Emerging-Market, Low Cost Members’ Inclusion Being Mulled by Oneworld Airline Group

While exploring measures to fill gaps in emerging markets, the case for seeking members from the ranks of discount carriers is being reviewed by the Oneworld alliance, which includes British Airways and American Airlines.

The group is evaluating steps to boost its presence in Africa, India and China and to low-cost operators that account for an ever-increasing share of global traffic, said Rob Gurney, who took over as Oneworld’s chief executive officer in October.

Compared to SkyTeam, which includes 20 members Air France and Delta Air Lines, and Star Alliance, which has 28 members and is led by the Deutsche Lufthansa AG and United Airlines, Oneworld is the smallest of the three main airline groupings. However the group claims that more proportion of “blue chip” brands is associated with it. Alliances must keep pace with industry consolidation and the joint venture pacts that have become key profit drivers for airlines while alliances remain vital in encouraging customer loyalty and boosting revenue, Gurney said.

“The value proposition hasn’t evolved as rapidly as market structures, industry trends or the operating models of our member airlines,” Gurney said in a briefing at the Aviation Club in London. “Like any enterprise that perhaps hasn’t moved at sufficient pace, you need to address that. This is a business.”

While saying he aims to establish an “ambitious agenda”, the CEO declined to reveal what new customer initiatives are under discussion.

Gurney said that without doing damage to existing members, Oneworld needs to think through how it might accommodate discount carriers. Though the divide is becoming blurred as the discounters target business travel and former flag carriers seek to slash costs, no-frills specialists don’t generally participate in the code-share and interline relationships around which alliances are built and compete with traditional network operators. To feed passengers onto the long-haul flights of competitors, plans are being explored by Ryanair Holdings Plc.

In Africa, three of the four biggest carriers – Ethiopian Airlines Enterprise, South African Airways and EgyptAir — are members of Star and a fourth, Kenya Airways Ltd., is part of SkyTeam and Gurney said Oneworld has held “formative” talks with possible recruits in Africa. The CEO said that the level of connectivity offered there by existing members, especially Qatar Airways, the only Persian Gulf carrier to join an alliance, partly offsets the absence of an African outpost.

While incompatible systems and differing service standards have been an issue, especially since some markets seem likely to transition to low-cost carriers without ever developing fully fledged network operators in emerging nations, it’s also possible that Oneworld could move toward granting membership to less-established carriers in emerging nations.

“We’ve got to be open to everything and anything,” Gurney said. “There are some markets that have skipped the cycle, and if we want to have a partner that’s operating in those markets we have to re-think how we collaborate.”

He said that though the timing is a matter for IAG and “scoping work” hasn’t yet started, an opportunity for the alliance to simplify the process for integrating new members could be provided as there are plans for Ireland’s Aer Lingus to join Oneworld after its purchase by BA owner International Consolidated Airlines Group SA.

(Adapted from Bloomberg)

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