It has been a very turbulent few weeks for oneworld alliance. A few weeks ago, Qantas and Emirates announced a close cooperation agreement for Australia-Europe traffic. Then, earlier this week, it was announced that Etihad, Air Berlin, and Air France-KLM are entering a cooperative agreement. Air Berlin is also a oneworld member, but it appears that it, along with Etihad, are actually lining up more with SkyTeam Alliance members. Then, later on the same day, it was announced that Qatar Airways is joining oneworld alliance, in cooperation with British Airways.
What can clearly be seen from these 3 moves is that oneworld is splintering, with each of the three Gulf carriers pulling their preferred partners in different directions. It is showcasing the new paradigm which will appear over the next few years – individual carriers will closely align with other carriers which suit their needs best, instead of focusing on which carriers will suit the alliance best.
“Oneworld is secondary [for Air Berlin],” Etihad’s CEO James Hogan was quoted as saying recently. Etihad took a ~30% stake in Air Berlin some time back. Instead, Air Berlin will focus on creating synergies and aligning networks with Etihad, Air France, and KLM, despite the fact that none of the carriers mentioned are fellow oneworld partners.
Similarly, Qantas has aggressively been pursuing a strategy of aligning with partners which are most valuable. With service to Africa, the airline has for years worked with South African Airways, despite the fact that they are in different alliances. With the new agreement with Emirates, oneworld partners will become secondary for services to Europe.
A similar phenomenon can be observed in other alliances as well. Delta Air Lines has aligned with Virgin Australia on USA-Australia sectors, despite not being alliance partners.
In every alliance, the core group of partners has gotten anti-trust immunity and agreed to lucrative joint ventures* on trans-atlantic sectors, pushing the concept of metal-neutrality. Metal neutrality is where carriers find it equally profitable for a passenger to be carried on its aircraft or its competitor’s aircraft, allowing better utilization and fleet planning. Delta Airlines operates a variety of services from the USA to Paris and Amsterdam from non-hub cities because it has a better cost profile and aircraft for those specific missions.*An interesting read on the advantages of joint-ventures can be found here.
Star Alliance has taken joint ventures even further – United, Lufthansa Group, and All Nippon Airways all have joint ventures with each other, forming a core group of partners which strengthens the alliance and keeps it together.
But the alliance is not an imperative part of any of this – carriers are perfectly capable of creating bilateral partnerships to suit their own needs. Removing alliances is removing an unnecessary middleman which simply adds costs and complications. And as alliances get larger and more unwieldy, they will reduce in importance – carriers will focus more on their individual goals.
This splinter in oneworld is the beginning of the end of alliances as we know them…
While these events were happening on the other end of the globe, Civil Aviation Ministry Ajit Singh was busy drafting a letter begging for Air India to be granted entry into Star Alliance. Indeed, there were some decent points about how Lufthansa took advantage of benefits given for being partners with Air India without returning the expected favor, but it is quite honestly irrelevant at this point. The 2000s was the decade of the alliance, and Air India is desperate to get in on that action, just as it is coming to an end. And let’s not discuss Jet Airways, which has sent so many mixed signals that we have to wonder whether they will ever get around to that love affair with Lufthansa which they profess to desire.
Jet, at least, has developed some kind of strategy regarding airline partners. They are willing to partner with practically everybody, from bmi to Barista Lavazza. The carrier has thrived on the business of feeding other carriers’ operations from India, and therefore they are eager to codeshare with every airline possible – it increases the route network and potential market without Jet actually having to fund expansion.
Air India, on the other hand, has relatively few partners. Mileage in Flying Returns, the frequent flyer program, can only be accrued on two partners – Lufthansa and Singapore Airlines. The carrier has blindly pursued Star Alliance membership and all the potential partners without evaluating further possibilities. And indeed, that may be one of the reasons why Air India has such limited support from within Star Alliance – they are only (very loosely) aligned with two carriers out of a group of 28! Then, there was the proposed cooperation with Adria Airways and a scissor hub in Ljubljana which they spent far too much time considering, but I won’t go there…
One has to wonder why Jet Airways and Air India aren’t actively pursuing deeper cooperation with strategically important partners instead of sitting back and waiting for potential alliance membership to solve all their problems. Share your thoughts in the comments below.