Etihad’s Hogan warns against ‘protectionist’ tactics

Etihad CEO_James Hogan-smallWith several North American and European carriers continuing to pressure governments and international regulators to modify open skies agreements in response to what they consider unfair tactics by Persian Gulf carriers, James Hogan, president and CEO of Etihad Airways, responded with a strong warning about how a recent rise of protectionism in the aviation industry could stifle world trade and reduce passengers’ choices.

“The dark clouds of protectionism are gathering over Europe and the United States,” Hogan said during a keynote address at the Aviation Club in London last week (pictured at right). Legacy U.S. carriers, such as United, Delta and American Airlines, along with European giants Air France-KLM and Lufthansa, have long complained that the Gulf carriers are rapidly stealing their market share thanks to no-interest government loans, subsidized fuel and cheap access to state-funded airports.

In response to allegations that Etihad, along with rival Gulf carriers Emirates and Qatar Airways, have received around US$42 billion in assistance from their respective governments since 2004, Hogan said that Abu Dhabi, the largest shareholder in his airline, was only guilty of making sound investments in aviation infrastructure.

“Investing in success is not a crime; blocking competition would be,” Hogan told the audience. Etihad, he added, has only been in business since 2003 and needed to expand rapidly via “equity capital and shareholder loans” to compete on the international market. Each of these loans came with strict performance conditions of profitability within a specific timeframe – conditions that the airline has met. “Our shareholder may be national, but when it comes to money, it is very, very rational,” he said.

“To have any chance of success,” Hogan continued, “Etihad Airways had to get to a size and scale that could compete against the networks of airlines that had not only been operating for years, but had benefited from decades of government investment and infrastructure support themselves.”

The legacy carriers met with the Obama Administration last month, asking the government to freeze the number of U.S. destinations that the Gulf carriers can serve in the American market under current open skies agreements until this dispute over funding is resolved.

“Five mega-carriers are trying to pull the ladder up after years of having it their own way,” Hogan said of the open skies debate. “The people that will really lose if these giant legacy airlines are successful are the millions of travelers benefiting from new choice in the global air travel market.”

The legacy carriers, Hogan concluded, are mostly afraid of direct competition. “When it comes down to it, competition is what the market wants,” he said. “And it should be what the airlines want. In almost every case, competition increases the size of the market. Maybe we all get a smaller slice – but if the cake is bigger, then everyone benefits.”

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