airline alliances
TRANSCRIPT
special report:alliances 2013
september 2013
Major events have reshaped the alliances’ networks such as TAM’s decision to leave Star for Oneworld, soon be joined by one of the Gulf mega-carriers, Qatar Airways. North Atlantic joint ventures have developed further with the tie-up between Delta and Virgin, while the pace of liberalisation in aviation remains frustratingly slow
SPECIAL REPORT ALLIANCES
� ightglobal.com/airlines September 2013 | Airline Business | 29
30 Changing partners A graphical snapshot of orbital changes around the alliances
32 Joined-up thinking How transatlantic partnerships are developing further
36 Alliance survey Our annual analysis and survey of the world’s codeshares and
partnerships for the three major alliances and leading unaligned carriers
41 Choosing wisely Partnerships that drive volume are not necessarily pro� table
42 Laboured progress Liberalisation is a slow process encumbered by self-interest
CONTENTS
All our special reports are available online at fl ightglobal.com/airlines
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ALLIANCES SNAPSHOT
September 2013 | Airline Business | 3130 | Airline Business | September 2013
Xxxxx xxxxx xxxxxxx IT, read our analysis with Lion Air chief executive Xxxxxxx Xxxxxxxxxx fl ightglobal.com/??????????
Joining 2014
Joining 2014
Joining 2013
Equity and codeshare deal with Air Berlin
JV with Qantas
Leaving Star to join Oneworld through
LATAM merger
Leaving Star to join Oneworld through American merger
Partnerships with SIA and Air New Zealand
Partnership with Delta
Codeshare with Air France-KLM
JV with Delta
JV with Delta
EMIRATES
CHANGING PARTNERSAn increasing taste for mergers and joint ventures, both inside and outside the major groupings, continues to see the evolution of the alliance worlds
SRILANKAN AIRLINES
HEADER: ALLIANCES: SNAPSHOT HEADLINE: CHANGING PARTNERS STANDFIRST:An increasing taste for mergers and joint venture, both inside and outside of the major groupings, continues to see the evolution of the alliance worlds Some small correction on the text boxes next to the circles: ONEWORLDFor Etihad – can we change the word-ing to: Equity and codeshare deal with Air BerlinFor TAM – can we change the wording to: Leaving Star to join Oneworld through LATAM mergerFor US Airways – can we change the wording to: Leaving Star to join One-world through American merger SKYTEAMGO! Should be GOL (there is an airline Go! By the way) and can we change the wording to:Partnership with Delta STAR ALLIANCESVirgin Australia – can we change the wording to: partnerships with SIA and ANZ
VIRGIN AUSTRALIA
VIRGIN ATLANTIC
ETIHADUS
AIRWAYS
TAM
VIRGIN AUSTRALIA
GARUDA INDONESIA
QATAR AIRWAYS
GOLETIHAD
STAR ALLIANCE
SKYTEAM
ONEWORLD
28 MEMBERS
18 MEMBERS
12 MEMBERS
� ightglobal.com/ab � ightglobal.com/ab
ALLIANCES SNAPSHOT
September 2013 | Airline Business | 3130 | Airline Business | September 2013
Xxxxx xxxxx xxxxxxx IT, read our analysis with Lion Air chief executive Xxxxxxx Xxxxxxxxxx fl ightglobal.com/??????????
Joining 2014
Joining 2014
Joining 2013
Equity and codeshare deal with Air Berlin
JV with Qantas
Leaving Star to join Oneworld through
LATAM merger
Leaving Star to join Oneworld through American merger
Partnerships with SIA and Air New Zealand
Partnership with Delta
Codeshare with Air France-KLM
JV with Delta
JV with Delta
EMIRATES
CHANGING PARTNERSAn increasing taste for mergers and joint ventures, both inside and outside the major groupings, continues to see the evolution of the alliance worlds
SRILANKAN AIRLINES
HEADER: ALLIANCES: SNAPSHOT HEADLINE: CHANGING PARTNERS STANDFIRST:An increasing taste for mergers and joint venture, both inside and outside of the major groupings, continues to see the evolution of the alliance worlds Some small correction on the text boxes next to the circles: ONEWORLDFor Etihad – can we change the word-ing to: Equity and codeshare deal with Air BerlinFor TAM – can we change the wording to: Leaving Star to join Oneworld through LATAM mergerFor US Airways – can we change the wording to: Leaving Star to join One-world through American merger SKYTEAMGO! Should be GOL (there is an airline Go! By the way) and can we change the wording to:Partnership with Delta STAR ALLIANCESVirgin Australia – can we change the wording to: partnerships with SIA and ANZ
VIRGIN AUSTRALIA
VIRGIN ATLANTIC
ETIHADUS
AIRWAYS
TAM
VIRGIN AUSTRALIA
GARUDA INDONESIA
QATAR AIRWAYS
GOLETIHAD
STAR ALLIANCE
SKYTEAM
ONEWORLD
28 MEMBERS
18 MEMBERS
12 MEMBERS
� ightglobal.com/ab � ightglobal.com/ab
gin Atlantic (the Delta-Virgin Atlantic joint venture will be separate from the existing partnership, but all fi ve parties will co-ordi-nate on traffi c fl ows in the market); and United Airlines, Air Canada and Lufthansa.
Yet these changes are being accepted by the industry.
“Despite these moves by Delta and Virgin, we are confi dent that American and its joint business partners will continue to offer cus-tomers the most attractive products and services and most compelling value propo-sition across the transatlantic [route],” says Kurt Stache, vice-president of strategic alli-ances at American.
American and its joint-venture partners will see their share jump to a little more than 24% from nearly 20% once US Airways is included, based on Flightglobal/Innovata’s September ASK data.
By comparison, Delta’s existing joint ven-ture has a 23% share across the North Atlan-tic, according to Flightglobal/Innovata data. While its alliance with Virgin will be separate from that, its two joint ventures together will have more than a 28% share.
“Obviously the [Delta-Virgin Atlantic] deal will strengthen Delta but, when we look at our relative strength across the Atlantic, we feel very good about it,” says Star Alliance chief executive Mark Schwab. Star includes the existing Air Canada, Lufthansa and United alliance, which has a market share of nearly 27%, according to Flightglobal/Innovata.
On the impending departure of US Air-ways Schwab says: “We strongly believe that fair competition among alliances – strong, high-quality and running sustainable busi-nesses – is in the best interest of both global and national economies.”
CAPACITY STASISCapacity across the Atlantic remains rela-tively fl at, with airlines remaining disci-plined, continuing a multi-year trend. Flight-global/Innovata data shows that there are 25.7 million ASKs scheduled in September, which is up by 1.2% compared to 2012 but down by about 1% since 2011.
Airlines are praising this trend. “We’ve right-sized our footprint in Europe over the last several quarters, and the improvement in our transatlantic unit revenue results this quarter illustrates the benefi t of capacity dis-
ALLIANCES SURVEY
September 2013 | Airline Business | 3332 | Airline Business | September 2013
Drop cap this is a nested style so should come in
with the right font and colour. There is a trick to make the edge of the character butt up fl ush to the grid – Make the drop cap count 2, type a space in front of the drop cap then kern the space to -200 or less until Regionals looks right!
CROSS HEADMelior / NI
Melior / I
JOINED-UP THINKINGTransatlantic tie-ups remain disciplined on capacity and have developed through Delta’s deal with Virgin, meaning 75% of the lucrative market is within a partnership
“Quote and quote and quote, four lines is
probably maximum length to be interesting”
QUOTE – PERSON NAMEQuote – person details
■
For more on the transatlantic, see our earlier analysis at:fl ightglobal.com/transatlantic12
REPORTEDWARD RUSSELL WASHINGTON DC
■
“Fair competition among alliances is in the best
interest of both global and national economies”
MARK SCHWABChief executive, Star Alliance
“Quote and quote and quote, four lines is
probably maximum length to be interesting”
QUOTE – PERSON NAMEQuote – person details
FIRSTNAME SURNAME LOCATION
TWO DECK HEADLINE HERE PLEASE
Text here please or bold up text to break up orBox text indent
CROSS HEAD
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No more than three lines in here xxxxxxxxxxxxxxxxx
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REPORTAUTHOR WHERE?
Delta Air Lines broke with North Atlantic joint-venture conven-tion with its recent acquisition of a 49% stake in Virgin Atlan-tic from Singapore Airlines.
The move was a precursor to a new immu-nised joint venture between the UK and USA, and – Delta hopes – an even greater share of the lucrative market.
“This is quite bold and quite new,” says Craig Jenks, president of consultancy Air-line/Aviation Projects. “In the whole history of North Atlantic alliances and joint ven-tures, this is much bolder than anything else we’ve seen.”
The deal is the fi rst in which a US carrier has taken a signifi cant equity stake in a Euro-pean carrier, as Delta and Virgin point out in their joint application for antitrust immunity to the US Department of Transportation. It is also the fi rst such transaction that includes a metal-neutral immunised alliance.
Lufthansa Group’s purchase of a 16% stake in JetBlue Airways for about $300 million in 2007 and British Airways’ investment of about $400 million for a 24.6% stake in then USAir (now US Airways) in 1994 included codeshares and, in the case of the latter, a joint marketing agreement, but neither went as far as the Delta and Virgin deal.
The new partnership is off to a strong start. Ed Bastian, president of Atlanta-based Delta, said in July that a codeshare between the car-
riers had generated $8 million in joint sales during its fi rst three weeks and that it antici-pated further revenue and yield improve-ments once the joint venture is in place.
The carriers plan to launch their alliance by 1 January 2014, subject to receiving anti-trust immunity, according to Bastian. They have already implemented a codeshare cov-ering 108 international routes, as well as reciprocal frequent-fl yer and lounge mem-ber benefi ts.
TIDYING UP LOOSE ENDSNot all matters related to the planned alliance are resolved.
Connections at New York JFK and Lon-don Heathrow could be hampered by nota-bly long processing times for arriving inter-national passengers in JFK terminal 4 – where the majority of fl ights on Delta and Virgin arrive and depart – and the carriers’ scattered operations in terminals 1, 3 and 4 at Heathrow.
Wayne Aaron, senior vice-president for alliances and partner development at Delta, says that they are in discussions with airport operator Heathrow Airports Holdings about what options are available to consolidate their joint operations and adds that their goal is to “fi nd the best way to co-locate at any air-port we serve”.
The fact that Virgin is not a member of SkyTeam like Delta, is another unresolved
matter. The carrier has said that it would con-sider membership in the future, but has no plans to join at the current time. The airlines’ tie-up marks the inclusion of the largest remaining unaligned segment of capac-ity across the North Atlantic in an immunised alliance. This will bring the share of transat-lantic capacity included in a joint venture to about 75% of the market, based on Flightglo-bal/Innovata data for September.
Looking further out, the merger of US Air-ways and American Airlines, if it succeeds in
its fi ght against a US Justice Department chal-lenge to the deal, would mean the next larg-est available share of transatlantic capacity joining a metal-neutral alliance and result in nearly 80% of capacity in the market being covered by one of the joint ventures, Flight-global/Innovata shows.
Should this happen then nearly 80% of transatlantic capacity would be priced and marketed by essentially only three players: American, British Airways, Finnair and Ibe-ria; Delta, Air France, Alitalia, KLM and Vir-
cipline,” said James Compton, chief revenue offi cer at United, in July.
United saw passenger unit revenues rise by 6.1% while it cut capacity by 1.3% across the Atlantic during the second quarter, com-pared to a year earlier.
Passenger unit revenues in the market improved by 6.8% at American, 1.4% at Delta and 4% at US Airways during the three months ending in June versus 2012. The US Airways gain even occurred as the Arizona-based carrier bucked the trend by increasing capacity by 5% during the period.
“We’ve had great results from getting actual corporate accounts in Europe signed up,” said Scott Kirby, president of US Air-ways, in July. “We historically haven’t done that as aggressively three or four years ago.”
Jenks says that capacity discipline across the Atlantic is likely to stay, especially as an increasing share of capacity in the market is covered by metal-neutral joint ventures.
“We’re in the early part of an upturn, if [history] repeats itself in a 10-year cycle,” he says. “The early upturn period is one of retrenchment. It’s an environment where growth is not the answer.”
THREATS ON THE HORIZONThe addition of fl ights by Gulf carriers or a new long-haul, low-cost carrier could upset the market, says Jenks. Emirates plans to launch fl ights between Milan and New York from 1 October, and it recently came to light that the carrier has the authority to fl y between the UK and USA, if it chooses to do so.
Ryanair chief Michael O’Leary said at the Paris air show in June that he “would love to do a transatlantic low-fare airline”, although he tempered his remarks by adding that he does not see an opportunity in the market until the “backlog of deliveries on the long-haul aircraft is worked through – both by Air-bus and Boeing”.
The addition of either Emirates or an O’Leary-run low-cost carrier would certainly change the dynamic across the North Atlan-tic. Additional capacity and lower fares alone could reverse the unit revenue gains that air-lines are reporting, not to mention the greater variation in product competition.
“The North Atlantic is the most competi-tive international market in the world,” says Schwab. It is this undeniable fact that keeps airlines on their toes and in constant search for the value proposition that will give them the strongest position in the market – as the Delta-Virgin deal and, to a lesser degree, the potential US Airways-American merger should it still happen, indicate. ■
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gin Atlantic (the Delta-Virgin Atlantic joint venture will be separate from the existing partnership, but all fi ve parties will co-ordi-nate on traffi c fl ows in the market); and United Airlines, Air Canada and Lufthansa.
Yet these changes are being accepted by the industry.
“Despite these moves by Delta and Virgin, we are confi dent that American and its joint business partners will continue to offer cus-tomers the most attractive products and services and most compelling value propo-sition across the transatlantic [route],” says Kurt Stache, vice-president of strategic alli-ances at American.
American and its joint-venture partners will see their share jump to a little more than 24% from nearly 20% once US Airways is included, based on Flightglobal/Innovata’s September ASK data.
By comparison, Delta’s existing joint ven-ture has a 23% share across the North Atlan-tic, according to Flightglobal/Innovata data. While its alliance with Virgin will be separate from that, its two joint ventures together will have more than a 28% share.
“Obviously the [Delta-Virgin Atlantic] deal will strengthen Delta but, when we look at our relative strength across the Atlantic, we feel very good about it,” says Star Alliance chief executive Mark Schwab. Star includes the existing Air Canada, Lufthansa and United alliance, which has a market share of nearly 27%, according to Flightglobal/Innovata.
On the impending departure of US Air-ways Schwab says: “We strongly believe that fair competition among alliances – strong, high-quality and running sustainable busi-nesses – is in the best interest of both global and national economies.”
