We have a new definition of global warming in Denmark with the skies hotting up in Northern Europe.
This morning’s announcement of codeshare plans between SAS and Etihad Airways has very interesting implications for the Northern European travel market, and for Europe’s aviation industry as a whole.
SAS is a Star Alliance member and partner of Lufthansa Airlines. Yes, the same Lufthansa Airlines which has lobbied European courts to stymie the progress of middle eastern carriers in the European market and identified the threats from Low-Cost Carriers like Ryanair and Middle Eastern carriers like Etihad Airways as damaging to the long-term profitability and stability of European carriers (including itself).
Etihad Airways has continued its progress in Europe regardless of objections and attempts to block its advancement. It has also taken the big alliances head-on by creating its very own sort-of alliance (partnership) with less of the standard complex reviews and approvals and terms and conditions and associated costs, and more of the ‘you’re a good airline let’s work together’ strategy. Etihad Airways’ CEO James Hogan explained this move as follows (Reuters):
“The model of alliances is fractured. See what happened to Qantas, Emirates and British Airways,” Etihad’s Chief Executive James Hogan told reporters on the sidelines of an IATA airlines conference in Abu Dhabi. “We believe partnerships are better, strong codeshare relationships and equity investments.”
Etihad Airways has some very strong partnerships, codeshare relationships and equity investments in Europe. (Stronger now with today’s announcement).
Etihad Airways holds equity investments in airberlin, Air Seychelles, Virgin Australia, Aer Lingus, Air Serbia and Jet Airways, and is in the process of formalising equity investments in Alitalia and Swiss-based Etihad Regional (operated by Darwin Airline).
It has current code-share partnerships with American Airlines, airberlin, Air Astana, Air France, Aer Lingus, ANA, Air Malta, Air New Zealand, Air Seychelles, Alitalia, Bangkok Airways, bmi, Brussels Airlines, Czech Airlines, Flybe, Garuda Indonesia, Safi Airways, Jet Airways, KLM, MEA, Niki Airlines, Royal Air Maroc, Olympic Airways, Rak Airways, S7, SriLankan Airlines, TAP Portugal, Turkish Airlines, Virgin Australia and Vietnam Airlines. French rail company SNCF to boot.
(In italics EU carriers, bolded Italics for EU carriers in which Etihad holds investments.)
A code-share partnership with a Star Alliance member is not unique for Etihad. Of these above, ANA, Air New Zealand, Brussels Airlines, TAP Portugal, and Turkish Airlines are Star Alliance carriers. But that’s the point. Of these five Star Alliance members, three are in Europe. Now add SAS. Etihad Airways is working its way through Europe through partnerships and codeshares at heated pace, and now Lufthansa has one more reason to be displeased with Etihad’s path of progress.
According to the two carriers’ identical announcements, here is how the new SAS and Etihad codeshare partnership will work (subject to regulatory approval):
“The agreement, which is subject to regulatory approval, will strengthen both carriers by enabling them to offer greater connectivity to and from a number of key European cities. SAS is Etihad Airways’ 47th airline partnership globally and its 22nd in Europe. For SAS, Etihad is the 23rd codeshare partner and the third with strong presence in the Middle East.”
“Both airlines will also develop and sign a Frequent Flyer agreement, which will benefit the members of Etihad Airways’ Etihad Guest and SAS’ EuroBonus loyalty programs.”
The respective airlines’ spokespersons had this to say in the announcement:
Kevin Knight, Etihad Airways’ Chief Strategy Officer: “This codeshare agreement with SAS will improve flight connections to Stockholm, Oslo and Copenhagen, as well as a number of important secondary cities across Scandinavia, greatly enhancing travel options and connections for air travellers and deepening our ties with Europe and European carriers. Partnerships like this one with SAS are central to Etihad Airways’ strategy and we look forward to placing the SK code on our flights to and from Abu Dhabi, and welcoming their passengers aboard our aircraft.”
Eivind Roald, SAS’ Executive Vice President & Chief Commercial Officer: “We are very pleased to announce this new codeshare cooperation with Etihad Airways and look forward to increase traffic between Scandinavia and the Middle East. Tourism and trade between our regions have increased over the years, and we are happy offer the benefits of both SAS and Etihad Airways to our travellers. From seven of SAS’ main European airports we can offer a high quality product with Etihad Airways to and from Abu Dhabi in the United Arab Emirates. We also look forward to welcoming passengers from Etihad Airways onboard giving them the true and appreciated SAS experience delivered the Scandinavian way where we focus on making life easier for frequent travellers.”
With this deal, SAS will place its SK code on Etihad Airways’ flights between Abu Dhabi and Brussels, Düsseldorf, Frankfurt, Rome, Milan, Zurich, Geneva and London Heathrow. Etihad Airways will place its EY code on SAS-operated flights from these European destinations, excluding Brussels, onto SAS’ hubs in Copenhagen, Oslo, and Stockholm. The EY code will also be placed on flights beyond Copenhagen to Billund [Billund–Yay!] and Ålesund; beyond Oslo to Ålesund, Kristiansand, Trondheim, and Stavanger; and beyond Stockholm to Umeå, Sundsvall, and Östersund.
