Etihad Airways Boeing 777-300ER. Photo: M Radzi Desa.

MIAMI – The UAE government has injected US$22bn into Etihad Airways (EY), the flag carrier of Abu Dhabi, since 2003. However, the investments have not stopped the downtrend in the airline’s operations seen at the end of 2019 and during 2020, even before the pandemic.

In fact, in 2017, EY canceled its equity alliance strategy based on foreign operator investments to attract more traffic through Abu Dhabi. Instead, it decided to focus on regional travel, aligning actions with state authorities. These included operations at the Abu Dhabi International Airport (AUH).

Etihad Airways Airbus A330-200. Photo: Christian Volpati.

Financial Dispute between the UAE and the US

Before the current pandemic crisis, the United Arab Emirates’ (UAE) governments and regional airlines faced a financial dispute. Due to the state aid granted to EY, Qatar Airways (QR), and Emirates (EK) in 2018, US airlines pushed for a crackdown against them, claiming they obtained “US$50bn in unfair subsidies.”

So far, two financial sources related to the matter revealed that the airline’s cash injections were carried out at the end of 2019. Yet Bloomberg reported that it was not clear if these payments were made after 2018. By that time, the UAE had agreed to increase financial transparency in its airlines to be able to make more deals with the US.

Bloomberg also said that the state-owned EY would not list the bonds and declined to comment.

Etihad Airways reported a first-half loss of US$758m in 2020. Photo: Anna Zvereva.

Etihad’s Balance Sheet

From 2015 to 2019, the EY cut its expansion operations after it reported about US$5,67bn in losses. This year, to respond to the crisis, it had to cut thousands of jobs and extended the reduced payment scheme for its staff. In a ‘hail mary’ move, EY sold US$600m in five-year “transition” Islamic bonds last month.

Bloomberg also reported that investments in bonds issued in 2015 helped fund EY, but that a network of affiliates got only 43% of their money back. This comes as the notes worth US$700m matured on September 28, making the debt formally go into default.

Despite this panorama, EY has not announced if it received any state support. Still, early this year, Fitch Ratings graded the carrier with an A. In addition, the credit provider described EY as a key contributor to Abu Dhabi’s economic diversification.

Featured photo: Etihad Airways Boeing 777-300ER. Photo: M Radzi Desa