Qatar Airways Sets Course for Oneworld Membership

As we all departed the Middle East following World Routes this year, we could not have escaped the key role that the Gulf region airlines have played in enhancing global air connectivity. And, two of the region’s carriers have dominated the aviation headlines in the past week showcasing the different business strategies of the big three operators – Emirates Airline and Etihad Airways from the United Arab Emirates (UAE) and Qatar Airways from nearby Qatar.

All three airlines have developed on a common business model to develop their home markets as transit points across the globe. They have been hugely successful as the strong standings of Dubai International Airport, Abu Dhabi International Airport and Doha International Airport in the world rankings for passenger traffic testify, but there has been little product differentiation between them. However, now we are seeing a slight change of course.

After Emirates Airline recently revealed plans for a new commercial business alliance with Qantas, Etihad Airways is continuing down a similar path with commercial partnerships key to its future development. Its President and Chief Executive Officer, James Hogan revealed at the World Route Development Strategy Summit, part of the World Routes event, that its relationships with other airlines across the globe had helped it enhance its global reach. He hinted at more deals and in less than 24 hours, Nasair confirmed at World Routes that it had agreed a codeshare deal with Etihad and this week full details of a long rumoured commercial partnership with Air France-KLM were revealed.

Just hours after this announcement, one of the worst kept secrets in the aviation world was revealed as Oneworld confirmed that it had reached an agreement for Qatar Airways to become the first of the major Gulf carriers to become a full member of one of the world’s global airline alliances. Although the airline’s Chief Executive Officer, Akbar Al Baker told The HUB during a visit to World Routes on September 30 that the suggestions were “just rumours,” the airline had been long suspected as a potential partner for the grouping.

Qatar Airways up until this week was the second largest full service airline in the world not to be aligned to one of big global airline alliances. It has accepted the invitation of the grouping’s management board and is expected to take its position in oneworld within the next 12 to 18 months under a sponsorship from British Airways. Alongside adding 15 destinations and three countries – Iran, Rwanda and the Seychelles - to the alliance’s network it will also bring its five-star service mentality, having been named as Airline of the Year for the past two years by the Skytrax independent airline quality rating agency.

Its entry to oneworld will come as Qatar Airways sets up a new home in Doha with the opening of the New Doha International Airport in 2013 helping to strengthen its position as a premium global hub with an eventual capacity for 50 million passengers a year. Since its launch in 1997, Qatar Airways has quickly established itself as one of the world's fastest growing and highest quality airlines. Last year it handled 15 million passengers and generated revenues of $6.4 billion and it has now expanded its fleet to 111 aircraft, with an average age of four years. It also holds orders and options for more than 250 more aircraft, worth more than US$ 50 billion, for delivery over the next few years. These include 13 Airbus A380-800s, 80 Airbus A350s, 60 Boeing 787s and 80 Airbus A320neos.

Qatar Airways will be oneworld's second member airline based in the Middle East, alongside Royal Jordanian, which became the first airline from the region to join any of the global alliances when it joined in 2007. In just 15 years of operations, Qatar Airways has built up a solid international route network flying to key business and leisure destinations worldwide - and winning countless awards for high service levels.

Its network serves 120 destinations in 70 countries in the Middle East, Europe, Africa, North and South America, Asia and Australasia, including oneworld hubs Amman, Berlin Tegel, Buenos Aires Ezeiza, Hong Kong, London Heathrow, Madrid, Melbourne, Moscow Domodedovo, New York JFK, Osaka Kansai, Sydney, Tokyo Narita, and the Kuala Lumpur home of oneworld member elect Malaysia Airlines.

Qatar Airways will substantially strengthen oneworld's customer offering by providing superior routing alternatives across many hundreds of city pairs. For example, passengers flying between Asia and Southern Europe or between Asia and Africa will now have convenient one-stop connections not previously available within the oneworld network. Its addition will increase oneworld's global coverage to 856 destinations in 159 countries, served by a combined fleet of 2,600 aircraft operating more than 9,300 flights and carrying almost a million passengers every day (342 million a year), generating annual revenues of nearly US$ 120 billion.