The on-sale date for the codeshare is Monday 8 December 2014 and the first travel date is Monday 19 January 2015.
What SAS brings to the deal:
Scandinavian Airlines (SAS) carries more than 28 million passengers annually and is Scandinavia’s leading airline with close to 1000 daily flights to 127 destinations in 36 countries in Scandinavia, Europe, the U.S. and Asia. SAS is a member of Star Alliance™ and can together with 26 partners offer more than 18,500 daily flights to 1,316 destinations around the world in over 193 countries. For more information, visit www.flysas.com
How Etihad Airways sweetens the deal:
Etihad Airways began operations in 2003, and in 2013 carried 11.5 million passengers. From its Abu Dhabi base Etihad Airways flies to 111 existing or announced passenger and cargo destinations in the Middle East, Africa, Europe, Asia, Australia and the Americas. The airline has a fleet of 105 Airbus and Boeing aircraft, and more than 200 aircraft on firm order, including 71 Boeing 787s, 25 Boeing 777-X, 62 Airbus A350s and 10 Airbus A380s. For more information, please visit: www.etihad.com
Let’s face it, travel between these two destinations is attractive to all parties involved. Scandinavians love to travel the world and a deal with Etihad brings more travellers from around the world to Scandinavia. Both carriers offer excellent service, one with the understated appeal of Scandinavian design, the other with over-the-top unparalleled luxury. It’s a win-win. Unless you’re Lufthansa.
The Lufthansa Group has warned of the inherent threat it perceives in progress by leading Gulf carriers in the European skies. In its 2014 Policy Brief, printed this September, the group encapsulated its thoughts a provocative question:
Expansion of the Gulf hubs: Will Europe soon be playing in the Second League?
The Gulf states have recognised the importance of aviation. Their governments are supporting the sector with sums reaching into the billions and developing the world’s largest airports and mega-airlines for their sparsely populated countries. Without any home market to speak of, Emirates has catapulted from 17th place in 2005 to fourth place in 2013, based on passenger kilometres. And the mega-hub Dubai, with less than half as many intercontinental transfer passengers as Frankfurt in 2005, is now, eight years later, already 50 percent larger than Frankfurt and no. 1 worldwide in this segment. In addition to these investments, the states from the Gulf region, which have no national parliaments, are ensuring optimal framework conditions for their aviation industries. Onerous legislation such as the German air travel tax or the unilateral move by the EU to implement emissions trading are inconceivable in those countries.
There’s more and you’re welcome to read all of it, but here are some key highlights relevant to today’s announcement:
Critical Etihad influence
According to the Swiss Federal Office of Civil Aviation (FOCA), which is responsible for supervision of civil aviation activities in Switzerland, the Swiss airline Darwin could be “remotely controlled” by minority shareholder Etihad. This would conflict with EU law, which also applies in Switzerland. The participation agreements can be adapted by the end of September or the FOCA may revoke Darwin’s operating license. In Germany, a similar proceeding is currently ongoing with regard to the Etihad/Air Berlin case.
What has thus far come of all this is Swiss authorities giving Darwin Airline until January 31, 2015 to answer more questions on Etihad’s plans, airberlin making a codeshare agreement with Alitalia (described by CAPA as revealing the “guiding hand of Etihad Airways”), and the Luftfahrt Bundesamt (LBA) rejecting proposed codeshares on 34 routes between airberlin/Etihad this winter then reversing its decision temporarily with limitations. The LBA set-back was annoying for airberlin and Etihad, then less annoying, but there’s the Alitalia codeshare as a back-up–perhaps not as good (as CAPA asserts) but it’s something.
The Lufthansa Group also had this to say:
Uncontrolled growth runs counter to open skies agreements
The open skies agreement between Germany and the United Arab Emirates (UAE) “shall have as their primary objective the provision of capacity commensurate with the foreseeable traffic demand to and from the territory of the Contracting Party.” Today, however, Emirates, Etihad, and Qatar have created gigantic growth which is not based on natural demand, but rather is aimed at weakening EU hubs and diverting travellers through their own hubs.
A specious argument if ever there was one. What is demand if not “natural demand”? Is there such a thing as unnatural demand? If seats are booked and profits rise, does this not indicate there is demand? Naturally, it does.
Actually, there is a more specious argument out there right now, which also affects Open Skies, and it happens to be a Nordic one. This is an amusing dilemma for aviation.
Open skies agreements are questioned when profitable luxury carriers plan to grow and when profitable Low-Cost Carriers plan to grow.
The only thing these two open skies battles have in common is that the objections are backed by “traditional” carriers which have long held control of these markets. Let’s have no competition, either from foreign luxury carriers offering a superior in-flight product at high fares or from foreign Low-Cost carriers offering a decent in-flight product at low fares. OK? Stop it. No more of that now. It’s not good for business. It’s evidently (somehow nobody has effectively explained) terrible for the industry and bad for passengers.
To recap: It’s nearing winter, but warm enough here in Denmark. It’s definitely a sunny day for SAS and typically hot for Etihad. It’s relatively warm, but mostly cloudy in Frankfurt. Let the sun shine in.