For airlines, focus shifts from Europe to West Asia

Global airlines are having to rework strategies according to developments at West Asian carriers
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First Published: Tue, Oct 09 2012. 03 04 PM IST
Late on Monday, Qatar Airways announced it was joining Oneworld, a global alliance of airlines. Photo: AFP
Late on Monday, Qatar Airways announced it was joining Oneworld, a global alliance of airlines. Photo: AFP
Updated: Tue, Oct 09 2012. 03 12 PM IST
Late on Monday, Qatar Airways announced it was joining Oneworld, a global alliance of airlines. The airline, 50% owned by the state of Qatar and 50% by private shareholders, flies to 120 destinations in 70 countries.
Hours earlier, Etihad Airways of the United Arab Emirates announced a code-sharing agreement with Air France-KLM on flights across its network. The deal, it said, was “the first phase of a much larger strategic partnership which commences on 28 October.” Etihad flies to 87 destinations in 55 countries.
The trigger for these deals was the partnership agreement big brother Emirates Airline of Dubai entered into with Qantas Airways in September. Australia’s Qantas dropped a 17-year agreement with British Airways and replaced it with Emirates, among the world’s top airlines by passengers carried. Emirates flies to 126 destinations in 74 countries.
The big picture beyond these deals is the shift in dynamics from Europe to West Asia.
The hub airports of these airlines are strategically located, allowing them to offer connectivity to any part of the world with just a single stopover. As a result, global airlines have to rework their strategies according to the developments at these West Asian carriers. Star Alliance, a global grouping of airlines led by Lufthansa, does not have a partner from the Gulf region. Similarly, SkyTeam, another alliance, led by Air France, will be forced to find a permanent and strong West Asian partner.
Oneworld is led by British Airways.
The other threat for these alliances is they could become redundant with the kind of code-share agreements Etihad and Emirates have entered into, which allow them to offer passengers advantages similar to these groupings. In any case, Emirates is not a believer in the alliances. Else, it has the potential to have formed a fourth global alliance.
What all this means for India is the global groupings could now find the country a more attractive destination than ever to catch alliance partners or invest equity. The reason is simple. India is the ninth largest aviation market in the world and touted to be one of the three largest by 2020. So it is only natural for West Asian or European carriers to want to gain control in an Indian carrier through equity.
Moreover, the Indian government recently eased rules to permit foreign carriers to invest in local carriers. Star Alliance will now have to expedite bringing Jet Airways on board to gain strength against the West Asian carriers, which are thriving in the region. Star Alliance had been wooing Air India earlier. Oneworld had tried to get Kingfisher Airlines Ltd onboard but the cash-strapped carrier could not make it.
West Asian carriers, too, will want to pick up stake in Indian carriers. Not as a natural fallout of the Indian government’s decision on allowing foreign investors but to compete with Emirates, the dominant foreign airline in India.
Emirates, which flies to 10 cities in India, has clarified it has no intention to make an equity investment in any Indian carrier. Etihad Airways, owned by the Abu Dhabi government, recently bought stakes in three airlines—in Europe, Australia and Seychelles. The airline is scouting for more such opportunities, especially in India. Qatar Airways and British Airways are also keen to invest in India.
Thanks to the Emirates-Qantas deal, suddenly all airlines are talking to Indian carriers rather than solely because of the government’s decision to free investments in the sector. Emirates has not only transformed the global airline order, but also made the Indian market more attractive—for equity investments and for larger code-share deals. It is up to Jet Airways, IndiGo, SpiceJet and GoAir to structure themselves for a potential deal.
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First Published: Tue, Oct 09 2012. 03 04 PM IST
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