Legacy airline alliances have outlived their usefulness, based on Abu Dhabi-based Etihad Airways’ president James Hogan.
Hogan yesterday delivered a keynote speech on the International Aviation Club in Washington, DC.
Hogan said Etihad Airways’ unique business model, that’s a mixture of organic growth, codeshares and minority equity investments, was proving very effective in building passenger numbers, revenue and profit for all its partners.
“The traditional airline alliances have evolved into slow-to-respond, bureaucratic organisations which struggle to deliver added value to their member airlines, lots of that are now not compatible with one another.
“If we glance on the consolidation currently occurring inside the airline industry, we’re also seeing more fragmentation in the alliances.
“This goes to continue as members seek easy methods to operate profitably in a completely competitive environment with high fuel costs and usually slower global economic growth.
“This month we can report our strongest ever first quarter results.
“Our codeshare and equity partners have made a massive contribution to that financial success,” Hogan said.
Etihad Airways owns 29 per cent of airberlin, 40 per cent of Air Seychelles, nine per cent of Virgin Australia and just below three per cent of Aer Lingus.
It has 42 code share relationships worldwide.
The airline posted a profit of US$42 million in 2012 and saw two of its equity partners – airberlin and Air Seychelles – return to profitability, meaning that every one five airlines are actually within the black.
Hogan said that Etihad Airways’ equity alliance of minority shareholdings, enabled the airline to go into markets within local foreign investment limits and, therefore, without the complexities, approvals or expense attached to mergers or larger investments.
“It is simpler, faster and much less expensive to grow through one-on-one partnerships with established, respected carriers than that’s to rely primarily on our own resources, and to begin from scratch in every market we serve.
“We have hand-picked like-minded partners with whom we will work collaboratively to construct revenue across a broader network and decrease operating costs.
“We specialise in our partners’ profitability up to our own, because we’re not facing competing interests.
“When the five chief executives sit to make decisions, we have now a shared commitment to make things happen,” he said.
Hogan said that because Etihad Airways had skin inside the game it may well go much further than legacy alliances in thinking innovatively and building relationships that delivered ongoing value.
“An example of innovation is the best way we’re now working with our equity alliance partners to develop ‘centres of excellence’ wherein operational and commercial expertise is pooled to deliver best practice around the group.
“Cooperation includes fleet and engine acquisition, maintenance, recruitment and coaching. That’s real value-add for our equity alliance and i’m confident it’s the way forward,” Hogan concluded.
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