LONDON/SYDNEY — Qantas Airways’ decision to drop a 17-year pact with British Airways in favour of a deal with Dubai-based Emirates reveals the potential for fast-growing Gulf carriers to shatter the established airline order.
The 10-year accord, announced on Thursday, will lead Qantas to scrap its revenue-sharing pact with British Airways to gain access to 70 Emirates destinations. While the Australian carrier will carry on codesharing with BA, the move puts in doubt the standing of the oneworld global alliance the pair helped forge.
Emirates, Qatar Airways and Etihad Airways are exploiting the Gulf’s position at the heart of intercontinental flight paths to build hubs served by waves of departures using the world’s biggest wide-body planes. That’s won them a higher share of lucrative long-haul traffic and is pressuring earnings at network operators including British Airways and Qantas.
“Things are changing,” Emirates president Tim Clark told reporters in Sydney. “The international airline community needs to align itself to what is going on in the 21st century, not what was going on in the back end of the 20th century.”
Groups such as oneworld, which also includes AMR’s American Airlines, and the rival Star and SkyTeam combinations, are an “anachronism,” better suited to the aviation industry of a previous generation, according to Emirates, which began flying in 1985 and has disavowed any interest in alliances.
The deal with Emirates marks “a positive development,” though benefits will take time to materialise because of the size of deficits at Qantas, which had a A$450 million ($465 million) loss in the 12 months through June, Standard & Poor’s said on Friday. S&P, which was already reviewing Qantas, cut the credit rating one level to BBB-, the lowest investment grade.
Global alliances, looser relationships which allow members to align frequent-flier programmes, share lounges and better align schedules and ticketing, are “weakening” because the major Gulf carriers aren’t members, Neil Hansford of consultants Strategic Aviation Solutions said by phone from Salamander Bay, Australia.
Alliances have also failed to deliver in areas such as joint aircraft purchasing and negotiation of airport access and are essentially a response to curbs on ownership, according to John Strickland, director of JLS Consulting in London. Foreign companies are restricted to 25 per cent stakes in US carriers, while the EU has a 49 per cent limit.
Still, the three worldwide groupings control about 60 per cent of air traffic, according to Airline Business magazine.
Star, led by Deutsche Lufthansa and United Continental Holdings, is largest with about 25 per cent and annual revenue of $202 billion, while SkyTeam, which includes Air France-KLM Group and Delta Air Lines, has 20 per cent and oneworld about 15 per cent, the trade title estimates.