MIAMI — Is it an alliance? Is it a partnership? Does it really matter what we call it? That last question is probably the only one which can be definitively answered and it seems that “no” is the correct choice.
For the Etihad Equity Partnership Group, also known informally as the fourth global alliance, things are different and company CEO James Hogan used a few minutes on stage during the IATA Annual General Meeting to get into the details of how and why he sees his group not as competitive with Star Alliance, SkyTeam and oneworld but more as a supplement to those operations. And, in many ways, it is not about building an alliance, as much as a single entity entirely focused on building out a global footprint.
“But that’s what the other alliances do,” you object. Yes and no. The “Big 3” alliances have some coordination among their members but, excepting the few joint ventures within the alliances, it is generally a far “lighter touch” sort of arrangement than not. They offer some connectivity and maybe even consolidation of flights into common terminals at major hubs. There is reciprocity within the loyalty programs, but it is rarely metal-neutral in a way, which is beneficial to passengers.
Hogan hopes his equity alliance is something bigger and smaller than that. It will be smaller in that it has fewer airlines but bigger in how it expands the reach of Etihad out into the rest of the world.
The key driver is that we’re taking an equity investment in a number of airlines. That’s achieved access to markets which we were bilaterally constrained. We saw the ability to stretch our network with Alitalia as we have with Virgin Australia. We’ve been able to enter new markets, such as India with Jet Airways.
Buying into the airlines enables Hogan and Etihad to get closer to each other and coordinate at a far deeper level than the Big 3. Etihad is the smallest of the ME3 carriers and it knows that puts it at a disadvantage for growth from its home base in Abu Dhabi.
Because the governments involved in the Equity Partnership host countries have already approved the partial ownership stakes, they are further inclined to approve the necessary joint venture operations, which really lets the group grow.
Even as his company sits in the cross-hairs of the US3 carriers’ Open Skies/subsidy fight, Hogan is looking to improve access for Etihad’s customers to North America by reshaping the Alitalia route map. Destinations such as Mexico City and San Francisco are among those the group hopes to add.
All of this adds up to a new way of doing business in the industry. It is the post-Alliance era Alliance. Equity stakes and joint ventures matter more than simple marketing agreements. There is still a ways to go, particularly on the loyalty program integration side of the efforts, but the Etihad Equity Partnership group is at the forefront of that change.