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Airlines and Subsidy - Our Position New - tcm233-845771 PDF
Airlines and Subsidy - Our Position New - tcm233-845771 PDF
Airlines and Subsidy - Our Position New - tcm233-845771 PDF
Myth US and European airlines received support decades ago but are now subsidy-free
FACT Bankruptcy protection and government bailouts continue to exist
Contents
Introduction
10
11
Fair competition
12
13
Sources of finance
14
15
16
18
Airport infrastructure
19
Oil
22
24
Environment
26
Conclusion
27
Introduction
At Emirates we see much to be encouraged about: more and more countries recognise that liberal air
access has a multiplier effect on their economies and best serves their national interest. Yet there are
still cases where some flag carriers or their alliance proxies successfully block new competition, by
creating an echo-chamber of repeated false assertions about rivals. We recognise that our success has
made us a target and some airlines have been willing to make gross misrepresentations about Emirates
and Dubai in order to serve their interests. We have nothing to hide and welcome all discussion on our
activities. Tim Clark, President, Emirates Airline
...OPERATE
WITH HUGELY
SUBSIDISED FUEL
COSTS !
...T-SHIRTS
MADE BY CHILD
LABOUR...!
1.8b
A$
1.4b
200m
0
30m
580
m
1981
560m
2.6b
800
m
160m
US$
1.5b
1992
3b
1991 / 92 / 94
2.7b
1994
1995
1996
1996
1997 / 2005
Aer Lingus
Air France
300 million and 580 million French Government capital injections in 1991 and 1992.
3 billion French Government capital injection in 1994.
Alitalia
1.5 billion and 1.2 billion Italian Government capital injections in 1997 and 2005.
British Airways
Iberia
Lufthansa
2002
2008 / 09
Olympic Airways 2.6 billion Greek Government accumulated debt write-off in 2008/09.
Qantas
TAP
Swiss
10
11
Fair Competition
12
Lufthansa
Austrian
Brussels Airlines
Swiss
Total
Airline
Government funding/support
Adria Airways
Lost 3.2 million in 2008 and 13.9 million in 2009 - both absorbed by the Slovenian Government. 50
million capital injection from the state approved in September 2011.
Air Canada
CA$250 million loan from the government-owned Export Development Corporation in 2009, of which
CA$100 million was from a special cabinet-controlled EDC account.
Asiana
Debt of KRW3.76 trillion to state-owned Korea Development Bank was frozen in January 2010.
Austrian Airlines
500 million in state aid from the Austrian Government to cancel debts prior to September 2009 takeover by
Lufthansa on the back of a 200 million loan from the Austrian Government.
Brussels Airlines
Loan of 125 million to SN Airholding (stakeholder in SN Brussels Airlines) granted from Federal Investment
Company in 2002.
Croatia Airlines
195 million Croatian Kuna in state aid between 2007 and 2009.
Lufthansa
SAS
Sought a new capital injection of SEK4-5 billion in 2010, half of which came from the Governments of
Sweden, Norway and Denmark - following a similar injection in 2009 from the same sources.
South African
Airways
ZAR1.5 billion loan from the State in 2009/10 in exchange for shares, following a ZAR3 billion loan from the
State in 2008.
Spanair
120 million in loans and capital increases from the Catalan Government in 2010/11.
Swiss
Thai Airways
THB23 billion loan from four Thai banks in 2008/2009, including one state-owned institution.
