Etihad Airways on Monday became the first of threePersian Gulf airlines accused of receiving billions in government subsidies to release a formal response with U.S. officials, calling the claims “inflammatory and inaccurate.”
Etihad, Emirates and Qatar Airways are accused of receiving $42 billion in subsidies during the last decade, according to detailed allegations filed with the U.S. government in January by the three largest airlines: American, Delta and United.
But Etihad denied getting $17 billion in subsidies, as alleged. Etihad also charged that the three U.S. airlines received $70 billion in comparable benefits from bankruptcy filings since 2000 that wiped out debt and reduced pension obligations.
U.S. executives have dismissed comparing bankruptcy benefits to subsidies because creditors and workers suffered those costs, rather than the government.
Etihad CEO James Hogan accused the U.S. rivals of “hypocrisy” in a letter accompanying his airline’s 60-page filing.
“Notwithstanding the above, Delta, United and American have made very inflammatory and inaccurate claims, and our attached response addresses each of these claims in detail,” Hogan said.
The U.S. departments of State, Transportation and Commerce are studying submissions from all sides in the dispute before deciding whether to ask for formal consultations with the governments of United Arab Emirates and Qatar about the subsidy allegations.
No timetable is set for a decision. But U.S. airline executives have asked for an immediate end to new U.S. flights from the Gulf carriers, even as those airlines announce more flights.
“We’d like the subsidized flying to discontinue — and certainly growth in the subsidized flying,” American CEO Doug Parker told USA TODAY’s editorial board May 15.
Etihad acknowledged getting $9.1 billion in equity funding and $5.2 billion in shareholder loans from its government since 2003. But the airline argued that government investment — as France recently increased its investment in Air France — doesn’t constitute subsidies.
Etihad also disputed favoritism in ground services.
Abu Dhabi doesn’t charge connecting passengers a facility fee for airport improvements, as U.S. airports do. But Etihad, which said the policy is the same as in the United Kingdom, also said it applies the same to all airlines.
“This allegation is so nonsensical is scarcely merits a response,” the filing said.
Etihad also disputed advantages in ground-handling fees for planes. For example, aBoeing 777-300ER costs $2,286 to prepare for another flight at Abu Dhabi Airport, compared to $2,240 in Kuala Lumpur and $2,443 in Bahrain, according to Etihad.
As for allegations of tax breaks, UAE is a tax-free country. But Etihad noted that some U.S. states don’t have income or corporate taxes.
“Their assertions are without merit,” Etihad’s filing states.
Even if subsidies were confirmed, Etihad argued that the airline doesn’t charge artificially low fares that could justify governmental consultations under so-called Open Skies agreements that allow unfettered flights between countries.
Hogan in his letter said the agreements don’t prohibit subsidies, just “unreasonably low fares that are a result of direct or indirect governmental subsidy or benefit.”