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Aviation

Oneworld confirms it has sounded out China Southern Airlines to join the alliance, potentially giving Cathay Pacific regional competition

  • Rob Gurney, CEO of the air carrier’s alliance, tells the Post it has spoken to the mainland Chinese airline, but formal talks have yet to take place
  • China Southern would provide the alliance with greater access to mainland China than Cathay, but the Hong Kong carrier could veto the move, say analysts
PUBLISHED : Saturday, 15 December, 2018, 6:03pm
UPDATED : Saturday, 15 December, 2018, 10:46pm

The courtship of another Chinese carrier to enter the same global airline group as Cathay Pacific Airways might pay off, as Oneworld acknowledged it could deepen its coverage in China, the alliance boss said in an interview with the Post.

Rob Gurney, the CEO of Oneworld, said it had yet to start formal talks with the mainland’s biggest airline China Southern Airlines, after the group’s biannual board meeting in New York last week. The alliance indicated it had spoken to the carrier but not since it announced its exit from the rival Skyteam alliance.

“There are no formal discussions underway with China Southern,” Gurney said, despite the alliance’s obvious lack of presence in mainland China, the world’s second-biggest air travel market, unlike the rival Skyteam and Star Alliance groups.

“There are still areas where we can potentially deepen our coverage, there is no doubt about that. We are talking to potential members to help meet some of that,” he said. This has meant its members have sought deals outside its core grouping, such as Qantas pairing with Skyteam’s China Eastern.

Unlikely wingmen: Alliance with mainland carrier ‘could help Cathay’

There are still areas where we can potentially deepen our coverage, there is no doubt about that. We are talking to potential members to help meet some of that
Rob Gurney, CEO, Oneworld

But Gurney acknowledged that the alliance had been speaking to the mainland carrier.

“We haven’t spoken to them [China Southern Airlines] since it has happened. And you know we have got a fantastic partner in Cathay Pacific, a Chinese airline, and they remain really important to us,” he said.

Gurney name-checked the Hong Kong carrier, which stands to be most affected, highlighting the sensitivity of adding a mainland Chinese airline which could serve Oneworld better and provide its members with more access to domestic flights in China, even for Cathay fliers travelling within the country.

The pair of Chinese airlines would overlap increasingly on long-haul flights and share similar strategies of competing for transfer passengers and operating from the same region at neighbouring airports.

Oneworld is currently represented by 13 airline members – including founding carriers Cathay Pacific in Hong Kong, British Airways, Australia’s Qantas and American Airlines. The group last week announced the addition of its first African carrier, Royal Air Maroc.

Cathay Pacific would not be drawn on China Southern’s intentions when speaking behind closed doors to financial analysts late last month in the first comments it offered. It is seen by observers as being at risk of leaving Oneworld due to the overlap with its nearby Chinese neighbour or it might at least exercise a veto on China Southern joining.

Cathay addressed the possibility of the Guangzhou-based carrier as a new member as “pure rumours”.

Chief customer and commercial officer Paul Loo Kar-pui added that Cathay was “very happy” being part of Oneworld, dampening fears it might leave, noting it was working in its alliance with “quality carriers”.

China Southern could not be reached for comment.

Most major carriers choose one of three airline groups, with Oneworld most familiar to Hongkongers thanks to Cathay Pacific’s membership.

China’s biggest airline to leave one of world’s major aviation alliances

Last year, American paid US$200 million (HK$1.5 billion) for a 2.76 per cent stake in China Southern, seen as an attempt to get the carrier to join Oneworld. The deal cast doubt on its existing membership when Skyteam alliance members Delta Air Lines joined forces with China Eastern and Air France-KLM to create a global pact without the Guangzhou carrier.

The Oneworld boss noted that a number of member airlines were lining up to work with China Southern on bilateral deals. American Airlines announced an expanded partnership with the mainland Chinese airline soon after the latter’s Skyteam exit was made public.

Customers of member airlines share benefits across the wider grouping, including air miles for flights and access to facilities such as airport lounges.

One of China’s largest airlines has its radar set on the US market

Oneworld member carriers engage in a basic form of cooperation as part of the alliance’s rules and requirements. This includes recognising fellow airline’s frequent fliers, offering the same benefits such as lounge access and other types of services and customer support.

China Southern has 580 aircraft and carried 126 million passengers last year, making an operating profit of US$1.1 billion last year. At the same time, Cathay Pacific has around 200 planes and carried 34 million people, but registered a loss of HK$1.25 billion (US$160 million).