Royal favors for Etihad?

State support: who is getting it, and how does it impact competition?

“Unfair competition” is an accusation leveled regularly by European carriers at airlines based in the Gulf Region. The usual target is Emirates, which has acquired a massive fleet of expensive widebody aircraft in a very short time, but Abu Dhabi-based Etihad Airways is also often a target, as are Saudia and Qatar Airways.

The latest example came from recently-appointed Lufthansa CEO Carsten Spohr who was in the US to attend a business leaders meeting hosted by President Obama. Interviewed by Reuters, Mr. Spohr said: “The biggest challenge for a chief executive of a European airline, just as for my counterparts in the United States, is running privatized companies in an industry where government- owned airlines are gaining more and more market share.” Spohr said in one of his first interviews since becoming CEO. “That’s the global game changer to our industry we need to find the right answers to.”

The response from the Gulf has always been some variation on “We get absolutely no state support, we have to operate on a commercial basis just as you do.” However, since these carriers are state-owned, they do not have to open their books to public scrutiny in the way their accusers do, and the dialog quickly defaults to “Do not.” “Do so!” DO NOT!”

But that may be about to change, as a report in the Australian Financial Review (AFR), quoted by Reuters, claims leaked ducuments show that Etihad has access to an interest-free US$3 billion loan from the Abu Dhabi ruling family. And not only was the loan interest-free, but, according to the AFR report, it also required no repayments until 2027.