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Etihad Airways rejects subsidy claims, attacks U.S. airline 'oligopoly'

An Etihad flight attendant is seen during a news conference at Malpensa Airport near Milan, October 20, 2014. REUTERS/Alessandro Garofalo

By Jeffrey Dastin

(Reuters) - Etihad Airways on Monday issued it strongest response yet to claims that it received market-distorting subsidies, saying it is required to repay loans and that its U.S. competitors have a "condescending" view of non-U.S. law.

The comments by the Abu Dhabi-based carrier mark its latest move to deter the Obama administration from revisiting aviation agreements with the United Arab Emirates and Qatar. U.S. airlines say more than $40 billion in subsidies from the countries have allowed Etihad, Emirates airline [EMIRA.UL] and Qatar Airways to begin driving down prices and push competitors out of certain markets, contrary to "Open Skies" agreements negotiated by the United States.

In a 60-page submission to the U.S. government Sunday made publicly available Monday, Etihad said U.S. Open Skies policy did not prohibit airlines from receiving shareholders loans. Etihad's sole shareholder, the government of Abu Dhabi, gave it $5.2 billion with "the express requirement that such loans be repaid by Etihad."

No international trade rules or precedent by the United States exists for addressing airline subsidy claims, complicating the U.S. government review of the matter.

Etihad said Open Skies policy does not define subsidy, but its main concern is to stop subsidies from lowering airfare artificially.

Citing a study it commissioned, Etihad said its published fares from April 2013 to March 2015 fell "generally" within the range of the fares of its opponents: namely, Delta Air Lines Inc, United Continental Holdings Inc and American Airlines Group Inc.

Other complaints by these airlines "take a very condescending view of non-U.S. law," Etihad added.

The U.S. airlines say Etihad has received a $501 million benefit because the UAE does not tax travelers connecting through its airports. Etihad said the rule applies to all carriers.

Etihad also said it funded its sponsorship of the Manchester City football club from its own liquidity, countering claims that Abu Dhabi covered the reportedly $640 million deal.

It summed the allegations as "little more than a regulatory attempt to further cement [U.S. airlines'] oligopoly."

Jill Zuckman, spokeswoman for the U.S airline-union Partnership for Open & Fair Skies, said in a statement, "Government to government consultations are entirely appropriate given that Etihad has taken billions of dollars in subsidies."

(Reporting by Jeffrey Dastin in Los Angeles; Editing by Bernard Orr)