CAPACITY STASISCapacity across the Atlantic remains rela-tively fl at, with airlines remaining disci-plined, continuing a multi-year trend. Flight-global/Innovata data shows that there are 25.7 million ASKs scheduled in September, which is up by 1.2% compared to 2012 but down by about 1% since 2011.
Airlines are praising this trend. “We’ve right-sized our footprint in Europe over the last several quarters, and the improvement in our transatlantic unit revenue results this quarter illustrates the benefi t of capacity dis-
ALLIANCES SURVEY
September 2013 | Airline Business | 3332 | Airline Business | September 2013
Drop cap this is a nested style so should come in
with the right font and colour. There is a trick to make the edge of the character butt up fl ush to the grid – Make the drop cap count 2, type a space in front of the drop cap then kern the space to -200 or less until Regionals looks right!
CROSS HEADMelior / NI
Melior / I
JOINED-UP THINKINGTransatlantic tie-ups remain disciplined on capacity and have developed through Delta’s deal with Virgin, meaning 75% of the lucrative market is within a partnership
“Quote and quote and quote, four lines is
probably maximum length to be interesting”
QUOTE – PERSON NAMEQuote – person details
■
For more on the transatlantic, see our earlier analysis at:fl ightglobal.com/transatlantic12
REPORTEDWARD RUSSELL WASHINGTON DC
■
“Fair competition among alliances is in the best
interest of both global and national economies”
MARK SCHWABChief executive, Star Alliance
“Quote and quote and quote, four lines is
probably maximum length to be interesting”
QUOTE – PERSON NAMEQuote – person details
FIRSTNAME SURNAME LOCATION
TWO DECK HEADLINE HERE PLEASE
Text here please or bold up text to break up orBox text indent
CROSS HEAD
No more than three lines in here xxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxx
x%
No more than three lines in here xxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxx
x%
■
Picture - caption. Style for caption
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ure
- cre
dit s
tyle
Xxxxx xxxxx xxxxxxxxx, read our analysis with xxxxxxxx chief executive Xxxxxxx Xxxxxxxxxx fl ightglobal.com/??????????
REPORTAUTHOR WHERE?
Delta Air Lines broke with North Atlantic joint-venture conven-tion with its recent acquisition of a 49% stake in Virgin Atlan-tic from Singapore Airlines.
The move was a precursor to a new immu-nised joint venture between the UK and USA, and – Delta hopes – an even greater share of the lucrative market.
“This is quite bold and quite new,” says Craig Jenks, president of consultancy Air-line/Aviation Projects. “In the whole history of North Atlantic alliances and joint ven-tures, this is much bolder than anything else we’ve seen.”
The deal is the fi rst in which a US carrier has taken a signifi cant equity stake in a Euro-pean carrier, as Delta and Virgin point out in their joint application for antitrust immunity to the US Department of Transportation. It is also the fi rst such transaction that includes a metal-neutral immunised alliance.
Lufthansa Group’s purchase of a 16% stake in JetBlue Airways for about $300 million in 2007 and British Airways’ investment of about $400 million for a 24.6% stake in then USAir (now US Airways) in 1994 included codeshares and, in the case of the latter, a joint marketing agreement, but neither went as far as the Delta and Virgin deal.
The new partnership is off to a strong start. Ed Bastian, president of Atlanta-based Delta, said in July that a codeshare between the car-
riers had generated $8 million in joint sales during its fi rst three weeks and that it antici-pated further revenue and yield improve-ments once the joint venture is in place.
The carriers plan to launch their alliance by 1 January 2014, subject to receiving anti-trust immunity, according to Bastian. They have already implemented a codeshare cov-ering 108 international routes, as well as reciprocal frequent-fl yer and lounge mem-ber benefi ts.
TIDYING UP LOOSE ENDSNot all matters related to the planned alliance are resolved.
Connections at New York JFK and Lon-don Heathrow could be hampered by nota-bly long processing times for arriving inter-national passengers in JFK terminal 4 – where the majority of fl ights on Delta and Virgin arrive and depart – and the carriers’ scattered operations in terminals 1, 3 and 4 at Heathrow.
Wayne Aaron, senior vice-president for alliances and partner development at Delta, says that they are in discussions with airport operator Heathrow Airports Holdings about what options are available to consolidate their joint operations and adds that their goal is to “fi nd the best way to co-locate at any air-port we serve”.
The fact that Virgin is not a member of SkyTeam like Delta, is another unresolved
matter. The carrier has said that it would con-sider membership in the future, but has no plans to join at the current time. The airlines’ tie-up marks the inclusion of the largest remaining unaligned segment of capac-ity across the North Atlantic in an immunised alliance. This will bring the share of transat-lantic capacity included in a joint venture to about 75% of the market, based on Flightglo-bal/Innovata data for September.
Looking further out, the merger of US Air-ways and American Airlines, if it succeeds in
its fi ght against a US Justice Department chal-lenge to the deal, would mean the next larg-est available share of transatlantic capacity joining a metal-neutral alliance and result in nearly 80% of capacity in the market being covered by one of the joint ventures, Flight-global/Innovata shows.
Should this happen then nearly 80% of transatlantic capacity would be priced and marketed by essentially only three players: American, British Airways, Finnair and Ibe-ria; Delta, Air France, Alitalia, KLM and Vir-
cipline,” said James Compton, chief revenue offi cer at United, in July.
United saw passenger unit revenues rise by 6.1% while it cut capacity by 1.3% across the Atlantic during the second quarter, com-pared to a year earlier.
Passenger unit revenues in the market improved by 6.8% at American, 1.4% at Delta and 4% at US Airways during the three months ending in June versus 2012. The US Airways gain even occurred as the Arizona-based carrier bucked the trend by increasing capacity by 5% during the period.
“We’ve had great results from getting actual corporate accounts in Europe signed up,” said Scott Kirby, president of US Air-ways, in July. “We historically haven’t done that as aggressively three or four years ago.”
Jenks says that capacity discipline across the Atlantic is likely to stay, especially as an increasing share of capacity in the market is covered by metal-neutral joint ventures.
“We’re in the early part of an upturn, if [history] repeats itself in a 10-year cycle,” he says. “The early upturn period is one of retrenchment. It’s an environment where growth is not the answer.”
THREATS ON THE HORIZONThe addition of fl ights by Gulf carriers or a new long-haul, low-cost carrier could upset the market, says Jenks. Emirates plans to launch fl ights between Milan and New York from 1 October, and it recently came to light that the carrier has the authority to fl y between the UK and USA, if it chooses to do so.
Ryanair chief Michael O’Leary said at the Paris air show in June that he “would love to do a transatlantic low-fare airline”, although he tempered his remarks by adding that he does not see an opportunity in the market until the “backlog of deliveries on the long-haul aircraft is worked through – both by Air-bus and Boeing”.
The addition of either Emirates or an O’Leary-run low-cost carrier would certainly change the dynamic across the North Atlan-tic. Additional capacity and lower fares alone could reverse the unit revenue gains that air-lines are reporting, not to mention the greater variation in product competition.
“The North Atlantic is the most competi-tive international market in the world,” says Schwab. It is this undeniable fact that keeps airlines on their toes and in constant search for the value proposition that will give them the strongest position in the market – as the Delta-Virgin deal and, to a lesser degree, the potential US Airways-American merger should it still happen, indicate. ■
Rex
Feat
ures
� ightglobal.com/ab36 | Airline Business | September 2013 September 2013 | Airline Business | 37� ightglobal.com/ab
ALLIANCES SURVEY
DATA COMPILED BY IAN JOYCE OF FLIGHTGLOBAL DATA RESEARCH ANALYSIS BY GRAHAM DUNN & FLIGHTGLOBAL INSIGHT
AIRLINE ALLIANCE SURVEYOur annual audit of the industry's groupings details new codeshares and joint venture developments for members of the global alliances featured in the Airline Business Top 200 Traf� c Rankings, as well as those for major non-aligned carriers
Star Alliance is the largest of the global alliances, but while it recently added another partner in Asia, it will lose one, and potentially two, members as a result of merger moves.
Taiwanese carrier Eva Air became Star's 28th member in June, positioning the alliance to bene� t from further development in cross-strait traf� c as well as reinforcing Asia-Europe and North America � ows. It complements Star's existing Chinese partners Air China and Shenzhen Airlines.
Shakeel Adam, managing partner at Aviado Partners, sees the addition of Eva as key in building its presence in the region – especially given the strength of SkyTeam, which in addition to its mainland Chinese partners also has Taiwanese operator China Airlines.
But Star could lose two members as a result of consolidation. US Airways' merger with American Airlines will – assuming regulatory hurdles to the deal are overcome –
see US Airways switch to Oneworld as part of the enlarged entity. Meanwhile, long-running uncertainty over the alliance future of the merged LATAM Airlines has � nally been settled, as TAM will follow LAN into Oneworld.
Star chief executive Mark Schwab says US Airways' departure for Oneworld will be good for competition. "We strongly believe that fair competition among alliances – strong, high-quality [and] running sustainable businesses – is in the best interest of both global and national economies," says Schwab. He says the same is true of TAM's alliance decision, and notes Star will remain the largest of the alliances.
But the departure of TAM, just three years after it joined Star, leaves the alliance back at square one in Brazil, for a second time. Star turned to TAM to � ll a void following the collapse of its previous Brazilian partner Varig. While Brazil's second-largest carrier Gol
remains unaligned, it has close links to SkyTeam through its partnership with stakeholder Delta Air Lines. While the enlarged Avianca is now a Star member, its Brazilian subsidiary Avianca Brazil is not yet.
After years of regular additions to the alliance, there are no pending new members set for Star. India and Russia remain key areas without a member. Star had lined up Air India to join, but that – like other potential alliance moves in India – has hit the buffers.
Much of the activity among individual alliance members has been around joint business partnerships. Alongside the transatlantic joint venture established by Air Canada, Lufthansa Group and United Airlines, these carriers are at the centre of joint ventures rolled into Japan with All Nippon Airways. Air Canada and United Airlines, meanwhile, have implemented their joint venture on US-Canadian services.
STAR ALLIANCE
STAR ALIGNS MEMBERS AS CONSOLIDATION GRIPS
GLOBAL ALLIANCES IN NUMBERS
ADRIA AIRWAYSMember since: 2004Codeshares: 10
AEGEAN AIRLINESMember since: 2010Codeshares: 6Partners/stakes: Planned merger with Olympic Air under review by European Commission
AIR CANADAMember since: 1997Codeshares: 25New codeshares: 2 (Aer Lingus, Etihad)Partners/stakes: Joint venture with United Airlines on USA-Canada flights, and with Lufthansa and United Airlines on flights to Europe
AIR CHINAMember since: 2007Codeshares: 27Partners/stakes: Holds a 30% stake in Oneworld carrier Cathay Pacific, while also holding majority stakes in Dalian Airlines (80%), and Shenzhen Airlines (51%), as well as a 31% stake in Tibet Airlines.
SHENZHEN AIRLINESMember since: 2012Codeshares: 7New codeshares: 1 (Silk Air)Partners/stakes: Part of Air China group, 80% stake in Kunming
SINGAPORE AIRLINESMember since: 2000Codeshares: 22Partners/stakes: Partnership with Virgin Australia, in which it has 20%
SOUTH AFRICAN AIRWAYSMember since: 2006Codeshares: 24New codeshares: 1 (Air Seychelles)
SWISS INT'L AIR LINESMember since: 2006Codeshares: 27Partners/stakes: Lufthansa Group carrier and part of its transatlantic joint venture with United Airlines and with ANA on Japanese routes
TAMMember since: 2010Codeshares: 16New codeshares: 1 (American)Partners/stakes: Will move from Star into Oneworld following merger with LAN to create LATAM
TAP PORTUGALMember since: 2005Codeshares: 27New codeshares: 1 (Emirates)
THAI AIRWAYSMember since: 1997Codeshares: 29Partners/stakes: Nok Air (49%)
TURKISH AIRLINESMember since: 2008Codeshares: 29New codeshares: 1 (SAS)
UNITED AIRLINESMember since: 1997Codeshares: 25Partners/stakes: Joint venture with Air Canada/Lufthansa group on transatlantic, ANA on Japan flights, Air Canada on Canada flights
US AIRWAYSMember since: 2004Codeshares: 19Partners/stakes: Set to leave Star Alliance for Oneworld if merger with American Airlines is completed
FIRSTNAME SURNAME LOCATIONV
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CROSS HEAD
NOTES: Based on RPKs for 2012 Top 200 passenger rankings and alliance members outside top 200
Other38.8%
SkyTeam20.1%
Star Alliance26.2%
Oneworld14.9%
ALLIANCES: MARKET SHARE
NOTES: Based on RPKs for 2010 Top 200 passenger rankings and alliance members outside top 200. SOURCE: Airline Business 2010 World Airline Rankings
ALLIANCES 2010MARKET SHARE
61.2%Alliance traf� c share
SKYTEAM
Revenue $145bnNet pro� t $0.5bn
Operating pro� t $3.7bn
ONEWORLD
Net loss$-1.7bn
Revenue $122bnOperating pro� t $2.0bn
SOURCE: Airline Business World Airline Rankings
STAR ALLIANCE
Net pro� t $3.8bn
Operating pro� t $6.6bn$202bnRevenue
ALLIANCE NETWORKS WEEKLY SCHEDULED OPERATIONS
Weekly global operations September 2013 Destinations Countries Frequencies Capacity (ASK)
Total Duplicates served (’000) (Bn) Share
Star Alliance 1,190 529 195 157 38.6 26.4%Oneworld 825 226 157 65 20.5 14.0%SkyTeam 957 345 178 105 26.9 18.4%TOTAL ALLIANCES 86.0 58.9%NOTES: Analysis based on weekly Innovata schedules for 9-15 September 2013. ASK=Available seat-kilometre. 1 mile=1.609km. Share is of total non-stop scheduled capacity offered. Destinations are airports served.
