‘Corporate welfare commonplace’ in airline industry

Etihad report showed major US carriers received a range of benefits from government

Gulf News

Dubai: Etihad Airways’ report on government-linked financial benefits received by the United States’ largest airlines simply highlights that “corporate welfare is commonplace globally,” an aviation analyst has said.

“Governments everywhere in the world have an interest in economic development and job creation, and will provide subsidies in one way or another to airlines,” said Ernest Arvai, partner at US-based aviation consultancy AirInsight, by email.

Etihad released a commissioned report on Thursday looking into the financial benefits received by Delta, United and American. The benefits range from Chapter 11 restructuring, bailouts from the Pension Benefit Guranty Corporation (PBGC) and tax incentives, grants and fuel subsidies.

“Every time a new facility is needed, such as an MRO (maintenance, repair and overhaul) shop, airlines (and most companies) in the US will receive bids for assistance, whether direct subsidy, low cost loans, tax breaks, or a combination of those, to locate facilities within a state,” stated Arvai.

The report was released in response to a 55-page whitepaper released by the US carriers earlier this year that alleges that the Gulf’s three biggest carriers, Etihad, Emirates and Qatar Airways have taken in $42 billion (Dh154 billion) in state subsidies over the past decade. The US airlines want their government to freeze Gulf carrier growth into the US and look at whether the subsidies are in violation of the open skies agreement between the US and UAE and Qatar.

Substantial benefits

“The goal of open skies agreements is free market competition to benefit consumers, and provide choice. Balancing those interests is tricky, but it appears that both sides have received substantial benefits in one way or another, and in our opinion, should be considered a wash,” stated Arvai.

The subsidy row between the US and the Gulf carriers have so far predominately played out through sneering comments in the media. Although some of the Gulf airlines have said they have met with US officials in a move to alleviate concerns.

“Publicly the Gulf airlines are maintaining this as a transportation issue and not publicly invoking this as a foreign policy or free trade matter,” said Will Horton, senior analyst at CAPA — Centre for Aviation, by email.

“The US side has been aggressive in promoting their view to the general public through physical and online ads as well as social media and the like. Emirates had a short YouTube video and now it seems Etihad is stepping up with a general public defence. There needs to be more,” he added.

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