Etihad Airways chief dismisses European airlines’ talk of subsidies

External investment is not a threat. It is an opportunity to strengthen airlines, and to support employment and economic growth, Etihad's James Hogan said.

Etihad Airways president and chief executive James Hogan said that Gulf carriers are not the cause of Europe’s aviation challenges. Delores Johnson / The National
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Etihad Airways is part of the solution to European airlines’ woes and not part of the problem, Etihad’s chief executive has asserted.

James Hogan, speaking at an EU conference on air transport competitiveness, said: “External investment is not a threat. It is an opportunity to strengthen airlines, and to support employment and economic growth.”

Mr Hogan noted that the European industry had serious problems that predate the birth of Etihad in 2003.

“Gulf carriers are not the cause of Europe’s aviation challenges,” he said.

Etihad has come under great scrutiny from European rivals over its equity investments in the continent’s carriers. Some European rivals allege that Etihad receives state subsidies, while the EU is inspecting the degree of control that Etihad has over European affiliates such as airberlin.

Will Horton, an analyst at Capa Centre for Aviation said: “Etihad is smartly reversing the argument to say Europe needs Etihad [in order] to remain diverse and competitive, shifting from a defensive to offensive position.”

Germany’s Lufthansa has fiercely resisted the inroads made by Etihad and other state-owned Gulf carriers. In February, it called on the EU regulator to block any investment by Etihad in financially ailing Alitalia, saying that the deal would spawn unfair competition.

Three years ago, Lufthansa terminated a codesharing agreement with Qatar Airways, saying it did not make "economic sense".

In his speech in Vienna this week, Mr Hogan countered that the European airline industry was built on “decades of government ownership and support”. He added that even after privatisation some European airlines still receive government bailouts, debt waivers and other forms of subsidies. He cited German government aid of €800 million (Dh4 billion) to Lufthansa to help bridge the gap in its pension fund.

Lufthansa declined to comment yesterday.

Mr Hogan emphasised that Etihad does not receive state funds.

“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,” he said.

Etihad is about to take a 49 per cent stake in Alitalia. The investment could be Etihad's most significant to date. Etihad currently has equity stakes in four European carriers: airberlin, Aer Lingus, Air Serbia and Darwin Airlines.

Were it not for Etihad, Mr Hogan said, some of those airlines would still be bleeding money.

Alitalia would miss out on a “rescue investor”, he added, causing thousands of job losses, air route closures, flight reductions and lost tax revenue for the European governments.

“Consolidation of airlines is critical to sustainable air services,” Mr Hogan said.

But that consolidation can come at the sacrifice of jobs.

In Italy, pilots and flight attendants belonging to three labour unions have called for a strike on July 20 to protest against their exclusion from the Etihad-Alitalia talks.

Italy’s transport ministry is in negotiations with Etihad and trade confederations to try to reduce the proposed job cuts to 1,500 from 2,250. Alitalia employs 14,000 people.

Job losses followed after Etihad bought stakes in Air Serbia and Air Seychelles. In August, when Etihad bought a 49 per cent stake in Air Serbia, it shed 333 jobs. In 2012, Etihad acquired a 40 per cent stake in Air Seychelles, and shrank the workforce by about 250 jobs, to around 550.

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