Warning on Airline Alliances Cutting Competition

Emirates has warned that the growing alliances among airlines requires “continual re-examination” to “ensure competition could thrive”.

Emirates vice president of public, international, industry and environment affairs, Andrew Parker, told delegates at the Outlook Aviation Summit in Sydney that alliances now controlled over 55% of global available seat kilometres with 90% of traffic on Atlantic routes carried by the three alliances.

“Alliances are evolving from what they originally intended to do – more seamless travel, frequent flyer programs, lounges,” Parker commented. “Today they are becoming fully integrated large global businesses that work as a single entity, often immunised by governments.

“We hope that they’re are continually re-examined so we don’t lose sight of consumer interest in all of this,” he said.

Emirates is focusing on differentiating itself through its product – “a truly global network that can compete against alliances like Star.”

Emirates has become the world’s fourth largest in terms of system wide capacity per week, according to the Centre for Asia Pacific Aviation, enjoying 8.1% growth in capacity per week. The Dubai-headquartered carrier also ranked among the world’s ten fastest growing airline during June 2011, Capa figures showed.

The airline announced that it would be upping its weekly flights from 63 to 70 with the introduction of a third daily Sydney service from October 1.


Andrew Parker

The number of tourists from the UAE to Australia has almost tripled in the past 10 years as Etihad Airways and have added more flights to the country. Arrivals from the UAE increased from 26,500 in 2000 to 75,600 last year, with the figures including nationals and expatriate residents, data from Australia’s tourism board show. That represents an increase of more than 185%. Average visitor spending of UAE tourists in Australia is $6440 versus a global average of $4850.

Emirates’ rival Etihad Airways is considering a move to join one of the three main global airline alliances, a plan that could create a fundamental shift in the Middle East’s aviation industry.

James Hogan, the chief executive of Etihad, said his airline would make a “great partner” with either Star Alliance, oneworld or SkyTeam but he would not rush into taking such far-reaching action.

Such a move would further distinguish Etihad from its two larger neighbours Emirates in Dubai and Qatar Airways, which have both pursued go-it-alone strategies. By contrast, Etihad has quietly amassed code-share partnerships with 31 carriers from around the globe to extend the reach of its network. It would be a natural progression to continue on this path of partnering other airlines and formally join an alliance, said Mr Hogan.

Airline alliances have evolved over the past 15 years in response to stringent restrictions on airline ownership worldwide. Since airlines are seen as strategic and symbolic national assets, many governments forbid foreign ownership. But in such a fragmented industry, with razor-thin profit margins, airlines have responded by bunching together, linking up their flights to offer passengers more travel options.

Star Alliance, led by Lufthansa, Singapore Airlines and United, is the biggest airline group with 27 members that last year collectively flew 796.3 billion passenger kilometres, a key industry metric. This is almost double that of oneworld, led by British Airways, Qantas and American Airlines, or Sky Team, led by Air France-KLM and Delta Air Lines.

Emirates Airline is the world’s largest unaffiliated airline, flying 143.6 billion international passenger kilometres last year, while Qatar Airways is the second-largest and Etihad ranks eighth-largest by international capacity worldwide.

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