x Abu Dhabi, UAEFriday 28 July 2017

Airlines look for partners in the clouds

Airlines that epitomized the golden era of travel are now mired in an age of New Millenium worries.

When the chief executive of Qantas talks about the need for "fundamental change", then you know a certain golden era of long-distance travel is long gone.

Airlines that epitomised the allure of international travel decades ago, such as Air France, British Airways and Qantas, are all now finding themselves dealing with a new age of worries, from striking unions, to spiralling pension obligations and security procedures, to new environmental taxes.

Profit margins have eroded down to razor thin levels, brought on by high fuel prices and increasing competition.

Now the market also includes a growing class of budget airlines for short-haul services and glitzy full service competitors in Asia and the Middle East that are winning market share on the long-haul market with sleek new jets and sophisticated on-board offerings. All the while, foreign ownership restrictions have hemmed in many airlines within their national borders and prevented them from making foreign acquisitions to expand their businesses and stay competitive.

To overcome its challenges, Qantas is right to pursue partnerships with Asian airlines. Asia is the future for the global economy and for global aviation and there are rich pickings in the Qantas backyard.

Already, the world's four largest airlines by market capitalisation are from the region. Air China is the biggest and is valued at US$20 billion (Dh73.4bn), or twice that of Delta or Lufthansa.

Singapore Airlines is the second-largest airline, valued at $14bn, followed by Hong Kong-based Cathay Pacific at $12bn and China Southern, at $11bn.

"Rapidly developing markets are shifting the industry's centre of gravity to the East," declared the International Air Transport Association last year.

For Middle East airlines, that means adding more routes into Asia, as evidenced by Etihad Airways announcing plans to fly to Chengdu and Qatar Airways announcing Chongqing in recent weeks.

igale@thenational.ae