Etihad slams ‘subsidised’ US Airlines

The battle wages between UAE and US carriers with Etihad Airways alleging America’s largest airlines received benefits worth US$71.48 billion.

The UAE airline commissioned research by consultancy firm, The Risk Advisory Group, to show USA’s three biggest carriers, Delta Air Lines, United Airlines and American Airlines received billions in government and court-sanctioned benefits.

According to the study, Etihad claims the US carriers accrued benefits valued at US$71.48 billion, more than US$70 billion of which was received after 2000 to enable the country’s three largest carriers “to transition from the verge of bankruptcy to today’s industry leaders, each achieving multi-billion dollar profits,” it stated.

In 2014, the three carriers generated collective net profits of US$8.97 billion, which quantifies to 45% of the total US$19.9 billion profits reaped by the entire global airline industry last year.

“The trend has continued into 2015, with all three major US airlines announcing strong net profits for the first quarter,” Etihad states.

Etihad said the firm identified the majority of benefits which accrued to Delta, United and American came from restructuring under Chapter 11 of the US Federal Bankruptcy Code, yielding them at least US$35.46 billion, and additional pension fund bailouts totalling US$29.4 billion from the US Government’s Pension Benefit Guaranty Corporation.

This is the latest in the war of open skies agreements between UAE airlines Etihad, Emirates and Qatar and the three US carriers who claimed they received unfair government subsidies in a highly competitive industry.

Etihad Airways, as well as the other airlines, consistently denied claims it received subsidies.

“We do not question the legitimacy of benefits provided to US carriers by the US government and the bankruptcy courts,” Etihad Airways general counsel and company secretary Jim Callaghan said.

“We simply wish to highlight the fact that US carriers have been benefitting and continue to benefit from a highly favourable legal regime, such as bankruptcy protection and pension guarantees, exemptions from certain taxes, and various other benefits. These benefits, which are generally only available to US carriers, have created a highly distorted market in which carriers such as Etihad Airways have to compete.”

Callaghan referred to a 2011 interview, published by America’s National Public Radio, in which a former Vice President of Continental Airlines, Pete Garcia, was quoted as saying: “Bankruptcy, for the airline industry in particular, is just a way to refinance the business. It is a financial move to keep you in business and give you time to renegotiate with your lenders.”

Callaghan said the current claims by United Airlines, Delta Air Lines and American Airlines that they were being harmed by Etihad Airways were baseless, and an attempt to obstruct higher-quality competition.

“There is no evidence whatsoever of any harm caused by Etihad Airways to any of the three big US airlines,” Callaghan said.

“The US Open Skies policy has delivered more choice and better service for millions of consumers, more airline access to and from America, and record profits for the biggest airlines in the US. It is time to refocus on the real issue here – that the Open Skies policy is delivering the benefits it was designed to deliver, and that everyone is a winner.”

The figures produced by The Risk Advisory Group were conservative, quantifiable and credible, and obtained from public records and statements, Callaghan said.

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