For years the upstart Abu Dhabi based airline, Etihad Airways, has had its reputation tarnished by the naysayers, most of them coming from the U.S. While the Airline Pilots Association recognizes the company as being a pretty bang-up luxury long hauler, the DC-based lobbying group has cited state subsidies as the reason for its success.
So on May 14, Etihad Airways had just about all it could take on this matter and went after American airline companies. It joined the chorus of Persian Gulf (or Arabian Gulf as they like to call it there) rivals Emirates Airlines and Qatar Airways in gunning down the perception that they are the only airlines on God's green earth that ever received a penny from its government.
Research commissioned by Etihad, based in the United Arab Emirates capital city of Abu Dhabi, sought to show the market how
U.K. based Risk Advisory Group did the study. It showed that the airlines received benefits valued at $71.48 billion, more than $70 billion of which has been since 2000, enabling America's three largest carriers to go from the edge of insolvency to profitable enterprises. In 2014, American airlines generated collective net profits of $8.97 billion, equivalent to 45% of the total $19.9 billion profits achieved in 2014 by the airline industry worldwide. The trend has continued into 2015, with all three major U.S. airlines announcing strong net profits for the first quarter.
The biggest government handouts were granted to Delta, United and American through pension fund bailouts totalling some $30 billion. Total support was closer to $70 billion.
Etihad Airways denies claims by the pilot unions and some executives at the major carriers that it gets subsidies from the guys residing in the big white castle near Emirates Palace in Abu Dhabi. The company does receive loans from the Abu Dhabi government, which is the sole owner of the company.
Etihad's General Counsel and Company Secretary Jim Callaghan said in a statement on Thursday that, “We do not question the legitimacy of benefits provided to U.S. carriers by the U.S. government and the bankruptcy courts. We simply wish to highlight the fact that U.S. carriers have been benefiting and continue to benefit from a highly favorable 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 U.S. carriers, have created a highly distorted market in which carriers such as Etihad Airways have to compete. There is no evidence whatsoever of any harm caused by Etihad Airways to any of the three big US airlines,” Callaghan said.
The pilot association sees Etihad as potentially becoming a threat to U.S. passenger travel to Europe and Latin America. For now, the main Gulf carriers of Etihad, Emirates and Qatar all make stops in the U.A.E. and Qatar. No one one from Dallas, where Etihad recently launched service, is going to fly to Sao Paulo on Etihad. To do that, they'd have to fly to Abu Dhabi, then all the way to Sao Paulo. While Etihad planes and on board service are great,the shortest distance from point A to point B is still a straight line.
Etihad and the other carriers do compete for European and Asian travel, however. Depending on the departing airport, it is easier to fly to India via Etihad because Americans can clear customs in Abu Dhabi upon their return home, rather than having to do that back in New York, or another port of entry. The fear is that one day these award winning airlines will provide direct flights to key U.S. destinations like Europe. Etihad recently took over Alitalia, so by default it will be getting Boston to Italy bound traffic, for example, without the stop-over in Abu Dhabi. This would be on a less glamorous Alitalia plane, however. Alitalia isn't complaining because Etihad was its white knight.
The Pilots Association (ALPA) has been advocating against Etihad in particular because of its beneficial pre-clearance facility in Abu Dhabi. It tries as hard as it can to paint Etihad with a black brush. Some of their complaints are merely nit-picky. It notes that much of Etihad’s state-of-the-art fleet is made up of
ALPA recently highlighted what it calls the "growing threat" of Etihad and other state sponsored firms in a report titled “Leveling the Playing Field.”
