Etihad president denies airline receiving state subsidies

Europe’s governments and airlines should embrace external investment to help strengthen the aviation sector, said James Hogan, President and Chief Executive Officer of Abu Dhabi’s Etihad Airways.

Speaking in Vienna at a European Union conference on air transport competitiveness in Europe, Hogan said aviation was a global, not regional, industry, generating strong economic and social benefits. He said his airline wanted to engage with Europe for mutual gain.

“Consolidation of airlines is critical to sustainable air services,” Hogan said. “External investment is not a threat. It is an opportunity to strengthen airlines, and to support employment and economic growth.”

Etihad Airways has acquired minority stakes in three European airlines – airberlin (29.2 per cent), Aer Lingus (4.99 per cent) and Air Serbia (49 per cent), and is finalising the acquisition of a 33.3 per cent stake in the Swiss regional carrier Darwin Airline, which operates as Etihad Regional.

Etihad Airways has also announced its intention to acquire a 49 per cent stake in Italy’s Alitalia, subject to regulatory approval.

Hogan said Middle Eastern airlines were coming under increasing scrutiny in Europe, as opponents cited the expansion of Gulf carriers as a major competitive threat.

“All Gulf carriers are not the same,” said Hogan. “We are different sizes, have different hubs and follow different strategies. We are actually vigorous competitors with each other.”

He said Etihad Airways, in particular, had become a major focus of larger competitors who feared and opposed its investment strategy.

“Etihad Airways is wholly-owned by the Government of Abu Dhabi. We received start-up capital, like every airline does, but we receive no state subsidies, no free fuel and no reduced airport charges in the United Arab Emirates.”

Hogan said the European airline industry was built upon decades of government ownership and support, and that even after privatisation or part-privatisation, government bailouts, debt waivers and various forms of subsidies had continued.

He cited examples of direct state aid totalling €14.2 billion, including an €800 million payment by the German Government to Lufthansa to support a pension fund gap, state aid of €1.1 billion for Swiss following the collapse of its predecessor, Swissair, and the Austrian Government’s absorption of €500 million of debt accrued by Austrian Airlines. Both airlines are now subsidiaries of Lufthansa.

“Gulf carriers are not the cause of Europe’s aviation challenges,” Hogan said, adding that the industry was already facing serious problems decades before Etihad Airways was established in 2003.

He said the biggest problems facing the European industry were long-standing issues including congestion from under-investment in airports and airspace management, high operating costs at traditional hub airports, high labour costs and inconsistent and inequitable taxes levied on airlines and passengers.

The rapid and broad growth of low cost airlines has also impacted heavily on legacy airlines, causing a major shift of intra-Europe traffic to budget operators and losses by legacy carriers on short and medium-haul routes.  In 2013, the 10 member carriers of the European Low Fares Airline Association operated 915 aircraft and carried 216 million passengers, or 43 per cent of all scheduled intra-Europe air traffic.

Hogan said consolidation had created three major European airline blocs – the Lufthansa Group, which, in addition to its Swiss and Austrian subsidiaries, owns Germanwings, holds major stakes in Brussels Airlines and SunExpress and a minority share in the US carrier JetBlue; International Aviation Group (IAG), which owns British Airways, Iberia and Vueling; and Air France KLM, which has equity in Alitalia, Transavia, Martinair and foreign carriers including Kenya Airways and the Brazilian airline GOL.

“We understand and respect the fact that European airlines have their own business models, and we understand and work within the rules of Europe,” Hogan said. “We have a different business model to suit our different requirements.

“To grow, we need scale. We cannot match the size of long-established competitors, including other Gulf carriers, so we have developed a strategy of growth through partnership,” he said.

“Our strategy is pro-competitive. We work with all partners for mutual gain, and within competition and ownership rules. Collaborative growth delivers sustainable businesses, and more choice, convenience, consistency, reliability and stability for our customers.”

Hogan said the investments by Etihad Airways strengthened partner airlines, preserved and created jobs, and maintained air services, delivering benefits to consumers, local and national economies, as well as major suppliers such as Airbus Industrie.

Without Etihad Airways’ stakes, Hogan said there would be a loss of financial investment and synergy benefits for airberlin, Aer Lingus, Air Serbia and Darwin Airline, and loss of a ‘rescue investor’ for Alitalia, costing thousands of jobs and leading to air route closures,  flight reductions, higher fares and lost tax revenue for European governments. Some carriers could even fail, causing much greater social problems.

“There are strong economic and social benefits from stable and connected airlines,” Hogan said.

“Etihad Airways wants to engage with Europe.”

Etihad, England cricket board sign 3-year deal

Etihad Airways and the England and Wales Cricket Board (ECB) have signed a three-year partnership deal which will see the carrier become the first ever official airline partner of the England Cricket Teams.

The sponsorship agreement will see all England national teams across men’s, women’s, age-group and disability cricket, fly with Etihad Airways and experience its award-winning products and services.

As part of the partnership, the airline will benefit from a comprehensive range of commercial rights which will include access to England players for promotional appearances, advertising at six international cricket grounds in England and Wales, tickets and hospitality packages.

Encompassing England’s domestic international and overseas cricket tours from 2014-2016, the agreement will also include winter training camps in Abu Dhabi and a joint community-based cricket initiative.

Among the highlights of the sponsorship tenure will be the home series against India (2014), the Ashes series against Australia (2015), the ICC World Cup in Australia and New Zealand (2015), the ICC World Twenty20 and ICC Women’s World T20 in India (2016), and the tour of South Africa (2016).

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