800 million
700 million
125 million
1.5 billion
3.125 billion
13
Sources of finance
Islamic
4%
Bonds
9%
Ex-Im
12%
Commercial Banks
19%
14
Operating Leases
43%
15
16
25
20
15
10
5
0
7.71
7.27
10.63
10.59
8.94
21.82
12.66
4.04
3.54
5.59
4.43
5.06
4.72
4.28
EK
TK
SQ
BA
CX
LH
QF
Fuel
120
Excluding Fuel
100
80
60
88
77
65
47
47
45
34
24
23
17
British Airways
Cathay Pacific
Thai Airways
Emirates
Singapore Airlines
Malaysia Airlines
Air India
Jet Airways
92 92
United Airlines
110 100
Qantas
Air France-KLM
20
American Airlines
40
Lufthansa
30
17
Source: IATA
18
(in US$)
SIN
BKK
BOM
IST
DXB
Terminal and runway charges
CAI
AUH
PEK
Passenger charges
KUL
BAH
Others
DOH
Airport infrastructure
Airports around the world are funded in widely
differing ways, with a variety of ownership
structures and relationships to the home
carrier and respective national governments.
Dubai International Airport is part of Dubai
Airports, a Dubai Government-owned entity
that has responsibility for all aspects of airport
development in Dubai.
It is not uncommon for governments or statecontrolled entities around the world to help
finance expansion of airport infrastructure,
viewing them as key drivers for economic
growth and essential for connectivity to the
global economy.
Some 78% of Europes airports were publiclyowned and a further 13% had some element of
public partnership, according to a 2010 study by
ACI, the international association of the worlds
airports. In addition, a 2007 ICAO report noted
that 70% of the more than 600 international
airports were publicly owned.
Following the Second World War, Australia
embarked on a major programme to build and
finance airports across the country, which were
held in government hands for a half century until
recent privatisation efforts.
19
While Emirates is a major carrier at Dubai International Airport, it is also worthwhile looking at some of the worlds
other large hub airports and how home carriers and respective alliances stack up in terms of market shares and the
amount of competition faced.
Top
20
Airport
London Heathrow
2
4
5
6
7
64.69
55.67
52.75
oneworld - 48%
8%
150
86%
107
53%
93
oneworld - 31%
Lufthansa - 61%
Star - 76%
45.43
35.01
91
104
49.48
83%
Number of
international
carriers
- Apr 2012
80%
Star - 4%
KLM - 57%
Total alliance
share of
international
flight
departures
- Apr 2012
SkyTeam - 62%
Emirates - 46%
49.68
50.19
Amsterdam Schiphol
SkyTeam - 67%
Star - 30%
Star - 36%
57%
79%
41%
92
93
70
34.54
SkyTeam - 46%
84%
11
London Gatwick
29.92
oneworld - 18%
23%
38
26.33
88%
63
24.45
Alitalia - 28%
SkyTeam - 38%
63%
94
23.83
Star - 78%
23.14
10
12
13
14
15
Madrid Barajas
16
18
Zurich Airport
17
19
20
Barcelona Airport
20
International
passengers
- 12 months
ending
Dec 2011 -
in millions
32.45
27.88
25.92
24.16
23.63
21.66
Iberia - 40%
Lufthansa - 63%
Iberia - 9%
oneworld - 45%
Star - 75%
Star - 38%
SkyTeam - 5%
72%
84%
11%
61
70
72
54
oneworld - 28%
64%
Star - 67%
77%
66
42%
66
SkyTeam - 39%
Star - 18%
85%
58%
75
64
44
Source: ACI, OAG, FG Pro and Dubai Airports (international carriers include cargo and charter operators)
ACG Air
C a r g o G e r m a n y
A e r o f l o t
Aerologic Aerosvit
Airl i n es Afri can
Express Airways Air
Algerie Air Almaty
Air Arabia Air Astana
Air Baltic Air Berlin Air
Open competition and free markets lay
Bucharest Air China Air
at the heart of Dubais status as a trading
Finland Air France Air
hub. Every day, Emirates goes head to
India Air India Express Air
Transport International Airblue
head with more than 150 rival airlines
Aircompany Scat Alitalia
serving Dubai International Airport.
