Gulf carriers received $ 42 billion in subsidies

Gulf airlines Qatar Airways, Etihad Airways and Emirates have received at least $ 42 billion in subsidies and other unfair government benefits since 2004, according to a two-year investigation commissioned by a lobbying organisation backed by several US airlines.

The so-called ‘Partnership for Open & Fair Skies’ (POFS) released a massive cache of Gulf carrier financial documents obtained during the global two-year investigation into the alleged multi-billion dollar subsidies provided by Qatar and the United Arab Emirates (UAE) to Qatar Airways, Etihad Airways and Emirates.

The organisation said: “Although this voluminous record offers clear evidence of those state-owned carriers’ violations of Open Skies policy, all three airlines have strongly resisted calls to provide a full accounting of their subsidisation.” It said in light of Qatar and Etihad’s ‘continued refusal to publicly release their financial statements and Emirates’ limited release of financial information’, the partnership also called on the Gulf airlines to open their books. 

“With the US government now investigating the Gulf carriers’ massive subsidies, Qatar Airways, Etihad Airways and Emirates must open their books and offer the same level of financial transparency that US airlines provide,” said Partnership for Open & Fair Skies Chief Spokesman Jill Zuckman.

POFS said that due to the Gulf carriers’ lack of financial transparency, American Airlines, Delta Air Lines and United Airlines undertook an extensive search around the world for information about those airlines’ “state subsidies and other unfair trade practices. During the course of this unprecedented investigation, the US airlines obtained hundreds of pages of financial statements, charter documents and other records from corporate registries in various countries where the Gulf carriers have local operations.”

POFS claimed the worldwide search spanned nearly 30 jurisdictions from Africa to Asia to Australia and yielded key sources of information about the Gulf carriers’ finances from Singapore, Australia, India, Belgium, Ireland, Malta and the United Kingdom. 

“Despite the US airlines’ exhaustive efforts, the Gulf carriers’ pervasive lack of transparency, as well as the interlocking relationships among the airlines, their suppliers, their hub airports and their government owners, has made it impossible to document the full extent of the subsidies,” POFS said. “It is clear, however, that the $ 42 billion that the US airlines were able to document understates the true numbers.”

It claimed the information in the financial records already in the possession of the US government “provided indisputable proof that Qatar and the UAE are funnelling massive amounts of money into their state-owned airlines in a calculated effort to undermine Open Skies policy and any semblance of fair competition,” said Zuckman. “We believe that the $ 42 billion in subsidies and other unfair state benefits that our investigation uncovered is just the tip of the iceberg.” 

The financial records released form the basis for the Partnership’s white paper, Restoring Open Skies: The Need to Address Subsidised Competition from State-Owned Airlines in Qatar and the UAE. POFS said, “The $ 42 billion in subsidies and other unfair government benefits documented in the report do not include subsidies received prior to 2004, massive purchases of goods and services from affiliated government-owned entities at not-at-arm’s-length prices, subsidised airport infrastructure and services, exemptions from corporate taxes and other taxes and duties, exemptions from competition laws, and more.” 

The newly released Gulf carrier financial records are available on the Partnership’s website. The Partnership for Open & Fair Skies is a coalition that includes American Airlines, Delta Air Lines and United Airlines, along with the Air Line Pilots Association, the Allied Pilots Association, the Association of Professional Flight Attendants, the Association of Flight Attendants-CWA, the Communications Workers of America, the Airline Division of the International Brotherhood of Teamsters, and the Transportation Workers Union of America.

The partnership presented a white paper, Restoring Open Skies: The Need to Address Subsidised Competition from State-Owned Airlines in Qatar and the UAE, to the U.S. government.  The Partnership called on the Obama Administration to open consultations under the Open Skies agreements with Qatar and the United Arab Emirates to address the flow of subsidised capacity to the US, and to seek a freeze on new passenger service during the consultations.

US airlines receive benefits worth $ 71 b: study

US airlines have received benefits valued at $ 71.48 billion, more than $ 70 billion of which has been since 2000, enabling the nation’s three largest carriers to transition from the verge of bankruptcy to today’s industry leaders, each achieving multi-billion dollar profits, according to a recent research.

The research commissioned by Etihad Airways, the national airline of the UAE, quantified a range of government and court-sanctioned benefits and concessions received by the three biggest US carriers, Delta Air Lines, United Airlines and American Airlines Group, and other airlines with which they have merged.

Last year, the three big US carriers generated collective net profits of $ 8.97 billion, equivalent to 45% of the total $ 19.9 billion profits achieved last year by the global airline industry.

The trend has continued into this year, with all three major US airlines announcing strong net profits for the first quarter.

The international consultancy The Risk Advisory Group, which conducted the research for Etihad, identified that the majority of benefits which accrued to Delta, United and American came from restructuring under Chapter 11 of the US Federal Bankruptcy Code, yielding them at least $ 35.46 billion, and additional pension fund bailouts totalling $ 29.4 billion from the US Government’s Pension Benefit Guaranty Corporation.

Etihad has consistently denied claims by Delta Air Lines, United Airlines and American Airlines that it received subsidies, and has stated publicly that it has received equity and shareholder loans from its sole shareholder, the Government of Abu Dhabi, the largest emirate and capital of the UAE. Releasing the findings by The Risk Advisory Group, the General Counsel and Company Secretary of Etihad Airways, Jim Callaghan, said: “We do not question the legitimacy of benefits provided to US carriers by the US government and the bankruptcy courts.

“We simply wish to highlight the fact that US carriers have been benefitting and continue to benefit from a highly favourable legal regime, such as bankruptcy protection and pension guarantees, exemptions from certain taxes, and various other benefits.  

“These benefits, which are generally only available to US carriers, have created a highly distorted market in which carriers such as Etihad Airways have to compete.”

The figures produced by The Risk Advisory Group were conservative, quantifiable and credible, and obtained from public records and statements, he said.

The Risk Advisory Group identified the largest beneficiaries of Chapter 11 restructuring and bailouts from the Pension Benefit Guaranty Corporation as United Airlines, with combined benefits estimated at $ 44.4 billion; Delta with combined benefits estimated at $ 15.02 billion; and American Airlines with combined benefits estimated at $ 12.05 billion.

Of these figures United achieved one-time bankruptcy debt relief totalling $ 26 billion, and pension termination benefits totalling $ 16.8 billion; Delta achieved bankruptcy debt relief totalling $ 7.9 billion, and pension termination benefits totalling $ 4.55 billion; and American Airlines achieved bankruptcy debt relief totalling $ 1.56 billion, and pension termination benefits of $ 8.08 billion.