Etihad admits receiving loans from Abu Dhabi government

Etihad Airways said it received cash and loans from the government of Abu Dhabi at its inception in 2003, lifting the veil somewhat on its financial relationship with its biggest shareholder.

However, the airline carrier didnt say whether it continues to receive such support from the Abu Dhabi government, reported Dow Jones Newswires.

Etihad has for years said it isnt subsidised by the oil-rich government of Abu Dhabi, which wholly owns the airline. Amid exploding growth at Etihad, airline executives in the US and Europe have accused the two of benefiting unfairly from government assistance.

Etihad has denied any such competitive advantage. Etihad has been under special scrutiny from regulators, airline executive and trade bodies amid an acquisition binge in which it has bought, or is considering buying stakes in other carriers.
In response to an article in the Australian Financial Review, Etihad said in an emailed statement it is a commercially-run airline. But the company confirmed that it had received a shareholder loan from the government in 2003.
"We have received financial support from our shareholder, in the form of equity capital and shareholder loans, which is perfectly normal for any start-up business," Etihad said in a statement. "We do not receive government subsidies."
The loan Etihad referred to in its statement was interest-free until 2027 and amounted to about US$3 billion, according to internal Etihad and Booz&Co consultants documents obtained by the Australian Financial Review and posted online.
The Australian Financial Review first reported the loan, and said Etihad received government support in hiring local Emirati people, in launching some routes and in the sponsorship of Manchester City Football Club, owned by Abu Dhabis Sheikh Mansour bin Zayed Al Nahyan.
An Etihad spokesman didnt say whether the airline had received further shareholder loans or confirm that the documents were genuine. PwC, which now owns Booz&Co declined to comment.
Etihad chief executive James Hogan has repeatedly claimed the airline isnt subsidised by the government and is run with a "commercial mandate".
The Abu Dhabi government-owned carrier has aggressively expanded around the globe in the 10 years since its launch, and now owns stakes in seven airlines from Australia to the Seychelles.
Recent talks to buy up to 49 percent of Alitalia have stalled,
but Etihad last week increased its stake in Virgin Australia to 22.24 percent from 19.8 percent.
Last month, Etihad provided $416 million through an open-ended convertible bond to Air Berlin, another equity stake partner. Under the terms of the bond, Etihad could lift its stake in Air Berlin to about 70 percent from 29.2 percent if it were converted. This would contravene European Union ownership rules and Etihad has previously said it has no plans to convert the bond.
The EU has asked member states to examine whether foreign airlines are gaining undue market influence over European carriers through minority stakes, including Etihads involvement in Air Berlin.