* Etihad got interest-free $3 bln loan from Abu Dhabi -
* Airline denies getting any government subsidies
* Says got equity capital and loans from shareholder
* Clash comes ahead of IATA AGM in Doha next month
(Adds Lufthansa comments, input on IATA AGM)
By Lincoln Feast and Praveen Menon
SYDNEY/DUBAI, May 22 Etihad Airways had access
to an interest-free $3 billion loan from Abu Dhabi's ruling
family, the Australian Financial Review newspaper said on
Thursday, prompting criticism from rivals that have long
complained of state support for the carrier.
Citing what it said were leaked documents prepared for
prospective financiers in 2011, the newspaper said the loan for
government-owned Etihad required no repayments until 2027.
The airline, which also has equity stakes in Air Berlin
and Aer Lingus, has long rejected allegations
from rivals in Europe and Asia that it receives unfair financial
support or state subsidies.
In a slide headed "Equity and Shareholders Loan," the
documents state: "The shareholder has provided significant loan
facility for aircraft deposits and working capital -
subordinated, interest free and no repayments until 2027."
(To view documents, click: link.reuters.com/ruk59v)
Etihad, which has been looking at a possible investment in
loss-making Alitalia, said in a statement it had received
financial support from its shareholder in the form of equity
capital and shareholder loans, but gets no government subsidy.
It said the airline operated under a strict commercial
mandate. It did not specifically comment on the $3 billion loan
mentioned in the report.
Europe's largest airline Lufthansa, one of the
biggest critics of state-owned Gulf carriers, renewed calls for
EU authorities to ensure fair market conditions.
"It is crucial that the European Commission and the
authorities in the European member states protect their private
European airlines and European hubs from unequal competition
from state-run air traffic systems," a spokesman said.
"We reject subsidies and the partial nationalisation of
European airlines, whether they come from European states, or
states or state-owned entities from outside of Europe."
Etihad, and other state-backed regional carriers such as
Emirates and Qatar Airways, have been rapidly
expanding their global reach, sometimes through partnerships.
European airlines have questioned this growth saying their
state-owned status meant they did not compete on a level playing
A spokesman for German pilots' union Vereinigung Cockpit
said of the newspaper report: "If it's true, then it's what
we've always feared."
"We already know we are competing with society systems that
don't have unions or income tax. It's not a level playing
field," Joerg Handwerg told Reuters at the Berlin ILA Airshow.
Air Berlin, in which Etihad has a near-30 percent stake,
declined to comment.
The latest clash comes ahead of the International Air
Transport Association (IATA) annual general meeting to be held
next month in Qatar, the first Gulf country to host the event
which will host over 200 top executives from airlines,
manufacturers and airport operators.
Etihad is a major shareholder in Virgin Australia Holdings
, which has been engaged in a fierce price and capacity
war in Australia with flag carrier Qantas Airways Ltd.
Qantas has long complained that Etihad, and by extension
Virgin, have benefited from subsidies from the Gulf state,
something Etihad management has repeatedly denied.
The newspaper said industry sources had provided the
documents, which had circulated among the management ranks of
Etihad's competitors, such as Qantas and Emirates.
The Australian and International Pilots Association said the
report of support from the royal family needed to be checked and
action taken to level the playing field.
"Etihad's contribution to Virgin's A$350 million ($323
million) equity issue last year was critical to the issue's
success. We now know this contribution was backed by the
interest-free generosity of the Abu Dhabi royal family," said
the association's president, Nathan Safe.
"Such an obviously unfair distortion of competition would
never be allowed in any other sector of the Australian economy
and it should not be allowed to continue in aviation."
Virgin Australia did not comment on the report.
($1 = 1.0850 Australian dollars)
(Additional reporting by Victoria Bryan; Editing by Matt
Driskill, Mark Potter and Pravin Char)