Abu Dhabi Channeled $22b Into Etihad Airways Between 2003-19

Abu Dhabi’s government stumped up around $22 billion for Etihad Airways since it began flying in 2003, underscoring the ambition of the emirate to turn its national carrier into a global player. The heavy investments, made before COVID-19 lockdowns strangled demand for air travel, were likely a prelude to support for the carrier this year, given the sector’s dire need for cash during the pandemic.

The extent of assistance could also return the spotlight to an agreement reached two years ago that settled a long-running dispute over government aid in the region, which pitted the largest US airlines against Gulf rivals. American carriers were pushing for a crackdown on what they described as more than $50 billion in unfair subsidies for Qatar Airways, Emirates and Etihad.

The airline revealed the previously undisclosed cash injections during recent bond investor meetings ahead of a sukuk sale, saying they were carried out until the end of 2019, according to two people familiar with the discussions. It wasn’t immediately clear if payments were made after 2018, when the UAE agreed to increase financial transparency in its airlines as part of a deal with the US.

State-owned Etihad won’t list the bonds and it only shared its prospectus with investors who signed a non-disclosure agreement. The airline declined to comment.

Even before the devastation wrought on the aviation industry by the pandemic, Etihad was paring back its sprawling operations after racking up $5.67 billion in losses over the four years ending 2019. Although the company hasn’t announced if it received any state support since the crisis erupted this year, it’s sold $600 million in five-year “transition” Islamic bonds last month as part of a $3 billion sukuk programme.

Since the pandemic upended travel, governments around the world have been forced to step in and offer lifelines to their national carriers. Emirates and Qatar Airways received $2 billion each, while Deutsche Lufthansa AG avoided insolvency with a 9 billion euro ($10.5 billion) multi-government bailout. South Africa last week agreed to a 10.5 billion rand ($641 million) rescue for the country’s grounded national airline.

Etihad has responded to this year’s upheaval by cutting jobs and recently extending the period of reduced pay for its staff until the end of this year. It posted a first-half loss of $758 million.

Despite the billions of dollars committed by Abu Dhabi, the airline in 2017 abandoned its so-called equity alliance strategy that saw it invest in a number of generally ailing foreign operators to help feed more traffic through the UAE capital.

It turned its focus toward regional travel while cutting routes, shrinking operations and slashing plane orders.

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