[AMcWhirter]

Every now and again airline alliances face upheaval.

Today comes news from Hong Kong’s SCMP that local airline Cathay Pacific may depart Oneworld in favour of a rival alliance like Star or Skyteam.

http://www.scmp.com/news/hong-kong/economy/article/2121660/airline-industry-braces-china-southern-exit-skyteam-alliance

I must stress that it’s speculation at this stage but there are rumours that this could happen should mainland carrier China Southern defect from Skyteam in favour of Oneworld.

If this were to happen there would certainly be a conflict between the two carriers. In particular the mainland Chinese carriers combined have already stolen a slice of Cathay Pacific’s market between Hong Kong, Europe and N America.

For its part Cathay Pacific has already been co-operating with Star’s founding member Lufthansa for some months already as we have reported. And Cathay Pacific is also 30 per cent owned by Air China, another Star member.

Developments are awaited.

Cathay Pacific and Lufthansa Group agree to cooperate

[rferguson]

My feeling is that they won’t leave OW.

OW has always been one of the loser alliances and airlines like CX are using that to their advantage – ie the LH tie up. They can enjoy the freedom of being part of one of the large alliances whilst still pursuing independent agreements with airlines from competing alliances without too much grief from other airlines within their own alliance.

I know the fact that Stars Air China is a large shareholder in CX has fuelled the leaving OW rumours but it’s worth noting QR is also their third largest shareholder.

Qantas ditched fellow OneWorld-er BA to tie up with EK and also has a Joint Venture with China Eastern.

Malaysian has tied up with EK also.

Regarding CZ leaving Skyteam I read on another side this is due to it feeling a ‘second tier’ airline within ST. Both China Southern and China Eastern are in Skyteam. The article mentions that since DL (cited as the ‘one that calls the shots in ST’) purchased a stake in China Eastern it has been pushing much more business in their direction and neglecting China Southern.

As Air China is in Star, OW would be an obvious choice for CZ – and a boon for OW whom have no alliance airline in mainland china.

[LuganoPirate]

The other side of the coin is whether *A carriers such as SQ and Thai would be happy letting another rival in. Both serve HKG via their SIN and BKK hubs so they may object quite strongly.

[AMcWhirter]

A report just published via routesonline.com quotes CZ’s president wanting stronger ties to AA in order to further develop its China-N America routings.

https://www.routesonline.com/news/29/breaking-news/275927/china-southern-wants-to-deepen-aa-ties-for-us-push/?utm_source=content_and_community&utm_medium=social_media&utm_campaign=routesonline&utm_content=china+southern+-+airlines++american+airlines+cooperation

[AMcWhirter]

Besides China Eastern there are Star members in Japan (ANA) and Taiwan (Eva Air).

[LuganoPirate]

[quote quote=839447]Besides China Eastern there are Star members in Japan (ANA) and Taiwan (Eva Air).
[/quote]

Right Alex, I forgot all about them. I think Star is so well covered in Asia I really doubt they would want another competing carrier.
The other risk is, if they were accepted one of the big boys might go over to OW who would likely be welcomed.

[Flightlevel]

WW said recently that marketing agreements (like CX/LH?) can be as important as alliances.
The CX/BA agreement on what is the OW biggest route in pax miles (LON-HKG) and CX connections beyond HKG are likely to be far more useful than star alliance links, unless a political decision is made?

[Flightlevel]

[quote quote=839469]WW said recently that marketing agreements (like CX/LH?) can be as important as alliances. The CX/BA agreement on what is the OW biggest route in pax miles (LON-HKG) and CX connections beyond HKG are likely to be far more useful than star alliance links, unless a political decision is made?
[/quote]
Correction,LON-HKG is OW biggest route in pax seat miles.

