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Welcome to our Monday Briefing for the week beginning 24 September 2018, summarising the main developments in air travel over the past week.
Emirates and Etihad
For a time it seemed that the future of air travel have pivoted permanently towards the Middle East.
With favourable Government support, geographic advantages, relatively unrestricted operating conditions and seemingly unlimited budgets, all the Big Three Middle Eastern airlines had to do was announce blockbuster aircraft orders at air shows, launch ever more capacious First and business class cabins, run celebrity endorsed ad campaigns and the traffic would just come its way. European and US airlines seemed positively pedestrian and spartan by comparison.
However, reality did not quite work out like that.
Etihad pursued a disastrous strategy of acquiring minority stakes in troubled European airlines such as Air Berlin and Alitalia that haemorrhaged cash. It has been heavily loss making, having reported a loss before exceptional items of USD$ 1.52 billion for 2017. The airline has also suspended routes, significantly curtailed its growth plans, and put aircraft orders under review.
Bloomberg, a traditionally cautious and reliable news outlet, reported last week that Emirates is in talks to acquire Etihad. Leaving aisle the regional politics of such a merger, in which we are not well versed, this deal will not escape the attention of regulators in both Europe and Australia.
Etihad codeshares with Air France and KLM on flights between Paris Charles de Gaulle and Amsterdam to Abu Dhabi and from their respective hubs. Etihad has similar agreements with Lufthansa from its hubs in Frankfurt and Munich. Surprisingly, there’s no such relationship with Virgin Atlantic.
It owns just over 20% of Virgin Australia and has an extensive codeshare relationship. Qantas and Emirates also have their own joint-venture covering Australia, the Middle East, Europe and Africa.
It is implausible that the Australian Competition & Consumer Commission (or indeed Qantas or Virgin Australia) would allow both joint-ventures to continue under single ownership. Given Virgin Australia’s complex shareholding structure shared between rival airlines with conflicting priorities, it is likely that a combined Emirates and Etihad would let this fall by the wayside.
Closer to home, Etihad currently operates three departures a day from Heathrow to Abu Dhabi. It also owns Alitalia’s Heathrow slots, which currently operates six daily departures to Italy. As such, a deal could more than double Emirates’ capacity at Heathrow of six daily flights.
Norwegian’s Bjørn Kjos on his future
Norwegian publication Nettavisen has an interview with Norwegian co-founder and CEO Bjørn Kjos.
Bjørn confirms in the interview that he is ready to step down in the medium term as CEO and a search is underway for a successor. On IAG’s so far unsuccessful bids for Norwegian, Bjørn comments:
“I’m not involved in it, it’s the board’s job, but we’ve never said we’re on sale. But should we sell, IAG is a great company to sell to. It’s a good company, says Kjos.
As Bjørn Kjos and fellow co-founder Bjørn H. Kise own a joint 27% stake in the airline, it is highly unlikely a bid go ahead without their consent. If both are minded to dispose of their stakes, this could change the prospect of a bid substantially.
Cathay Pacific & Qantas – The Best Of Frenemies
Two airlines that are longstanding members of the same alliance announcing a modest reciprocal codeshare relationship should not be news.
However, in the case of Cathay Pacific and Qantas it is. Although they are both members of Oneworld, their relationship has been cool at best. Cathay Pacific objected vociferously to Qantas’ plans to launch JetStar Hong Kong.
Qantas will place its code on Cathay Pacific flights from Hong Kong to Cairns and Perth as well as a number of regional routes from Hong Kong. Cathay Pacific will put its code on select Qantas domestic routes.
This is not the first time Qantas has made moves to a former partner or rival. It reinstated a codeshare with Air France from Singapore to Paris and will launch a new codeshare partnership with Air New Zealand next month. Whilst its former joint-business with BA is never coming back, don’t rule out some form of expanded relationship if Qantas pursues more non-stop flights to Australia.
In case you missed it:
BA relaunches Kos from London Gatwick. (London Air Travel)
The progress of United Polaris at London Heathrow. (London Air Travel)
Seasonal Christmas and Winter Ski Routes from London (London Air Travel)
Also of note this week:
Potential strike action on the Piccadilly Line from Wednesday 26 September to Saturday 29 September. (Transport for London)
The Indian Government considers measures to assist struggling Indian airlines. (Financial Times)
Late Post Publication Updates:
[Reserved for updates during the day.]
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