An adjunct professor at Georgetown University, Washington D.C. has accused both Etihad and Qatar Airways of “accounting gimmicks” in their annual financial results. Rob Britton, who teaches two specialized MBA electives at Georgetown, claims the two airlines have “cooked the books” – in fact, performing much worse than either airline claims and losing millions of dollars each year.
The accusations were made by Britton in a blog post published on the popular American news site, HuffPost. He points to reports made by forensic accountants who have studied the financial results of both Qatar and Etihad Airways in depth – if true, it does not look good for either airline.
In May, Qatar Airways published its results for 2016 in which the airline said it had made a profit of $540 million USD. Yet, that’s not what the financial investigators have concluded – they, instead, found Qatar Airways had actually lost $703 million USD. That’s on top of alleged state subsidies coming to a staggering $491 million USD. Britton laid waste to Qatar’s published results, calling them simply “bogus.”
Meanwhile, Etihad Airways only recently admitted to having lost a huge $1.87 billion USD in 2016. Yet Britton claims the financial situation at Etihad is even worse than that. In 2015, Etihad said it had made a profit $103 million USD. Not true, says Britton. Instead, the Abu Dhabi-based airline lost a whopping $2.06 billion in 2015 – on top of $1.7 billion USD in government subsidies. 2014 wasn’t much better either – allegedly Etihad had an “operating loss of $1.4 billion and subsidies of $2.6 billion in its 2014 fiscal year.”
Could the claims be biased against Etihad and Qatar Airways?
But here’s where things get complicated. Because Britton may well have a slightly vested interest. Between 1987 to 2009, the professor worked at American Airlines in a variety of senior management roles. Before his time at American, he also had roles at now defunct Northwest Airlines and Republic Airlines.
He comes with years of experience in the aviation industry and clearly knows what he’s talking about. So much so that he regularly guest lectures at notable universities including Kellogg, Wharton, London Business School and the Stockholm School of Economics. But could he be biased when it comes to accusing Etihad and Qatar Airways (as well as fellow Middle East airline, Emirates) or violating Open Skies agreements?
After all, his work frequently appears on the website of airline lobby group, the Partnership for Open and Fair Skies. Funded by American Airlines, Delta and United Airlines, the Partnership accuses the big Gulf airline’s of exploiting Open Skies agreements to “dominate global aviation.”
Are the Middle East airline’s violating ‘Open Skies’ agreements
As Britton puts it, the agreements give these airline’s “unlimited access to the U.S. market.” But he believe’s the subsidies that the government’s of Qatar and UAE are accused of giving to their respective airline’s “distort competition and threaten U.S. companies, their employees, and the communities they serve.”
Of course, the Big 3 American carriers are no strangers to subsidies either. But here’s the point – it’s one thing to accept a subsidy to fund an otherwise unprofitable route that no other airline would be willing to fly. Or perhaps to save an airline from bankruptcy following the biggest terrorist atrocity in history.
It’s quite another to throw huge subsidies at airline’s operating what would be popular routes with plenty of competition. The fear put forward by some American carriers is that the Gulf airlines are deliberately operating at a loss in order to put U.S. airlines out of business.
There’s plenty of debate on both sides and the claims made by Rob Britton aren’t quite the smoking gun that he would probably hope they would be. This debate will no doubt continue to rage for some time.