Newly Unearthed Etihad Documents Prove Extensive, Ongoing Subsidization Scheme
Etihad’s own financial statements show billions of government funding in 2014 in violation of Open Skies to prop up failing carrier
Washington, D.C. (August 25, 2015) – New documents discovered as part of an ongoing, worldwide investigation have provided damning evidence of additional, massive subsidies to Etihad Airways from the United Arab Emirates in violation of Open Skies.
The Etihad financial statements, which have never been disclosed to the U.S. government, are included in a major legal submission that the Partnership for Open & Fair Skies filed with the U.S. Department of Transportation on Monday. The filing categorically disproves statements by Qatar Airways, Etihad Airways and Emirates to the U.S. government and demonstrates real harm to the U.S. carriers and American jobs.
On May 28, 2015, Etihad issued a press release claiming to have posted a net profit of $73 million in fiscal year 2014, “its strongest financial results to date,” but the company declined to release any financial statements or corroborating evidence. Investigators working for the three U.S. carriers and several airline employee unions obtained a copy of the non-public statements in Hong Kong – and the contents make clear why Etihad is refusing to release them to the U.S. government.
The financial statements show that in 2014, as in every other year since 2007, Etihad received significant cash injections from the government of Abu Dhabi: $2.6 billion – a single year record, and over twice as much as the prior single year high of $1.25 billion in 2010. The documents also indicate that the total government funding in 2014 was as high as $5 billion.
As in previous years, the financials show that Etihad’s status as a “going concern” was specifically tied to the “expected continued financial support from the Shareholder of the Company” (i.e., the government of Abu Dhabi). Without the subsidies, Etihad would not be commercially viable.
“Etihad’s own financials prove that it is not a commercially viable enterprise and owes its continued existence to massive government subsidies from the United Arab Emirates,” said Jill Zuckman, chief spokesperson for the Partnership for Open & Fair Skies. “Do we really need further evidence that American aviation workers are being forced to compete against foreign treasuries in violation of Open Skies policy? In light of these revelations, the Obama administration must act now to stand up for American jobs.”
The documents further disclose that Etihad received another $543 million subsidized “loan” in 2014 and that an additional $40 million has been committed by the government. Etihad also obtained $1.85 billion in long-term, unsecured bank loans in 2014 “for financing its capital projects, contributions to investee companies and working capital requirements.” Although the statements do not identify the lenders, the notes to the statements strongly suggest that they are Abu Dhabi government-owned banks, which may explain the remarkable fact that $1.4 billion of the loans outstanding at the end of fiscal year 2014 are unsecured – an amazing feat for a company with a going concern opinion.
Additionally, Etihad had to resort to accounting gimmicks and trickery to portray itself as profitable. For example, for the second year in a row, Etihad recorded a $700 million gain by selling one of its own business units to itself. In 2014, Etihad sold its Global Cargo Management Company to itself and the year before it sold its frequent flyer program to itself in order to show profit. This single transaction made the difference between the “profit” that Etihad reported for 2014 and a loss in the hundreds of millions of dollars.
Researchers for the Partnership for Open & Fair Skies have scoured the globe for more than two years to compile forensic and archival evidence documenting more than $42 billion in unfair subsidies and benefits that the governments of UAE and Qatar have provided to state-owned airlines Qatar Airways, Etihad Airways and Emirates. During this time, researchers discovered financial documents in Australia, Singapore, Belgium and Malta in order to prove the magnitude of the subsidization that is upending the international aviation world.
The Partnership’s legal filing provides hard evidence to the U.S. government that the Gulf carriers’ claims are false and that those carriers have gone to great lengths to obfuscate the obvious – that massive government subsidies are propping up the three carriers. It also shows that the Gulf carriers’ entry into a U.S. city takes passengers away from domestic carriers, rather than adding to the total number of people flying to the United States as the Gulf carriers have tried to insist without substantiation.