Winners & losers: Grandmagate & the changing landscape

Winners & losers: Grandmagate & the changing landscape

On 29 June, thanks largely to Grandmagate, American Airlines cancelled their codeshare relationships with Qatar Airways and Etihad Airways, effective 25 March 2018.

Grandmagate

While speaking at a private dinner in Dublin, Qatar Airways Group Chief Executive Office Akbar Al Baker said, “You are always being served by grandmothers at American carriers.” He also noted that the average age for Qatar’s crew is 26.

The outrage following the comment was one of the few times I’ve ever seen US airline leadership and unions completely united in a response.  The Gulf carriers have loud and fierce opponents in the US, who have formed an alliance called the Partnership for Open & Fair Skies. It seeks to block any expansion by the Middle East 3 (Emirates, Etihad and Qatar) of their US networks. The comment was a rallying cry for the trio’s opponents.

Al Baker quickly and “unreservedly” apologized for the comment, noting tension between the ME3 and the US carriers (this isn’t the first verbal spat he’s been in – see Qatar’s history with Delta). But it wasn’t enough. American pulled its codeshare numbers off all Qatar flights (following a recommendation by their pilots union) effective next March.

Chief still wants a piece of the AA action

Despite all this, Al Baker has indicated that he’s still interested in buying a 10% stake in American (which, in short, would represent a very good investment on their part).

This spat hasn’t made it easier: before the “grandmas” comment, American CEO Doug Parker had called the potential investment “puzzling,” and it was likely to face significant opposition by the AA Board, which has final approval.

Nevertheless, Qatar recently refiled its stock purchase to address some questions from the US Securities and Exchanges Commission. It’ll be interesting to see how this plays out – the relationship could be very beneficial for American in that they’ll receive cash for the shares and can strengthen their route network globally. In times of potential disruption (i.e. Qatar aircraft and crews operating BA flights that would otherwise be grounded due to a union strike), Qatar has the bandwidth (and cash) to help fill the gap.

Winners & Losers

The immediate winners of American’s codeshare pull are JetBlue and Emirates, which have a solid partnership that sees the former feeding Emirates flights and vice versa.

A lot of Oneworld traffic will move to British Airways (which isn’t entirely bad for Qatar as they own nearly 20% of International Airlines Group, BA’s parent company, nor AA as they have a transatlantic joint venture). BA flies to many destinations in the Middle East and Subcontinent, so it’ll be a convenient Plan B for many heading this way. Cathay Pacific could benefit as well – even though it may be longer, the right price point could lure some Oneworld fliers to transit through Hong Kong.

Etihad has already been struggling in the US, so this won’t help them at all. Not being as restricted as Qatar in terms of alliance membership, they may turn to other US carriers to help feed their flights to Abu Dhabi.

Doha-based Americans (like me) and US-bound travellers now have more limited options when flying to the States. Booking through American onto Oneworld flights (Qatar, BA) was one of the cheapest ways of getting to North America, not to mention the loss of a myriad of routes and schedules they previously offered.

Qatar’s Uncool Summer

Its been an interesting month and a half for Qatar Airways.

First the Gulf political crisis began, wherein Saudi Arabia, Bahrain, Egypt and the UAE closed their airspace to the airline (they were subsequently given a single route through Bahrain’s airspace to access Iranian airspace). All 18 routes were cancelled.

Qatar seems to have handled the gargantuan task of rebooking customers fairly well – I experienced it firsthand, and heard positive stories from a lot of others (including London and Dubai-based friends).

But, ultimately, there is a loss of revenue when flights to a significant portion of your route network are cancelled.

During this time the airline rolled-out a quality marketing campaign (“No Borders, Only Horizons”) and won another bunch of Skytrax awards – including Airline of the Year and World’s Best Business Class.

Al Baker started a press offensive on behalf of both the airline and the country, discussing how the airspace restriction is potentially illegal, that everything in Qatar is fine given the circumstances. Cargo operations are at an all time high, making sure the country is well-stocked with food products and raw materials needed to continue the big infrastructure push.

A few weeks later, on 6 July, the US-imposed laptop ban was removed for Hamad International, which was a welcome relief, to say the least.

Ultimately, given the political situation in the Gulf, Qatar could not afford to lose the feeder traffic from American and yet they have. I hope the negative effects are not long-lasting.

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