See below the list of current and pending members of the Global Alliances.
Garuda Indonesia formally enters SkyTeam on 5-Mar-2014, becoming the fifth flag carrier in the fast-growing Southeast Asian region to join a global alliance. With Garuda, SkyTeam surpasses Star as the largest alliance in Southeast Asia by seat capacity with about a 16% share compared to 14% for Star and 10% for oneworld.
For Garuda, entering SkyTeam is an important component of the carrier’s new business plan, which also includes fleet renewal and expansion, product enhancements and ambitious growth of its international network. SkyTeam will particularly help Garuda in Europe, a market the carrier is focusing on in 2014 with new non-stop services to Amsterdam and London.
For SkyTeam, Garuda significantly improves the alliance’s access to Southeast Asia, in particular the region’s largest market – Indonesia. SkyTeam now has members in two key fast-growing emerging ASEAN markets – Indonesia and Vietnam.
Air France-KLM’s 2013 results saw its operating result return to profit for only the second time in six years, but the operating margin of just 0.5% (and another net loss) highlights that its Transform restructuring programme still has work to do. A return to profit in the passenger business was instrumental in the improved group result, while the cargo segment remained in loss and the maintenance division continued to produce healthy results.
2014 will see a modest increase in ASKs of around 1% overall, down 2% on medium-haul and up 2% on long-haul. The strongest area of growth will be Latin America and the group’s position in that market should be enhanced by a newly announced partnership with GOL (including the acquisition by Air France-KLM for USD52 million of a 1.5% equity stake in the Brazilian carrier) that broadly mirrors SkyTeam partner Delta’s relationship with GOL.
The North Atlantic JV within SkyTeam delivers significant unit revenue benefits, but the deal with GOL expands Air France-KLM's options. This, and its indication that it is seeking to deepen its relationship with Etihad, are further signs that SkyTeam cannot satisfy all its needs.
Brazil’s Gol plans to begin codesharing with Aerolineas Argentinas in Mar-2014, finally moving to the implementation phase of a partnership which was initially forged in late 2011. The partnership will significantly improve the two carriers’ position between Argentina and Brazil, a large market now controlled by LAN and TAM parent LATAM.
For Gol, Aerolineas will become the low-cost carrier’s second two-way codeshare partner after Delta Air Lines. Gol has been carrying the code of several carriers for several years but until recently lacked the technology to sell on other airlines. It is now discussing potential two-way partnerships with several carriers, including TAP Portugal, as part of its new international strategy while looking at expanding its own network including to Africa.
For Aerolineas, the partnership is the carrier’s first in South America and results in significantly improved access to Latin America’s largest market. It supplements several codeshares Aerolineas has been working towards since joining SkyTeam in 2012.
Finnair’s 2013 results saw an unwelcome return to losses at the operational level, although the net result remained positive (just) due to non-operating items. In spite of achieving its Phase 1 cost savings target six months early and establishing a creditable track record of lowering its ex fuel CASK in recent years, unit revenue weakness remains a less predictable wildcard.
Most of the group’s organisational restructuring, including the outsourcing of maintenance and catering, the reorganisation of its travel services business and the switch to an all Airbus fleet, is now complete. Further cost savings will depend on the outcome of employee negotiations, a process that led to a strike warning in 4Q2013. Although it did not materialise, the strike threat then contributed to a particularly weak quarterly result, with both RASK falling and CASK rising in the quarter.
In 2014, it will be crucial to demonstrate that management can return both of these indicators to a healthy path and restore the group to profit.
Air New Zealand is reviewing options for covering Latin America, which according to CEO Christopher Luxon remains the last white spot in the carrier’s network after plugging all its other holes with its new Singapore Airlines (SIA) partnership.
The forthcoming withdrawal from the South Pacific market by Aerolineas Argentinas could leave an opening for Air NZ as oneworld partners Qantas and LAN will be left as the only carriers crossing the South Pacific between Australasia and South America. Air NZ’s new partnership with SIA could be extended to Latin America, providing feed for a potential new route which would otherwise not be viable.
But the economics of Australasia-South America routes are challenging and Air NZ has not yet been able to find a suitable partner on the Latin American end. Air NZ has been eager for some time to exploit New Zealand’s position between Asia and South America and connect an underserved and fast-growing market. Likewise, Auckland Airport has envisaged itself as a potential hub for the connections. There is still no easy solution for Air NZ.
Air Europa-Etihad codeshare links LatAm to Asia Pacific: Etihad again challenges alliance status quo
The new codeshare agreement announced this week by Air Europa and Etihad is clearly based on each party gaining access to parts of the other’s network that complement their own. Air Europa will link its Madrid hub to Etihad’s in Abu Dhabi, giving the latter non-stop access to Spain for the first time (albeit via codeshare), but this deal does not seem to be about Europe.
Air Europa’s greatest asset is its Latin American network, where Etihad has only one destination currently. Under the new deal, Etihad will have the widest access to Latin America of the three big Gulf carriers. For its part, Air Europa is currently absent from Asia Pacific and the Middle East, but it will gain better access to these regions through Etihad than its Spanish rival Iberia has through its oneworld partners.
The agreement also casts the spotlight once more on the development of airline alliances. On the surface, this is just another bilateral partnership, but it raises further questions. For example, what does the addition of another codeshare agreement between Etihad and a SkyTeam member mean for that alliance grouping, as the ties grow stronger? How will arch-enemy Delta view its SkyTeam partners' ever-closer friend? And is this new codeshare a precursor to Air Europa’s joining the Etihad ‘Equity Alliance’?
