The Australian Financial Review says leaked documents show Etihad received a $3 billion interest-free loan from the royal family of Abu Dhabi despite the airline’s repeated denials it was subsidised.
The loan does not need to be repaid until 2027 and would provide a significant capital injection for Etihad, which competes with Australian national carrier Qantas.
The Fin’s report says the airline has repeatedly denied it is given a helping hand by the royals. For example its CEO James Hogan said this in 2009:
“We are a government-owned carrier but we have been established and have to run as a commercial business. We get no state-funded handouts.”
Etihad is also a significant shareholder in Virgin Australia, which is fighting tooth and nail with Qantas for domestic market share.
When Virgin announced a $350 million capital raising with the help of its overseas airline owners (including Etihad), the battle became so desperate that Qantas asked the Government for help.
It didn’t get a debt guarantee or a public investment. Instead the Government drafted legislative changes that would lift a cap on foreign ownership. The only trouble is, the changes will probably fail to make it through the Upper House.
Etihad has been given the green light by Australian authorities to increase its shareholding in Virgin to 22.9%. Hogan will also join the Virgin board after last year’s $350 million capital raising.
Hogan also told The Australian he was happy with the current proportion of Virgin Australia the company holds, and that it would not seek to increase it in the near future.
Virgin Australia’s other airline shareholders are Air New Zealand and Singapore Airlines. Both have board seats at Virgin Australia.
Yesterday Qantas all but conceded defeat to Virgin in its domestic battle, advising the market it would not add any additional capacity in the first three months of the next financial year. This comes after it failed to fill as many seats in April 2014 as it did one year previously, despite demand increasing.
Qantas announced a $235 million half-year loss in February and said it would cut 5000 jobs, including pilots and management.
There’ more here.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.