I resigned from Qatar Airways exactly five years after I joined, on 2-Sep-2012. Just over a month later in early October 2012, the airline announced that it had been invited to join the oneworld alliance, sponsored by British Airways (BA).
It was not a surprise to those of us who had been working on the ninth floor. Willie Walsh, the CEO of BA’s owner IAG at the time and former BA CEO himself, had been seen hanging out with Qatari CEO Akbar Al Baker. We knew something was up.
So when I read that Abu Dhabi-based Etihad has signed an agreement with Air France and Dutch flag carrier KLM, I wondered if they might be on a similar path. Like BA at oneworld, Air France and KLM (AFKL) are key members of the SkyTeam alliance.
According to an Etihad press release, the airlines are “contemplating” expanding their existing codeshare and 40 routes already have a new codeshare in place. They are also allowing their loyalty members to earn points from each others’ flights, plus “terminal co-location, reciprocal lounge access and ground handling”.
It looks like Etihad and AFKL are getting close indeed. The next logical step would be for Etihad to go all the way and announce it’s intent to join SkyTeam.
So will Etihad join SkyTeam? Who know. Should they join? I decided to find out.
What are the key economics of airline alliances?
Airlines have collaborated for decades using a process called interline. All IATA members will accept tickets issued by others and bill them for the revenue they need. Often but not always this is done through either the IATA Clearing House or Airlines Clearing House.
Sometimes airlines are just liable to pay each other the published fare. Other times, they have a Special Prorate Agreement (SPA) in place. The SPA tells each airline how much they will charge each other for bookings in each fare class, the much-feared and poorly understood ATPCO chart one and chart two.
Going further, airlines may codeshare. That means they are operating flights with another airline’s IATA code and their codeshare partners operate flights with their fare code.
So there are potentially four airlines concerned with a ticket:
1. The carrier who issues the ticket
2. The carrier who published the fare under which the ticket was issued
3. The carrier whose code and flight number appears
4. The carrier who operates the flight.
Complex airline industry settlement plans ensure that every relevant airline gets their cut. The industry would be much simpler without it and I question whether access to interline is worth the hassle for most carriers.
An alliance goes a step further. All alliance members can codeshare with each other and their loyalty club members can collect or redeem points on each other’s flights. An alliance is effectively a super-SPA.
Being part of an alliance is great for marketing. Other airlines actively sell your flights for you and market connections to your network. It is easier to attract fliers who like collecting points on their favourite airline and might otherwise not choose your services.
Unfortunately joining an alliance is also costly. Think of spending hundreds of thousands of Dollars just to start the discussions. Then there are membership fees and all the man hours required to set up systems, face those chart one and chart two gremlins, map demand and generally make things happen.
Even the planes need to be repainted with an alliance logo. Some aircraft may fly in the alliance’s own livery rather than the airline’s.
So will it be worth it for Etihad? I evaluated nine criteria:
1. Where do Etihad fly and which SkyTeam members do they connect with?
2. Which SkyTeam members do Etihad not connect with?
3. Are there good SkyTeam connections into Abu Dhabi, ideally from unserved or under-served markets?
4. Does Abu Dhabi itself have a market profile fit for SkyTeam?
5. Will joining SkyTeam help Etihad compete with oneworld member Qatar Airways?
6. Would Etihad’s membership of SkyTeam abstract revenue away from UAE partner airline Emirates?
7. Does Etihad’s on-board product and service align with SkyTeam standards?
8. Is joining SkyTeam aligned with Etihad’s shareholder objectives?
9. Is joining SkyTeam a good use of the airline’s human and IT resources?
I started with Etihad’s summer 2024 schedule, based on the week just before the solstice of 16-Jun to 22-Jun. This is a strong travel season but the northern hemisphere summer holidays have not normally started yet. It also covers none of Ramadan, Eid, the Prophet’s birthday, the Islamic new year or any public holidays in the UAE.
Here is what I found:
1. Etihad will operate 1,508 flights a week to and from Abu Dhabi, 754 in each direction
2. There are no fifth-freedom or indirect services, every flight is direct and non-stop
3. Etihad most likely manages it’s airline in terms of eight regions, shown in the maps of flight numbers below:
[Aside: I always appreciate it when airlines give Chinese cities the ‘8’ flight numbers as 8 is considered a lucky number in China!]
4. Mumbai, Delhi and London operate a quad-daily service, with other frequencies shown in the maps below:
5. The single-aisle fleet operates 375 frequencies each way, 49.7% of the total, with 173 (46.1%) of these on A321 and 202 (53.9%) on A320
6. The long-range fleet operates the remaining 379 frequencies (50.3%), with 32 on A350-1000, 21 on A380-800 (all London), 60 on B787-10, 224 on B787-9 and 42 on B777-300ER
The maps below show where each of the aircraft fly:
I generated all maps on the excellent Great Circle Mapper.
So should Etihad join SkyTeam with this network? Here is the scorecard with the results!
These scores are by the UK university honours classification system, so 70% is first class, 80% is amazing, 90% is flawless and 100% the best business case you have ever seen. 60% is a respectable 2.1 upper second and 50% a Desmond Tutu (lower second – 2.2!). 40% is third class, below 40% a fail.
Etihad could join SkyTeam but there is no really strong incentive. I would use the resources they have to keep on with the good work they are already doing to serve Abu Dhabi rather than trying to go global.
But how did I get to these scores? Read on to find out…
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