On October 8, Etihad announced the creation of a new alliance , Etihad Airways Partners.
Fruit of its recent equity investments, the Abu Dhabi-based company gives a marketing face to its capital actions.
An alliance bringing together the airlines controlled by Etihad
Etihad does not really create the surprise. The alliance created by Etihad therefore brings together 6 companies for the moment: airberlin, Air Serbia, Air Seychelles, Jet Airways, Darwin Airline, and Etihad Airways.
These companies are of very different sizes and with a fairly heterogeneous clientele.
Apart from airberlin which is part of oneworld, no other of these companies is currently part of an alliance, and their passengers often have to use another loyalty program to reach all destinations. This new alliance therefore brings many benefits to the passengers of these companies, who will enjoy common advantages throughout the Etihad Airways Partners network.
A unique positioning in the Gulf
To differentiate themselves, Gulf companies are all pursuing unique strategies. Even if the Premium positioning is common to all, each of the companies is destined to develop differently.
- Thus, Qatar Airways has chosen to join an established alliance, oneworld. If this has no theoretical effect on its intrinsic development, integration into an alliance allows it to expand its clientele to the destinations of its current network, and to attract a high-contribution clientele sensitive to the advantages linked to the program loyalty.
- Emirates, they remain on their position of strong intrinsic growth, almost explosive, and piecemeal partnerships, except with Qantas, but without capital investment. The power of the Dubai hub being their biggest asset. But the arrogant attitude of the managers of the local subsidiaries vis-à-vis the competition and the incredible dumping on prices, including in Premium classes, cast doubt on the long-term credibility of the company’s economic model.
- Etihad, the youngest and who had been rather discreet until then, with a sly cheek… By nibbling at the capital of airlines in difficulty, and by working both on the cost structure (rationalization of the network, pooling of purchases between these companies) and on the product (significant improvement of the product offered) is in the process of paying itself a good share of the cake, often helped by the states which see in Etihad the savior of their national company…
The creation of the Etihad alliance is only the marketing materialization of their Business strategy, which makes it possible to add, to the improvement in the profitability of these equity investments, a benefit for the traveler who will retain him in these companies.
A disruption of alliances?
A beautiful friendship that is crumbling in the 3 historical alliances
The question of the upheaval of the alliances already in place, Star Alliance, oneworld and SkyTeam therefore arises. These three alliances, built in the 1990s, bring together almost all the major historical airlines, and have generally been built around airlines forming their core (United and Lufthansa for Star Alliance, British Airways and American Airlines for oneworld and Air France- KLM and Delta for SkyTeam). These alliances have thus grown to reach each of around twenty companies today.
However, in recent years, tensions between member companies of the same alliance have appeared:
- At Star Alliance, we note the difficulty of Singapore Airlines in applying the benefits normally attributed to frequent flyers, or the recent very violent clash between Lufthansa and Turkish Airlines
- At oneworld, we note the current strong tensions since the extended partnership of Qantas with Emirates
- At SkyTeam, we note the also very violent clash between Delta and Korean , or Delta’s desire not to award miles to flights on Saudia
The new alliance created by Etihad therefore adds fuel to the fire. Two alliances are involved: oneworld for airberlin, which is already part of Etihad Airlines Partners; SkyTeam for Alitalia, which admittedly is not yet part of the new alliance but in which Etihad holds 49% of the shares and which has no reason not to join it a priori.
Can an airline be part of two alliances at the same time?
To this question, I would answer that it depends on the form of the alliance. For example, the links between Emirates and Qantas are not incompatible with the latter’s participation in oneworld, because the links are bilateral. Moreover, many companies have code share flights with companies from another alliance than their own.
Moreover, Etihad’s equity investments were not particularly troublesome commercially. But now, the fact that a real marketing alliance exists with attributes similar to the 3 alliances in place (alignment of loyalty programs, harmonization of products on the ground, etc.) does not allow multiple memberships. Thus, in the medium term, airberlin will have to leave oneworld, and Alitalia will have to choose which alliance to stay in. And therein lies the whole dilemma: the 3 alliances have a powerful strike force and an enormous network. Etihad does not yet have a company large enough to reach all regions of the world, and in a fine way.
In conclusion, Etihad is indeed changing the landscape of global air transport. But this revolution will take time. The alliances will remain in the medium term, but their form will change. The next few months will tell us what the commercial success of these alliances is…