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Emirates, Qatar and Etihad are forces to be reckoned with

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LONDON, England – Trust the carriers of the Persian Gulf to cause mischief again.

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LONDON, England – Trust the carriers of the Persian Gulf to cause mischief again. Having already destroyed the economics of the cosy international airline world, previously dominated by the European airlines, now the gulf carriers seem set to mess up the airline alliances too.

All the major European airlines are now part of one of the three big alliances. There is Star (the biggest) based around Lufthansa and United Airlines; Skyteam based around Air France/KLM and Delta; Oneworld based around BA and American Airlines.

The gulf airlines have until now eschewed the alliances. Firstly because competitively the alliances didn’t want them, and secondly because they were growing very nicely, thank you, without them.

The reality is the three gulf carriers, Emirates, Qatar and Etihad are forces with which to be reckoned. Strategic investments by co-operative governments have given them large fleets and huge airports. They have created a flourishing environment while established carriers languish.

Where London, Paris and Frankfurt were the traditional change-hubs, today Dubai, Doha and Abu Dhabi are perfectly placed at the crossroads of east and west. They are able to open up vast new markets in the Indian and Asian continent, as anyone who has been in those airports in the middle of the night can see.

Over the past year the gulf airlines have expanded their investments and routes and in doing so are slowly disrupting, some say destroying, the airline alliances. It is oneworld that is feeling the effects most.

First, James Hogan’s Etihad bought an equity stake in Air Berlin, a oneworld member. That deal raised eyebrows but it is workable within the alliance. Then, rival Tim Clark’s Emirates set up a 10-year partnership with Qantas — another oneworld member — which will clearly have major implications on relations with other alliance members such as BA and Cathay. But everyone put a brave face on it.

Today Akbar Al Bakar’s Qatar Airways joins oneworld and comes within the fold. So, all three gulf carriers are now, in some shape or form, in bed with oneworld airlines.

That would be confusing enough, but now another nail has been hammered into the alliance coffin. Oneworld’s Air Berlin (and its paymaster Etihad) is entering a relationship with Air France/KLM, a member of Skyteam. And it’s not just a codeshare, but a long-standing strategic tie-up. Hang on. How on earth can a oneworld Air Berlin do a strategic tie up with the leading carrier in a rival airline and keep its loyalty to oneworld?

Even allowing for the fact oneworld is a looser federation of airlines than Star, this is a nonsense. The oneworld members are now either in bed with rival gulf carriers or hitched to rival alliance members in strategic partnerships.

It beggars belief to think that oneworld can be more than a frequent flyer earn-and-burn alliance under those circumstances. The one who has most right to be annoyed is Al Bakar at Qatar. Once he is a full member he can rightly ask after the loyalties of Qantas and Air Berlin. Are they to his airline as a oneworld member? Or to Emirates and Etihad as their respective partners? We know the answer. It is a mess.

Clark at Emirates has always said the alliances’ days are numbered. At this year’s IATA conference he sparked a lively debate with the view that the alliances were passed their sell by date because they couldn’t address the competitive demands of today’s market.

He may be right. They were a creation of necessity because global airlines cannot legally consolidate. However, as we are now seeing, the gulf carriers are either joining the alliances (Qatar) picking them off one by one (Emirates) or simply creating split loyalties (Etihad).

I predict that Air Berlin will eventually leave oneworld and join Skyteam to tidy up its relationship. I predict Qantas will slowly but surely drift away from oneworld but keep one foot in the camp because of its relationship with American Airlines and U.S. routes. And I predict Star loses Brazil’s TAM to oneworld next year.

And throughout all of this the gulf carriers continue doing ad hoc deals where necessary (Emirates talking to American, for instance) and re-writing the rules.

The point here is that the gulf carriers are in the left seat. They have the planes, the hubs, the connections and are opening up the new markets. Now the alliances have to learn how to deal with it. It won’t be pretty.

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About the author

editor

Editor in chief is Linda Hohnholz.