The Gulf carrier already codeshares with oneworld member designate Malaysia Airlines and it is now likely to develop bilateral links with more airlines in the alliance as it moves towards becoming a member of the group. Two established oneworld member airlines currently serve its Doha home - British Airways from its London hub, and Royal Jordanian from its Amman base - along with member elect SriLankan, from its Colombo hub. Opportunities for increasing the alliance's services to Doha are expected to be explored as part of the entry process.

"Alliances are playing an increasingly important role in the airline industry today - and that will continue long into the future. Qatar Airways has carefully reviewed its strategic options and it is very clear that joining oneworld is by far the best way forward for us as we look to strengthen our competitive offering and give passengers what they fully deserve - more choice,” said Akbar Al Baker, Chief Executive Officer, Qatar Airways at an event to mark its planned alliance entry in New York this week.

“In Qatar Airways' relatively short history, we have quickly established a reputation for innovation, quality and excellence in everything we do, raising standards which our industry peers have watched with envy. We are pleased to build on that by becoming the only major airline from the Gulf to date to be invited to join any of the global airline alliances - and we are proud to have been invited to join the best of them, in oneworld,” he added.

Entry to an alliance usually means following a standard set of group procedures, but Akbar Al Baker is certainly not going to let standards slip at Qatar Airways and expects its new partners to match his own service levels. In an interview at World Routes he highlighted some of the factors that distinguish Qatar Airways from some of Europe’s leading operators and why they don’t always see eye-to-eye. “We learnt [from western carriers] and now we are teaching them how to run efficient airlines,” he said.

“It is true there are western carriers that want to impede the growth of Middle Eastern carriers. They perceive us a threat. We are more efficient, have a higher class of product. We are absolutely aggressive and we have learnt creating a hub from them and they don’t like this. They realise the growth in Middle Eastern carriers is not harming their growth. They have to keep up with the high standards of product and high quality of in-flight services, newer aircraft and most importantly very god value for money,” Akbar Al Baker explained.

Qatar Airways will be the ninth largest carrier within the oneworld grouping of full, affiliate and members elect when they are ranked by available seat capacity for this year. As the table below illustrates the carrier will hold an approximate 5.1 per cent share of total seat capacity (based on 2012 schedules) with over 116,000 annual departures and more than 25 million annual seats.

So, will Qatar Airways’ decision impact its rivals? No, appears to be the immediate answer as Emirates and Etihad follow their own path. Having already gone on a spending spree in 2012, some analysts had suggested that Etihad Airways could have looked to make its most significant investment to date in European flag carrier Air France – KLM, but its commercial partnership is a logical step, which in the future could perhaps lead to greater synergies with the SkyTeam founder. In the meantime, the arrangement forms a traditional codeshare which will enable Etihad to access new markets via the networks of Air France and KLM from their respective hubs at Paris Charles De Gaulle and Amsterdam Schiphol airports.

Alongside placing its ‘EY’ code on KLM’s own Amsterdam – Abu Dhabi route and the Air France ‘AF’ code on its own Abu Dhabi – Paris CDG link, the arrangement, which will come into effect from October 28, 2012, will enable Etihad to fly passengers under its code on to Bordeaux, Copenhagen, Madrid, Nice and Toulouse from Paris and Billund, Cardiff, Newcastle, Oslo, and Stavanger from Amsterdam. On a reciprocal basis Air France passengers will be able to connect through Abu Dhabi for flights to Colombo, Dhaka, Kathmandu (subject to governmental approval), Mahe and Male, while KLM passengers will be able to connect through Abu Dhabi for flights to Colombo, Islamabad, Lahore, Melbourne and Sydney. Through the agreement with Etihad, Air France and KLM will also co-operate with airberlin on flights between France, Germany and the Netherlands.

“This deal, Etihad Airways’ 40th codeshare, marks a momentous milestone for both airline groups and offers countless opportunities to develop an unrivalled commercial relationship,” said James Hogan, President and Chief Executive Officer, Etihad Airways. “It reflects the core elements of Etihad Airways’ 10-year master plan, driven by organic network growth, combined with the forging of strategic codeshare partnerships and minority equity investments in other airlines. The linking together of these three components, as we continue to strengthen our bilateral agreements, means all the pieces of our plan are coming together.”