LONDON — The Arabian Gulf’s ‘Big Three’ – Emirates Airline, Qatar Airways and Etihad Airways – are growing at a seemingly unstoppable rate. But as well as their organic growth, which involves the purchase of airliners in quantities so great that accountants in Seattle and Toulouse must go home every evening with broad smiles on their faces, they are increasingly linking up with other carriers to extend their global reach.
The three airlines have each adopted a different strategy in finding new partners.
In 2013, Emirates began a five-year strategic alliance with Qantas for both passenger and freight services, while Etihad is developing a collection of equity partners and Qatar Airways has taken its first equity interest in another airline by becoming the largest shareholder in British Airways, Iberia and Vueling parent group IAG. The Emirates-Qantas tie-up involves each carrier’s passengers gaining increased access to services under a single airline code, together with access to each other’s frequent flyer programs. Dubai became the hub for Qantas passengers heading for Europe rather than Singapore, while travelers on Emirates can connect to Qantas’s Australian network. The two fly 14 times a day from Australia to Dubai.
Emirates has codeshare arrangements with 14 other carriers, but both the Dubai and Australian sides say their agreement involves considerably more than this, involving collaboration on areas such as scheduling, sales and pricing. Qantas has upgraded several aspects of its ground and airborne service to match that of its partner and Emirates’ much larger presence in Europe means that Australian passengers can now connect in Dubai to a far great number of European destinations (more than 30, rather than Qantas’s previous two).
For Emirates, it pulls more traffic onto its network, with UAE government figures in spring last year showing that Australasian traffic through Dubai International Airport had leapt by 30% following the tie-up. Qantas, for its part, reported a jump in bookings for passengers taking advantage of the new connections through the Gulf. Some Australian commentators fear that the deal favors Emirates over Qantas. But the Australian flag-carrier was already hitting financial squalls and it doubtless felt that doing something was better than doing nothing and seeing its traffic decline inexorably.
A completely different approach has been taken by Emirates’ smaller neighbour, Etihad. As well as amassing a huge group of codeshare partners, Abu Dhabi-based Etihad has pioneered an ‘equity partners’ approach in which it has taken stakes of up to 49% in a group of seven carriers. In some cases – such as at Air Serbia and Air Seychelles – these stakes are accompanied by management contracts. The effect is to pull the companies into a constellation orbiting around Etihad, with an increasingly dense, interlocking web of flight connections and codeshares.
Some of the companies picked up by Etihad have seemed odd choices. Air Serbia, for example was, before rebranding, the former Jat, previously the national carrier of Yugoslavia but, since the break-up of that country in the 1990s, a shadow of its old self that the Serbian government had tried unsuccessfully to privatize.
The taking by Etihad of a 49% stake plus a management contract in summer 2013 was followed by changes in almost every area. Airbus A319s and A320s were leased to replace the elderly Boeing 737-300s, as well as an A330-200 to start services from Belgrade to new York soon, administration staff numbers were slashed and new cabin crew not only recruited but sent for training in Abu Dhabi so that Etihad’s ethos and training standards could be imparted. The result in the first year of Etihad involvement has been an airline moving back into profit (just) and booming passenger numbers.
Not all of Etihad’s partnerships have been so successful. Airberlin has stubbornly remained in the red despite extensive management efforts and Etihad’s biggest challenge – turning round perennial loss-maker Alitalia – has just begun. Etihad president and CEO James Hogan has been generous with his comments on the strength of the Italian flag-carrier’s brand and his belief that it can become a premium carrier with a bias towards long-haul traffic, but at the same time has made it very clear that attitudes and practices have to change – and quickly.
Qatar Airways, meanwhile, has been robust in its refusal to take on the airline industry’s waifs and strays. Its no-nonsense CEO, Akbar Al Baker, has repeatedly replied to queries on whether his airline would take interests in other airlines by saying that he sees no point in getting involved with financial basket-cases that would be a drain on Qatar’s financial resources and management time. The purchase of an additional stake in IAG didn’t come as a surprise to many. However, Al Baker and his IAG counterpart Willie Walsh are known to admire each other; Walsh is said to have been instrumental in bringing Qatar on board the oneworld alliance.
How links between Qatar and IAG develop remain to be seen, but Walsh raised the possibility at an analysts’ briefing in March of the two organizations combining their considerable purchasing power to acquire future aircraft, powerplants and maintenance services.
Three airlines, three different ways of looking at the economic landscape. Which will be the most successful? The only thing that can be said with confidence is that the Big Three will continue to grow rapidly in coming years.