Doha International Airport, home of Qatar Airways joined Oneworld alliance this week. Fadi Al Assad / Reuters
Doha International Airport, home of Qatar Airways joined Oneworld alliance this week. Fadi Al Assad / Reuters

Revolution in the air: Arabian Gulf carriers enter old boys' club



The old school of established international carriers did not have much complimentary to say about Etihad Airways, Emirates airline and Qatar Airways … until, that is, they realised there were many more pros than cons to inviting the new boys into their clubs.

In only a few weeks, the Arabian Gulf's three premier airlines have dragged the focus of the global industry into their own back yard.

Only last year Etihad Airways, Emirates airline and Qatar Airways were under sustained attack from almost the entire airline establishment.

The new pretenders were marching into the old network carriers' territory and they did not like it.

"The Gulf companies are killing our industry," Jean-Cyril Spinetta, the chief executive of Air France-KLM group, said last year.

His predecessor Pierre-Henri Gourgeon, the chief of Air France, was more apocalyptic, warning that Europe was "at the crossroads of international air travel and this is a role we need to value and defend".

Mr Gourgeon attacked what he called the Arabian Gulf carriers' predatory practices.

Lufthansa's chief executive, Christoph Franz, was more personal, describing the nations as places "where nothing exists besides sand and a box of money".

The three airlines were "unfairly subsidised by their governments", "dumping capacity" into others' markets, and "should not be granted further bilateral access".

Every argument possible was deployed to block the expansion of Middle East operators into the major European gateways.

"How things can change in the blink of an eye," the Centre for Aviation (Capa), international airline industry analysts, observed yesterday.

"In the short space of a month all three Gulf carriers have been welcomed into the hearths of the world's biggest and oldest airlines - Emirates with Qantas, Etihad with Air France-KLM, and now Qatar Airways in Oneworld.

"It is not entirely coincidence. Once the first domino fell it was always going to be a rush for the remaining partners."

Qatar Airways' announcement that it is to formally join the Oneworld alliance marked the final step for the three Gulf carriers, from the fringes of the industry to centre stage.

With a few strokes of their pens, they have made it impossible for the old boys' club to dismiss them as brash new boys not ashamed to "cheat".

The old-world legacy carriers are rushing to embrace Etihad, Emirates and Qatar. It is as if the rest of the industry has woken up to the fact that the perceived threat could actually bring real benefits.

Their hubs in Abu Dhabi, Dubai, and Doha are at the airline crossroads of the world, with routes from the Americas and Europe to Australia and South-East Asia, and from Russia and India, south to Africa.

They are centres where one-stop operations between almost any two points in the world have been made possible with new long-haul aircraft.

And service is their trump card. While the rest of the industry was cutting back, shaving an olive off the salad or charging for coffee, the Gulf trio were proving the old concept of pampering the passenger still worked.

You just have to look at the passenger figures and the rewards garnered. The latest International Air Transport Association's global air passenger traffic survey for August showed that while passengers numbers rose by 5.3 per cent, Middle East airlines were carrying 16.7 per cent more.

Etihad's third-quarter results on Monday revealed passenger numbers were up 23 per cent, with 2.79 million travellers carried in the quarter, compared with 2.27 million for the same period last year.

The airline also delivered a record load factor (the number of seats sold on each flight), with an average seat occupancy of 81.2 per cent, its best ever quarterly performance.

Awards for best airline, best first class and best business class have been collected by the Gulf trio in an almost rotating order.

Those factors and their refusal to play by the rules, using their own business models to strike deals that suit them, not bending their operations to accommodate what they see as outmoded ways of running a carrier, has taken them to the top.

Etihad and Air France-KLM entered a strategic alliance this week that goes far beyond selling tickets on each other's flights.

It will involve the carriers integrating the way they operate their businesses, from buying airliners and maintaining them to joint marketing, route-planning and a whole raft of other economies of scale.

The ultimate aim is to cut costs and maximise passenger numbers on joint route map that now embraces Europe, the Middle East, Asia and Australia.

Last month, Emirates and Qantas also entered a strategic partnership that will see the Australian carrier switch its Asian centre from Singapore to Dubai, and open its domestic network to Emirates' passengers.

Qatar opted for the traditional route of an alliance, but with caveats, and its decision, reinforced by the seismic shocks of the Etihad and Emirates deals, looks like it will unravel the alliance concept, dealing yet another blow to the old world order.

What these deals should mean for the flying public is more choice, more flights, cheaper tickets and a quick, easy booking process. On the downside, if the airlines are lucky, it will also mean more crowded flights as they share their growing passenger counts.

Under the Etihad deal, a passenger flying from Abu Dhabi to Stockholm would take Etihad to Amsterdam Schipol and change planes to a KLM flight to Sweden, all on one ticket.

Before the deal it would mean chasing around travel agents and ending up with a clutch of onward tickets, while dragging luggage between different terminals.

If you're an Air France passenger coming the other way, heading to the Seychelles, you book your flight from France to Abu Dhabi and change planes to an Etihad or Air Seychelles flight.

And because Etihad and Air France-KLM will be sharing the booking costs, ground handling and the myriad other charges, they can hold their prices down, move your luggage for you and offer a greater choice of times and flights.

Global alliances are loose relationships that allow members to align frequent-flyer programmes, share lounges and better align schedules and ticketing.

But they have been steadily weakened because the major Gulf carriers aren't members, explains Neil Hansford, of the Strategic Aviation Solutions consultancy in Australia.

Alliances have also failed to deliver in areas such as joint aircraft buying and negotiation of airport access, and are essentially a response to curbs on ownership, says John Strickland, director of JLS Consulting in London.

There are three worldwide airline alliances that control about 60 per cent of global air traffic. Star, led by Lufthansa and United Continental, is the largest with about 25 per cent, while SkyTeam, which includes Air France-KLM has 20 per cent, and Oneworld about 15 per cent.

That Qatar Airways chose Oneworld is no surprise. Rumours that a deal was being hammered out was one of the triggers for the deals with Etihad and Emirates.

Qatar's chief executive Akbar Al Baker has made no secret that he wanted no part of an alliance that would cramp his style of doing business. Mr Al Baker was reassured by Oneworld chief Bruce Ashby.

"We believe that an airline alliance that prevents its members from solving its business needs and prevents its customers from taking the most convenient path from point A to B ought to go the way of the dinosaur," Mr Ashby said at the formal event in New York marking Qatar's invitation to join.

Oneworld's belief that each member must do what is necessary to reap maximum benefit for their business was tested when Qantas decided to dissolve its long-term joint business agreement with BA in favour of its deal with Emirates.

Willie Walsh, the chief executive of the Oneworld member IAG, has noted that the idea of closing off a market or a customer group purely, "because somebody is outside the alliance, to me doesn't make sense. And I have argued strongly that we should remain open to that style of doing business".

Equally, there were no demands made by Qatar as a condition of joining Oneworld that the member American Airlines should dissolve its code-share deal with Etihad.

But given the events of the past month, all of this flexibility beggars the question: are alliances any longer relevant?

Mr Al Baker says yes."Alliances are playing an increasingly important role in the airline industry today and that will continue long into the future," he said after announcing his membership of Oneworld.

"Qatar Airways has carefully reviewed its strategic options and it is very clear that joining Oneworld is by far the best way forward for us, as we look to strengthen our competitive offering and give passengers what they fully deserve - more choice."

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