AIR NEW ZEALANDMember since: 1999Codeshares: 19Partners/stakes: Joint venture on Trans-Tasman routes with Virgin Australia, in which it owns 23%
ALL NIPPON AIRWAYSMember since: 1999Codeshares: 33Partners/stakes: Joint venture with United Airlines on flights between Japan-USA, and with Austrian, Luftansa and Swiss to Europe. Minority stake in Japanese LCC Peach Airlines and has taken full control of AirAsia Japan
ASIANA AIRLINESMember since: 2003Codeshares: 24Partners/stakes: Air Busan (46% )
AUSTRIANMember since: 2000Codeshares: 31Partners/stakes: Lufthansa Group carrier and part of its transatlantic joint venture with United Airlines and with ANA on Japanese routes
AVIANCAMember since: 2012Codeshares: 8Partners/stakes: Operating under common Avianca brand after completing TACA merger
BRUSSELS AIRLINESMember since: 2009Codeshares: 28Partners/stakes: Lufthansa Group carrier and part of its transtlantic joint venture with United Airlines
COPA AIRLINESMember since: 2012Codeshares: 7A AIRWAYSCROATIA AIRLINES
Member since: 2004Codeshares: 8
EGYPTAIRMember since: 2008Codeshares: 22
ETHIOPIAN AIRLINESMember since: 2009Codeshares: 16New codeshares: 1 (Oman Air)
EVA AIRMember since: 2013Codeshares: 11Partners/stakes: China Cargo Airlines (16%)
LOT POLISH AIRLINESMember since: 2003Codeshares: 23
LUFTHANSAMember since: 1997Codeshares: 34Partners/stakes: Lufthansa Group includes wholly-owned Germanwings, Swiss International Air Lines, Eurowings, and part-owned Air Dolomiti and Brussels AIrlines. Also owns 19% of JetBlue. Joint ventures with group partners from Europe to North America with Air Canada and United Airways and to Japan with ANA
SCANDINAVIAN AIRLINESMember since: 1997Codeshares: 24New codeshares: 1 (Turkish Airlines)
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ALLIANCES SURVEY
DATA COMPILED BY IAN JOYCE OF FLIGHTGLOBAL DATA RESEARCH ANALYSIS BY GRAHAM DUNN & FLIGHTGLOBAL INSIGHT
AIRLINE ALLIANCE SURVEYOur annual audit of the industry's groupings details new codeshares and joint venture developments for members of the global alliances featured in the Airline Business Top 200 Traf� c Rankings, as well as those for major non-aligned carriers
Star Alliance is the largest of the global alliances, but while it recently added another partner in Asia, it will lose one, and potentially two, members as a result of merger moves.
Taiwanese carrier Eva Air became Star's 28th member in June, positioning the alliance to bene� t from further development in cross-strait traf� c as well as reinforcing Asia-Europe and North America � ows. It complements Star's existing Chinese partners Air China and Shenzhen Airlines.
Shakeel Adam, managing partner at Aviado Partners, sees the addition of Eva as key in building its presence in the region – especially given the strength of SkyTeam, which in addition to its mainland Chinese partners also has Taiwanese operator China Airlines.
But Star could lose two members as a result of consolidation. US Airways' merger with American Airlines will – assuming regulatory hurdles to the deal are overcome –
see US Airways switch to Oneworld as part of the enlarged entity. Meanwhile, long-running uncertainty over the alliance future of the merged LATAM Airlines has � nally been settled, as TAM will follow LAN into Oneworld.
Star chief executive Mark Schwab says US Airways' departure for Oneworld will be good for competition. "We strongly believe that fair competition among alliances – strong, high-quality [and] running sustainable businesses – is in the best interest of both global and national economies," says Schwab. He says the same is true of TAM's alliance decision, and notes Star will remain the largest of the alliances.
But the departure of TAM, just three years after it joined Star, leaves the alliance back at square one in Brazil, for a second time. Star turned to TAM to � ll a void following the collapse of its previous Brazilian partner Varig. While Brazil's second-largest carrier Gol
remains unaligned, it has close links to SkyTeam through its partnership with stakeholder Delta Air Lines. While the enlarged Avianca is now a Star member, its Brazilian subsidiary Avianca Brazil is not yet.
After years of regular additions to the alliance, there are no pending new members set for Star. India and Russia remain key areas without a member. Star had lined up Air India to join, but that – like other potential alliance moves in India – has hit the buffers.
Much of the activity among individual alliance members has been around joint business partnerships. Alongside the transatlantic joint venture established by Air Canada, Lufthansa Group and United Airlines, these carriers are at the centre of joint ventures rolled into Japan with All Nippon Airways. Air Canada and United Airlines, meanwhile, have implemented their joint venture on US-Canadian services.
STAR ALLIANCE
STAR ALIGNS MEMBERS AS CONSOLIDATION GRIPS
GLOBAL ALLIANCES IN NUMBERS
ADRIA AIRWAYSMember since: 2004Codeshares: 10
AEGEAN AIRLINESMember since: 2010Codeshares: 6Partners/stakes: Planned merger with Olympic Air under review by European Commission
AIR CANADAMember since: 1997Codeshares: 25New codeshares: 2 (Aer Lingus, Etihad)Partners/stakes: Joint venture with United Airlines on USA-Canada flights, and with Lufthansa and United Airlines on flights to Europe
AIR CHINAMember since: 2007Codeshares: 27Partners/stakes: Holds a 30% stake in Oneworld carrier Cathay Pacific, while also holding majority stakes in Dalian Airlines (80%), and Shenzhen Airlines (51%), as well as a 31% stake in Tibet Airlines.
SHENZHEN AIRLINESMember since: 2012Codeshares: 7New codeshares: 1 (Silk Air)Partners/stakes: Part of Air China group, 80% stake in Kunming
SINGAPORE AIRLINESMember since: 2000Codeshares: 22Partners/stakes: Partnership with Virgin Australia, in which it has 20%
SOUTH AFRICAN AIRWAYSMember since: 2006Codeshares: 24New codeshares: 1 (Air Seychelles)
SWISS INT'L AIR LINESMember since: 2006Codeshares: 27Partners/stakes: Lufthansa Group carrier and part of its transatlantic joint venture with United Airlines and with ANA on Japanese routes
TAMMember since: 2010Codeshares: 16New codeshares: 1 (American)Partners/stakes: Will move from Star into Oneworld following merger with LAN to create LATAM
TAP PORTUGALMember since: 2005Codeshares: 27New codeshares: 1 (Emirates)
THAI AIRWAYSMember since: 1997Codeshares: 29Partners/stakes: Nok Air (49%)
TURKISH AIRLINESMember since: 2008Codeshares: 29New codeshares: 1 (SAS)
UNITED AIRLINESMember since: 1997Codeshares: 25Partners/stakes: Joint venture with Air Canada/Lufthansa group on transatlantic, ANA on Japan flights, Air Canada on Canada flights
US AIRWAYSMember since: 2004Codeshares: 19Partners/stakes: Set to leave Star Alliance for Oneworld if merger with American Airlines is completed
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CROSS HEAD
NOTES: Based on RPKs for 2012 Top 200 passenger rankings and alliance members outside top 200
Other38.8%
SkyTeam20.1%
Star Alliance26.2%
Oneworld14.9%
ALLIANCES: MARKET SHARE
NOTES: Based on RPKs for 2010 Top 200 passenger rankings and alliance members outside top 200. SOURCE: Airline Business 2010 World Airline Rankings
ALLIANCES 2010MARKET SHARE
61.2%Alliance traf� c share
SKYTEAM
Revenue $145bnNet pro� t $0.5bn
Operating pro� t $3.7bn
ONEWORLD
Net loss$-1.7bn
Revenue $122bnOperating pro� t $2.0bn
SOURCE: Airline Business World Airline Rankings
STAR ALLIANCE
Net pro� t $3.8bn
Operating pro� t $6.6bn$202bnRevenue
ALLIANCE NETWORKS WEEKLY SCHEDULED OPERATIONS
Weekly global operations September 2013 Destinations Countries Frequencies Capacity (ASK)
Total Duplicates served (’000) (Bn) Share
Star Alliance 1,190 529 195 157 38.6 26.4%Oneworld 825 226 157 65 20.5 14.0%SkyTeam 957 345 178 105 26.9 18.4%TOTAL ALLIANCES 86.0 58.9%NOTES: Analysis based on weekly Innovata schedules for 9-15 September 2013. ASK=Available seat-kilometre. 1 mile=1.609km. Share is of total non-stop scheduled capacity offered. Destinations are airports served.
AIR NEW ZEALANDMember since: 1999Codeshares: 19Partners/stakes: Joint venture on Trans-Tasman routes with Virgin Australia, in which it owns 23%
ALL NIPPON AIRWAYSMember since: 1999Codeshares: 33Partners/stakes: Joint venture with United Airlines on flights between Japan-USA, and with Austrian, Luftansa and Swiss to Europe. Minority stake in Japanese LCC Peach Airlines and has taken full control of AirAsia Japan
ASIANA AIRLINESMember since: 2003Codeshares: 24Partners/stakes: Air Busan (46% )
AUSTRIANMember since: 2000Codeshares: 31Partners/stakes: Lufthansa Group carrier and part of its transatlantic joint venture with United Airlines and with ANA on Japanese routes
AVIANCAMember since: 2012Codeshares: 8Partners/stakes: Operating under common Avianca brand after completing TACA merger
BRUSSELS AIRLINESMember since: 2009Codeshares: 28Partners/stakes: Lufthansa Group carrier and part of its transtlantic joint venture with United Airlines
COPA AIRLINESMember since: 2012Codeshares: 7A AIRWAYSCROATIA AIRLINES
Member since: 2004Codeshares: 8
EGYPTAIRMember since: 2008Codeshares: 22
ETHIOPIAN AIRLINESMember since: 2009Codeshares: 16New codeshares: 1 (Oman Air)
EVA AIRMember since: 2013Codeshares: 11Partners/stakes: China Cargo Airlines (16%)
LOT POLISH AIRLINESMember since: 2003Codeshares: 23
LUFTHANSAMember since: 1997Codeshares: 34Partners/stakes: Lufthansa Group includes wholly-owned Germanwings, Swiss International Air Lines, Eurowings, and part-owned Air Dolomiti and Brussels AIrlines. Also owns 19% of JetBlue. Joint ventures with group partners from Europe to North America with Air Canada and United Airways and to Japan with ANA
SCANDINAVIAN AIRLINESMember since: 1997Codeshares: 24New codeshares: 1 (Turkish Airlines)
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A recent recruitment drive has swelled SkyTeam's partners and reach. Aerolineas Argentinas, China Airlines, China Eastern Airlines, Middle East Airlines, Saudia and Xiamen Airlines have all joined the alliance in recent years. Garuda Indonesia will follow next year, taking SkyTeam membership up to 20 airlines.
“We have our global footprint. The network is more or less done, 95% of the fundamental O&Ds are covered, so let’s focus on the customer bene� ts. That’s our priority,” says SkyTeam chief executive Michael Wisbrun.
Brazil and India remain white spots, although Gol – which has a codeshare with several SkyTeam carriers, including shareholder, Delta Air Lines – in part addresses Brazil.
Attempts by SkyTeam to secure an Indian airline have yielded nothing. “India is a big question,” says Wisbrun. “I think we still have
some way to go.” Other changes in alliance membership are
likely to be driven by mergers. “You recognise that consolidation will be the driving element of the market and that consolidation will also impact the alliances. There will be shifts of the membership driven by consolidation,” says Wisbrun.
Delta's acquisition of Singapore Airlines' 49% stake in Virgin Atlantic puts the possibility of a � rst UK carrier on the SkyTeam agenda. Delta hopes to launch its own joint venture with Virgin on UK-USA routes next year – separate to Delta's existing transatlantic joint venture with Air France-KLM and Alitalia – and the UK carrier is pondering alliance membership. Virgin Atlantic's new chief executive Craig Kreeger says SkyTeam would be the obvious choice, but it needs to weigh up the value alliance membership offers against existing bilateral agreements.
Delta has already drawn Gol closer to the alliance after acquiring a minority stake and partnering with the Brazilian carrier. This comes on top of its partnerships with Aeromexico and Virgin Australia.
Several SkyTeam carriers have also moved closer to Etihad Airways – which is developing its own array of partners, notably Air France-KLM. That tie-up also sees them working with Oneworld carrier Air Berlin. Meanwhile, another European carrier, Aero� ot, is reviewing its partnerships strategy after hiring consultants Oliver Wyman.
Wisbrun believes alliances will continue to have a long-term role, especially given the regulatory barriers to international consolidation. “Alliances in one way or another will always be in place and get the bene� ts of scale you could get from consolidation," he says. "There is no other way to co-operate."
ALLIANCES SURVEY
STAR ALLIANCE MARKET SHARE
Member Year joined
Pax traffi c RPK (m)
Pax (m)
Revenue ($m)
Net result($m)
United Airlines† 1997 292,594 96 37,110 840 Lufthansa†† 1997 141,055 66 40,164 -18 US Airways 2004 97,815 53 13,341 180 Air China 2007 93,185 49 15,260 1,095 Singapore Airlines 2000 87,824 17 11,896 269 Air Canada 1997 87,280 31 11,779 -253 All Nippon Airways 1999 59,940 45 17,897 357 Thai Airways 1997 55,267 18 6,361 -333 TAM 2010 56,718 37 7,574 -253 Turkish Airlines 2008 58,876 33 7,008 11 Swiss†† 2006 31,606 15Asiana Airlines 2003 28,521 15 4,821 15 Air New Zealand 1999 26,996 13 3,315 62 AviancaTaca 2012 26,368 20 3,815 109
TAP Portugal 2005 25,945 10 3,215 4 Scandinavian Airlines 1997 24,839 23 6,441 -262 South African Airways 2006 21,509 7 3,200 Austrian Airlines†† 2000 17,792 11Copa Airlines 2012 16,409 7 1,830 310 Egyptair 2008 15,496 7 1,500 Ethiopian Airlines 2011 13,151 4 1,517 75
Brussels Airlines 2009 8,487 6 1,449 -112 LOT Polish Airlines 2003 7,244 5 1,065 Aegean Airlines 2010 5,809 6 934 -38 Blue1 2004 1,525 2Adria Airways 2004 1,219 1Croatia Airlines 2004 1,317 2 298 -14 Total 1,304,787 597 201,790 2,044 Share 25.0% 22.0% 30.3%EVA Air 2013 26,406 7 3,472 7Shenzhen Airlines 2012 24,033 18Share if above carriers join 26.0% 22.9% 30.8%
NOTES:†Group � nancial results for United-Continental holdings, traf� c � gures include Continental. ††Lufthansa Group � nancial results inculdes Swss and Austrian. Totals based on Airline Business World Airline Rankings.
Global grouping SkyTeam has set course on a recruitment drive in recent years and that has seen three carriers join the alliance in the last 12 months. It secured its � rst members in the Middle East after Saudia was followed into the alliance by Lebanese carrier Middle East Airlines this summer.
The latter was the culmination of a lengthy process which began when MEA was � rst invited to be an associate member at the start of 2006, but which was long-delayed over whether it could retain its existing frequent � yer programme. This was resolved when the associate programme was scrapped and MEA joined as a full member.
