x Abu Dhabi, UAEWednesday 20 September 2017

Etihad mulls joining air alliance

Etihad Airways believes it would make a great partner for one of the three large airline alliances.

Etihad has amassed code-share partnerships with 31 carriers from around the globe. Andrew Parsons / The National
Etihad has amassed code-share partnerships with 31 carriers from around the globe. Andrew Parsons / The National

Etihad Airways is considering a move to join one of the three main global airline alliances, a plan that could create a fundamental shift in the Middle East's aviation industry.

James Hogan, the chief executive of Etihad, said his airline would make a "great partner" with either Star Alliance, oneworld or SkyTeam, but he would not rush into taking such far-reaching action.

"We believe we would be a great partner for one of the alliances," Mr Hogan said. "If we get into an alliance, we would represent a very important part of the world which most alliances aren't serving properly today."

Such a move would further distinguish Etihad from its two larger neighbours Emirates Airline in Dubai and Qatar Airways, which have both pursued go-it-alone strategies.

By contrast, Etihad has quietly amassed code-share partnerships with 31 carriers from around the globe to extend the reach of its network. It would be a natural progression to continue on this path of partnering other airlines and formally join an alliance, said Mr Hogan.

However, the airline is going to carefully weigh its options, he added. "We are not rushing in. It has to win, and it has to be right for both organisations."

Airline alliances have evolved over the past 15 years in response to stringent restrictions on airline ownership worldwide. Since airlines are seen as strategic and symbolic national assets, many governments forbid foreign ownership. But in such a fragmented industry, with razor-thin profit margins, airlines have responded by bunching together, linking up their flights to offer passengers more travel options.

"So many airlines join one of the big three alliances because it allows them to reap the benefits of free-flowing traffic without the restrictions of ownership," said Addison Schonland, an aviation analyst with Innovation Analysis Group of the US.

Star Alliance, led by Lufthansa, Singapore Airlines and United, is the biggest airline group with 27 members that last year collectively flew 796.3 billion passenger kilometres, a key industry metric. This is almost double that of oneworld, led by British Airways, Qantas and American Airlines, or Sky Team, led by Air France-KLM and Delta Air Lines.

For passengers, alliances offer simpler ticketing processes and smoother connections on intercontinental trips, as well as the chance to earn and redeem frequent-flier miles on other member carriers.

Emirates Airline is the world's largest unaffiliated airline, flying 143.6 billion international passenger kilometres last year, while Qatar Airways is the second-largest and Etihad ranks eighth-largest by international capacity worldwide.

One of the biggest questions would be whether Etihad would continue to honour its existing bilateral relationships with 31 other carriers, including its strategic alliance with Virgin Australia. There has also been speculation the Virgin group of airlines could create a fourth major alliance. But Mr Hogan said any speculation linking Etihad to such a proposal was too premature to discuss.

"If it adds up, yes [we will do an alliance], if not I'm happy to continue to build strong bilateral agreements and work with all three groups," he said.

Next year, Middle East Airlines (MEA) of Lebanon, Saudi Arabian Airlines and Gulf Air of Bahrain hope to join one of the big three airline groupings to help feed traffic into their networks.

MEA and Saudi Arabian both plan to join SkyTeam, while Gulf Air is undecided. Oman Air and Royal Air Maroc have also been named as likely to go with an international alliance.

igale@thenational.ae