Categories
Latest Travel Deals

How Much Government Funding Has Etihad Recieved In Total?

Advertisement

Search Cheap Flights and hotels

On October 29th, Etihad Airways, launched “the world’s first Transition Sukuk and the first Sustainability-Linked financing in global aviation.” The Sukuk – the Islamic equivalent to a bond, is valued at $600 million and connects financing to the airline’s carbon reduction targets. But beyond this latest round of private financing, the airline has received tens of billions of dollars in state funding. So just how much government assistance has the Abu Dhabi-based carrier received since its founding in 2003?

Etihad 787
Etihad is just one of the many airlines in the Middle East region that are state-backed or state-owned. Photo: Getty Images

$22 billion in government funding

According to Executive Traveller, the UAE government has poured roughly $22 billion into the carrier over the last 17 years. Up until now, the cash injections went undisclosed. However, during recent bond investor meetings ahead of the Sukuk sale, sources report that the tens of billions in funding had gone to the airline up until the end of 2019.

Advertisement
Advertisement

Check prices and Book Cheap flights and hotels

The airline was to be a source of pride for the emirate it represents: Abu Dhabi. With a similar business model of global long-haul connectivity, it would go head-to-head with its much older counterpart – Dubai-based Emirates. Emirates has been operating since 1985, making it roughly 18 years older than Etihad.

Etihad Airways Airbus A380-861 A6-APF (2)
Currently, Etihad’s entire Airbus A380 fleet remains grounded due to extremely low levels of travel demand. Photo: Vincenzo Pace | JFKJets.com

Losing money even before COVID-19

It didn’t require a global pandemic to put Etihad in bad financial shape. The airline posted a loss of $870 million in 2019. If we want to be optimistic, we could say that it was trending towards profitability. That’s because 2019’s loss was an improvement over the $1.28 billion lost in 2018. Still, in 2017 the carrier posted a loss of $1.5 billion and $2 billion in 2016. Therefore, the airline has posted losses for four straight years – with a fifth and likely more devastating loss on the way.

While it takes massive amounts of investment to launch an international airline – especially one as big and expansive as Etihad – it’s quite astounding that the carrier has been able to continue operating, going against some of the fundamental free-market principles of running a business.

Etihad Airways Boeing 777-3FX(ER) A6-ETR
Etihad must compete with carriers like Emirates and Qatar Airways. In scenarios, more distant carriers like Turkish Airlines and Ethiopian Airlines also compete for the same customers. Photo: Vincenzo Pace | JFKJets.com

The uneven playing field is something US carriers have complained about for years, alleging that over $50 billion in unfair subsidies have been poured into Etihad, Emirates, and Qatar Airways collectively.

In recent times, the big three US operators (American, United, Delta) have been leading the charge in asking the government to crack down on the state-backed Middle Eastern carriers that have been drawing passengers away. According to AINOnline, the Middle Eastern airlines argued that US airlines have also benefited from government support – particularly after the 2001 terrorist attacks and from bankruptcy rules that wiped out pension obligations and debts.

Losing money with other airlines

It’s strange to think that airlines thousands of miles away have been losing Etihad’s money too – but this has been the case in recent years with Etihad buying up stakes in several unprofitable carriers.

Historically, Etihad’s purchases have included a 29.2% stake in Air Berlin, 49.8% in Niki, 49% in Air Serbia, 40% in Air Seychelles, 49% in Alitalia, 24% in Jet Airways, and 21.8% in Virgin Australia. Some of these haven’t been a disaster, but four of these seven airlines have collapsed. Virgin Australia was a close call, while Alitalia will be restructured and reshaped into a new carrier.

Etihad is undergoing a transformation and aims to continue its trend of shrinking its losses. While 2020 didn’t do it any favors, projections indicate that the carrier will continue to post losses up until around 2022. Hopefully, Etihad’s days of large government subsidies are over – or will end after this current crisis.

What is your opinion regarding airlines receiving government funding? Is it the duty of the government to support the industry and the largest carriers, or should it never happen? Let us know your thoughts in the comments.

Simple Flying reached out to Etihad Airways requesting comment on these reports. The airline failed to respond before the publication of this article.

Original Article

Advertisement

Search Flights and hotels at Discount

Leave a Reply

Your email address will not be published. Required fields are marked *