Etihad Files Response to “Open Skies” Debate


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The row between the big 3 airlines in the US (American, Delta & United) and the Big 3 Middle East Carriers (Etihad, Emirates & Qatar) has been dragging on for months. The US carriers (US3) want the American government to take action against the Middle East carriers (ME3) for what they believe are breaches of the “Open Skies” agreement.

Put simply the US3 claim that the ME3 are government subsidised entities and therefore have an unfair advantage. An advantage that they have used to the detriment of the US airlines.

I made my views on this argument pretty clear in this post here so I won’t go into just how ridiculous the US airlines are being…but suffice it to say that my point of view hasn’t changed.

Up until yesterday, I believe the US government had only received formal submissions on the Open Skies debate from the US airlines but, yesterday, Etihad submitted it’s reply: (you can download the full press release here).

Middle East Airlines

The headline from the press release announcing the formal submission reads:

KEEP THE SKIES OPEN, SAYS ETIHAD AIRWAYS CHIEF

No surprise there!

The release goes on to say:

Etihad Airway’s submission to the US government:

  • Highlights the many benefits that the US Open Skies policy and competition deliver to consumers, to American workers, and to US trade and tourism
  • Categorically refutes the claims made by the Big Three US carriers
  • Proves that equity and loans from Etihad’s shareholder are not subsidies under any applicable rules
  • Shows that Big Three have not demonstrated any harm from Etihad, whereas Etihad has shown how they have benefited from its operations

Etihad has also used the formal response to hit back at the US3 by claiming:

“The Big Three [US] carriers have gained more than $70 billion in benefits from US Government authorities, and through legal processes such as Chapter 11 bankruptcy reorganization, over the last 15 years.”

The press release goes on to say what specific allegations Etihad has refuted in their formal response:

“Etihad Airways has submitted that the Big Three carriers’ claims, allegations, and requests for relief are not supported by fact, logic, law, or treaty, and that:

(1) Etihad’s conduct, and that of the UAE Government, is fully consistent with the US–UAE Air Services Agreement, applicable United States law and the governments’ respective treaty obligations;

(2) Government ownership is not an issue under the US-UAE Air Services Agreement;

(3) Shareholder equity and loans are not subsidies;

(4) While Etihad competes vigorously for all passengers, it does not charge artificially low fares;

(5) Etihad causes no actionable harm to the Big Three carriers, and actually provides them with significant commercial benefits in terms of connecting passengers onto their networks (an estimated 300,000 in 2015);

(6 ) Etihad has been successful in markets in which the Big Three carriers affirmatively choose not to compete, and is in fact providing the Big Three carriers with an avenue (through codeshare and interline agreements) to offer their passengers routes that they choose not to fly themselves; and

(7) Etihad treats its worldwide employees, who come from over 140 countries, including the United States, fairly and with respect.”

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Specifically, when refuting the allegations that the airline is subsidised, Etihad says that the government of the UAE has invested $14.3bn in the airline of which $9.1bn “was provided in equity funding” and $5.2bn was “provided in shareholder loanson the understanding that the airline would operate as a commercial enterprise, deliver a long-term return on investment, repay the shareholder loans and reach sustainable profitability.

The press release quotes further extracts from the formal response and Etihad isn’t taking things lying down.

On the US3 not serving the Middle East:

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.

On the US3’s claims that they’ve lost market share to the Indian Sub-Continent:

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.”

On the claims that the ME3’s existence is threatening US jobs:

“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.”

Etihad even make sure to take a swipe at the US3’s tactics:

“[T]he 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.”

The press release goes on to detail the various expert reports that the airline has commissioned to look into the allegations made against them by the US3 and, if you want to know more about those, download the full press release here.

The document is surprisingly entertaining reading for something that’s discussing a formal submission to the US government. The general tone is one of “you’re kidding us, right?” towards the US3 and then slowly taking apart their objections to the way the ME3 do business.

I haven’t seen the documents showing how the funding and finances of the ME3 are structured – I’m going to take and educated guess that no other travel blogger has either – so I can’t comment with any authority on whether or not the ME3 are being subsidised.

What I do know is that all the other claims made by the US3 are looking weaker by the day   and their reputation is being dragged down every time this Open Skies debate makes it back into the news. 

 

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