US should not put a lid on growth of its aviation sector

ABU DHABI: Etihad Airways urge US authorities to remain committed to the open skies policy which serves as a key to the growth and development of its aviation by offering fair competition to other carriers.
Etihad Airways, the national airline of the United Arab Emirates, has urged the US Government to ‘keep the skies open’, in a comprehensive formal response to the joint campaign by Delta Air Lines, United Airlines and American Airlines to block competition and roll back the benefits of Open Skies.

The Etihad Airways response, which has now been submitted to the US Department of State, the US Department of Transportation and the US Department of Commerce, emphasises the many benefits delivered by Open Skies to consumers, to American workers, to US carriers and to US trade and tourism.

It categorically refutes claims made by the Big Three carriers about Etihad Airways’ finances, giving a clear and compelling explanation that the equity funding and shareholder loans provided by the Government of Abu Dhabi, by way of investing in a successful business model, fully comply with the US-UAE Air Services Agreement and all other applicable rules.

The submission also shows that the big three carriers have gained more than $70 billion in benefits from US Government authorities, and through legal processes such as Chapter 11 bankruptcy reorganization, in the past 15 years.

“Etihad Airways did not seek this fight; we focus on doing business as we have been repaying our investors since 2003, including $800 million in 2014.

The airline has established strong relationships with more than 80 global financing partners and aircraft lessors, 26 of which are based or headquartered in the US.

Etihad Airways is highly focused on its commercial mandate. Although it is only 11 years old, the airline has posted consecutive net profits since 2011. Etihad Airways complies with International Financial Reporting Standards (IFRS) and is audited by KPMG.

“Our story is one of an airline that has chosen to challenge the global status quo, bringing new competition to markets that have for too long been dominated by the major legacy airlines,” James Hogan said.

“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 per cent of international departures, we have instead been attacked.”

Etihad Airways’ submission includes the example of routes to the Indian sub-continent to explain the inaccuracies of the Big Three’s arguments. The submission states:

“Their only specific claim is that from 2008 to 2014, they have allegedly collectively lost five percentage points of their market share to the Indian subcontinent. However, what they neglected to mention is that during the same period their passenger numbers actually grew by 18 per cent. So while their collective market share actually went down by a relatively insignificant 4.4 percentage points (not 5 percentage points), their actual passenger volumes grew by over 18 per cent, or over 250,000 passengers, including both economy and premium classes. This passenger growth clearly demonstrates the power and effects of Open Skies and liberalized traffic rights.

“The Big Three carriers affirmatively and voluntarily choose not to directly serve Etihad’s key Middle East and Indian Subcontinent markets in a meaningful way. Instead they are routing US passengers through congested European hubs and on to their European alliance partners to serve certain destinations. Indeed, the Big Three carriers’ campaign is little more than a regulatory attempt to further cement their oligopoly, particularly on transatlantic markets.”

“These airlines criticize us for being Government-owned – but government stakes in airlines are completely normal around the world. The majority of airlines in the global alliances, which the Big Three dominate, are owned or controlled by governments or government-owned entities. Just this month, the French Government increased its shareholding in Air France,” Hogan said, adding that facts, not myths, should be the rule of the game the debate.

“The big three criticize us for receiving Government investment. We have never made any secret of the fact that we have received equity funding and shareholder loans, which again is not unusual for airlines, or indeed for many businesses. These investments received from our shareholder are not like the more than $70 billion the Big Three have received from US Government sources or court-approved processes since 2000 alone, a fact shown in a study by The Risk Advisory Group.

“The Big Three say our services threaten competition. Yet a report by independent analysts the Edgeworth Group shows that our services actually stimulate traffic flows, which have increased overall passenger numbers on those routes for airlines including the Big Three and their alliance partners.

“The Big Three say we threaten American jobs. Yet their campaign seeks to limit the operations of Etihad Airways, which according to Oxford Economics will support 23,400 American jobs this year, and almost double that number by 2020.

“And finally, the Big Three have spent millions of dollars trying to influence politicians on the supposed threats from the Gulf carriers, yet their report mentions consumer choice only once – even then in a cursory manner.”

In his covering letter to Etihad Airways’ submission, Hogan said that the US carriers had been able to benefit from numerous Chapter 11 reorganization processes, which gave them a major advantage over their international competitors.

“Yes, we understand that bankruptcy is a court process, but unlike these US carriers, Etihad does not have an avenue by which we can periodically clean up our balance sheet by disclaiming debts and other legal obligations. We have to carry these obligations and debts on our books,” he said.

Hogan’s letter also said that the United Arab Emirates had embraced the US concept of Open Skies.

“One country that shared the vision of the United States is our home, the United Arab Emirates, which also embraced the idea of open and less regulated traffic flows despite being a small and, at the time, relatively unknown country working toward financial stability and success. This is why we find it so ironic that in 2015 Etihad Airways finds both itself and its home country under attack. We have helped fully realize the best in international aviation policy: safe travel provided by the highest quality airlines at fair prices that allow millions of passengers to travel conveniently and easily to and from the United States to markets in the Middle East, the ISC and beyond, enjoying the many benefits the aviation industry offers.”

In addition to a detailed rebuttal of the Big Three US carriers’ report, Etihad Airways’ submission to the US Government also includes three reports commissioned from independent and respected global expert consultancies.

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