Air Asia CEO to focus on regional expansion

The nature of international aviation is such that the issues of most interest and importance to Gulf carriers are not always played out in the Gulf. Consequently, currently, keen observers are looking off-shore. No, not the annual general meeting of the legacy airlines’ trade association, IATA (International Air Transport Association), held in Beijing last week, but to Australia and New Zealand. Beijing was an ideal place for the IATA AGM. The meeting runs with all the cool spontaneity of the Chinese Communist Party Annual Assembly of the People after all. It was the ‘pre-cooked’ nature of the event that saw Qatar Airline’s CEO, Akbar Al Baker, stir up a long overdue revolt from the floor at last year’s AGM in Singapore. As Al Baker noted in Geneva recently, the jury is still out on whether the change of director-general has had an impact. Back in the real world of running complex international airlines, attention has turned to Australia. This is for two reasons. First, Qantas, Australia’s long-haul legacy airline recently shocked the market with an announcement of a profit revision. More than 30 per cent of its share price was wiped out in a week. Secondly, at the same time, Etihad Airways from Abu Dhabi, gently increased its shareholding in Qantas’ main domestic — and increasingly, international — rival Virgin Australia to 5 per cent. It did this on-market. The question is what all this might mean.The rumour mill has whirred into high gear. Two snippets emerged from the grinding. First, it was rumoured that Emirates might be interested in a tie-up with Qantas. Emirates’ President, Tim Clark, has ruled out an equity stake, but there are many ways to work together short of equity. Secondly, Air New Zealand, which owns more than 20 per cent of Virgin Australia, has dispatched a very senior team to a series of tripartite meetings of themselves, Virgin and Etihad. If these are true then there is only one thing to say: game on. Qantas has a proud history. It is the world’s second oldest international airline. Once, Qantas carried more than 45 per cent of all Australians that travelled overseas. Now, that figure is 17 per cent%. It is symptomatic of the fundamental changes underway in international aviation. New generation airlines, with new generation equipment — fleets of B777 and A380s — are reshaping the environment. That has left airlines like Qantas struggling. The legacy carriers are desperately looking to revise and rejuvenate their business model. Comparing Emirates and Etihad is an interesting study. They are pursuing different growth strategies from almost identical bases. After a disappointing and difficult period with Sri Lanka’s national carrier, Srilankan Airlines, Emirates has tended to plough its own furrow. It now extends its network to more and more cities, joining more and more city-pairs around the world. Notwithstanding the rumours surrounding Qantas, in general terms it has chosen to not codeshare with other airlines or to enter into other market sharing agreements. Rather it wants to manage and control its network, and that network’s growth, centred on its Dubai airport hub. Etihad is the smallest of the “big three” Gulf carriers. It has fewer aircraft than either Emirates or Qatar. Its strategy appears to be one of gaining a foothold in particular markets by dealing with like-minded carriers. It has taken equity in Dublin-based Aer Lingus, airberlin of Germany and now, Virgin Australia. With equity comes seats on the board and an engagement with the management and strategy of an airline. In other words it wants to grow its network by building feed into the edges of the network, confident that it will then flow over its Abu Dhabi hub. We will see these strategies head-to-head in Australia, which is why it is so interesting. If the rumours are even partially true, Qantas is looking at a codeshare or other sort of contractual tie-up, directing Qantas’ passengers over Dubai and on to the incredible Emirates network beyond. Onward connections to Europe, Africa, the Middle East and even the east coast of the USA; for Qantas’ passengers an array of choices never previously seen. Without having to transfer through Heathrow. Qantas would continue to fly to Singapore, Bangkok and London. Australians would be spoilt for choice like never before. Etihad, on the other hand, if rumours are to be believed, is looking to be much, much, more disruptive. In addition to codeshares and services over Abu Dhabi to the ends of the Etihad network, a three-way tie-up across the Tasman, the Pacific and the Indian would be something else again. Speaking as an aviation regulatory practitioner, the issues are mouth-wateringly complex. But that is a testament only to the stupidity and growth inhibiting quality of the current rules and regulations. I shall talk about some of those issues in a future column. Andrew Charlton is Managing Director of the Europe-based strategic advisory, government and public affairs firm, Aviation Advocacy.from gulfnews.com