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| Etihad Airways’ Rapid Growth Frustrates Rivals | Etihad Airways’ Rapid Growth Frustrates Rivals |
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| ABU DHABI — Amid a forest of steel and cranes in the desert, the organic forms of Abu Dhabi’s new airport terminal are starting to take shape. | |
| The existing airport has become too small for the ambitions of its main tenant, Etihad Airways, the smallest and fastest growing of the three giant Middle Eastern airlines, whose expansion has sown resentment among the legacy carriers of North America and Europe. | The existing airport has become too small for the ambitions of its main tenant, Etihad Airways, the smallest and fastest growing of the three giant Middle Eastern airlines, whose expansion has sown resentment among the legacy carriers of North America and Europe. |
| For more than a decade, the Persian Gulf airlines have transformed international travel, focusing on an obsession with service and single-hub connections. They now fly to more foreign destinations and have more international seats than United States carriers. | For more than a decade, the Persian Gulf airlines have transformed international travel, focusing on an obsession with service and single-hub connections. They now fly to more foreign destinations and have more international seats than United States carriers. |
| Now, how Etihad operates — and especially how it is financed — has become a critical issue in an increasingly contentious battle with airlines and unions in the United States, which accuse the gulf carriers of stealing passengers with the help of generous government support. | Now, how Etihad operates — and especially how it is financed — has become a critical issue in an increasingly contentious battle with airlines and unions in the United States, which accuse the gulf carriers of stealing passengers with the help of generous government support. |
| A highly public rift erupted last month, when the chief executives of Delta Air Lines, American Airlines and United Airlines met with senior government officials to argue that flights from the Persian Gulf airlines into the United States should be scaled back. The effort represents a rare attack against open skies policies that the United States and its airlines have promoted around the world for years. | A highly public rift erupted last month, when the chief executives of Delta Air Lines, American Airlines and United Airlines met with senior government officials to argue that flights from the Persian Gulf airlines into the United States should be scaled back. The effort represents a rare attack against open skies policies that the United States and its airlines have promoted around the world for years. |
| Etihad is particularly exposed to criticism given how fast it has grown since it was founded in 2004. It now has more than 100 planes and flies to 110 destinations, including São Paulo, Brazil, Johannesburg and New Delhi. By 2017, the sprawling $3 billion new airport here will have an annual capacity of 30 million passengers — as much international traffic at New York’s Kennedy Airport today — mostly driven by Etihad. | Etihad is particularly exposed to criticism given how fast it has grown since it was founded in 2004. It now has more than 100 planes and flies to 110 destinations, including São Paulo, Brazil, Johannesburg and New Delhi. By 2017, the sprawling $3 billion new airport here will have an annual capacity of 30 million passengers — as much international traffic at New York’s Kennedy Airport today — mostly driven by Etihad. |
| And increasingly, it is targeting the United States. It has six daily flights to the United States, up from one six years ago, while Emirates Airline and Qatar Airways each fly to nine American cities daily. | And increasingly, it is targeting the United States. It has six daily flights to the United States, up from one six years ago, while Emirates Airline and Qatar Airways each fly to nine American cities daily. |
| James Hogan, Etihad’s chief executive, strikes an unapologetic tone. His mandate, he said, is to make money for his shareholder, the government of Abu Dhabi, and be a showcase for its hometown, the capital of the United Arab Emirates. | James Hogan, Etihad’s chief executive, strikes an unapologetic tone. His mandate, he said, is to make money for his shareholder, the government of Abu Dhabi, and be a showcase for its hometown, the capital of the United Arab Emirates. |
| “Wherever you are in the world, you play to your advantage,” said Mr. Hogan, who is Australian. “What are we doing that’s so wrong? We are doing business in a tough environment. We are commercial. We have to be creative. We are giving customers choice.” | “Wherever you are in the world, you play to your advantage,” said Mr. Hogan, who is Australian. “What are we doing that’s so wrong? We are doing business in a tough environment. We are commercial. We have to be creative. We are giving customers choice.” |
| Etihad and the other Persian Gulf airlines operate the latest-generation airplanes, hire younger flight attendants and offer onboard perks, like bars and showers, that other carriers find frivolous. | Etihad and the other Persian Gulf airlines operate the latest-generation airplanes, hire younger flight attendants and offer onboard perks, like bars and showers, that other carriers find frivolous. |
| Some of the service stretches the definition of first class. Etihad, for example, sells a $20,000 one-way ticket that comes with a personal flight attendant it calls a butler, a bedroom and a private bathroom. The airline contends such extravagance — available on one Airbus A380 now — signals that anyone capable of such over-the-top luxury for a select few can also improve the lot in the back of the cabin. | Some of the service stretches the definition of first class. Etihad, for example, sells a $20,000 one-way ticket that comes with a personal flight attendant it calls a butler, a bedroom and a private bathroom. The airline contends such extravagance — available on one Airbus A380 now — signals that anyone capable of such over-the-top luxury for a select few can also improve the lot in the back of the cabin. |
