Emirates rebuts subsidy claims with new report

Dubai carrier Emirates has revealed a comprehensive report, rebutting subsidy allegations leveled at it by its American counterparts.

In the report, the airline specified that it has not received any fuel hedging subsidies from its parent firm International Corporation of Dubai or enjoyed special status among local suppliers.

Emirates’ statement comes after three major US carriers reported that the Dubai airline had received over $6bn in subsidies, enabling it to expand its network rapidly.

The US carriers argued that this assistance made Emirates and its Gulf peers ineligible to be parties to the Open Skies agreement.

“The subsidy allegations put forward by the Big 3 are patently false,” said Emirates president and CEO Sir Tim Clark.

“We have been profitable for 27 years straight, and unlike our accusers, we have never depended on government bail-outs or protection from competition. In fact, we were told right from the start by the government of Dubai that Emirates has to deliver profits and stand on its own feet.

“We had to then, and we still have to now. Dubai has no oil reserves to speak of, and therefore it embarked on a well-documented strategy to diversify its economy with air transport as a key enabler.

“Our global expansion is funded from our own cash flow, and debt raised in the open market through banks and financial institutions. Our success is due to superior commercial performance. To date we have paid our shareholder, the Dubai government, more than $3bnin dividends. All of this is laid out in our financials, audited by Pricewaterhouse Coopers. We are financially transparent, and have published fully audited accounts for over 20 years.”

In its most detailed report to date, Emirates also counters claims by the US carriers that the Dubai airport fees are too low and the absence of a fee on connecting passengers.

The airline noted that the Open Skies rules only has a ceiling on the maximum costs that an airport can charge but not a floor. In addition, it noted that airports -including those used by the US carriers as hubs- do not charge to recover their full costs.

In relation to charging connecting passengers, Emirates said that there is no legal obligation on airports to charge the connecting passengers. It pointed out that many Asian hubs also refrain from collecting fees from their transfer passengers.

Emirates also sharply criticised US carriers for leveling subsidy claims on narrow evidence, saying that they “favour Open Skies agreements only when they work to their financial advantage”.

The Dubai carrier noted that if the US government were to revoke the Open Skies treaty it would only hurt consumers by restricting their choices in the market.

US carriers’ lobby group Partnership for Open and Fair Skies has dismissed the Emirates report.

“Emirates can submit as many pages as it wants, but it still won’t paper over what has been well-documented: Emirates has received billions in subsidies and unfair benefits from the treasury of the UAE,” said the group’s chief spokesperson Jill Zuckman.

“Our investigation shows that these massive subsidies have allowed Emirates, Etihad and Qatar airlines to expand far beyond what market forces could ever support, distorting international competition and tilting the playing field to its advantage.”

The group urged the US government to revisit the Open Skies treaty to ensure a free and fair market for competition and to protect US jobs.

Gulf airlines and US carriers United, Delta and American have been engaged in a public spat, with the North American group accusing their GCC counterparts of receiving government subsidies to support their expansion plans.

The US carriers argued that this growth has taken their market share and could put thousands of American jobs at stake.

The Gulf carriers have continuously rebutted these claims saying that US airlines’ unsatisfactory service is to blame for their losses.