Etihad Got $2.5 Billion Cash Injection from Abu Dhabi
August 24 2015 - 7:10PM
Dow Jones News
The Abu Dhabi government last year injected $2.5 billion into
Etihad Airways, new funding that critics say proves the Persian
Gulf carrier is unfairly subsidized by the state in violation of
air treaties with the U.S. government.
The previously-undisclosed cash injection is detailed in
state-owned Etihad's financial statements, which were made public
on Monday by the Partnership for Open & Fair Skies, a lobby
group led by the three biggest U.S. airlines.
The group, which includes several labor unions and U.S. carriers
American Airlines Group Inc., United Continental Holdings Inc. and
Delta Air Lines Inc., is pushing the U.S. government to limit the
rapid growth of Etihad and its regional peers, Dubai's Emirates
Airline and Doha-based Qatar Airways.
Etihad reported a net profit of $73 million last year on
revenues of $5.86 billion, according to the airline's financial
statements, which are audited by KPMG LLP. Earnings were boosted by
a one-off sale of a subsidiary to another part of the group for
$700 million.
"Etihad's own financials prove that it is not a commercially
viable enterprise and owes its continued existence to massive
government subsidies from the United Arab Emirates," said Jill
Zuckman, chief spokesperson for the Partnership for Open & Fair
Skies.
A spokesperson for Etihad said the airline had never hid
receiving equity capital and loans from the Abu Dhabi
government.
"That is completely normal for any business which has
significant long-term capital commitments, for example for aircraft
deposits," the spokesperson said. "These issues have all been
addressed in our submission to the U.S. government."
The group submitted Etihad's financial statements as part of its
latest legal submission to the U.S. government as part of its
effort to prove the Gulf carriers harm U.S. airlines'
operations.
Etihad's documents were filed by the airline to a corporate
registry in Hong Kong last month and were obtained and verified by
The Wall Street Journal.
The big three U.S. passenger carriers in January asked the U.S.
government to renegotiate air treaties with Qatar and the United
Arab Emirates, where Emirates and Etihad are based.
They allege the three state-owned Gulf airlines have received
more than $40 billion in government subsidies since 2004 that allow
the carriers to unfairly compete in the aviation market.
The U.S. Transportation, State and Commerce departments said
they would review the allegations and opened regulatory dockets
where any party could file information and lobby for either
side.
Emirates, Etihad and Qatar have dismissed the U.S. carriers'
claims, denied they are unfairly subsidized and filed rebuttals on
the U.S. dockets.
FedEx Corp.'s FedEx Express delivery unit, Atlas Air Worldwide
Holdings Inc., JetBlue Airways Corp. and Hawaiian Holdings Inc.'s
Hawaiian Airlines have also said they oppose the big three U.S.
carriers' submissions to the U.S. government.
The Abu Dhabi government's latest capital injection came as
Etihad invested hundreds of millions of dollars investing in other
carriers around the world, according to the airline's financial
statements.
It wasn't immediately clear how the latest government funds were
used, and Etihad declined to comment.
Etihad has minority equity stakes in eight airlines, and
supports the carriers through investment in their loyalty programs,
bonds and operations. It paid $543 million for a 49% stake in
Italy's Alitalia and bought perpetual bonds worth $399 million
issued by Germany's Air Berlin PLC. It also spent $150 million on a
50% interest in Jet Airways (India) Ltd.'s loyalty program.
The strategy has helped the airline, the smallest of the three
Persian Gulf carriers, to achieve scale globally in markets where
aviation rights are restricted or the carrier has faced fierce
competition, particularly from its regional peers seeking to funnel
traffic through their hubs.
The U.S. government has negotiated 117 "open skies" treaties
with countries since 1992, allowing airlines from both sides to
access any airport in both countries.
Write to Rory Jones at rory.jones@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
August 24, 2015 18:55 ET (22:55 GMT)
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