 percent of Virgin Australia, 3 percent of Ireland’s Aer Lingus and 24 percent of India’s Jet Airways.

A spokesperson for Air Serbia said in a statement: "Air
Serbia... expressed its disappointment at a decision by the US Department
of Transportation to dismiss the airline’s application to serve the US market
through codeshare arrangements with Etihad Airways and other carriers.

"The
national carrier of Serbia believes the decision to block its proposed
codeshare runs counter to the global spirit of liberalising air transport, and
does not take into account the broader trade and diplomatic relationships
developed between the governments of both countries.

"The
airline notes that US carriers have long been permitted to operate services
direct to Serbia, and that two major US carriers currently codeshare on flights
into Belgrade, via another European gateway.

"The
principles of reciprocity would dictate that Air Serbia be given the same
opportunity. Serbia is a major strategic gateway to the emerging markets of
Eastern Europe and the Balkans. Air Serbia is now considering a response to the
Department of Transportation ruling."

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procan 5 years ago

Serbia /Etihad get turned down cold, interesting . What does this all mean going forward eh?