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Analysis
airline consolidation has all been internally generated. And even within Europe, where cross-border mergers have been more feasible, neither the Air France- KLM nor BA-Iberia mergers have so far proved a conspicuous success, although Air France is still considering a formal tie-up with Alitalia. Far better, it seems to some airlines, to opt for such vehicles as bilateral ‘joint business arrangements’. Finnair, for example, is joining the BA/Iberia- AA transatlantic JV in spite of all four carriers being in the Oneworld alliance, suggesting that the one-size-fits-all approach of traditional alliances may no longer work in all circumstances. Oneworld CEO Bruce Ashby not surprisingly defends the alliance model. “If you look at the travel between the top 100 business cities worldwide, 86 per cent of revenue is on alliances, so that tells me we’re not quite finished yet,” he says. Travel buyers are also becoming less certain about the benefits of
alliances. “I think the influence on choice of carrier is more around customer preference, such as loyalty schemes which at times help us with compliance and, therefore, deal take-up,” says Margaret Birse, travel buyer at Serco. “The issue for me is that there is rarely any financial benefit to
The one-size-fits-all approach of traditional alliances may no longer work in all circumstances
doing alliance deals, as each region/ airline will look at market share and, therefore, the potential to affect this with pricing.” She also points out that “while we have not historically done a lot with American, they are more interested in talking to us now as part of the alliance with BA.” Anda Zarina also thinks that “the bigger and more complex the alliances become, the more inefficiencies become apparent.” She finds it “extremely annoying in this
A GULF APART
WHEN QATAR AIRWAYS joins the Oneworld alliance – which it expects to do so before the end of the year – it will become the first of the fast-growing Gulf carriers to become a member of a traditional airline alliance. To many observers, the move is seen as a clear sign that the aggressive expansion over the past decade by the three major Gulf carriers – Emirates, Etihad and Qatar – has finally been officially recognised by the ‘legacy’ carriers of the Western world. But, ironically, Qatar could
become both the first and last Gulf airline to choose the alliance route to growth, at least for the foreseeable future. Qatar’s main Gulf rivals have adopted significantly different paths to expansion and, in doing so, have in effect provided a real-time case- study into the current wave of airline consolidation and growth strategies around the world. Both Emirates and Etihad are pursing policies which they believe can achieve
not only most of the benefits of belonging to an alliance – such as a wide route network – but also avoid some of the perceived drawbacks (for example, extra bureaucracy). Emirates made clear
its intention to upset the established order when, at Easter, it orchestrated a spectacular flight over Sydney Harbour by two Airbus A380s, one decked out in Emirates’ livery and the other in the colours of Australian carrier Qantas. The flypast – which Qantas says was the first time two commercial A380s have flown in such a formation – was marking the launch in April of a codeshare tie-up between the two airlines. The deal has meant Qantas
switching its ‘stopover hub’ from Singapore to Dubai, providing it with an increased number of destinations in Europe, the Middle East and Africa. Emirates, in return, gets access to Qantas’s domestic passengers. The move by Qantas and Emirates, first announced last autumn, to link
Emirates and Qantas flypast, Sydney
up in this way came as a major blow to British Airways and the Oneworld alliance of which Qantas is a member. BA had for some 17 years also operated a joint venture agreement with Qantas and at one stage held a minority investment in the airline, with plans for a full merger before it decided to join up with Iberia. Now that the BA-Qantas joint venture has been usurped by the Emirates deal, BA has had to put a brave face on losing its direct Qantas links. Rival Etihad has adopted
a different approach: taking minority stakes in several airlines around the world to give it a foothold in key markets. Hence, it owns some 29 per cent of Air Berlin, 40 per cent of Air Seychelles, 9 per cent of Virgin Australia
and 3 per cent of Aer Lingus – with the prospect of Etihad increasing its stake or making a full bid for the Irish carrier if Ryanair fails to overturn an EU ruling blocking its own takeover attempt. Etihad is also considering a rescue deal for struggling Serbian state airline Jat Airways, which could eventually see it taking up to a 49 per cent holding. It is perhaps ironic that
just as Qatar Airways gears up to join Oneworld that not only has Emirates caused a breach in the alliance with its Qantas deal, but Etihad is also potentially set to cause further schisms with its stake in Air Berlin – another Oneworld member. If it ever decided to launch a full bid for the German carrier, then that could be a real game-changer.
day and age” that basic technology kinks still exist in the system. “With KLM/Air Baltic, for example, you can buy a flight with a connection via Amsterdam but you can only check- in online for the flight operated by KLM,” she explains. “Once you get to Amsterdam, a traveller needs to find a check-in machine to print out a boarding pass for Air Baltic.”
WORSENING BUREAUCRACY But if buyers and travellers are worried now about apparent bureaucracy and inefficiencies in the current alliance and codeshare arrangements between airlines, then it is probably only going get worse as the demand for air travel surges – fuelled by emerging markets such as China and Brazil. Latest forecasts from the International Air Transport Association suggest that the world’s airlines will carry an extra 800 million passengers by 2016, to a total of 3.6 billion. You have been warned. n
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