Jetrader - Summer 2016 - 19

Chart 1 - Airline Alliance Shares within Asia, May 2016

Source: OAG Schedules Analyser

for new alliance structures and will, we
suspect, be the catalyst for any changes
that we see.
Analysis of the alliance frequency
shares within and out of Asia reveals a
stark contrast to the global perspective
outlined earlier, as the chart above highlights. While the relative share between
alliance members and non-aligned carriers
is consistent with other markets around
the world, the respective shares amongst
the three alliances show a very different
On a global basis, the Skyteam alliance
has some 17.9 percent of global capacity;
within Asia that share rises to some 23 percent. The oneWorld alliance, with a global
share of some 13.7 percent, has a mere
8.2 percent of the Asia market capacity.
Much of the regional imbalance lies right at
the centre of the fastest growing regional
market, China, where both China Southern
and China Eastern Airlines are members of
Skyteam; indeed the two carriers account
for nearly 55 percent share of the alliance's
capacity in the region.
For New York-based oneWorld, the membership gap is stark. With no significant
locally-based Chinese airline, it is a hole
that needs to be filled if the alliance is
to provide the levels of global coverage and reach that its competing alliances enjoy. Overlay that position with
two of oneWorld's members, American
Airlines and British Airways (both seeking to build their presence in China for

which connectivity will be crucial), and
you can't help but sense something will
soon change.
At its most simplistic, it would seem that
the two most likely targets would be either of
the current Skyteam members; after all, can
either of those carriers maximize their alliance
opportunities when in the same alliance? And
from a higher national perspective, does such
dual membership really provide China with
the maximum commercial benefit? So, how
does that potentially play out for each of the
three major Chinese Airlines?
Air China - Very much seen as a solid
established member of the Star Alliance
since 2007, the carrier provides around
a quarter of the alliance's Asian capacity with its major base being located in
Beijing. With a secure and large share of
the alliance capacity it would seem to be
in a 'secure, stay-put' position, except for
a near 30 percent share in Cathay Pacific
that provides a means of engaging in an
oneWorld discussion.
China Eastern - The more recent of the
two Skyteam members, having joined in
2007, China Eastern is the very slightly
junior carrier to its counterpart China
Southern, with less than one percent difference of the Asian alliance share between
the two. China Eastern's Shanghai hub certainly offers considerable attraction with
its corporate demand and scope for future
growth, but can they really maximize the
opportunity with China Southern - a longer established Skyteam member?

China Southern - the Guangzhou hub
provides a very strong base for the carrier
as it increasingly competes for the wider
regional markets. With its close proximity to Hong Kong lies another potential
catalyst for change in the alliance scene,
since the creation of two major oneWorld
hubs in such close proximity would, while
being very competitive, create complexity.
So, if you accept that two airlines, ranked
6th (China Southern) and 7th (China Eastern)
respectively, in terms of capacity this summer, are likely to remain part of one of three
alliances when one of those alliances has
a very large member gap to fill in China,
then it would seem to prove the adage that
alliances are indeed made to be broken;
however, how that will play out remains to
be seen. Will the Air China/Cathay Pacific
equity position bring Cathay to Star or
indeed Air China to oneWorld? Will China
Eastern be better placed and offer more to
oneWorld? Only time will tell on that front,
but there are other factors that may accelerate this period of alliance change in Asia.
Malaysia Airlines' entry into oneWorld is
still in its relative infancy, but was born out
of a very different strategy to that strategy now being followed. With an increasingly strong relationship with Emirates, is
that position tenable over the long-term?
Similarly, will Qantas remain in oneWorld?
Furthermore, place a very large and
wealthy regionally-based carrier such as
Hainan Airlines into the mix, which has a
much larger global ambition in the wider
aviation industry than just the airline, and
it all adds up to that feeling that something
will change, and probably sooner rather
than later.
And finally, let's take the position
of International Airlines Group (IAG), a
major airline operator with British Airways,
Iberia, Vueling, and most recently Aer
Lingus. For IAG and the individual airlines,
Asia represents a weak spot in the network
map, with Cathay Pacific the only current
opportunity for alliance development; even
then, Air China, a Star Alliance member,
has an interesting near 30 percent share
of the business.
This makes our initial observation, that
alliances are made to be broken, one that
could indeed play out and bring some disruptive change to the market as everyone seeks
a larger share of the growing pie.
Jetrader  *  Summer 2016 19