At the tail end of last year, Taiwanese carrier China Airlines joined the alliance. This further strengthened its membership in the region, which already includes China Southern Airlines, China Eastern Airlines, Korean Air and Vietnam Airlines. This will be further supplemented when two more Asian carriers join. Xiamen Airlines, majority-owned
by existing SkyTeam carrier China Southern, is set to enter this year, while Garuda Indonesia will also join but is not expected to enter until 2014 as it migrates to a new IT system.
SkyTeam's newest recruit will be Aerolineas Argentinas, which is was scheduled to join at the end of August. This will give the grouping its � rst member in South America. While it has long had a presence in Central America through Aeromexico, SkyTeam remains relatively light in the wider Latin American region. But Delta Air Lines has given it a link in the key market of Brazil through its partnership and small stake in GOL – Latin America’s largest unaligned carrier. The US carrier has also just completed a partnership with Aeromexico, which sees it take a 4% stake in its SkyTeam partner.
The alliance also continues to work on strengthening its presence in India, where none of the alliances has yet secured a member partner.
SKYTEAM
SKYTEAM KEEPS PACE UP
SKYTEAM ALLIANCE MARKET SHARE
Member Year joined
Pax traffi cRPK (m)
Pax (m)
Revenue ($m)
Net result($mv)
Delta Air Lines 2000 310,228 164 35,115 854 Air France† 2000 133,036 50 34,109 -1,131 China Southern 2007 101,637 64 14,017 944 China Eastern 2011 100,744 69 12,943 689 KLM† 2000 82,047 25Korean Air 2000 64,857 23 10,676 -272 Aerofl ot 2006 42,021 14 5,388 526 Saudia 2012 34,721 20 5,500Alitalia 2001 34,544 25 4,862 -96 China Airlines 2011 31,798 11 4,493 -66 Vietnam Airlines 2010 23,000 15 2,200 Aeromexico 2000 21,783 14 2,872 167 Air Europa 2007 17,713 9 1,830 -13 Kenya Airways 2007 9,943 4 1,213 19 CSA Czech Airlines 2001 5,076 4 855 -50 Middle East Airlines 2012 3,865 2 635 64 Tarom 2010 2,104 2 375 TOTAL 1,019,117 514 137,083 1,635 Share 19.5% 18.9% 20.6%Garuda Indonesia 2012 23,081 15 3,091 98 Xiamen Airlines 2012 18,897 15Aerolineas Argentinas 2012 10,750 4 1,200 Share if above carriers join 20.5% 20.2% 21.2%NOTES: †Air France-KLM Group � nancial results. Totals based on Airline Business World Airline Rankings. Revenues refer to group � gures.
ONEWORLD ALLIANCE MARKET SHARE
Member Year joined
Pax traffi c RPK (m)
Pax (m)
Revenue ($m)
Net result($m)
American Airlines 1998 203,621 86 23,979 -1,979 British Airways† 1998 117,348 33 22,839 776 Qantas* 1998 106,759 45 14,842 249 Cathay Pacifi c 1998 90,345 20 12,649 729 Air Berlin** 2012 52,140 35 5,909 -380 Iberia† 2000 51,268 17Japan Airlines 2007 48,217 25 15,276 2,366 LAN Airlines*** 2000 38,423 23 5,718 320 Finnair 2000 21,498 8 2,757 -122 S7 Airlines 2010 10,543 5 1,543 25 Royal Jordanian 2007 8,400 3 1,038 -82 Associate/regional/affi liate members
American Eagle 1998 14,661 17Comair 1998 4,180 4Dragonair 1998 9,531 7Globus 2010 3,427 2Air Nostrum (Iberia Regional) 2000 2,938 5Japan TransOcean Air 2007 1,963 3BA CityFlyer 1998 919 1TOTAL AFFILIATES 37,618 39TOTAL (MEMBERS + AFFILIATES) 786,180 339 106,550 1,902 Share 15.1% 12.5% 16.0%Malaysia Airlines 2012 39,731 13 4,549 -825 SriLankan Airlines 2013 11,270 4 700Share if above carriers join 16.0% 13.1% 16.8%NOTES: *Includes QantasLink. **Includes NIKI. ***Includes LAN Argentina, LAN Equador, LAN Express and LAN Peru. †IAG Group � nancial results include British Airways and Iberia. Totals based on Airline Business World Airline Rankings. Revenues refer to group � gures.
THE WORLD’S LARGEST NON-ALIGNED CARRIERS
Carrier Pax traffi c RPK (m) Passengers (m) Revenue ($m)
Southwest Airlines 167,154 135 15,658 Emirates 160,446 34 16,958 Ryanair 93,875 76 6,063 Qatar Airways 64,762 15 6,825 EasyJet 61,347 55 5,552 JetBlue Airways 49,403 26 4,509 Malaysia Airlines 39,731 13 4,549 Etihad Airways 38,700 8 4,100 Virgin Atlantic Airways 38,038 5 4,400 Alaska Airlines 36,364 18 4,318 GOL Linhas Aéreas 33,266 36 4,515 Transaero Airlines 33,180 9 2,948 Jet Airways 30,643 17 3,157 Virgin Australia 29,569 19 3,260 WestJet 27,183 16 3,116 Shenzhen Airlines 26,406 18Hainan Airlines 24,330 14 4,074 Eva Air 24,033 7 3,472 Jetstar 23,304 14Garuda Indonesia 23,081 15 3,091 SkyWest Airlines 21,923 24 3,655 AirAsia 21,307 18 1,464 Frontier Airlines 20,759 15Air India 20,304 4 3,250Sichuan Airlines 19,346 13NOTES: EasyJet and Ryanair have no codeshare or marketing agreement but are present in this list for completeness. Southwest and JetBlue either have � edgling marketing pacts or plans to cross-market activities with each other, while Virgin Australia has a handful of codeshare deals with other carriers.
After remaining outside since the global alliances’ inception more than a decade ago, there have been a string of hints and speculation that the Gulf giants maybe looking to � nally engage more with the groups.
Speculation has intensi� ed recently that one of the Gulf’s “big three” is imminently poised to name its selection, with Qatar Airways and Oneworld seen as the most likely association.
Local rival Etihad Airways now has a stake in Oneworld new recruit Air Berlin, and has been talking codeshares with SkyTeam’s Air France.
Even Emirates, the standard-bearer for the independents, is
holding talks with Oneworld’s Qantas over a potential alliance, although what form this might take remains unclear.
The low-cost carriers, many of whose business models increasingly share common ground with network airlines, also � irt with the alliances but on an opportunistic basis.
Virgin Australia, now pretty much ensconced in the network carrier camp after its brand repositioning, has alliances in place with Star’s Air New Zealand and Singapore Airlines, but also on the transpaci� c with SkyTeam’s Delta Air Lines. The latter also has a partnership in place with GOL. JetBlue is a
low-cost operator with developing codeshare links with network majors. But low-cost stalwarts Southwest Airlines, Ryanair and EasyJet all remain to be tempted into an alliance world. Up and coming European low-cost player Vueling – part owned by Iberia/British Airways parent International Airlines Group – already has codeshare links with these Oneworld members.
The airlines of HNA Group – Hainan Airlines and Hong Kong Airlines – are the most prominent of China’s unaligned players and remain an attractive prize.
NON-ALIGNED
WHICH OF THE GULF’S ‘BIG THREE’ WILL BLINK FIRST?
It has been a case of one in, one out so far this year for Oneworld. The plug was � nally pulled on struggling Hungarian carrier Malev in February, but Oneworld’s numbers in Europe were quickly lifted back by the entry of a Air Berlin, a carrier whose own fortunes have been looking up since Etihad Airways took a stake in it late last year.
But hopes for the alliance to immediately bene� t from Europe’s newest airport were hit when the opening of Berlin Brandenburg airport was further pushed back into 2013. Oneworld was also forced to put
plans to expand in India on hold, after mounting � nancial problems at King� sher Airlines put its planned membership on ice. Oneworld will strengthen in Asian presence with both Malaysia Airlines and SriLankan Airlines in line to join, but it remains the only alliance without a mainland Chinese carrier – although it does have Hong-Kong-based Cathay Paci� c.
Another Oneworld carrier, Mexicana, has been grounded for almost two years and it is unclear what kind of operator will emerge even if long-planned revival efforts � nally succeed.
But there looks to be better news for the alliance in the region, with it well placed to retain LAN following its merger with TAM.
If the merged LATAM does opt for Oneworld this would also give it a big presence in Brazil. And all eyes will be on the end game for American Airlines as it bids to come out of Chapter 11 bankruptcy protection. While the airline’s management favour an independent restructuring, US Airways – a member of Star Alliance but outside of the big transatlantic joint ventures – continues to push for a merger under the American brand.
ONEWORLD
ONEWORLD HOPES FOR LATAM LIFT
WHAT NEXT FOR AIRLINE ALLIANCES AND PARTNERSHIPS?As global alliances attract new members, consolidation continues to play out and market-speci� c joint ventures – both in and outside of the alliance groupings – become more prominent, the shape of airline partnerships are evolving fast. Against this backdrop, airline management consultancy Booz & Company has launched a survey looking at the future of partnership models in the sector. Aimed at industry members with an interest in airline collaboration, its objective is to evaluate the success of the different partnership models and examine key challenges ahead. And Airline Business will be publishing some of the key � ndings later this year. Find out more about the survey at: booz.com/AirlinePartnershipSurvey
JOIN THE ALLIANCES DEBATE IN ISTANBULJoin keynote speaker Qatar Airways chief executive Akbar Al Baker, the heads of the three global alliances and senior executives from a host of airlines in Istanbul for the third Airline Business-organised Alliances, Partnerships and Joint Ventures. Up for debate on this year's agenda will be what are the next steps for the big three alliances? What are the "realities" of alliance membership? How do the evolving low-cost carriers interact with the big alliances? And how are partnership models evolving away from a one size � ts all approach. The conference will be held on 24-25 September. Find out more about the conference at:fl ightglobal.com/alliances2012
NOTES and DEFINITIONSThis summary survey lists codeshare deals for Star Alliance, SkyTeam and Oneworld alliance members, together with leading non-aligned carriers. It covers codeshares between airlines featuring in the Airline Business Top 200 Passenger Rankings or within the same global alliance. Partners in the same global alliance are in bold. Alliances are de� ned as limited if covering up to 10 routes and comprehensive if 10 or above. Interline and other marketing agreements are excluded. Data sourced from airline questionnaire returns and company websites. The full survey covers more than 800 alliances. For more details: insight@fl ightglobal.com
Airline Year Type
ADRIA AIRWAYSAeroflot 2003 LAustrian 2001 LBrussels Airlines 2008 LLOT Polish Airlines 2005 LLufthansa 1995 LScandinvian Airlines 2007 CSwiss 2005 LUkraine Int'l Airlines 2006 L
AEGEAN AIRLINESBrussels Airlines 2009 LLufthansa 2005 COlympic Air 2011 CScandinavian Airlines 2011 CTAP Portugal 2006 CUS Airways 2011 C
AIR CANADA Air China 2008 LAir New Zealand 1997 C
SKYTEAM BROADENS GLOBAL FOOTPRINT
If the demise of Malev, Mexicana and wannabe-member King� sher Airlines, the � nancial restructuring of American Airlines, Air Berlin and Japan Airlines, and uncertainty over the alliance future of LAN kept the pressure on Oneworld, it is in an altogether happier position today.
Having fended off SkyTeam's overtures to JAL and seen Air Berlin put on a � rmer footing under Etihad's investment, American's planned exit from Chapter 11 bankruptcy protection and LAN's decision to stick with the alliance have given the grouping a further lift. Both outcomes would not only secure existing members in the alliance, but bring new partners in the form of Star Alliance incumbents TAM and US Airways.
US Airways has already started the process of leaving Star to join Oneworld. That was envisaged for early next year, once American's restructuring plan closes later this
year. This timeline though is clouded by the US Department of Justice's challenge to the merger. The deal with US Airways is central to American's plan to exit Chapter 11 – a deal Oneworld partners have welcomed as creating a strengthened American Airlines.
Regulatory issues also delayed the implementation of the LAN and TAM merger. However, after that was � nalised the partners then ended the uncertainty over the alliance future of the merged entity, con� rming LAN would bring TAM into Oneworld as part of the creation of LATAM Airlines. The double boost not only keeps one of its longest serving carriers in the camp, but secures its � rst partner in the key Brazilian market.
Oneworld, which last year added Air Berlin and Malaysia Airlines to its membership, is set for a further boost when Qatar Airways joins in October. It will be the � rst of the mega-Gulf carriers to join the grouping.
SriLankan Airlines will follow in 2014, which could ultimately take its membership to 16.
Several Oneworld carriers have already implemented joint business agreements in key markets. American, British Airways and Iberia's transatlantic joint venture has now been supplemented by Finnair. The latter will join BA's joint venture on Japanese routes with Japan Airlines. JAL also has a joint venture in place with American Airlines on Japan-USA � ights.
But Qantas pulled the plug on its long-standing joint venture on kangaroo routes with British Airways, in favour of a wide-ranging partnership with Emirates.
It is not the only pull from outside of the alliance. Air Berlin has teamed with SkyTeam carriers Air France and KLM as part of a wide-ranging codeshare with part-owner Etihad Airways. Cathay Paci� c meanwhile is 29% owned by Star Alliance carrier Air China.
