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If you can’t beat them join them – Gulf airlines

Emirates Airline

The entry of major Gulf airlines into alliances took many industry analysts by surprise.

October 21, 2012 1:26 by



After years as the brash outsiders in the industry, fast-growing Gulf airlines are starting to take a more cooperative approach, seeking alliances rather than direct confrontation with big carriers in the rest of the world.

The shift, which appears to be in response to tough market conditions and a realisation that the Gulf airlines cannot sustain their breakneck expansion indefinitely, may benefit consumers by providing more integrated flight schedules and helping carriers cut costs, which could in some cases translate into lower fares.

Qatar Airways last week became the first major Gulf airline to announce plans to join the oneworld alliance. Members of the alliance, which includes American Airlines, British Airways and Cathay Pacific, cooperate in areas such as route networks, frequent flyer schemes and parts procurement.

That deal was announced shortly after archrival Etihad Airways, Abu Dhabi’s flag carrier, sealed a codeshare deal with Air France-KLM, under which they will share flights.

Emirates entered a codeshare deal with Australia’s Qantas earlier this year, the first for the Dubai-based giant, which had previously steered clear of alliances and relied on organic growth by expanding its fleet.

“This is great news for the consumers,” Tony Tyler, chief executive of the International Air Transport Association(IATA), said at an industry conference in Abu Dhabi on Tuesday.

“Alliances help airlines offer very competitive fares on other airline networks. So consumers can go around world at competitive prices.”

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Airline alliances were set up in the 1990s to help carriers benefit from each other’s marketing efforts and route networks in the face of national regulators’ tight control over traffic rights. In addition to oneworld, the big alliances are Star, which includes Lufthansa, and SkyTeam, which includes Air France-KLM and U.S. carrier Delta.

The entry of major Gulf airlines into alliances took many industry analysts by surprise. The three top carriers, created over two decades from the mid-1980s, are backed by rich governments, enjoy modern aviation infrastructure and are based in a part of the world near several key population centres.

This has allowed them, relying on their own resources, to transform the Gulf into an intercontinental hub. In doing so, they took away a big chunk of market share from the older airlines; the share of Middle East and North Africaairlines in international traffic has jumped from 4.8 percent in 2002 to 11.5 percent, according to IATA.

The Gulf carriers have become huge in the process. Emirates is one the largest customers of Airbus, ordering over 90 A380 superjumbos, while last week Etihad reported a 19 percent year-on-year rise in third-quarter revenues, a growth rate far beyond the capabilities of most Western carriers.

Emirates “have been resolute in going it alone and with their current performance and planned capacity growth, they can afford to wait and see hasty marriages of convenience unravel rather than act in haste,” said Sudeep Ghai, partner at consultants Athena Aviation.



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