Last updated: 11:13 AM ET, Tue June 02 2015

Etihad Issues Formal Response to US Government

Airlines & Airports | Rich Thomaselli | June 02, 2015

Etihad Issues Formal Response to US Government

Etihad Airways has delivered a formal submission to the Obama Administration, highlighting the advantages of the Open Skies Agreement and refuting the claims of the big three U.S. carriers who claim the Persian Gulf airlines receive government subsidies.

In a letter supporting the airline’s submission to the U.S. Departments of State, Transportation and Commerce, James Hogan, Etihad Airways President and Chief Executive Officer, said: “Etihad Airways did not seek this fight; we focus on making money by providing world class, innovative, re-imagined and value-for-money product and services to our guests.” 

Etihad Airways has submitted that the Big Three carriers’ claims, allegations, and requests for relief are not supported by fact, logic, law, or treaty, and that:

(1) Etihad’s conduct, and that of the UAE Government, is fully consistent with the US–UAE Air Services Agreement, applicable United States law and the governments’ respective treaty obligations;

(2) Government ownership is not an issue under the US-UAE Air Services Agreement;

(3) Shareholder equity and loans are not subsidies;

(4)  While Etihad competes vigorously for all passengers, it does not charge artificially low fares;

(5) 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 (an estimated 300,000 in 2015);

(6 ) Etihad has been successful in markets in which the Big Three carriers affirmatively choose not to compete, and is in fact providing the Big Three carriers with an avenue (through codeshare and interline agreements) to offer their passengers routes that they choose not to fly themselves; and

(7) Etihad treats its worldwide employees, who come from over 140 countries, including the United States, fairly and with respect.

Hogan said: “For these reasons, we respectfully submit that the Big Three carriers’ campaign against Etihad Airways should end immediately and that there is no basis whatsoever for government-to-government consultations under the US–UAE Air Services Agreement.”

As for the subsidies alleged by American, Delta and United airlines, Hogan said the government of the UAE – for the sake of competition – provided capital and shareholder loans.

The letter noted that “since 2003, the Government has invested $14.3 billion in Etihad Airways; of this amount, $9.1 billion was provided in equity funding and a further $5.2 billion was provided in shareholder loans.

"These commitments were made on the basis that the airline would operate commercially, deliver a long-term return on investment, repay shareholder loans and achieve sustainable profitability.

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, its home and global hub.”

Hogan added: “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 percent of international departures, we have instead been attacked.”

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