Al-Naser Airlines Ariana Afghan
Ark Airways Armavia Avia Company
Atlas Air
Austrian Airlines Azerbaijan A i r l i n e s
B a h r a i n
A i r B i m a n B a n g l a d e s h
B r i t i s h
Airways Cargoitalia Cargolux Airlines Intl
Cargolux Italia
Caspian Airlines Cathay Pacific China Airlines
China Eastern Airlines
China Southern Condor Coyne Airways Daallo Airlines Delta Airlines Inc. DHL International E.C.
Donavia Donbass Aero Airlines Eastern Skyjets Egypt Air Emirates EPL Fzco Eritrean Airlines Ethiopian Airlines Etihad Airways Euro-Asia Air Intl Expo Aviation
Falcon Express Cargo Airlines Fars Air Qeshm Federal Express Felix Airways Finnair Fly Dubai Free Bird Airlines Garuda Indonesia Georgian Airways Global Jet GMG
Airlines Gryphon Airlines Gulf Air Hainan Airlines Co Indigo Air Investavia Iran Air Iran Aseman Airlines Iranian Air Transport Naft Iraqi Airways Jade Cargo International
Jazeera Airways Jet Airways Jubba Airways Kam Air Kenya Airways Kingfisher Airlines Limited Kish Airline KLM Korean Air Kuban Airlines Kuwait Airways
Kyrgyzstan Air Company Latcharter Airlines Lufthansa M.E.A Mahan Air Malaysia Airlines Martinair Mihin Lanka Nasair National Air Cargo National Air Services (NAS)
National Airline Neos Nepal Airlines Corporation Norwegian Air Shuttle Oman Air Orenburg Airlines Pakistan Intl Qatar Airways Romanian Air Royal Brunei Air
Royal Jordanian
Rus Aviation LLC Rwandair Express Safi Airways Saudi Arabian Airlines Shaheen Air Intl
Siberia Airlines
Silk Way Airlines Singapore Airlines Somon Air
S r i L a n k a n
Airlines Starlight Airlines Sudan Airways
Swiss Intl
Air Lines Syrian Arab Air TAAG Angola
Airlines
Taban Airlines Taimyr Airlines Thai
Airways Int Thomas Cook Airlines
Sk TNT Airways Transaero
Airline Travel Svcs A.S. Tui
Airlines - Arkefly Tunis Air
Turkish Airlines Turkmenistan
Airlines Ukraine Intl Airlines
United Airlines United
Airways (BD) United
Nations Organization
United Parcel Service
U r a l A i r l i n e s
Uzbekistan Airways
Source: Dubai Airports and dnata
V i m A i r l i n e s
Virgin Atlantic
21
Yemenia Yemen Air
Oil
22
103%
102%
100%
300
80
250
60
20
0
71%
66%
66%
64%
82%
29%
34%
34%
36%
18%
BA
EK
SQ
CX
LH
Others
Source: Emirates
20
15
200
10
150
100
Fuel
100%
97%
Dubai
100
40
102%
US cents
50
0
23
24
Taxes
Some competitors and a few governments raise
the issue of Emirates not paying corporate tax
in Dubai; a fiscal policy setting consistent across
the Gulf region and in many other parts of the
world. American Airlines famously moved from
New York to Texas in 1979 to secure lower taxes.
And of course the 150 foreign airlines operating
out of Dubai do not pay corporate taxes on their
Dubai-based operations and profits.
The more important element of any tax debate is
the commercial reality of actual profitability and
what taxes pay for and how they are collected.
Airlines have to be profitable to pay taxes. Hence
in 2009-10, a large number of airlines in Europe
did not pay tax. Furthermore, in most countries
there is the ability to carry losses forward to
reduce future tax paid if profitability returns. So
in many cases over the past decade, airlines have
paid no effective tax at all to their governments.
Consider also that through consolidation, a
handful of the dominant and giant airline
multinationals can capture the losses of acquired
entities in their balance sheets to reduce their
taxation positions in their domiciled states.
25
Environment
26
Conclusion
27