News

Etihad’s CEO: “legacy airline alliances have outlived their usefulness”

5 Apr 2013 by Alex McWhirter
My recent blog questioned the relevance of traditional airline alliances. Now that question must be asked again in light of comments made by James Hogan, Etihad’s CEO, during a speech at the International Aviation Club in Washington DC a couple of days ago. Hogan claimed that “The traditional airline alliances have evolved into slow-to-respond, bureaucratic organisations which struggle to deliver added value to their member airlines, many of which are no longer compatible with each other.” “If we look at the consolidation currently occurring throughout the airline industry, we are seeing more fragmentation within the alliances. This is going to continue as members seek ways to operate profitably in a very competitive environment with high fuel costs and generally slower global economic growth.” What Hogan is referring to here is the fact that a number of airlines have, over the past year, struck deals outside their own alliances, sometimes to the detriment of existing members. The prime example must be the marketing link between Qantas (a Oneworld member) with non-alligned Emirates for kangaroo route services. One could argue that this tie-up is to the detriment of Oneworld members British Airways and Cathay Pacific. Another example would be the various marketing links between Air France and KLM (both Skyteam members) along with Air Berlin (a Oneworld member and 29 percent owned by Etihad) and non-alligned Etihad itself. And now we see that non-alligned Virgin Atlantic is set to operate a joint venture (JV) with US carrier Delta, Air France and KLM who are all Skyteam members. This is discussed on a current Forum thread here. Why have JVs suddenly become popular? It’s because, as Hogan says, they can be set up quickly between two or more airlines. When an airline seeks to join an alliance, it must first be invited and then go through many processes before it can be accepted for membership. These processes take time and money to achieve. With a JV, an airline does not have to work together with alliance members with whom it may not wish to cooperate. Also with a JV an airline escapes having to pay costly alliance membership fees. Says Hogan, “It is easier, faster and far more cost-effective to grow through one-on-one partnerships with established, respected carriers than it is to rely totally on our own resources.” “We have hand-picked like-minded partners with whom we can work collaboratively to build revenue across a broader network and reduce operating costs.” So are JVs the way forward? We must wait and see. Visit etihadairways.com. Report by Alex McWhirter
Loading comments...

Search Flight

See a whole year of Reward Seat Availability on one page at SeatSpy.com

Business Traveller March 2024 edition
Business Traveller March 2024 edition
Be up-to-date
Magazine Subscription
To see our latest subscription offers for Business Traveller editions worldwide, click on the Subscribe & Save link below
Polls