| American carriers, Mr. Hogan said, had failed to adapt to a globalized economy and were trying to protect their business by blocking competitors. | American carriers, Mr. Hogan said, had failed to adapt to a globalized economy and were trying to protect their business by blocking competitors. |
| It is a charge American carriers reject. The Persian Gulf airlines, they respond, have received more than $38 billion in government subsidies, according to a 55-page dossier they have shared with government officials in recent weeks but have not made public. | It is a charge American carriers reject. The Persian Gulf airlines, they respond, have received more than $38 billion in government subsidies, according to a 55-page dossier they have shared with government officials in recent weeks but have not made public. |
| Etihad alone received $17 billion in government subsidies in the last 10 years, they say. This includes $6 billion in interest-free loans from the government of Abu Dhabi to buy new planes from Boeing and Airbus, and $6.5 billion to cover operating losses. | Etihad alone received $17 billion in government subsidies in the last 10 years, they say. This includes $6 billion in interest-free loans from the government of Abu Dhabi to buy new planes from Boeing and Airbus, and $6.5 billion to cover operating losses. |
| Etihad’s $640 million sponsorship of Manchester City, an English Premier League soccer club, was also paid by the government on behalf of the airline. | Etihad’s $640 million sponsorship of Manchester City, an English Premier League soccer club, was also paid by the government on behalf of the airline. |
| “Etihad’s argument fundamentally misunderstands the international consensus on the definition of ‘subsidy,’ ” the report said. “Given the company’s dismal financial performance over the last 10 years, if not for the subsidies, Etihad would have gone out of business.” | |
| Emirates, the biggest and oldest of the three, discloses its financial accounts, uses international auditors and posts regular quarterly profits. Etihad and Qatar Airways, on the other hand, have not opened their books to public scrutiny. | Emirates, the biggest and oldest of the three, discloses its financial accounts, uses international auditors and posts regular quarterly profits. Etihad and Qatar Airways, on the other hand, have not opened their books to public scrutiny. |
| Mr. Hogan declined to comment on the accusations raised by his rivals, saying he had not studied them carefully. He acknowledged that the airline had the support of its shareholder, but denied any of that amounted to subsidies. Etihad says it has been profitable since 2011. | Mr. Hogan declined to comment on the accusations raised by his rivals, saying he had not studied them carefully. He acknowledged that the airline had the support of its shareholder, but denied any of that amounted to subsidies. Etihad says it has been profitable since 2011. |
| “Like any new airline, there was seed money and there was shareholder equity,” Mr. Hogan said. | “Like any new airline, there was seed money and there was shareholder equity,” Mr. Hogan said. |
| It is not the first time that rivals or governments have sought to slow the growth of the Persian Gulf airlines. Restrictions against unlimited service from such carriers exist in Canada, Germany, China and South Korea, said Will Horton, an analyst at CAPA Centre for Aviation. | It is not the first time that rivals or governments have sought to slow the growth of the Persian Gulf airlines. Restrictions against unlimited service from such carriers exist in Canada, Germany, China and South Korea, said Will Horton, an analyst at CAPA Centre for Aviation. |
| But he said the attempt by American carriers to roll back open sky agreements was “unprecedented.” | But he said the attempt by American carriers to roll back open sky agreements was “unprecedented.” |
| “If the U.S. carriers can limit growth, that will impact the Gulf carriers,” Mr. Horton said. | “If the U.S. carriers can limit growth, that will impact the Gulf carriers,” Mr. Horton said. |
| The calls for limits come after the United States government last year opened a Customs and Border Protection pre-clearance facility in Abu Dhabi for passengers flying into the United States, a move that angered airlines like Delta. The facility was requested by the American government but is financed by Abu Dhabi, including salaries and lodging for the officers. | The calls for limits come after the United States government last year opened a Customs and Border Protection pre-clearance facility in Abu Dhabi for passengers flying into the United States, a move that angered airlines like Delta. The facility was requested by the American government but is financed by Abu Dhabi, including salaries and lodging for the officers. |
| “We manage Etihad with as much discipline as any U.S. carrier,” said James Mueller, a former United executive, who runs the airline’s sales operations. | “We manage Etihad with as much discipline as any U.S. carrier,” said James Mueller, a former United executive, who runs the airline’s sales operations. |
| Other aspects of the carrier’s strategy puzzle outsiders. Etihad has invested in a string of smaller airlines — including Airberlin, Air Serbia and Air Seychelles — to build its own network of airlines to compete with the world’s three big airline alliances — Star Alliance, SkyTeam and OneWorld. | Other aspects of the carrier’s strategy puzzle outsiders. Etihad has invested in a string of smaller airlines — including Airberlin, Air Serbia and Air Seychelles — to build its own network of airlines to compete with the world’s three big airline alliances — Star Alliance, SkyTeam and OneWorld. |