ONEWORLD STRONGER FOR ADVERSITY
AIR BERLINMember since: 2012Codeshares: 12Partners/stakes: Etihad holds a 29% stake in the airline and Air Berlin has codeshares with a number of Etihad’s main partners
AMERICAN AIRLINESMember since: 1998Codeshares: 33New codeshares: 2 (Qatar Airways, TAM)Partners/stakes: Planned merger with US Airways would take the latter into Oneworld. Transatlantic joint venture with British Airways, Finnair and Iberia. Joint venture on Pacific flights with Japan Airlines
BRITISH AIRWAYSMember since: 1998Codeshares: 16Partners/stakes: Part of IAG along with Spanish carriers Iberia and Vueling. Operates immunised transatlantic joint venture with American Airlines and European partners Finnair and Iberia; joint venture on Japanese routes with Japan Airlines and ultimately Finnair. Has bolstered its partnership with Cathay Pacific after the end of its long-running joint venture with Qantas on kangaroo routes
AEROFLOT Member since: 2006Codeshares: 32Partners/stakes: Has taken controlling stakes in local carriers Orenair, Rossiya, SAT and Vladivostok Air
AEROLINEAS ARGENTINASMember since: 2012Codeshares: 6
AEROMEXICOMember since: 2000Codeshares: 12
AIR EUROPAMember since: 2007Codeshares: 7
AIR FRANCEMember since: 2007Codeshares: 46New codeshares: 3 (Cyprus Airways, Etihad, Jet Airways)Partners/stakes: Part of Air France-KLM Group, which holds 25% stake and joint venture with Alitalia. Together with KLM and Alitalia, is part of transatlantic joint venture with Delta. Wide-ranging codeshare with Etihad
ALITALIAMember since: 2001Codeshares: 32
New codeshares: 1 (SriLankan Airlines)Partners/stakes: Minority (25%) owned by Air France-KLM, with which it operates joint venture on Franco-Italian routes. Part of transatlantic joint venture with Air France, KLM and Delta CHINA AIRLINES
Member since: 2011Codeshares: 14New codeshares: 1 (Transaero)Partners/stake: Holds 94% stake in Mandarin Airlines
CHINA EASTERN AIRLINESMember since: 2011Codeshares: 14Partners/stakes: Holds controlling stakes in Shanghai Airlines and China Eastern Airlines Wuhan and 50% stake in planned low-cost joint venture Jetstar Hong Kong
CHINA SOUTHERN AIRLINESMember since: 2011Codeshares: 18Partners/stakes: Holds a 39% stake in Sichuan Airlines
CZECH AIRLINESMember since: 2001Codeshares: 25Partners/stakes: SkyTeam partner Korean Air this year acquired a 44% stake in the airline
DELTA AIR LINESMember since: 2000Codeshares: 21New codeshares: 1 (Virgin Atlantic)Partners/stakes: Acquired 49% stake in Virgin Atlantic and is launching joint venture on UK-USA routes. Part of existing transatlan-tic joint venture with Air France, KLM and Alitalia, minority stakeholder and partner with Aeromexico and Gol. Immunised joint venture with Virgin Australia on USA-Australia flights
KENYA AIRWAYSMember since: 2007Codeshares: 14New codeshares: 1 (Etihad Airways)Partners/stakes: KLM holds 27% stake in the airline; Kenya Airways hold 49% stake in Tanzanian regional carrier Precision Air
KLMMember since: 2000Codeshares: 43New codeshares: 2 (Etihad Airways, Jet Airways)Partners/stakes: Part of Air France-KLM Group, which holds 25% stake and joint venture with Alitalia. Together with KLM and Alitalia, is part of transatlantic joint venture with Delta. Holds a minority stake in Kenya Airways
Wide-ranging codeshare with Etihad
KOREAN AIRMember since: 2000Codeshares: 30New codeshares: 1 (Myanmar)Partners/stakes: Has acquired a 44% stake in SkyTeam partner Czech Airlines
MIDDLE EAST AIRLINESMember since: 2012Codeshares: 9
SAUDIAMember since: 2012Codeshares: 12
TAROMMember since: 2010Codeshares: 15
VIETNAM AIRLINESMember since: 2010Codeshares: 18Partners/stakes: Holds a 70% stake in Vietnamese low-cost joint venture Jetstar Pacific
XIAMEN AIRLINESMember since: 2012Codeshares: 6New codeshares: 1 (Garuda Indonesia)Partners/stakes: Majority-owned by China Southern Airlines
CATHAY PACIFICMember since: 1998Codeshares: 15New codeshares: 1 (S7 Airlines)Partners/stakes: Part-owned (30%) by Star Alliance carrier Air China
FINNAIRMember since: 2000Codeshares: 22Partners/stakes: Has joined American Airlines, British Airways and Iberia’s transatlantic joint venture; planning to join BA’s joint venture with Japan Airlines on routes to Japan
IBERIAMember since: 2000Codeshares: 25Partners/stakes: Part of IAG along with British Airways and Vueling; operates immunised transatlantic joint venture with American Airlines and European partners British Airways and Finnair
JAPAN AIRLINESMember since: 2007Codeshares: 23New codeshares: 1 (S7 Airlines)Partners/stakes: Part of joint venture with American Airlines on flights to the USA, and British Airways on European services which Finnair will also join
LAN AIRLINES Member since: 2000Codeshares: 12Partners/stakes: Merger with TAM to create LATAM Airlines Group will see the Brazilian carrier move into Oneworld
MALAYSIA AIRLINES Member since: 2012Codeshares: 28
QANTASMember since: 1998Codeshares: 26New codeshares: 1 (Emirates)Partners/stakes: Qantas ended its long-held joint venture on
kangaroo routes with British Airways, switching to a wide-ranging joint venture with Emirates. Its Jetstar low-cost operation is involved in a number of joint venture carriers around Asia
ROYAL JORDANIANMember since: 2007Codeshares: 12New codeshares: 1 (SriLankan Airlines)
S7 AIRLINESMember since: 2010Codeshares: 14New codeshares: 3 (Cathay Pacific, Japan Airlines, SriLankan Airlines)
Malaysia Airlines became the latest member to join Oneworld in 2012
SKYTEAM ONEWORLD
� ightglobal.com/ab38 | Airline Business | September 2013 September 2013 | Airline Business | 39� ightglobal.com/ab
A recent recruitment drive has swelled SkyTeam's partners and reach. Aerolineas Argentinas, China Airlines, China Eastern Airlines, Middle East Airlines, Saudia and Xiamen Airlines have all joined the alliance in recent years. Garuda Indonesia will follow next year, taking SkyTeam membership up to 20 airlines.
“We have our global footprint. The network is more or less done, 95% of the fundamental O&Ds are covered, so let’s focus on the customer bene� ts. That’s our priority,” says SkyTeam chief executive Michael Wisbrun.
Brazil and India remain white spots, although Gol – which has a codeshare with several SkyTeam carriers, including shareholder, Delta Air Lines – in part addresses Brazil.
Attempts by SkyTeam to secure an Indian airline have yielded nothing. “India is a big question,” says Wisbrun. “I think we still have
some way to go.” Other changes in alliance membership are
likely to be driven by mergers. “You recognise that consolidation will be the driving element of the market and that consolidation will also impact the alliances. There will be shifts of the membership driven by consolidation,” says Wisbrun.
Delta's acquisition of Singapore Airlines' 49% stake in Virgin Atlantic puts the possibility of a � rst UK carrier on the SkyTeam agenda. Delta hopes to launch its own joint venture with Virgin on UK-USA routes next year – separate to Delta's existing transatlantic joint venture with Air France-KLM and Alitalia – and the UK carrier is pondering alliance membership. Virgin Atlantic's new chief executive Craig Kreeger says SkyTeam would be the obvious choice, but it needs to weigh up the value alliance membership offers against existing bilateral agreements.
Delta has already drawn Gol closer to the alliance after acquiring a minority stake and partnering with the Brazilian carrier. This comes on top of its partnerships with Aeromexico and Virgin Australia.
Several SkyTeam carriers have also moved closer to Etihad Airways – which is developing its own array of partners, notably Air France-KLM. That tie-up also sees them working with Oneworld carrier Air Berlin. Meanwhile, another European carrier, Aero� ot, is reviewing its partnerships strategy after hiring consultants Oliver Wyman.
Wisbrun believes alliances will continue to have a long-term role, especially given the regulatory barriers to international consolidation. “Alliances in one way or another will always be in place and get the bene� ts of scale you could get from consolidation," he says. "There is no other way to co-operate."
ALLIANCES SURVEY
STAR ALLIANCE MARKET SHARE
Member Year joined
Pax traffi c RPK (m)
Pax (m)
Revenue ($m)
Net result($m)
United Airlines† 1997 292,594 96 37,110 840 Lufthansa†† 1997 141,055 66 40,164 -18 US Airways 2004 97,815 53 13,341 180 Air China 2007 93,185 49 15,260 1,095 Singapore Airlines 2000 87,824 17 11,896 269 Air Canada 1997 87,280 31 11,779 -253 All Nippon Airways 1999 59,940 45 17,897 357 Thai Airways 1997 55,267 18 6,361 -333 TAM 2010 56,718 37 7,574 -253 Turkish Airlines 2008 58,876 33 7,008 11 Swiss†† 2006 31,606 15Asiana Airlines 2003 28,521 15 4,821 15 Air New Zealand 1999 26,996 13 3,315 62 AviancaTaca 2012 26,368 20 3,815 109
TAP Portugal 2005 25,945 10 3,215 4 Scandinavian Airlines 1997 24,839 23 6,441 -262 South African Airways 2006 21,509 7 3,200 Austrian Airlines†† 2000 17,792 11Copa Airlines 2012 16,409 7 1,830 310 Egyptair 2008 15,496 7 1,500 Ethiopian Airlines 2011 13,151 4 1,517 75
Brussels Airlines 2009 8,487 6 1,449 -112 LOT Polish Airlines 2003 7,244 5 1,065 Aegean Airlines 2010 5,809 6 934 -38 Blue1 2004 1,525 2Adria Airways 2004 1,219 1Croatia Airlines 2004 1,317 2 298 -14 Total 1,304,787 597 201,790 2,044 Share 25.0% 22.0% 30.3%EVA Air 2013 26,406 7 3,472 7Shenzhen Airlines 2012 24,033 18Share if above carriers join 26.0% 22.9% 30.8%
NOTES:†Group � nancial results for United-Continental holdings, traf� c � gures include Continental. ††Lufthansa Group � nancial results inculdes Swss and Austrian. Totals based on Airline Business World Airline Rankings.
Global grouping SkyTeam has set course on a recruitment drive in recent years and that has seen three carriers join the alliance in the last 12 months. It secured its � rst members in the Middle East after Saudia was followed into the alliance by Lebanese carrier Middle East Airlines this summer.
The latter was the culmination of a lengthy process which began when MEA was � rst invited to be an associate member at the start of 2006, but which was long-delayed over whether it could retain its existing frequent � yer programme. This was resolved when the associate programme was scrapped and MEA joined as a full member.
At the tail end of last year, Taiwanese carrier China Airlines joined the alliance. This further strengthened its membership in the region, which already includes China Southern Airlines, China Eastern Airlines, Korean Air and Vietnam Airlines. This will be further supplemented when two more Asian carriers join. Xiamen Airlines, majority-owned
by existing SkyTeam carrier China Southern, is set to enter this year, while Garuda Indonesia will also join but is not expected to enter until 2014 as it migrates to a new IT system.
SkyTeam's newest recruit will be Aerolineas Argentinas, which is was scheduled to join at the end of August. This will give the grouping its � rst member in South America. While it has long had a presence in Central America through Aeromexico, SkyTeam remains relatively light in the wider Latin American region. But Delta Air Lines has given it a link in the key market of Brazil through its partnership and small stake in GOL – Latin America’s largest unaligned carrier. The US carrier has also just completed a partnership with Aeromexico, which sees it take a 4% stake in its SkyTeam partner.
The alliance also continues to work on strengthening its presence in India, where none of the alliances has yet secured a member partner.
SKYTEAM
SKYTEAM KEEPS PACE UP
SKYTEAM ALLIANCE MARKET SHARE
Member Year joined
Pax traffi cRPK (m)
Pax (m)
Revenue ($m)
Net result($mv)
Delta Air Lines 2000 310,228 164 35,115 854 Air France† 2000 133,036 50 34,109 -1,131 China Southern 2007 101,637 64 14,017 944 China Eastern 2011 100,744 69 12,943 689 KLM† 2000 82,047 25Korean Air 2000 64,857 23 10,676 -272 Aerofl ot 2006 42,021 14 5,388 526 Saudia 2012 34,721 20 5,500Alitalia 2001 34,544 25 4,862 -96 China Airlines 2011 31,798 11 4,493 -66 Vietnam Airlines 2010 23,000 15 2,200 Aeromexico 2000 21,783 14 2,872 167 Air Europa 2007 17,713 9 1,830 -13 Kenya Airways 2007 9,943 4 1,213 19 CSA Czech Airlines 2001 5,076 4 855 -50 Middle East Airlines 2012 3,865 2 635 64 Tarom 2010 2,104 2 375 TOTAL 1,019,117 514 137,083 1,635 Share 19.5% 18.9% 20.6%Garuda Indonesia 2012 23,081 15 3,091 98 Xiamen Airlines 2012 18,897 15Aerolineas Argentinas 2012 10,750 4 1,200 Share if above carriers join 20.5% 20.2% 21.2%NOTES: †Air France-KLM Group � nancial results. Totals based on Airline Business World Airline Rankings. Revenues refer to group � gures.
ONEWORLD ALLIANCE MARKET SHARE
Member Year joined
Pax traffi c RPK (m)
Pax (m)
Revenue ($m)
Net result($m)
American Airlines 1998 203,621 86 23,979 -1,979 British Airways† 1998 117,348 33 22,839 776 Qantas* 1998 106,759 45 14,842 249 Cathay Pacifi c 1998 90,345 20 12,649 729 Air Berlin** 2012 52,140 35 5,909 -380 Iberia† 2000 51,268 17Japan Airlines 2007 48,217 25 15,276 2,366 LAN Airlines*** 2000 38,423 23 5,718 320 Finnair 2000 21,498 8 2,757 -122 S7 Airlines 2010 10,543 5 1,543 25 Royal Jordanian 2007 8,400 3 1,038 -82 Associate/regional/affi liate members
American Eagle 1998 14,661 17Comair 1998 4,180 4Dragonair 1998 9,531 7Globus 2010 3,427 2Air Nostrum (Iberia Regional) 2000 2,938 5Japan TransOcean Air 2007 1,963 3BA CityFlyer 1998 919 1TOTAL AFFILIATES 37,618 39TOTAL (MEMBERS + AFFILIATES) 786,180 339 106,550 1,902 Share 15.1% 12.5% 16.0%Malaysia Airlines 2012 39,731 13 4,549 -825 SriLankan Airlines 2013 11,270 4 700Share if above carriers join 16.0% 13.1% 16.8%NOTES: *Includes QantasLink. **Includes NIKI. ***Includes LAN Argentina, LAN Equador, LAN Express and LAN Peru. †IAG Group � nancial results include British Airways and Iberia. Totals based on Airline Business World Airline Rankings. Revenues refer to group � gures.
THE WORLD’S LARGEST NON-ALIGNED CARRIERS
Carrier Pax traffi c RPK (m) Passengers (m) Revenue ($m)
Southwest Airlines 167,154 135 15,658 Emirates 160,446 34 16,958 Ryanair 93,875 76 6,063 Qatar Airways 64,762 15 6,825 EasyJet 61,347 55 5,552 JetBlue Airways 49,403 26 4,509 Malaysia Airlines 39,731 13 4,549 Etihad Airways 38,700 8 4,100 Virgin Atlantic Airways 38,038 5 4,400 Alaska Airlines 36,364 18 4,318 GOL Linhas Aéreas 33,266 36 4,515 Transaero Airlines 33,180 9 2,948 Jet Airways 30,643 17 3,157 Virgin Australia 29,569 19 3,260 WestJet 27,183 16 3,116 Shenzhen Airlines 26,406 18Hainan Airlines 24,330 14 4,074 Eva Air 24,033 7 3,472 Jetstar 23,304 14Garuda Indonesia 23,081 15 3,091 SkyWest Airlines 21,923 24 3,655 AirAsia 21,307 18 1,464 Frontier Airlines 20,759 15Air India 20,304 4 3,250Sichuan Airlines 19,346 13NOTES: EasyJet and Ryanair have no codeshare or marketing agreement but are present in this list for completeness. Southwest and JetBlue either have � edgling marketing pacts or plans to cross-market activities with each other, while Virgin Australia has a handful of codeshare deals with other carriers.
