Oneworld Is First Alliance to Welcome Big Mideast Carrier

NEW YORK -- ( TheStreet) -- Oneworld has become the first global alliance to welcome one of the big three Middle East airlines, adding Qatar Airways to its roster of a dozen members and three "members elect" who have received invitations.

A press conference at the Four Seasons hotel on Monday provided a demonstration of the ever-increasing importance of the three alliances in global aviation. About 70 reporters attended, as did the CEOs of Qatar and of two of the world's leading airlines, British Airways and American Airlines ( AAMRQ.PK).

American pilots demonstrated outside the event. Within the U.S. airline industry, American's bankruptcy is a dominant news story. But in the bigger context of global aviation, it is barely a story at all. American is going to restructure and emerge from bankruptcy as the U.S. anchor for oneworld. In fact, it seems that oneworld has in some ways adopted the American "cornerstone" strategy of being the dominant carrier in the world's most important business markets.

"In travel between the top 100 cities in the world, we are bigger than Skyteam," said oneworld CEO Bruce Ashby in an interview. "We are bigger in the international premium travel market, and we connect the international business centers, New York and Tokyo and London. Qatar also has a lot of high value, important city to important city routes." In particular, he said, Qatar offers convenient connections for markets such as South Africa to China, Kenya to India and Sao Paulo.

"What we're trying to do with the alliance is to focus on the frequent international traveler who wants multi-sector travel across different airlines to get to places around the world (with) smooth transfers as they leave their home airline," Ashby said. "That's what alliances are all about."

The big three Middle East carriers are Qatar, with a hub in Doha that serves 119 destinations; UAE-based Etihad, with a hub in Abu Dhabi that serves about 90 destinations; and Emirates, with a hub in Dubai that serves 120 destinations. All three carriers are growing rapidly, thanks to oil wealth that enables them to be among the world's leading buyers of aircraft. They have been seen as industry outliers that are able to undercut other carriers, particularly European airlines, in offering lower-cost worldwide connections through their hubs.

But that is changing. "People said these carriers would never have been invited to any alliance because they were incompatible," Ashby said. "They think they are the enemy and compete with all other carriers, but that is not true. An alliance is a customer proposition. If customers need access to some point that members don't serve well, there are no rules (at oneworld) against customers getting to where they want to go." Ashby said oneworld is more flexible than Skyteam and Star in allowing cross-alliance alliances by its members.

Logically, one would expect each of the big three Mideast airlines to line up with a different alliance, just as each of the big three U.S. carriers have, with Delta ( DAL) in Skyteam and United ( UAL) in Star. So far, it has not worked out that way.

Emirates maintains that it has no interest in an alliance, but will sign code-share deals with individual carriers. It recently signed a code-share deal with Qantas, a oneworld member. In some respects, Emirates resembles Alaska ( ALK), which signs deals with individual carriers but avoids alliances. Said Ashby, "Emirates is like a really big Alaska in a really hot place."

Etihad has also sought relationships with various carriers. It has invested in oneworld member airberlin, and on Monday Skyteam stalwart AirFrance-KLM Group announced a new codeshare deal with Etihad and airberlin.

"Qatar sees the world differently," Ashby said. "They believe that belonging to a group of complimentary carriers is a benefit to their global customers."

-- Written by Ted Reed in Charlotte, N.C.

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