Wolfgang Prock-Schauer and James Hogan, respectively the CEOs of airberlin and Etihad Airways, held a joint press conference in Berlin on 13-Jan-2014. At the conference, they reviewed the progress of their codeshare agreement since 2012 and outlined plans for its development in 2014.
In addition, Mr Hogan took the opportunity to reinforce the rationale behind Etihad’s equity alliance strategy (“Global reach is beyond the capability of any single airline”). He also reiterated his airline’s support for airberlin (“We are confident that airberlin is on the right path back to profitability and the next phase in the airline’s proud history”).
The announcements led to an 11% increase in the share price of Air Berlin PLC on the day as investors were cheered by Etihad’s vote of confidence in the loss-making German carrier. Nevertheless, the closer co-operation signalled by the two airlines stopped short of what some observers had expected. Further developments cannot be ruled out, however.
Air New Zealand (Air NZ)'s new partnership with Singapore Airlines (SIA), announced on 16-Jan-2014, covers flights between their hubs and beyond, significantly deepening a relationship that had soured several years ago.
For Air NZ, the partnership provides important offline access to Southeast Asia, South Asia, Europe and South Africa. Air NZ's only online presence in those markets today is in London Heathrow. SIA will be Air NZ’s second major partner after Virgin Australia, where the New Zealand flag carrier holds an equity share of 26% in parent company Virgin Australia Holdings.
Air NZ is now particularly weak in Southeast Asia while it covers North Asia with three much smaller partnerships that it sees as having less strategic importance – Air China, All Nippon Airways and Cathay Pacific. The new deal with SIA essentially closes the door on the potential of the Cathay partnership expanding beyond the (admittedly large) greater China market. For SIA the partnership increases its presence in the South Pacific, where it already has a partnership with Virgin Australia. New Zealand is a small but relatively important market for SIA.
This end-of-year wrap reviews 15 of the most read reports from CAPA analysts in 2013. The most popular report from CAPA’s analysts this year looked at the impending impact of the big three Middle East airlines on the US market, Emirates, Etihad and Qatar Airways, once they establish there more widely. In particular it looked at the direction of Emirates, shortly after commencing a remarkable joint venture agreement with Qantas which commenced on 1-Apr-2013.
In Asia, much of the attention is towards the rise and rise of LCCs and their various international joint venture operations, all accelerating the process of change away from the old bilateral restrictions. For Europe too, most of the action has derived from the main LCCs, as the established airlines struggle to reduce costs and find new models to help them adapt to the new environment – including partnerships with the former enemies from the Gulf.
Latin America too has seen several key cross border mergers, including the LATAM consolidation to create the largest airline group in the region. Africa, with one or two exceptions, sadly still struggles to overcome inefficiencies and government meddling, while gradually opening up to private, more efficient models. And Russia looks forward to a new 2014 with renewed vigour.
TAP Portugal diversifies Latin America network with links to Star Alliance hubs Bogota & Panama City
TAP Portugal has unveiled plans to start serving Bogota and Panama City, providing important new links to two Star Alliance hubs. Bogota and Panama City are two of the largest hubs in Latin America but are relatively under-served from Europe.
TAP will be the fourth carrier and first Star member to operate long-haul services from Panama City, which is the hub of Star member Copa Airlines. Bogota is now served by only four long-haul carriers, including Star members Avianca and Lufthansa.
Bogota and Panama City, which will be served in a triangle routing from Jul-2014, are also strategically important for TAP as they will diversify its Latin America network. TAP is the fifth largest carrier in the Europe-Latin America market but currently 12 of its 13 Latin American destinations are in Brazil.
Have the global airline alliances been effective at generating cost efficiencies, or is their value limited to revenue benefits? Can bilateral partnerships be as effective as a branded global alliance? Do the immunised joint ventures within the alliances have a destabilising impact on those alliance members that are not also JV members? Should the alliances attract LCCs to join their ranks?
At CAPA’s World Aviation Summit in Amsterdam on 26-27-Nov-2013, Professor Rigas Doganis led a discussion on these and other questions examining the state of the world’s three global airline alliances. Panellists included the CEOs of two of the alliances and executives from an airline that is an alliance member, but not in a joint venture, and from a hybrid LCC that is outside the alliance system.
Partnerships and KLM Royal Dutch Airlines are intertwined: KLM and Northwest Airlines first joined forces in 1989 when KLM acquired a 20% holding in the US carrier, then the two pioneered the industry's first modern joint venture in 1997, subsequently been imitated not just by trans-Atlantic peers but by airlines across the world. Partnerships today are even more prevalent and critical for KLM. The trans-Atlantic deal has expanded and KLM has a JV with Kenya Airways, among others.
But it is Asia where KLM's breadth of partnerships is most evident and also where there are expansion opportunities, as KLM COO and Deputy CEO Pieter Elbers told CAPA at its recent World Aviation Summit in Amsterdam.
The launch of European flights by China's Sichuan and Xiamen Airlines could see KLM form a deeper partnership, adding to its existing relationships with China Eastern and JV partner China Southern. KLM's historical relationship with Malaysia Airlines has continued despite MAS joining oneworld in 2013, and KLM has also added one-time foe Etihad Airways as a partner. KLM would like a partner in Japan, its second-largest Asian market, and ideally hitch on Air France's relationship with JAL. Mr Elbers describes a stable if limited relationship with SkyTeam heavyweight Korean Air. The growth in partnerships comes as Asia widens its lead over North America as KLM's largest long-haul market.