| It also paid 560 million euros, or $625 million, for 49 percent of Alitalia and other assets. | It also paid 560 million euros, or $625 million, for 49 percent of Alitalia and other assets. |
| Mr. Hogan said these partnerships would save money in the long run by making common purchases, and provide bigger network opportunities for all. Etihad had chosen that course, he said, because the major alliances would not enter partnerships with him. | Mr. Hogan said these partnerships would save money in the long run by making common purchases, and provide bigger network opportunities for all. Etihad had chosen that course, he said, because the major alliances would not enter partnerships with him. |
| The modern world of aviation can also make for strange bedfellows. While Delta is leading the charge against the Persian Gulf carriers, its partner Air France has a commercial deal with Etihad to share passengers on some routes. Alitalia is also a member of SkyTeam, which is also Delta’s alliance. | The modern world of aviation can also make for strange bedfellows. While Delta is leading the charge against the Persian Gulf carriers, its partner Air France has a commercial deal with Etihad to share passengers on some routes. Alitalia is also a member of SkyTeam, which is also Delta’s alliance. |
| Meanwhile, Etihad’s growth shows no sign of slowing. The airline received 250,000 applications for flight attendants last year. Each week, as many as 100 new trainees graduate from the airline’s six-and-a-half-week course. | Meanwhile, Etihad’s growth shows no sign of slowing. The airline received 250,000 applications for flight attendants last year. Each week, as many as 100 new trainees graduate from the airline’s six-and-a-half-week course. |
| Employees accept the airline’s basic bargain: they work long shifts but are given free housing, and there is no income tax to pay in the U.A.E. | Employees accept the airline’s basic bargain: they work long shifts but are given free housing, and there is no income tax to pay in the U.A.E. |
| Etihad’s hiring policies could be seen as discriminatory in the United States and Europe, where employees are afforded labor protections that are absent in the Persian Gulf countries. | Etihad’s hiring policies could be seen as discriminatory in the United States and Europe, where employees are afforded labor protections that are absent in the Persian Gulf countries. |
| During training, new recruits use an automated cabin that can simulate emergencies — like smoke filling the cabin or crash landings that require a fast response from the crew. | During training, new recruits use an automated cabin that can simulate emergencies — like smoke filling the cabin or crash landings that require a fast response from the crew. |
| Crew members also learn how to sample wines and detect the differences among them. Female flight attendants are given guidelines for applying their makeup or pinning their hair. | Crew members also learn how to sample wines and detect the differences among them. Female flight attendants are given guidelines for applying their makeup or pinning their hair. |
| Aboard Etihad’s planes, attention to detail abounds as well. The airline has three sets of chopsticks, some rounded, some square, some metal, some wooden, depending on whether the flight is headed to China, South Korea or Japan. | Aboard Etihad’s planes, attention to detail abounds as well. The airline has three sets of chopsticks, some rounded, some square, some metal, some wooden, depending on whether the flight is headed to China, South Korea or Japan. |
| Passengers in coach are given pillows that can split open to serve as headrests. Night masks have a red side and a green side. Which one passengers expose indicates whether they want to sleep or be awakened by flight attendants at mealtime. “There is an advantage of having no legacy,” said Peter Baumgartner, Etihad’s chief commercial officer, pointing out that the airline can be more creative in its approach to business than traditional carriers. | Passengers in coach are given pillows that can split open to serve as headrests. Night masks have a red side and a green side. Which one passengers expose indicates whether they want to sleep or be awakened by flight attendants at mealtime. “There is an advantage of having no legacy,” said Peter Baumgartner, Etihad’s chief commercial officer, pointing out that the airline can be more creative in its approach to business than traditional carriers. |
| One recent morning, traffic was dense with dozens of flights departing to places like Hyderabad and Chennai, in India; Chengdu, China; Ho Chi Minh City, Vietnam; Muscat, Oman; and Bangkok. None of those cities are served directly by an American airline out of the United States. | One recent morning, traffic was dense with dozens of flights departing to places like Hyderabad and Chennai, in India; Chengdu, China; Ho Chi Minh City, Vietnam; Muscat, Oman; and Bangkok. None of those cities are served directly by an American airline out of the United States. |
| Ultimately, Mr. Horton said, Etihad is simply capitalizing on an opportunity. Delta and United do not fly to Abu Dhabi, and each only offers one flight daily to the vibrant commercial and touristic hub of Dubai. American Airlines has none. | Ultimately, Mr. Horton said, Etihad is simply capitalizing on an opportunity. Delta and United do not fly to Abu Dhabi, and each only offers one flight daily to the vibrant commercial and touristic hub of Dubai. American Airlines has none. |
| “If we look past all the rhetoric,” Mr. Horton said, “at the end of the day what the Gulf carriers do is transport passengers to markets U.S. airlines and their existing partners cannot adequately serve.” | “If we look past all the rhetoric,” Mr. Horton said, “at the end of the day what the Gulf carriers do is transport passengers to markets U.S. airlines and their existing partners cannot adequately serve.” |