Etihad Contests Australian Report, Says It Gets Loans, Not Subsidies

Abu Dhabi-based Etihad Airways has responded to claims made in the Australian Financial Review on Thursday that it had  access to a secret, interest-free $3 billion loan from the Abu Dhabi ruling family, contrary to its long-standing denials.

Etihad, which has been looking at a possible investment in loss-making Alitalia, said in a statement it had received financial support from its shareholder in the form of equity capital and shareholder loans, but gets no government subsidy.

It said the airline operated under a strict commercial mandate. It did not specifically comment on the $3 billion loan mentioned in the report.

Citing what it said were leaked documents prepared for prospective financiers in 2011, the newspaper said in a report today that the loan for the state carrier required no repayments until 2027.

In a slide headed “Equity and Shareholders Loan,” the document states: “The shareholder has provided significant loan facility for aircraft deposits and working capital – subordinated, interest free and no repayments until 2027.”

Etihad is already a major shareholder in Virgin Australia Holdings, which has been engaged in a brutal price and capacity war with flag carrier Qantas Airways Ltd.

Etihad is already a major shareholder in Virgin Australia Holdings, which has been engaged in a brutal price and capacity war with flag carrier Qantas Airways Ltd.

Qantas has long complained that Etihad and by extension Virgin, have benefited from subsidies from the Gulf state, something Etihad management has repeatedly denied.

Qantas has been lobbying for government support and changes to the law that limits its foreign ownership.

The newspaper said industry sources had provided the document, which had circulated among the management ranks of Etihad’s competitors, such as Qantas and Emirates.

The Australian and International Pilots Association said the claims of support from the royal family needed to be checked and action taken to level the playing field.

“Etihad’s contribution to Virgin’s A$350 million ($322.6 million) equity issue last year was critical to the issue’s success. We now know this contribution was backed by the interest-free generosity of the Abu Dhabi royal family,” said AIPA President Nathan Safe.

“Such an obviously unfair distortion of competition would never be allowed in any other sector of the Australian economy and it should not be allowed to continue in aviation.”

Virgin Australia did not immediately respond to requests for comment.