Abu Dhabi's Etihad airline says outside investment vital for EU carriers

BERLIN, July 3 Thu Jul 3, 2014 10:29am EDT

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BERLIN, July 3 (Reuters) - Abu Dhabi's state-owned airline Etihad Airways, currently under scrutiny by the European Union because of its numerous stakes in EU airlines, said the bloc had to accept outside investment in its carriers in order to sustain current services.

Etihad recently agreed to buy a 49 percent stake in ailing Italian airline Alitalia as part of its strategy of growth via minority stakes in airlines across the world which has also seen it take stakes in Air Berlin, Air Serbia and Ireland's Aer Lingus.

"Consolidation of airlines is critical to sustainable air services," Etihad Chief Executive James Hogan said in a statement on Thursday. "External investment is not a threat. It is an opportunity to strengthen airlines, and to support employment and economic growth."

He said that without the financial investment it has made in European airlines, thousands of jobs could have been lost and routes closed.

"There are strong economic and social benefits from stable and connected airlines," Hogan said. "Etihad Airways wants to engage with Europe."

The European Union is looking into whether Etihad exercises more control than allowed under the region's rules for airlines with a European operating licence, and is scrutinising in particular its 29 percent stake in Air Berlin.

Major European airline Lufthansa has been a vocal critic of Etihad and its rivals Emirates and Qatar, saying they do not compete on a level playing field because they are state-owned.

Hogan said all Gulf carriers were not the same and said they were rivals too. "We are different sizes, have different hubs and follow different strategies. We are actually vigorous competitors with each other."

Etihad also came under fire in May when an Australian paper reported it had access to an interest-free loan from the Abu Dhabi's ruling family.

"We received start-up capital, like every airline does, but we receive no state subsidies, no free fuel and no reduced airport charges in the United Arab Emirates," Hogan said in the comments, which were made at a conference in Vienna. (Reporting by Victoria Bryan; Editing by Sophie Walker)

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