The llonorable John Kerry 

ecretary 

United tates Department of tate 

2201 C treet, NW 

Washington, DC 20520 

The Honorable Anthony Foxx 

Secretary 

May 22,2015 

United tates Department of Transportation 

1200 New Jersey A venue, E 

Washington, DC 20590 

The Honorable Penny Pritzker 

Secretary 

United States Department of Commerce 

1401 Constitution Avenue. NW 

Washington, DC 20230 

~~VI 

<=TIH/~D A I RWAYS 

RE: Empirical Investigation and Analysis of Economic Issues Raised in "Restoring 

Open Skies: The Need to Address ubsidized Competition from State-Owned 

Airlines in Qatar and the U.A.E." 

Dear Secretaries Kerry, Foxx, and Pritzker, 

As noted during our meetings in March with your staff at the Departments of tate, 

Commerce, and Transportation, Etihad is preparing a comprehensive response to the 

allegations made by Delta, American, and United (the U.S. 3). However, as promised 

during those meetings, we are releasing certain parts of our response as they become 

available. The second of these is a report from Edgeworth Economics entitled "Empirical 

Investigation and Analysis of Economic Issues Raised in 'Restoring Open kies: The Need 

to Address ubsidized Competition from tate-Owned Airlines in Qatar and the U.A.E.' ," 

which was commissioned by Etihad Airways. 

The Edgeworth Report concludes that: 

• Traffic numbers to markets in which the U .. 3 compete with Etihad have increased 

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• For example, between 2009 and 2014, the U.S. 3 and their partners' economy 

passenger numbers between the U.S. and the Indian Subcontinent actually grew 

18%- premium traffic grew by 27%- despite losing market share; 

• Etihad's pricing on routes on which they compete with the U.S. 3 and their partners 

is competitive; and 

• Etihad's growth is not "excessive," as claimed by the U.S. 3, but rather is the result 

of increasing demand in emerging markets. 

The Edgeworth Report also analyzed the recent economic report by Compass Lexecon 

commissioned by the U.S. 3 to demonstrate the "harm" caused to them by the Gulf 

carriers' service to the U.S. Edgeworth found fatal flaws in the methods and conclusions 

therein: 

• The Compass report does not analyze the effect of the alleged conduct on fares, the 

standard of harm in the US-UAE bilateral air services agreement; 

• The Compass report fails to establish a causal link between the traffic analyses it 

presents and the alleged subsidies, a well-established legal benchmark for antitrust 

and competition issues; and 

• The Compass report assumes that incumbent carriers arc entitled to the passengers 

they serve and that new entrants must stimulate new traffic - a position inapposite 

in a competitive market. 

The Edgeworth Report leads to several inescapable conclusions: Etihad Airways is not 

violating the Open Skies agreement, is competing on market terms, is not "damaging'' U.S. 

carriers, and is benefiting consumers in all of the markets in which it competes. Further, 

the Compass Lexecon Report, which attempted to demonstrate "harm" to the U.S. 3, is 

fatally flawed and strikingly contradicts Compass Lexecon's own past analyses in favor of 

U.S. airline mergers. 

Yours sincerely, 

aghan 

General Counsel & Company Secretary 

Encl. 

901 151h 5tretl, NW 5ullt 610, washing1on, DC 20005 

Tel l-888·8 ETIHAO Fax: •1202 735·2620 

National Airline of The unned Arab Emlrales 

e!TM~D 

AIIWAYI 

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