Jetrader - Summer 2016

Table of Contents for the Digital Edition of Jetrader - Summer 2016

A Message from the President
O&A: Tom Doxey, Allegiant
More Used Parts Take to the Air, Recycled Through the Secondhand Market
Alliances - Made to be Broken
The Balancing Act - Record Profits and Uncertain Futures: Reflections from ISTAT Americas 2016
Growth in ISTAT Asia Continues
Securing the Future: A Profile on ISTAT Foundation Student Andre Fansi
Turkey: Drones Now and in the Future
Avation History
Aircraft Appraisals
ISTAT Foundation
Advertiser Index
Jetrader - Summer 2016 - cover1
Jetrader - Summer 2016 - cover2
Jetrader - Summer 2016 - 3
Jetrader - Summer 2016 - 4
Jetrader - Summer 2016 - 5
Jetrader - Summer 2016 - 6
Jetrader - Summer 2016 - A Message from the President
Jetrader - Summer 2016 - 8
Jetrader - Summer 2016 - 9
Jetrader - Summer 2016 - Calendar/News
Jetrader - Summer 2016 - 11
Jetrader - Summer 2016 - O&A: Tom Doxey, Allegiant
Jetrader - Summer 2016 - 13
Jetrader - Summer 2016 - More Used Parts Take to the Air, Recycled Through the Secondhand Market
Jetrader - Summer 2016 - 15
Jetrader - Summer 2016 - 16
Jetrader - Summer 2016 - 17
Jetrader - Summer 2016 - Alliances - Made to be Broken
Jetrader - Summer 2016 - 19
Jetrader - Summer 2016 - The Balancing Act - Record Profits and Uncertain Futures: Reflections from ISTAT Americas 2016
Jetrader - Summer 2016 - 21
Jetrader - Summer 2016 - 22
Jetrader - Summer 2016 - 23
Jetrader - Summer 2016 - 24
Jetrader - Summer 2016 - 25
Jetrader - Summer 2016 - 26
Jetrader - Summer 2016 - Growth in ISTAT Asia Continues
Jetrader - Summer 2016 - 28
Jetrader - Summer 2016 - 29
Jetrader - Summer 2016 - 30
Jetrader - Summer 2016 - 31
Jetrader - Summer 2016 - 32
Jetrader - Summer 2016 - Securing the Future: A Profile on ISTAT Foundation Student Andre Fansi
Jetrader - Summer 2016 - 34
Jetrader - Summer 2016 - 35
Jetrader - Summer 2016 - 36
Jetrader - Summer 2016 - Turkey: Drones Now and in the Future
Jetrader - Summer 2016 - 38
Jetrader - Summer 2016 - 39
Jetrader - Summer 2016 - Avation History
Jetrader - Summer 2016 - 41
Jetrader - Summer 2016 - 42
Jetrader - Summer 2016 - 43
Jetrader - Summer 2016 - 44
Jetrader - Summer 2016 - Aircraft Appraisals
Jetrader - Summer 2016 - 46
Jetrader - Summer 2016 - 47
Jetrader - Summer 2016 - ISTAT Foundation
Jetrader - Summer 2016 - 49
Jetrader - Summer 2016 - 50
Jetrader - Summer 2016 - 51
Jetrader - Summer 2016 - 52
Jetrader - Summer 2016 -
Jetrader - Summer 2016 - Advertiser Index
Jetrader - Summer 2016 - cover3
Jetrader - Summer 2016 - cover4