After remaining outside since the global alliances’ inception more than a decade ago, there have been a string of hints and speculation that the Gulf giants maybe looking to � nally engage more with the groups.
Speculation has intensi� ed recently that one of the Gulf’s “big three” is imminently poised to name its selection, with Qatar Airways and Oneworld seen as the most likely association.
Local rival Etihad Airways now has a stake in Oneworld new recruit Air Berlin, and has been talking codeshares with SkyTeam’s Air France.
Even Emirates, the standard-bearer for the independents, is
holding talks with Oneworld’s Qantas over a potential alliance, although what form this might take remains unclear.
The low-cost carriers, many of whose business models increasingly share common ground with network airlines, also � irt with the alliances but on an opportunistic basis.
Virgin Australia, now pretty much ensconced in the network carrier camp after its brand repositioning, has alliances in place with Star’s Air New Zealand and Singapore Airlines, but also on the transpaci� c with SkyTeam’s Delta Air Lines. The latter also has a partnership in place with GOL. JetBlue is a
low-cost operator with developing codeshare links with network majors. But low-cost stalwarts Southwest Airlines, Ryanair and EasyJet all remain to be tempted into an alliance world. Up and coming European low-cost player Vueling – part owned by Iberia/British Airways parent International Airlines Group – already has codeshare links with these Oneworld members.
The airlines of HNA Group – Hainan Airlines and Hong Kong Airlines – are the most prominent of China’s unaligned players and remain an attractive prize.
NON-ALIGNED
WHICH OF THE GULF’S ‘BIG THREE’ WILL BLINK FIRST?
It has been a case of one in, one out so far this year for Oneworld. The plug was � nally pulled on struggling Hungarian carrier Malev in February, but Oneworld’s numbers in Europe were quickly lifted back by the entry of a Air Berlin, a carrier whose own fortunes have been looking up since Etihad Airways took a stake in it late last year.
But hopes for the alliance to immediately bene� t from Europe’s newest airport were hit when the opening of Berlin Brandenburg airport was further pushed back into 2013. Oneworld was also forced to put
plans to expand in India on hold, after mounting � nancial problems at King� sher Airlines put its planned membership on ice. Oneworld will strengthen in Asian presence with both Malaysia Airlines and SriLankan Airlines in line to join, but it remains the only alliance without a mainland Chinese carrier – although it does have Hong-Kong-based Cathay Paci� c.
Another Oneworld carrier, Mexicana, has been grounded for almost two years and it is unclear what kind of operator will emerge even if long-planned revival efforts � nally succeed.
But there looks to be better news for the alliance in the region, with it well placed to retain LAN following its merger with TAM.
If the merged LATAM does opt for Oneworld this would also give it a big presence in Brazil. And all eyes will be on the end game for American Airlines as it bids to come out of Chapter 11 bankruptcy protection. While the airline’s management favour an independent restructuring, US Airways – a member of Star Alliance but outside of the big transatlantic joint ventures – continues to push for a merger under the American brand.
ONEWORLD
ONEWORLD HOPES FOR LATAM LIFT
WHAT NEXT FOR AIRLINE ALLIANCES AND PARTNERSHIPS?As global alliances attract new members, consolidation continues to play out and market-speci� c joint ventures – both in and outside of the alliance groupings – become more prominent, the shape of airline partnerships are evolving fast. Against this backdrop, airline management consultancy Booz & Company has launched a survey looking at the future of partnership models in the sector. Aimed at industry members with an interest in airline collaboration, its objective is to evaluate the success of the different partnership models and examine key challenges ahead. And Airline Business will be publishing some of the key � ndings later this year. Find out more about the survey at: booz.com/AirlinePartnershipSurvey
JOIN THE ALLIANCES DEBATE IN ISTANBULJoin keynote speaker Qatar Airways chief executive Akbar Al Baker, the heads of the three global alliances and senior executives from a host of airlines in Istanbul for the third Airline Business-organised Alliances, Partnerships and Joint Ventures. Up for debate on this year's agenda will be what are the next steps for the big three alliances? What are the "realities" of alliance membership? How do the evolving low-cost carriers interact with the big alliances? And how are partnership models evolving away from a one size � ts all approach. The conference will be held on 24-25 September. Find out more about the conference at:fl ightglobal.com/alliances2012
NOTES and DEFINITIONSThis summary survey lists codeshare deals for Star Alliance, SkyTeam and Oneworld alliance members, together with leading non-aligned carriers. It covers codeshares between airlines featuring in the Airline Business Top 200 Passenger Rankings or within the same global alliance. Partners in the same global alliance are in bold. Alliances are de� ned as limited if covering up to 10 routes and comprehensive if 10 or above. Interline and other marketing agreements are excluded. Data sourced from airline questionnaire returns and company websites. The full survey covers more than 800 alliances. For more details: insight@fl ightglobal.com
Airline Year Type
ADRIA AIRWAYSAeroflot 2003 LAustrian 2001 LBrussels Airlines 2008 LLOT Polish Airlines 2005 LLufthansa 1995 LScandinvian Airlines 2007 CSwiss 2005 LUkraine Int'l Airlines 2006 L
AEGEAN AIRLINESBrussels Airlines 2009 LLufthansa 2005 COlympic Air 2011 CScandinavian Airlines 2011 CTAP Portugal 2006 CUS Airways 2011 C
AIR CANADA Air China 2008 LAir New Zealand 1997 C
SKYTEAM BROADENS GLOBAL FOOTPRINT
If the demise of Malev, Mexicana and wannabe-member King� sher Airlines, the � nancial restructuring of American Airlines, Air Berlin and Japan Airlines, and uncertainty over the alliance future of LAN kept the pressure on Oneworld, it is in an altogether happier position today.
Having fended off SkyTeam's overtures to JAL and seen Air Berlin put on a � rmer footing under Etihad's investment, American's planned exit from Chapter 11 bankruptcy protection and LAN's decision to stick with the alliance have given the grouping a further lift. Both outcomes would not only secure existing members in the alliance, but bring new partners in the form of Star Alliance incumbents TAM and US Airways.
US Airways has already started the process of leaving Star to join Oneworld. That was envisaged for early next year, once American's restructuring plan closes later this
year. This timeline though is clouded by the US Department of Justice's challenge to the merger. The deal with US Airways is central to American's plan to exit Chapter 11 – a deal Oneworld partners have welcomed as creating a strengthened American Airlines.
Regulatory issues also delayed the implementation of the LAN and TAM merger. However, after that was � nalised the partners then ended the uncertainty over the alliance future of the merged entity, con� rming LAN would bring TAM into Oneworld as part of the creation of LATAM Airlines. The double boost not only keeps one of its longest serving carriers in the camp, but secures its � rst partner in the key Brazilian market.
Oneworld, which last year added Air Berlin and Malaysia Airlines to its membership, is set for a further boost when Qatar Airways joins in October. It will be the � rst of the mega-Gulf carriers to join the grouping.
SriLankan Airlines will follow in 2014, which could ultimately take its membership to 16.
Several Oneworld carriers have already implemented joint business agreements in key markets. American, British Airways and Iberia's transatlantic joint venture has now been supplemented by Finnair. The latter will join BA's joint venture on Japanese routes with Japan Airlines. JAL also has a joint venture in place with American Airlines on Japan-USA � ights.
But Qantas pulled the plug on its long-standing joint venture on kangaroo routes with British Airways, in favour of a wide-ranging partnership with Emirates.
It is not the only pull from outside of the alliance. Air Berlin has teamed with SkyTeam carriers Air France and KLM as part of a wide-ranging codeshare with part-owner Etihad Airways. Cathay Paci� c meanwhile is 29% owned by Star Alliance carrier Air China.
ONEWORLD STRONGER FOR ADVERSITY
AIR BERLINMember since: 2012Codeshares: 12Partners/stakes: Etihad holds a 29% stake in the airline and Air Berlin has codeshares with a number of Etihad’s main partners
AMERICAN AIRLINESMember since: 1998Codeshares: 33New codeshares: 2 (Qatar Airways, TAM)Partners/stakes: Planned merger with US Airways would take the latter into Oneworld. Transatlantic joint venture with British Airways, Finnair and Iberia. Joint venture on Pacific flights with Japan Airlines
BRITISH AIRWAYSMember since: 1998Codeshares: 16Partners/stakes: Part of IAG along with Spanish carriers Iberia and Vueling. Operates immunised transatlantic joint venture with American Airlines and European partners Finnair and Iberia; joint venture on Japanese routes with Japan Airlines and ultimately Finnair. Has bolstered its partnership with Cathay Pacific after the end of its long-running joint venture with Qantas on kangaroo routes
AEROFLOT Member since: 2006Codeshares: 32Partners/stakes: Has taken controlling stakes in local carriers Orenair, Rossiya, SAT and Vladivostok Air
AEROLINEAS ARGENTINASMember since: 2012Codeshares: 6
AEROMEXICOMember since: 2000Codeshares: 12
AIR EUROPAMember since: 2007Codeshares: 7
AIR FRANCEMember since: 2007Codeshares: 46New codeshares: 3 (Cyprus Airways, Etihad, Jet Airways)Partners/stakes: Part of Air France-KLM Group, which holds 25% stake and joint venture with Alitalia. Together with KLM and Alitalia, is part of transatlantic joint venture with Delta. Wide-ranging codeshare with Etihad
ALITALIAMember since: 2001Codeshares: 32
New codeshares: 1 (SriLankan Airlines)Partners/stakes: Minority (25%) owned by Air France-KLM, with which it operates joint venture on Franco-Italian routes. Part of transatlantic joint venture with Air France, KLM and Delta CHINA AIRLINES
Member since: 2011Codeshares: 14New codeshares: 1 (Transaero)Partners/stake: Holds 94% stake in Mandarin Airlines
CHINA EASTERN AIRLINESMember since: 2011Codeshares: 14Partners/stakes: Holds controlling stakes in Shanghai Airlines and China Eastern Airlines Wuhan and 50% stake in planned low-cost joint venture Jetstar Hong Kong
CHINA SOUTHERN AIRLINESMember since: 2011Codeshares: 18Partners/stakes: Holds a 39% stake in Sichuan Airlines
CZECH AIRLINESMember since: 2001Codeshares: 25Partners/stakes: SkyTeam partner Korean Air this year acquired a 44% stake in the airline
DELTA AIR LINESMember since: 2000Codeshares: 21New codeshares: 1 (Virgin Atlantic)Partners/stakes: Acquired 49% stake in Virgin Atlantic and is launching joint venture on UK-USA routes. Part of existing transatlan-tic joint venture with Air France, KLM and Alitalia, minority stakeholder and partner with Aeromexico and Gol. Immunised joint venture with Virgin Australia on USA-Australia flights
KENYA AIRWAYSMember since: 2007Codeshares: 14New codeshares: 1 (Etihad Airways)Partners/stakes: KLM holds 27% stake in the airline; Kenya Airways hold 49% stake in Tanzanian regional carrier Precision Air
KLMMember since: 2000Codeshares: 43New codeshares: 2 (Etihad Airways, Jet Airways)Partners/stakes: Part of Air France-KLM Group, which holds 25% stake and joint venture with Alitalia. Together with KLM and Alitalia, is part of transatlantic joint venture with Delta. Holds a minority stake in Kenya Airways
Wide-ranging codeshare with Etihad
KOREAN AIRMember since: 2000Codeshares: 30New codeshares: 1 (Myanmar)Partners/stakes: Has acquired a 44% stake in SkyTeam partner Czech Airlines
MIDDLE EAST AIRLINESMember since: 2012Codeshares: 9
SAUDIAMember since: 2012Codeshares: 12
TAROMMember since: 2010Codeshares: 15
VIETNAM AIRLINESMember since: 2010Codeshares: 18Partners/stakes: Holds a 70% stake in Vietnamese low-cost joint venture Jetstar Pacific
XIAMEN AIRLINESMember since: 2012Codeshares: 6New codeshares: 1 (Garuda Indonesia)Partners/stakes: Majority-owned by China Southern Airlines
CATHAY PACIFICMember since: 1998Codeshares: 15New codeshares: 1 (S7 Airlines)Partners/stakes: Part-owned (30%) by Star Alliance carrier Air China
FINNAIRMember since: 2000Codeshares: 22Partners/stakes: Has joined American Airlines, British Airways and Iberia’s transatlantic joint venture; planning to join BA’s joint venture with Japan Airlines on routes to Japan
IBERIAMember since: 2000Codeshares: 25Partners/stakes: Part of IAG along with British Airways and Vueling; operates immunised transatlantic joint venture with American Airlines and European partners British Airways and Finnair
JAPAN AIRLINESMember since: 2007Codeshares: 23New codeshares: 1 (S7 Airlines)Partners/stakes: Part of joint venture with American Airlines on flights to the USA, and British Airways on European services which Finnair will also join
LAN AIRLINES Member since: 2000Codeshares: 12Partners/stakes: Merger with TAM to create LATAM Airlines Group will see the Brazilian carrier move into Oneworld
MALAYSIA AIRLINES Member since: 2012Codeshares: 28
QANTASMember since: 1998Codeshares: 26New codeshares: 1 (Emirates)Partners/stakes: Qantas ended its long-held joint venture on
kangaroo routes with British Airways, switching to a wide-ranging joint venture with Emirates. Its Jetstar low-cost operation is involved in a number of joint venture carriers around Asia
ROYAL JORDANIANMember since: 2007Codeshares: 12New codeshares: 1 (SriLankan Airlines)
S7 AIRLINESMember since: 2010Codeshares: 14New codeshares: 3 (Cathay Pacific, Japan Airlines, SriLankan Airlines)
Malaysia Airlines became the latest member to join Oneworld in 2012
SKYTEAM ONEWORLD
� ightglobal.com/ab40 | Airline Business | September 2013
EMIRATES Codeshares: 12New additions: 2 (Qantas, TAP Portugal)Partners/stakes: Wide-ranging joint venture with Qantas on flights between Australia and Europe through Dubai
ETIHADCodeshares: 38New codeshares: 5 (Air Canada, Air France, JAT Airways, Kenya Airways, KLM)Partners/stakes: Its equity alliance strategy includes stakes in Aer Lingus (2.99%), Air Seychelles (40%), Air Berlin (29%), Virgin Australia (10%), and JAT Airways (49%), and a planned 24% stake in India’s Jet Airways. Has developed extensive codeshare partnerships across these airlines, while also striking codeshare with carriers from the global alliances, including Air France, KLM and Air Canada
GARUDA INDONESIACodeshares: 12New codeshares: 1 (Xiamen Airways)Partners/stakes: Garuda is due to join SkyTeam in 2014
JET AIRWAYSCodeshares: 16New additions: 2 (Air France, KLM)Partners/stakes: Planned wide-ranging co-operation with Etihad under which the Gulf carrier will take a 24% stake in the airline, and codeshares with several of its equity partner carriers
JETBLUE Codeshares: 7New additions: 2 (Aer Lingus, Qatar Airways)Partners/stakes: Lufthansa holds a 19% stake in JetBlue
JETSTAR Codeshares: 3Partners/stakes: Developed several joint venture carriers in the region, including Jetstar Japan and Jetstar Hong Kong
QATAR AIRWAYS Codeshares: 12New codeshares: 4 (American Airlines, Bangkok Airlines, JetBlue, Oman Air)Partners/stakes: Qatar Airways is due to join Oneworld in October, becoming the first of the Gulf mega-carriers to join a global
grouping. Its brief involvement with Cargolux ended when it sold its 35% stake in the freight carrier at the start of 2013
SRILANKAN AIRLINESCodeshares 9New additions: 3 (Alitalia, Royal Jordanian, S7 Airlines)Partners/stakes: Airline is due to join Oneworld alliance in 2014
TRANSAEROCodeshares: 7New additions: 2 (China Airlines, Virgin Atlantic)
VIRGIN ATLANTICCodeshares: 11New additions: 2 (Delta, Transaero)Partners/stakes: SkyTeam carrier Delta acquired 49% stake in the airline from Star Alliance member Singapore Airlines, and the two carriers will implement a joint venture covering routes between the UK and USA in 2014
VIRGIN AUSTRALIACodeshares: 10Partners/stakes: Joint venture with 23% shareholder Air New
Zealand on trans-Tasman flights. Partnership with Singapore Airlines, which holds a 20% stake in the airline; partnership with Etihad Airways, which holds a 10% stake in the airline. Operates a joint venture partnership with Delta
ALLIANCES SURVEY
Some of the bigger operators remain steadfastly independent of the alliances, while other unaligned carriers are future candidate members. Either way, they increasingly touch the alliances' world.
