James Hogan, President and CEO of Etihad Airways, as well as Vice-Chairman of Air Serbia, has defended his company’s decision to invest in airlines across the world, saying the likes of Air Serbia and Alitalia would be bankrupt if Etihad hadn’t stepped in.
Speaking at a European Union conference on air transport competitiveness in Vienna, Mr. Hogan called out Lufthansa and its offensive against his company’s investments. He cited examples of direct European state aid totaling 14.2 billion euros, including an 800 million euro payment by the German government to Lufthansa to support a pension fund gap, state aid of 1.1 billion euros for Swiss International Air Lines following the collapse of its predecessor, Swissair, and the Austrian government’s absorption of 500 million euros of debt accrued by Austrian Airlines. Both airlines are now subsidiaries of Lufthansa.
The statements come as Etihad’s takeover of Jat Airways, and the launch of Air Serbia almost a year ago, has ben thrown back into the spotlight following the arrest of Belgrade Airport’s CEO last week, accused of providing benefits to low cost airline Wizz Air, contrary to state laws. Politicians, unions and members of the industry itself have accused the Serbian government of protectionism while the country’s former Prime Minister, Zoran Živković, said the state will subsidies Air Serbia until the end of 2016.
However, Mr. Hogan said the European airline industry was built on decades of government ownership and support, and that even after privatisation or part privatisation, government bailouts, debt waivers and other subsidies continued. “Consolidation of airlines is critical to sustainable air services. External investment is not a threat”, he added. Without Etihad Airways’ stakes, Mr. Hogan said there would be a loss of financial investment and synergy benefits for Air Serbia, Air Berlin, Aer Lingus and Darwin Airline, as well as a loss of a “rescue investor” for Alitalia, costing thousands of jobs and leading to air route closures, flight reductions, higher fares and lost tax revenue for European governments. “There are strong economic and social benefits from stable and connected airlines”, Mr. Hogan said. “Etihad Airways wants to engage with Europe”.
German flag carrier Lufthansa, which has been engaged in a long running war of words with Gulf airlines over alleged subsidies and state backing, walked away from a planned codeshare agreement with Etihad in 2011. Several months ago Lufthansa appealed for the European Commission to investigate whether Etihad exercises effective control of its European subsidies Air Serbia, Air Berlin and Darwin Airline, contrary to EU regulations. In addition to its Swiss and Austrian subsidiaries, the Lufthansa Group also owns Germanwings and holds major stakes in Brussels Airlines and SunExpress and a minority share in the US carrier JetBlue.
There has also been further opposition to the Etihad-Air Serbia deal. Earlier this year Delta Air Lines and ALPA (Air Line Pilots Association) successfully lobbied for the US Department of Transport to deny Air Serbia codeshare rights on Etihad flights to the United States. Furthermore, Delta has appealed against allowing the Serbian carrier to codeshare on Air Berlin flights to the US, although a decision on this issue is still pending. However, Delta itself is under investigation by the European Commission for its 49% stake in Virgin Atlantic.
Source Balkans
