Issues & Trends – August 2012

EY’s Hogan queries future of airline alliances

ETIHAD boss James Hogan has questioned whether the major airline alliances will survive in their present form.

He sees the future belonging to carriers that strike a series of bilateral arrangements such as the partnerships his airline has formed with Virgin Australia.

Etihad has underwritten its inte-grated code share partnership with Virgin Australia by taking an equity stake in the carrier, eventually reaching 10 per cent, and has fashioned similar links with Aer Lingus and Air Berlin.

Saying that he did not see existing airline alliances continuing in their present form, Hogan noted that Etihad has 36 code share partners including with members of Star, Skyteam and oneworld.

“Our secret weapon is that we are only eight years old and we have been able to start with a clean sheet of paper,” he said.

He said the arrangements his airline is forging with Virgin Australia, Aer Lingus and Air Berlin are part of a strategy to secure its position in regions where it flies terminating services.

In Australia, for example, Hogan said Etihad will not fly its own aircraft to secondary cities, relying instead on Virgin Australia’s network.

He said the approach presented “a compelling proposition” to Australian corporate travellers and travel manage-ment companies, offering them direct access to a wide network of European ports over Abu Dhabi.

“People don’t want to backtrack (when travelling to European ports),” he said.

He claimed Etihad’s network is “the fastest-growing in aviation history”, currently offering 86 cities with plans to add 100 more over the next seven years.

Meanwhile, observers query the impact that reported Qantas talks with Emirates about setting up a Dubai hub will have on the oneworld alliance.

Asked about the Qantas move, Hogan said it is “always nice” when a competitor feels the need to adopt your strategy.

Hogan made the comments at a Melbourne press conference announcing a five year extension of the airline’s naming rights sponsorship of Etihad Stadium.

He said the sponsorship had worked well for the airline that was unknown to Australians when it entered the market five years ago. Australians were asking “Who is Etihad?”

Hogan said the Etihad board backed him, “a boy from Melbourne”, who told them that the sponsorship of the stadium, primarily a venue for AFL fixtures – but also used for other football codes, cricket, concerts and other events – was an answer to its branding problem.

He said Etihad’s above the line advertising spending was small compared to some of its competitors but the stadium sponsorship had helped boost recognition of the brand throughout Australia “almost overnight”.

He pointed out that in 2007, when the first Etihad Stadium deal was sealed, the airline was operating three Sydney-Abu Dhabi services a week.

It is currently flying twice daily from Sydney to Abu Dhabi, daily from Melbourne and thrice weekly from Brisbane.

And while in Australia, Hogan announced that Etihad will increase its weekly Australian flights to 28 by hiking Brisbane frequencies to daily from February 1, adding 47,000 seats a year to its capacity in this market. Like the existing services, the new flights will utilise A330 aircraft and will fly between Brisbane and Abu Dhabi over Singapore.