Avowed independent carrier Emirates struck a ground-breaking tie-up with Oneworld member Qantas. This has seen Qantas scrap its long-standing joint venture with British Airways on kangaroo routes and connect through Dubai instead. "This decision appears to have as much to do with operational and commercial reasons as it does alliance reasoning," says Aviado Partners managing partner Shakeel Adam
Fellow Gulf carrier Etihad Airways continues to develop its partnership strategy, both in the shape of more equity investments through India's Jet Airways and Serbia's Jat Airways, and collaboration with existing members of all three alliances. This year this has seen it, for example, add codeshares with Star Alliance member Air Canada and SkyTeam's Air France-KLM. This includes co-operation with Oneworld's Air Berlin. The governance rules of SkyTeam and Star Alliance are believed to
generally discourage codeshare partnerships with members of a competing alliance.
"There seems to be some tolerance for this at the moment, but I don't think all member carriers are happy about it," says Adam, about the cross-alliance partnerships being struck.
Other joint ventures and partnerships have been struck that bring non-aligned carriers closer to particular alliances. Delta Air Lines' tie-up with Gol has underlined a partner carrier – albeit outside of the alliance – for SkyTeam in the key Brazilian market. Delta's investment in and planned UK-USA joint venture with Virgin Atlantic also moves the UK carrier closer to SkyTeam.
Delta also has a joint venture with Virgin Australia, although the latter also has ties with Star pair Air New Zealand and Singapore Airlines – both of which hold stakes in the Australian carrier, as does Etihad.
Some unaligned carriers are already on their way into the alliances – Qatar Airways joins Oneworld this year, SriLankan Airlines will follow in 2014 and Garuda Indonesia is on its way to SkyTeam. This leaves a small
waiting list of airlines to join the alliances."Joint ventures are taking a lot of the
attention because they are relatively new," says Adam, "I don't think alliances are slowing down, but Star and SkyTeam have added so many new members in recent years it feels like they are taking time to let these new members settle in.
"I think there is going to be a lot of alliance activity in the next year," he adds. That includes India, where Star's move for Air India and Oneworld's for King� sher have come to nothing. "I think one, maybe two of the alliances will � nd a solution in India. I think the Latin American shake out will continue to play out and I think you will see Star strengthen in Latin America." He notes, for example, that Avianca Brazil at present in the only Avianca operator not yet in Star Alliance.
"WestJet, Alaska, Airlines JetBlue and Virgin Australia – these are the dancing partners everyone wants," he adds, pointing to various collaborations they made with alliance carriers. He says there is little incentive for these carriers to "get married" just yet.
CARRIERS COURT SUITORS PLAYING THE FIELDFIRSTNAME SURNAME LOCATION
tWo DecK HeaDline Here please
Text here please or bold up text to break up orBox text indent
CROSS HEAD
NON-ALIGNED
SURVEY NOTESThis year's Airline Business alliance survey features codeshare, joint venture and partnership highlights for all the global alliance members, as well as partnership activity for selected unaligned carriers. Total number of codeshares are listed for each carrier with those added since August 2012 marked as new additions. Partner/stakes details do not necessarily cover all stakes or partnerships owned by the airline, but focus on key relationships and joint ventures within and outside the global alliances. Information is sourced from survey returns, company information and Flightglobal Pro. A full listing of codeshares is available to subscribers of Flightglobal Pro. For more on this premium news service, visit:fl ightglobal.com/proinfo
� ightglobal.com/ab
ALLIANCES FEEDBACK
September 2013 | Airline Business | 41
airline can play this game selectively to ensure it wins more often than oth-ers, without falling into the yield dilu-tion trap.
Unfortunately, few airlines, if any, can measure with confi dence whether their agreements produce positive in-cremental revenue. Many airlines misinterpret growth in interline pas-senger volume and revenue. The mul-tiplication of competing itineraries, caused by extensive and often uncon-trolled code-sharing and prorating, results in signifi cant cannibalisation. Most airlines are unable to identify or measure this, therefore the problem goes unchecked.
Airlines new to partnerships focus on alliances, but not all have exploit-ed the full potential of their own net-works, nor do they realise the benefi ts provided to them through bilateral and multilateral partnership; be it a simple interline agreement, SPA, codeshare, membership in an alliance or a JV.
Successful airlines get the basics right, ensuring they identify only the most profi table partnerships.
Airlines need to continue to develop innovative means of expanding their network reach without employing ex-cessive capital to launch unsustainable operations. Partnerships between air-lines will certainly remain vital in en-suring industry sustainability. Howev-er, there is a desperate need for more discipline to identify which partner-ships to enter and to measure and exe-cute these partnerships with evidence-based precision. Airlines will and should continue to part-ner bilaterally and mul-tilaterally through alli-ances and JVs. ■
Read how Etihad’s equity alliances are rede� ning the industry at: fl ightglobal.com/equityalliance
Partnerships allow airlines to expand network reach and to be more competitive, but they’re not always pro� table – even when they drive additional volume, says Shakeel Adam of Aviado Partners
CHOOSING FRIENDS WISELY
“Partnerships between airlines will certainly remain vital in ensuring industry
sustainability”SHAKEEL ADAM
Managing partner, Aviado Partners
agreements (SPA) created to allow air-lines to expand network reach and to be more competitive. These provide a de facto guarantee for adding incre-mental profi table revenue. Yet it seems the industry has become carried away. An analysis of global data shows tens of thousands of overlapping and com-peting itineraries between airlines and their partner combinations across non-stop, one and multistop options.
Traditional airline thinking consid-ers having more options for travel as being the best option. Yet, the volume of competing itineraries creates tre-mendous potential for cannibalisation within an airline, across partners and between competing offers. Overlap-ping competing itineraries creates an exponential increase in the virtual supply of product in the market, skewing economic logic and adding signifi cant downward pressure on yields worldwide.
Airlines launch fl ights to offer faster routings and connections, and gain market share. This always creates win-ners and losers. If well executed, an
Shakeel Adam is managing partner of Aviado Partners, a global consultancy specialising in airline commercial issues including assisting airlines to maximise the potential of SPA, codeshare, alliance and JV partnerships. Follow him on twitter @shakeeladam
The fi rst ever multilater-al airline grouping, Star Alliance, celebrated its 15th anniversary just
over a year ago, fi rmly establishing its position as the largest global alliance. Over 16 years, there have been numer-ous attempts to launch others, but only three exist today, with SkyTeam the second largest followed by Oneworld.
While Star pioneered the multilat-eral airline alliance, it expanded on an idea already developed bilaterally be-tween a number of airlines with the most recognisable partnership having been that between KLM and North-west Airlines.
Alliances have grown signifi cantly over the years leaving some airlines feeling left out and others loudly stat-ing their desire to remain independent. Joint ventures (JVs) have developed as the next stage of deeper cooperation, allowing airlines to coordinate pricing and schedules with anti-trust immu-nity; further adding pressure on those ‘not in the club’. It started with the in-vention of the bilateral anti-trust JV and further developed into the multi-lateral JV. The move from bilateral to multilateral across alliances and JVs was a natural one.
However, there is more to the story. Alliances account for just over 60% of global ASKs and JVs account for a frac-tion of this, leaving almost 40% of ASKs outside a global alliance and about 70% of ASKs outside a JV. Alli-ances and JVs are signifi cantly more concentrated in mature markets such as the North Atlantic and the North Pa-cifi c. Nevertheless, the most profi table airlines in the world include alliance members, low-cost airlines and inde-pendent full service carriers. Alliance membership can provide tremendous benefi ts, but membership alone does not guarantee success. Nor does stay-ing out of alliances guarantee failure.
At the core of all partnerships are in-terline agreements and special prorate
� ightglobal.com/ab � ightglobal.com/ab
negotiations with Turkey and India, and set a 2015 goal for super-bilaterals “with all neighbouring countries”. An accord with Ukraine is expected by mid-2014. Negotiations are under way with Australia, New Zealand and, recently, with Tunisia. De-spite resistance from some quarters, such as that Israel’s unions raised against the EU-Israel pact, Europe is moving ahead with its super-bilateral programme. Compared with this piecemeal progress on bilaterals and super-bilaterals, multilateral efforts have little to show. Multilateral progress is either behind schedule, stalled, or losing ground.
ASEAN will probably miss its 2015 goal for a single aviation market. Alan Khee-Jin Tan, law professor and aviation specialist at the National University of Singapore says: “The region has not even achieved full relaxation of third/fourth freedom rights among all the cap-ital cities, with Indonesia holding out for its capital, Jakarta,” he says. Tan says the conse-quences are “that unlimited third/fourth free-dom for the other cities, as well as fi fth free-
cross-border carriers with foreign ownership limits but almost none to foreign control. In several other countries, offi cials simply turn a blind eye to both.
IATA’s agenda for freedom converts the blind eye approach into a formal waiver. Na-tions that sign the agenda agree to waive on a
reciprocal basis any restrictions in their own bilaterals on ownership by airlines from other signing nations. For instance, even if foreign-ers took over Air New Zealand, it could still fl y to Malaysia, Singapore and the USA be-cause all four countries have signed the agen-da, thereby agreeing to waive any requirement that a majority of New Zealand citizens own Air New Zealand. Unfortunately, this does not address the problem Air New Zealand would face in fl ying to non-signatory Japan.
The agenda was signed or endorsed early on by Chile, the European Commission, Ku-wait, Malaysia, Panama, Singapore, Switzer-land, UAE and the USA. Bahrain, Lebanon, New Zealand and Qatar have since joined. To-gether these nations represent more than 60% of the world’s aviation. But the question re-mains how non-signing nations would treat agenda country airlines that are foreign-owned or controlled. Until more nations sign, the agenda is mainly a promise of liberalisa-tion some day in the future.
The USA and EU also have discussed a draft multilateral convention on foreign in-vestment in airlines. But the US State Depart-ment, which would handle these talks, has no current information on their status.
The main reason that liberalisation is pro-gressing so slowly is that many airlines or gov-ernments that protect them don’t want it, fearing the competition it could unleash.Law professor Brian Havel, director of DePaul University’s International Aviation Law Insti-tute in Chicago, elaborates in a recent law re-view article co-authored with Gabriel Sanchez. “The bilateral system and the na-tionality rule, operating hand-in-glove, have parochialised an industry that has enabled so many other industries to globalise.”
“Many of these national laws,” Havel and Sanchez say, “are retained for explicitly pro-tectionist purposes.” ■
dom rights, remain unrealised.”But even if ASEAN creates its “grand-sound-
ing” single aviation market, as Tan calls it, he predicts it will be more cosmetic than real. He notes that it will not address such key issues as seventh freedoms. Without seventh freedoms, ASEAN airlines can only serve other nations from their home base. For instance, AirAsia could not fl y to China from Singapore or Viet-nam, but only from Malaysia.
MALIAT, the Multilateral Agreement on the Liberalisation of Air Transportation, is stalled or going backwards. Initially the USA, Brunei, New Zealand, and Singapore signed it, followed by Chile and Peru, but it has failed to gain a following. Only three small Pacifi c Island nations and Mongolia have since joined, and Mongolia limited its commitment to cargo fl ights – hardly a ringing endorse-ment. Moreover, following a tiff with neigh-bouring Chile, Peru has withdrawn.
LACK OF PROGRESSThe Forteleza agreement, designed to open skies between secondary cities in the Merco-sur group of South American nations, is even more moribund. Argentina blocked carriers in neighbouring Uruguay from using it. In Africa, no visible progress has occurred since the African Union endorsed the Yamoussoukro Decision to open aviation markets 13 years ago. This overall lack of multilateral progress in aviation seems to parallel the World Trade Organisation’s lack of progress in completing the Doha Round on international trade.
Market access is one key to liberalisation, but it is not the only one. Lifting the limits on airline ownership and control is the other. If airlines from different nations could own each other, third, fourth and fi fth freedoms would matter less. But access rights remain critical be-cause reforms in airline nationality or owner-ship and control show so little progress. In some cases there is even open hostility. The US Congress, for instance, recently warned it does not even want the subject of airline ownership on the agenda in new EU-US trade talks.
