Customers and innovation are the victims of 'stifled competition': Etihad CEO

Published November 8th, 2015 - 02:00 GMT

The president and chief executive officer of Abu Dhabi-based Etihad Airways has accused legacy carriers of attempting to stamp out competition in the global air travel market.

His remarks come as Etihad along with its Gulf peers Emirates and Qatar Airways remain embroiled in a subsidy row with the big three carriers in the United States including United, Delta and American.

“Currently, the US carriers are investing tens of millions of dollars to attempt to stifle competition, and we have seen similar moves by some of the larger European legacy carriers,” James Hogan said during a talk at the Royal Aeronautical Society in London.

“The victim here is the customer. The cost is innovation.

“The way for aviation to flourish is through innovation. Innovation creates new ways of getting through the obstacles of a regulated, shackled industry,” he stressed.

“This industry needs to encourage that innovation for the benefits it brings to customer choice and to real competition.”

Hogan said that air travel was stuck with a regulatory system which limits consolidation, competition and consumer choice.

“Air travel is the lifeblood of the modern economy. But while the modern globalised economy has seen trade and tourism jump forward in leaps and bounds, the structure of our industry has shuffled forward only a few tiny steps.

“This is an industry which cries out for new competition, across many different markets; but it is one in which smaller operators can only operate in niche environments.”

Hogan also insisted that it was extremely challenging for an airline to become a competitive global carrier with scale playing a key role.

“Scale means a network which can compete against the networks of legacy carriers, built up over decades. Scale means the ability to reach consumers with a brand promise across many different markets – profile and visibility that will deliver customers.

“And scale means the ability to strip down costs to competitive levels, through economies of scale throughout operations.

“That means this is an industry which requires a massive cost of entry to compete,” he added.

Etihad, Etihad and Qatar Airways are currently among the fastest growing airlines in the world, expanding their networks with fleet and capacity addition.

However, the big three US carrier allege that the three Gulf carriers have received about $42bn in subsidies from their respective governments, which allowed them to grow so rapidly. Such funds, they argue, distort the market and do not provide a level playing field.

The big three American carriers also claim the subsidies violate the US open skies agreement with Qatar and the United Arab Emirates.

However the Gulf airlines have refuted the allegations, claiming that the US carriers are losing out because of sub-standard customer service. In addition, regional airlines also say that their growth benefits other aerospace sectors in the US and Europe.

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