What is the difference between a) receiving interest-free government “loans” with no repayment obligation, and b) undergoing a bankruptcy restructuring process that involves no taxpayer money and includes oversight by an independent judiciary? Nothing, says Etihad Airways.

Recently, Etihad released a report claiming that U.S. airlines have received billions of dollars in “government benefits” that are a “fair comparison” to the $42 billion worth of well-documented subsidies and other unfair state support that the governments of Qatar and the UAE have provided to Etihad, Qatar Airways and Emirates Airline over the last decade.

This is Etihad’s attempt at distracting from the real issue, which is the harmful impact the subsidies they receive are having on the aviation marketplace. But we wondered: just how does Etihad define a government subsidy?

Unlike the Partnership for Open & Fair Skies’ white paper, Restoring Open Skies: The Need to Address Subsidized Competition from State-Owned Airlines in Qatar and the UAE, which uses clearly defined and widely accepted World Trade Organization (WTO) standards to conservatively quantify the Gulf carriers’ subsidies, Etihad inaccurately suggests that the U.S. airlines have been subsidized by measures that are, by WTO definitions or any other international standard, simply not subsidies.

For example, in its report Etihad erroneously characterizes the Chapter 11 process as “government benefits,” when in fact Chapter 11 bankruptcy is a restructuring process that is supervised by an independent judiciary and involves no provision of taxpayer funds to the reorganizing company.

The Economist said it best in a recent article:

Proponents of the Gulf model often note that airlines in America benefited from the Chapter 11 bankruptcy protection system after the 9/11 terrorist attacks. This, they claim, amounted to a back-door subsidy, propping up the domestic sector while its debts and costs were trimmed. But that is an unfair comparison. Chapter 11 restructurings do not involve equity injections by the taxpayer. They are restructurings conducted under the watchful eye of an independent judiciary. By contrast, decisions about the organization of Gulf-carrier balance sheets are taken behind closed doors, by dynastic rulers who have no accountability to their citizens.

What is perhaps even more astonishing than Etihad’s false claims about U.S. airlines is the company’s persistent denial of the fact that it receives massive subsidies from its sole owner, the Government of Abu Dhabi. In reality, Etihad would likely not even exist without them.

Since 2004, Etihad has received at least $18 billion in government subsidies – more than even its larger Gulf carrier counterparts, Qatar and Emirates. Those subsidies take the form of “equity infusions,” interest-free government “loans” that the airline isn’t obligated to repay, and more – all measures that are unequivocally subsidies under rules established under WTO agreements and applied by the U.S. Department of Commerce. Etihad’s subsidies continue to cover the carrier’s financial losses year after year, and the airline’s independent auditors state in their financials that Etihad would not be a commercially viable company without them.

While Etihad’s playbook appears to include hiding information about its own financials and leveling false claims against U.S. airlines, these tactics are merely distractions from the core issue.

When the UAE government signed its Open Skies agreement with the United States back in 2002, it agreed to play by the rules of fair competition in exchange for open access to U.S. markets – these rules do not allow for subsidized support. The enormous subsidies that the UAE is funneling to its state-owned airlines are in clear violation of Open Skies and should be addressed in bilateral consultations, as provided for in the Open Skies agreements themselves.

We need the U.S. government to act now. Subsidy-fueled expansion by Etihad and the other Gulf carriers is costing U.S. jobs and hurting our economy. Without swift action, things will only get worse.

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