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The Economist looks at the problems at SkyTeam

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There was an interesting piece on the Economist website a couple of weeks ago about the SkyTeam alliance, which is well worth a read. The link is here.

If you are a regular reader of Head for Points, you will already be familiar with some of the issues raised. I discussed Delta’s introduction of a ‘minimum spend’ rule to retain status here. I have also touched on Delta’s recent refusal to award status miles for flights on Korean Airlines, which is a SkyTeam partner (in fact, possibly the best regarded SkyTeam partner) and Virgin’s unwillingness to join SkyTeam.

Unfairly or not, SkyTeam is generally seen as the ‘alliance of losers’. A quick look at the list of members will make that clear – you will struggle to think of an occasion you last heard someone rave about even one of them.

That said, I don’t agree with the thrust of the article – that looser relationships between airlines based on equity stakes will take over from alliances.

Has Etihad really benefitted from its investments in Aer Lingus or Virgin Australia? I accept that the airberlin deal is being integrated more deeply and is probably feeding Etihad decent traffic – but airberlin, for now, remains a oneworld alliance member. Aer Lingus doesn’t even fly to Abu Dhabi, so it is difficult to see what benefits Etihad gets. There has also been no move so far to create a single frequent flyer scheme around those airlines where Etihad is a minority partner.

Read The Economist piece and see what you think.

Comments (8)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • London Traveller says:

    Of all of Etihad’s investment decisions, buying 49% of Jat Airways (to be rebranded as Air Serbia) must be the most bizarre. Virgin Australia is interesting because Etihad, Singapore Airlines and Air New Zealand are all jostling for position by increasing their equity stakes and all three airlines have differing interests.

  • Sir Stamford says:

    Etihad is using its equity stakes in other carriers (e.g. Air Berlin) to make joint purchases of aircrafts, IFE, sets and aircraft maintenance. Each of these airlines would not otherwise have access economies of scale and negotiating power. This is, on top, of codingsharing arrangements between Etihad and its investment partners.

    Have a look at this CAPA article:

    The article concluded as follows:

    “Mr Hogan is an outspoken critic of global alliances and believes Etihad’s approach has significantly more value. While Etihad’s codeshare partners include members of all three alliances, four of the five carriers it has chosen to invest in are also non-aligned – Jet Airways, Aer Lingus, Air Seychelles and Virgin Australia. When Etihad invested airberlin was too far down the road to joining oneworld to reverse course.

    The success of Etihad and rival Emirates, which has also built a strong network of partners including its game-changing deal with Qantas, has illustrated there is an alternative to global alliances. Etihad is now taking its innovative approach to partnerships one step further by pursuing joint purchase opportunities with its closest partners.

    The deals Etihad has shared with airberlin and Jet on the 787, and the potential joint aircraft order the three carriers and tiny Air Seychelles may place in the future, will lower costs and make each carrier more competitive. Once again Etihad is jolting the status quo, providing a tangible set of benefits to partners which are out of the reach of the once mighty global alliances.”

    Sir Stamford

    • James says:

      I do not care what Emirates or Ethiad say about their partnerships, these partnerships are so limited and only benefit a few customers in limited locations on simple itineraries.

      What I the customer needs is Global Alliances where I can get from a continent to any other continent via one Alliance, where I can also earn and redeem miles across all members.

      • Rachid says:

        Actually, what we need as customer is easy access/ transfer accross regions with potentially different airlines.wether this is done through alliances or partnership, only the end is needed, we should not care the mean.
        I think alliances are alternatives for legacy airlines to do strong partnerships because they do not have the cash to get equity for lots of airlines, only way to garantee an airline remains loyal.
        Qantas could not have done that deal with Emirates with any others!

    • creampuff says:

      Vietnam Airlines. I like Vietnam Airlines and I’ve flown on them a lot (rather unsurprisingly as I used to live in Vietnam).

      I think I’d actively avoid most of the others except maybe Korean or KLM.

  • London Traveller says:

    I can see the logic of the Emirates/Qantas partnership in giving Emirates access to Qantas’ corporate and frequent flyer base and its domestic network but I fail to see what is transformative about Etihad buying stakes in Jat Airways and Air Seychelles when they offer so little in terms of network and revenue. The risks of failed investments must outweigh the benefits.

    • Rachid says:

      Well, I bet Etihad does not intend to leave Air seychelle a small player, neither JAT.
      they invested an airline at cheap price, and will conyribute to turn it into a medium size decent airline with good connections in their respective regions. Otherwise, today, yes if does not make sense! lets have the same discussion in 2 years….

      • Sir Stamford says:

        A good example would be Air Seychelles (HM) commencing their three weekly services between Seychelles and Hong Kong, operated with Etihad Airways. It would not have been commercial feasible for such a small airline like HM to operate routes like this one without the add-on traffic from Abu Dhabi and Etihad.

        Sir Stamford

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