Again, there are more signs of local than of multilateral progress. Individual nations con-tinue to experiment with different approaches to airline ownership and control. Canada al-lows variable voting rights to ensure that for-eign shareholders never control an airline. Malaysia does not vary the voting rights; it cuts them off for foreign shareholders above the limit. Colombia and Australia are among a handful of nations that apply a national inter-est rather than a national citizenship test, al-though Australia continues to hold Qantas to a traditional foreign ownership limit.
Cross-border affi liates, pioneered in Latin America and now popular in Asia, present one of the greyest areas. Southeast Asian transport offi cials pay close attention to these
ALLIANCES LIBERALISATION
September 2013 | Airline Business | 4342 | Airline Business | September 2013
Reality lags well behind the lip service paid to liberalised avia-tion. Occasional headlines her-ald breakthroughs, such as the new Canada-China accord, which
opens access between these countries, but such progress is incremental and often frustratingly slow.
A review of both bilateral and multilateral steps towards liberalisation confi rms that “slow” is the operative word.
At the bilateral level, the negotiating con-ferences hosted by ICAO attract few headlines but perhaps have the widest effect because of how many doors they succeed in opening. At the organisation’s fi rst such conference in Dubai in 2008, offi cials from 27 nations gath-ered to negotiate bilateral agreements. That one-stop global market proved so popular with developing nations that ICAO has since hosted four more conferences – in Istanbul, Mumbai, Montego Bay, and Jeddah. ICAO’s Yuanzheng Wang, who runs these events, es-timates they have produced almost 400 new bilaterals, often between nations that shared no air service.
ICAO has decided to make these an annual affair. Wang says the next one is slated for Durban, South Africa in December. They have “been very successful”, he explains, and ICAO is exploring ways to expand them, “for example, by providing them for regional or multilateral meetings”.
Beyond conventional bilaterals, the push for open skies continues. New Zealand inked
body. Europe has such a central authority in the form of the European Commission, plus a court-ordered obligation to replace bilaterals with super-bilaterals, or “bloc” agreements. As a result, it can show more progress. As a fi rst step, the Commission has inked “horizontal agreements” with most nations of the world. These put existing bilaterals on an equal foot-ing for all EU members until the Commission can replace them with super-bilaterals.
The EU-US agreement completed in 2007 pioneered these super-bilaterals, opening skies between the USA and the EU. Norway and Ice-land have since acceded to it. The second-stage EU-US agreement inked in 2010 tries to tackle the more contentious issue of airline owner-ship and control, but does little more than set a framework for further talks. In the meantime, the EU has entered open skies super-bilaterals with Canada, Brazil and most recently Israel. Last year the Commission reviewed its progress in liberalising aviation and called for “a major and rapid transformation”.
In December it announced plans to open
three more open skies agreements in July – with the UAE, Qatar and Kuwait. The USA now claims open skies accords with over 100 nations. Each new one, US offi cials say, fi ts another piece into the puzzle. One of the big incentives for other nations to enter these deals is that the US Department of Transporta-tion treats open skies as a prerequisite to anti-trust immunity. But when two of the most re-cent US open skies accords are with Guyana and Yemen, one wonders if the programme has reached the limits of its effectiveness.
SUPER-BILATERALSBeyond one-on-one bilaterals are deals between blocs of nations on the one hand and individual countries on the other – pacts that might be called “super-bilaterals”. The 2010 accord between the Association of Southeast Asian Nations (ASEAN) and China is an exam-ple. ASEAN wants more super-bilaterals, spe-cifi cally with India, Japan and South Korea. But the reluctance of less-developed ASEAN countries to ratify ASEAN’s agreement with China shows how hard it is for any bloc to com-mit all its members without a central governing
LABOURED PROGRESSBeyond individual bilateral agreements, liberalising the skies is a painstakingly slow process encumbered by protectionism and self-interest
■
To read an analysis about the pace of liberalisation in the African market visit:fl ightglobal.com/africanliberalisation
REPORTDAVID KNIBB SEATTLE
■
“Quote, quote, quote, quote, quote, without
name is best at about fi ve lines is probably max
length to be interesting”
“Quote and quote and quote, four lines is
probably maximum length to be interesting”
QUOTE – PERSON NAMEQuote – person details
FIRSTNAME SURNAME LOCATIONWTWO DECK HEADLINE HERE PLEASE
Text here please or bold up text to break up orBox text indent
CROSS HEAD
No more than three lines in here xxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxx
x%
The number of nations with whom the USA has established
open skies accords
100+
■
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Pict
ure
- cre
dit s
tyle
Xxxxx xxxxx xxxxxxxxx, read our analysis with xxxxxxxx chief executive Xxxxxxx Xxxxxxxxxx fl ightglobal.com/??????????
REPORTAUTHOR WHERE?
If ASEAN creates a single aviation market it will be more cosmetic than real
and won’t address seventh freedoms
Rex
Feat
ures
Member states like Indonesia, the Philippines and Vi-etnam continue to be very cautious in opening up market access to carriers from other member states
� ightglobal.com/ab � ightglobal.com/ab
negotiations with Turkey and India, and set a 2015 goal for super-bilaterals “with all neighbouring countries”. An accord with Ukraine is expected by mid-2014. Negotiations are under way with Australia, New Zealand and, recently, with Tunisia. De-spite resistance from some quarters, such as that Israel’s unions raised against the EU-Israel pact, Europe is moving ahead with its super-bilateral programme. Compared with this piecemeal progress on bilaterals and super-bilaterals, multilateral efforts have little to show. Multilateral progress is either behind schedule, stalled, or losing ground.
ASEAN will probably miss its 2015 goal for a single aviation market. Alan Khee-Jin Tan, law professor and aviation specialist at the National University of Singapore says: “The region has not even achieved full relaxation of third/fourth freedom rights among all the cap-ital cities, with Indonesia holding out for its capital, Jakarta,” he says. Tan says the conse-quences are “that unlimited third/fourth free-dom for the other cities, as well as fi fth free-
cross-border carriers with foreign ownership limits but almost none to foreign control. In several other countries, offi cials simply turn a blind eye to both.
IATA’s agenda for freedom converts the blind eye approach into a formal waiver. Na-tions that sign the agenda agree to waive on a
reciprocal basis any restrictions in their own bilaterals on ownership by airlines from other signing nations. For instance, even if foreign-ers took over Air New Zealand, it could still fl y to Malaysia, Singapore and the USA be-cause all four countries have signed the agen-da, thereby agreeing to waive any requirement that a majority of New Zealand citizens own Air New Zealand. Unfortunately, this does not address the problem Air New Zealand would face in fl ying to non-signatory Japan.
The agenda was signed or endorsed early on by Chile, the European Commission, Ku-wait, Malaysia, Panama, Singapore, Switzer-land, UAE and the USA. Bahrain, Lebanon, New Zealand and Qatar have since joined. To-gether these nations represent more than 60% of the world’s aviation. But the question re-mains how non-signing nations would treat agenda country airlines that are foreign-owned or controlled. Until more nations sign, the agenda is mainly a promise of liberalisa-tion some day in the future.
The USA and EU also have discussed a draft multilateral convention on foreign in-vestment in airlines. But the US State Depart-ment, which would handle these talks, has no current information on their status.
The main reason that liberalisation is pro-gressing so slowly is that many airlines or gov-ernments that protect them don’t want it, fearing the competition it could unleash.Law professor Brian Havel, director of DePaul University’s International Aviation Law Insti-tute in Chicago, elaborates in a recent law re-view article co-authored with Gabriel Sanchez. “The bilateral system and the na-tionality rule, operating hand-in-glove, have parochialised an industry that has enabled so many other industries to globalise.”
“Many of these national laws,” Havel and Sanchez say, “are retained for explicitly pro-tectionist purposes.” ■
dom rights, remain unrealised.”But even if ASEAN creates its “grand-sound-
ing” single aviation market, as Tan calls it, he predicts it will be more cosmetic than real. He notes that it will not address such key issues as seventh freedoms. Without seventh freedoms, ASEAN airlines can only serve other nations from their home base. For instance, AirAsia could not fl y to China from Singapore or Viet-nam, but only from Malaysia.
MALIAT, the Multilateral Agreement on the Liberalisation of Air Transportation, is stalled or going backwards. Initially the USA, Brunei, New Zealand, and Singapore signed it, followed by Chile and Peru, but it has failed to gain a following. Only three small Pacifi c Island nations and Mongolia have since joined, and Mongolia limited its commitment to cargo fl ights – hardly a ringing endorse-ment. Moreover, following a tiff with neigh-bouring Chile, Peru has withdrawn.
LACK OF PROGRESSThe Forteleza agreement, designed to open skies between secondary cities in the Merco-sur group of South American nations, is even more moribund. Argentina blocked carriers in neighbouring Uruguay from using it. In Africa, no visible progress has occurred since the African Union endorsed the Yamoussoukro Decision to open aviation markets 13 years ago. This overall lack of multilateral progress in aviation seems to parallel the World Trade Organisation’s lack of progress in completing the Doha Round on international trade.
Market access is one key to liberalisation, but it is not the only one. Lifting the limits on airline ownership and control is the other. If airlines from different nations could own each other, third, fourth and fi fth freedoms would matter less. But access rights remain critical be-cause reforms in airline nationality or owner-ship and control show so little progress. In some cases there is even open hostility. The US Congress, for instance, recently warned it does not even want the subject of airline ownership on the agenda in new EU-US trade talks.
Again, there are more signs of local than of multilateral progress. Individual nations con-tinue to experiment with different approaches to airline ownership and control. Canada al-lows variable voting rights to ensure that for-eign shareholders never control an airline. Malaysia does not vary the voting rights; it cuts them off for foreign shareholders above the limit. Colombia and Australia are among a handful of nations that apply a national inter-est rather than a national citizenship test, al-though Australia continues to hold Qantas to a traditional foreign ownership limit.
Cross-border affi liates, pioneered in Latin America and now popular in Asia, present one of the greyest areas. Southeast Asian transport offi cials pay close attention to these
ALLIANCES LIBERALISATION
September 2013 | Airline Business | 4342 | Airline Business | September 2013
Reality lags well behind the lip service paid to liberalised avia-tion. Occasional headlines her-ald breakthroughs, such as the new Canada-China accord, which
opens access between these countries, but such progress is incremental and often frustratingly slow.
A review of both bilateral and multilateral steps towards liberalisation confi rms that “slow” is the operative word.
At the bilateral level, the negotiating con-ferences hosted by ICAO attract few headlines but perhaps have the widest effect because of how many doors they succeed in opening. At the organisation’s fi rst such conference in Dubai in 2008, offi cials from 27 nations gath-ered to negotiate bilateral agreements. That one-stop global market proved so popular with developing nations that ICAO has since hosted four more conferences – in Istanbul, Mumbai, Montego Bay, and Jeddah. ICAO’s Yuanzheng Wang, who runs these events, es-timates they have produced almost 400 new bilaterals, often between nations that shared no air service.
ICAO has decided to make these an annual affair. Wang says the next one is slated for Durban, South Africa in December. They have “been very successful”, he explains, and ICAO is exploring ways to expand them, “for example, by providing them for regional or multilateral meetings”.
Beyond conventional bilaterals, the push for open skies continues. New Zealand inked
body. Europe has such a central authority in the form of the European Commission, plus a court-ordered obligation to replace bilaterals with super-bilaterals, or “bloc” agreements. As a result, it can show more progress. As a fi rst step, the Commission has inked “horizontal agreements” with most nations of the world. These put existing bilaterals on an equal foot-ing for all EU members until the Commission can replace them with super-bilaterals.
The EU-US agreement completed in 2007 pioneered these super-bilaterals, opening skies between the USA and the EU. Norway and Ice-land have since acceded to it. The second-stage EU-US agreement inked in 2010 tries to tackle the more contentious issue of airline owner-ship and control, but does little more than set a framework for further talks. In the meantime, the EU has entered open skies super-bilaterals with Canada, Brazil and most recently Israel. Last year the Commission reviewed its progress in liberalising aviation and called for “a major and rapid transformation”.
In December it announced plans to open
three more open skies agreements in July – with the UAE, Qatar and Kuwait. The USA now claims open skies accords with over 100 nations. Each new one, US offi cials say, fi ts another piece into the puzzle. One of the big incentives for other nations to enter these deals is that the US Department of Transporta-tion treats open skies as a prerequisite to anti-trust immunity. But when two of the most re-cent US open skies accords are with Guyana and Yemen, one wonders if the programme has reached the limits of its effectiveness.
SUPER-BILATERALSBeyond one-on-one bilaterals are deals between blocs of nations on the one hand and individual countries on the other – pacts that might be called “super-bilaterals”. The 2010 accord between the Association of Southeast Asian Nations (ASEAN) and China is an exam-ple. ASEAN wants more super-bilaterals, spe-cifi cally with India, Japan and South Korea. But the reluctance of less-developed ASEAN countries to ratify ASEAN’s agreement with China shows how hard it is for any bloc to com-mit all its members without a central governing
LABOURED PROGRESSBeyond individual bilateral agreements, liberalising the skies is a painstakingly slow process encumbered by protectionism and self-interest
■
To read an analysis about the pace of liberalisation in the African market visit:fl ightglobal.com/africanliberalisation
REPORTDAVID KNIBB SEATTLE
■
“Quote, quote, quote, quote, quote, without
name is best at about fi ve lines is probably max
length to be interesting”
“Quote and quote and quote, four lines is
probably maximum length to be interesting”
QUOTE – PERSON NAMEQuote – person details
FIRSTNAME SURNAME LOCATIONWTWO DECK HEADLINE HERE PLEASE
Text here please or bold up text to break up orBox text indent
CROSS HEAD
No more than three lines in here xxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxx
x%
The number of nations with whom the USA has established
open skies accords
100+
■
Picture - caption. Style for caption
Pict
ure
- cre
dit s
tyle
Xxxxx xxxxx xxxxxxxxx, read our analysis with xxxxxxxx chief executive Xxxxxxx Xxxxxxxxxx fl ightglobal.com/??????????
REPORTAUTHOR WHERE?
If ASEAN creates a single aviation market it will be more cosmetic than real
and won’t address seventh freedoms
Rex
Feat
ures
Member states like Indonesia, the Philippines and Vi-etnam continue to be very cautious in opening up market access to carriers from other member states
Flightglobal InsightQuadrant House, The Quadrant, Sutton, Surrey, SM2 5AS, UKTel: +44 20 8652 8724 Email: [email protected] Web: www.flightglobal.com/insight