Etihad and Emirates show airline alliances are outdated

Aviation alliances are bad for brands, new analysis shows, in the wake of criticism made by UAE airline chiefs about the global carrier agreements.

Most of the world’s big airlines are members of one of the top-three alliances, namely the Star Alliance, Oneworld or SkyTeam.

But airlines that shun such alliances saw healthier increases in brand valuations this year, according to an analysis of data from the UK consultancy Brand Finance by The National.

The world’s top-50 airlines ranked by brand value includes 36 alliance members. Of those for which comparative data is available, member airlines saw a total average 3.4 per cent decline in their 2015 brand valuations.

But airlines that are not alliance members saw an average rise of 12.3 per cent in their brand values, the data shows. Savio D’Souza, the associate director at Brand Finance, which also has operations in Abu Dhabi, says the likes of Etihad and Emirates have turned the alliance model “on its head”. Indeed, it “probably doesn’t work any more”, he says.

The consultancy’s valuations are tied to the companies’ underlying business performance – and, as such, do not reflect well on airline alliances.

For alliance members whose values rose, the average growth was just US$53 million between 2014 and 2015. But for non-alliance members with rising value, the average was $320m.

The UAE’s two biggest airlines are not members of the three big airline alliances. Emirates’ president Tim Clark said in May alliances were “the old way” of doing things, while its chairman Sheikh Ahmed bin Saeed Al Maktoum has said the Dubai airline could not have grown as big by joining an alliance.

James Hogan, president and chief executive of Etihad, said last year that the model is “fractured”.

Mr D’Souza points to Etihad’s model of “equity alliances”, where it invests in carriers in strategically important regions, as being more effective than regular alliances. The Abu Dhabi airline has invested in the likes of airberlin and Alitalia.

“Etihad is doing really well,” says Mr D’Souza. “It does seem like something that might work much better.”

Qatar Airways is the only one of the three big Arabian Gulf carriers to have joined an alliance, having joined Oneworld in 2013.

“Qatar Airways was kind of talked into joining the Oneworld alliance a few years ago,” says Mr D’Souza. “I think once they joined it, the general feeling is that they haven’t really seen the benefit of it. So it does feel like the whole alliances model is a little broken and isn’t really working as it was envisaged.”

Qatar Airways did not comment when contacted by The National.

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