after its launch in 2012. It is tipped for another crack at the UK, having received the first of a fleet of 15 Airbus A350s in August. After getting its fingers burned first time round, any resumption of the route
would see it operate a traditional, two-cabin, full-service concept. Whether it returns to Gatwick is debatable, as Cathay Pacific has since moved back in and is operating successfully. If Hong Kong Airlines can find slots at Heathrow, a codeshare with Virgin Atlantic would benefit both airlines. Meanwhile, Skyteam member China Southern has succeeded in getting an extra slot and launched a second daily Heathrow-Guangzhou service in June. Further north, Hainan Airlines established its Manchester-Beijing flight in June 2016, while Cathay Pacific goes daily to Hong Kong from December 1. This is good news for buyers – more choice means lower prices as established carriers are forced to respond. Tianjin Airlines’ UK general manager Robert Chen’s blunt statement that “a pricing penetration strategy will be adopted by Tianjin Airlines to win the UK market”, is a neat summation. As the favourable fuel price and investment environment continues, combined with the procurement of new-generation aircraft, more competitors will emerge. This may be a headache for legacy airlines, but it is a great opportunity for canny buyers looking for bargaining power.
Nothing ventured… JVs appear to be the key to ensuring that legacy carriers survive and thrive
legacy airlines are circling the wagons and having to work closer together than they ever imagined.
No one is immune: even the most cherished brands, such as
Virgin Atlantic, have had to adjust to the new reality. Sir Richard Branson’s airline is now effectively out of his control after he made the understandable decision in July to sell 31 per cent to Air France-KLM, whose SkyTeam partner Delta already owns 49 per cent. At the same time, Delta and another SkyTeam member, Shanghai’s China Eastern, each bought 10 per cent of Air France-KLM (just to complicate matters further, Delta already owns a 3.2 per cent slice of China Eastern). Virgin is a big brand, but in global terms, it’s a small player. It has wisely got closer to two very large players in a worldwide joint venture that will last at least 15 years. It will include Alitalia and is likely to see Virgin join SkyTeam. There will be the usual benefits for customers of lounge access and points redemption, but make no mistake, the benefits are for the airlines. The joint venture will include an associate partner scheme ‘at a later stage’ so buyers can expect more common-rated fares and, ultimately, less choice. UK buyers will be familiar with the existing joint venture between Delta and Virgin across the Atlantic. This deal will extend and replicate it on other key routes. Delta has been busy elsewhere; in June, it and Korean Air signed a trans-Pacific joint venture, extending an accord begun in 2000 when both carriers became co-founders of SkyTeam. The JV will create a combined network serving more than 290 destinations in the Americas and more than 80 in Asia. Ahead of the signing, Delta launched a nonstop service between Atlanta and Seoul, complementing Korean Air’s existing service. Korean Air has added a third flight between Los Angeles and Seoul, as well as a second between San
Francisco and Seoul. Together, the carriers are a sizeable force, accounting for 18 flights a day between Korea and the US. Meanwhile, American Airlines and Qantas have not had
approval for their joint trans-Pacific venture despite similar arrangements between Delta and Virgin Australia, and United and Air New Zealand. AA launched flights from Los Angeles to Sydney in late 2015 and from LA to Auckland in June last year thinking it would get approval for a joint venture with Oneworld partner Qantas. Australia and New Zealand agreed, with Australia acknowledging that the LA-Sydney route was not viable without a JV, but the Obama administration rejected it. This prompted AA to suspend its Auckland flights during low season and downgrade the Boeing 777 used to fly to Sydney to a smaller 787 this November. AA has said it will “re-file” its application hoping the Trump administration will assent. The carrier may have bigger things on its mind, however. In a joint effort, AA, United and Delta are fighting Emirates, Etihad and Qatar Airways in a long-running row over what the US carriers claim is unfair competition after the Gulf carriers launched a slew of US routes. The US airlines accuse their Middle East counterparts of starting these routes illegally. Qatar Airways announced in June that it would buy an initial 4.75 per cent stake in its US Oneworld partner, with plans to increase this to 10 per cent. It abandoned its plan in August, but not before AA announced it would end its codeshares with Qatar and Etihad from March 2018. AA said the decision was “an extension of our stance against the illegal subsidies that these carriers receive from their governments”. However, AA has maintained interline agreements with both carriers. In July the US State Department marked 25 years of open skies with a celebration. The atmosphere may have been frosty.
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