‘Oneworld airline’ mulls low-cost, emerging-market members

Bloomberg

The Oneworld alliance, which includes British Airways and American Airlines, is reviewing the case for seeking members from the ranks of discount carriers while exploring measures to fill gaps in emerging markets.
Rob Gurney, who took over as Oneworld’s chief executive officer in October, said he’s considering the group’s approach to low-cost operators that account for an ever-increasing share of global traffic, and evaluating steps to boost its presence in Africa, India and China.
Oneworld is the smallest of the three main airline groupings, with 14 members versus 28 at the Deutsche Lufthansa AG and United Airlines-led Star Alliance and 20 at SkyTeam, which includes Air France and Delta Air Lines, though it claims to have a greater proportion of “blue chip” brands. Gurney said that while alliances remain vital in encouraging customer loyalty and boosting revenue, they must keep pace with industry consolidation and the joint venture pacts that have become key profit drivers for airlines.
“The value proposition hasn’t evolved as rapidly as market structures, industry trends or the operating models of our member airlines,” Gurney said in a briefing at the Aviation Club in London. “Like any enterprise that perhaps hasn’t moved at sufficient pace, you need to address that. This is a business.”
The CEO declined to reveal what new customer initiatives are under discussion, while saying he aims to establish an “ambitious agenda.”

Blurring Divide
Oneworld needs to think through how it might accommodate discount carriers without doing damage to existing members, Gurney said. No-frills specialists compete with traditional network operators and don’t generally participate in the code-share and interline relationships around which alliances are built, though the divide is becoming blurred as the discounters target business travel and former flag carriers seek to slash costs. Ryanair Holdings Plc is also exploring plans to feed passengers onto the long-haul flights of competitors.
Oneworld’s sole representative in Africa is affiliate member Comair, which is owned by BA and serves short-haul markets in the south of the continent. It also lacks members in China and lost a planned Indian recruit with the grounding of Kingfisher Airlines Ltd. in 2012.
Gurney said Oneworld has held “formative” talks with possible recruits in Africa, where three of the four biggest carriers — Ethiopian Airlines Enterprise, South African Airways and EgyptAir — are members of Star and a fourth, Kenya Airways Ltd., is part of SkyTeam. The absence of an African outpost is partly offset by the level of connectivity offered there by existing members, the CEO said, especially Qatar Airways, the only Persian Gulf carrier to join an alliance.
Oneworld isn’t currently pursuing recruits in India, where Air India is a Star Alliance member, or mainland China, where China Eastern, China Southern and Xiamen Air have joined SkyTeam and Air China and Shenzhen Airlines are part of Star. It would nevertheless “absolutely like to be working with airlines domiciled in those countries” on the right terms, Gurney said.

Aer Lingus Entry
It’s also possible that Oneworld could move toward granting membership to less-established carriers in emerging nations — where incompatible systems and differing service standards have been an issue — especially since some markets seem likely to transition to low-cost carriers without ever developing fully fledged network operators.
“We’ve got to be open to everything and anything,” Gurney said. “There are some markets that have skipped the cycle, and if we want to have a partner that’s operating in those markets we have to re-think how we collaborate.”
Plans for Ireland’s Aer Lingus to join Oneworld after its purchase by BA owner International Consolidated Airlines Group SA provide an opportunity for the alliance to simplify the process for integrating new members, he said, though the timing is a matter for IAG and “scoping work” hasn’t yet started.
Gurney, who joined from non-aligned Emirates of Dubai and previously worked at BA and fellow Oneworld member Qantas Airways Ltd., said he accepts that members won’t always see eye to eye and that some may have conflicting priorities and business models.
Qatar Air, which joined Oneworld in 2013, last year clashed with American Airlines, a founder of the alliance in 1999, saying it might go so far as to form a breakaway group, after the U.S. company lent its weight to a push to curb Gulf-carrier growth. Tensions may revive after President Donald Trump told U.S. airlines Thursday he’d help them compete with foreign carriers allegedly benefiting from illegal subsidies, a charge they’ve directed at Mideast rivals.