[IanFromHKG]

It’s an interesting idea, but I am not sure that China Southern is really that much of a competitor to CX’s customer base in Hong Kong. Now that I no longer travel for work, I regularly check alternative routings/airlines for our LH travel (which, for the Memsahib and myself, is always in business class) in order to get the best deals, and have yet to find a competitive fare and routing on CZ for long-haul. This is probably because it isn’t really that easy to get between HKG and CAN. Do you know how many flights there are per day between HKG and CAN? Two. TWO!! Both operated by Cathay Dragon. CZ don’t fly between HKG and CAN. The fastest alternative travel option will take at least two hours (driving, if you’re lucky, don’t hit traffic, and get across the border without long queues but with, of course, a China visa for many nationalities). Other options will all be 3+ hours – in which time you could be in Bangkok with a vast number of possible connections.

Where CZ might be a competitor is in Europe-to-China or North America-to-China – but CX have plenty of competition in those indirect routes already anyway.

And let us not forget that CX’s own alliance partners AY and BA compete on the Hong Kong-to-Europe market, AA on the Hong Kong-to-North America market, QF on the Hong Kong-to-Australasia market etc etc.

Having a Chinese partner for domestic routes can only be good for oneworld, IMHO. I don’t really see what CX has to be afraid of.

[stevescoots]

I agree with what you say Ian, If CZ had its main hub in Shenzhen or the much delayed Kowloon to GZ High speed train had a stop at CAN then it may well be a different story. This story is more about the increased nationalistic and anti Swire Tone of SCMP since Jack Ma took over than anything else (the rescent CX should be allowed to fail as its a British airline, not a HK one) . There seems to be more critical comments about CX in the SCMP than there ever are of BA in the Uk rags. Whilst general view is that QR’s stake in CX is more of an investment than expansion i would not be surprised top see that grow into code shares on QR routes

[Flightlevel]

IanfromHkg
Where CZ might be a competitor is in Europe-to-China or North America-to-China – but CX have plenty of competition in those indirect routes already anyway.
And let us not forget that CX’s own alliance partners AY and BA compete on the Hong Kong-to-Europe market, AA on the Hong Kong-to-North America market, QF on the Hong Kong-to-Australasia market etc.
[/quote]
CX doesn’t really compete with OW partners since they have marketing agreements and codeshares,except for CX excellent service!
Interesting if the Open Skies agreement between the UK and China may change the market?

[IanFromHKG]

Looking at the ex-HK market, Flightlevel, the only codeshares CX has with oneworld airlines where the partner is the operating carrier are:
AA to Dallas and Los Angeles
JL to Tokyo
MH to Kuala Lumpur
QR to Doha
S7 to Vladivostok and Irkutsk

And according to CX’s website, the only Joint Operating Services/Strategic Agreements CX has are with Air China and Air New Zealand

[travelsforfun]

The situation in the Chinese market, with two of the big three carriers has always been inherently unstable. While DL has been cosying up to MU, AF/KL have been building their ties with CZ.

But I think CZ joining Oneworld alongside CX is problematic – not so much in the Hong Kong market itself, but across the Pearl River Delta. HKG and CX have positioned themselves well to tap into traffic from around the region, with a multitude of direct coach and (airside) ferry services, in addition to the two KA flights a day to CAN. The entrance of the other region’s major carrier into Oneworld would complicate that.

Unless CX and CZ are able to come to some sort of arrangement, I think for now it remains in the interest of the other Oneworld carriers to retain Cathay Pacific as a member. Its customer service proposition remains in a different league to its Mainland Chinese rivals. In any case, the Mainland Chinese market for foreign business and leisure travellers is still focused to a disproportionate extent on Beijing and Shanghai, served directly by most Oneworld carriers – with CX/KA well-placed to fill in the gaps, providing better access to Mainland China than any other foreign airline (nothwithstanding the enduring value of Hong Kong as a business and leisure destination in its own right).

In the short-to-medium term, I think the absence of Oneworld from the Chinese domestic market will only be addressed when CX strikes the right deal with a Mainland Chinese carrier.

[Author]

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