Rumor: Cathay Pacific To Join Star Alliance, China Southern To Join OneWorld

Danny Lee of the South China Morning Post has an interesting story today about the prospect of Cathay Pacific leaving oneworld and joining Star Alliance, and China Southern leaving SkyTeam and joining oneworld.

Both of these moves have been rumored for a while, and it sounds like nothing is finalized yet, though I think China Southern’s president saying that alliances are a “sensitive topic” is pretty telling of his unhappiness with the current arrangement:

China Southern president Tan Wangeng was recently quoted as saying the future of its alliance membership was “a sensitive topic”.

“I think we have to accept the reality,” Delta Air Lines’ Greater China chief, Wong Hong, said. “It is more for them to think through and decide.”

“Until such time … [the move] is a decision China Southern may make at some point in the future. Today, officially, they are with us and they are no different to any other Skyteam partner.”

Why China Southern might leave SkyTeam and join oneworld

China Southern is China’s largest airline, though sort of has a second-tier status in SkyTeam. That’s because Delta seems to largely run the show at SkyTeam, and they have invested in China Eastern. So in general China Eastern gets a lot more love from Delta than China Southern does.

Furthermore, keep in mind that American recently invested in China Southern. So while we could see a partnership between the two airlines outside of the traditional alliance landscape, eventually it wouldn’t be illogical for the two airlines to be part of the same alliance, especially if China Southern isn’t getting much out of their current alliance.

China-Southern-A380

Why Cathay Pacific might leave oneworld and join Star Alliance

This is a rumor that has been around for eons, and personally I’m not convinced it’s happening. The basis of this is that Air China is the second largest investor in Cathay Pacific, so it’s logical for them to cooperate more on some level, especially as Cathay Pacific continues to struggle financially.

Cathay Pacific has also lately introduced partnerships with some Star Alliance airlines, including Air Canada and Lufthansa. However, these out-of-alliance partnerships aren’t unusual.

Oh, the Star Alliance Upgrade Awards page also shows a picture of a Cathay Pacific first class seat, which is how we know with certainty that this is happening. 😉

Star-Alliance-Upgrades

My take on the situation

To me it seems logical enough that China Southern would leave SkyTeam and join oneworld, given that it’s the only global alliance without an airline based in mainland China. That’s a huge gap, especially given that SkyTeam and Star Alliance presently have multiple airlines based in mainland China.

However, the argument seems to be that because Guangzhou is so close to Hong Kong, oneworld couldn’t support both China Southern and Cathay Pacific. Personally I don’t see that the same way. Guangzhou and Hong Kong are two distinct markets, and it’s not like they’re co-terminal. Sure, they both compete in terms of connecting passengers, but Cathay Pacific also competes with Japan Airlines, Malaysia Airlines, etc., in many markets. When you look at it globally, I’m not sure Cathay Pacific would have less competition in Star Alliance than they presently have in oneworld.

While Air China is a big investor in Cathay Pacific, up until now it seems more like a financial investment than an attempt to integrate businesses. Cathay Pacific wouldn’t have to change alliances for them to work more closely together. Besides, Qatar Airways recently bought a stake in Cathay Pacific, making them the third largest investor.

It’s all speculation at this point. If I had to guess, I’d say it’s pretty likely that China Southern joins oneworld at some point, though personally I don’t think it’ll come at the expense of Cathay Pacific’s membership in the alliance.

What do you think — while China Southern and/or Cathay Pacific change alliances?

Comments

  1. @Lucky do you think this will change the Alaska/Cathay partnership….have been banking up points there for two years saving for a J or F trip to Hong Kong in another year or so… 🙁

  2. Looks like it would be a loss for OW and the F lounges in HKG would become significantly less crowded. Unless *A introduces alliance wide F benefits for top tier fliers(like HON, PPS Solitaire etc).

  3. No way SQ and TG let CX join Star. I could see SQ actually leaving Star in protest for One World if that were to happen. We already know the relationship SQ has within the alliance and most other partners -particularly United- is lukewarm at best.

    CZ to OneWorld seems plausible since no mainland Chinese carrier is in OneWorld. And I agree with @Lucky that even though Guangzhou and Hong Kong are close, they are two distinct markets. Room for both CX and CZ.

  4. @keitherson no one can veto CZ from joining OW. Every member gets a vote, and the weight of the vote is based on the total capacity that carriers brings into the alliance. Guess who’s the biggest carrier in oneworld by ASK… 😉

  5. Cathay has never had great partnerships with any of Oneworld’s major airlines. Qantas abandoned them for EK, British Airways has never had any sort of partnership beyond alliance and codesharing, American invested in one of Cathay’s largest competitors for the Chinese market. The alliance changes would make sense…

  6. Oneworld needs a mainland carrier. If HU isn’t going to join (I think CX protests this idea) then why not CZ? Being EXP with AA and based in Taiwan there are not many options to redeem miles with OW but plenty with *A. I hope it happens.

  7. SQ can leave *A for all I care, they are essentially a standalone program as it is. If you want to travel on them, you need to put miles in KrisFlyer anyways. CX would be huge!

    It would make my 300k AA miles I have useless – been saving up for a honeymoon on CX F.

  8. I am a big *A flyer and would love to see Cathay join the *A. I can’t see it happening though, as I don’t think Singapore Airlines or Thai Airways or even EVA Air would be too happy with that. I can definitely see China Southern potentially joining OW though.

  9. No way, China Southern don’t have a Platinum Membership, they needed one so that their members can be OWE. Also as a Cantonese, with China Southern’s sub-par service, I think this will not bring any more passenger into OW instead they will lose some.

  10. CX needs CA to enter China. However, I don’t think CA will need CX to enter *A as they have different markets and marketing strategy.

  11. UA execs have been putting the press on CX for a year now. I’ll bet the CX move happens as it is a better move for them. UA can provide traffic for their LAX/SFO/ORD/EWR flights while AC can help out north of the border.

  12. If CZ joins OW, i’m wondering if MF will also join (since CZ partially owns MF)

    and if OW get to use the new airport at Beijing…

  13. @Mark – right, and if that happens ANA will be pretty ticked with UA. They have a transatlantic JV and Narita mini feeder hub where the aim is to have ANA do most of the flying within Asia with UA codeshares and UA feed.

    IF (big IF) CX does join Star, then I think you see a ton of movement within Asia amongst alliances. ANA could warm up to DL in an instant and join Sky Team if UA supports CX, SQ could leave Star. It would be alliance musical chairs basically. Just about every major carrier in Asia is in an Alliance with the exception of Hainan and Philippines Air so it’s a bit like playing three dimensional chess.

  14. For me this would be a dream come true (Definitely for the improved lounges alone at HKG), though I can’t see ANA, EVA, Thai, SQ , Air China, Asiana and we should mention Shenzhen Airlines (Tiny regional airlines) approve this.

    East Asia has been very kind to *A already. Bring on CX

  15. i’d be jumping up and down in euphoria if this happens but it’s too good to be true. Oneworld is already a thin alliance to begin with and they’re experiencing either vanishing exodus, like Mexicana MALEV AirBerlin, failure to join like Kingfisher, chickening at last minute due to costs like AerLingus, and some totally useless ones that hardly delivers value, like SriLankan and Malaysian.

  16. I would be glad to see CZ join OW, but I would be heartbroken to see CX go to SA. As an AA EP and UA 1K, I would lose the ability to earn EQDs on the great CX fares I often find to/from Asia.

  17. American has two flights into HKG, then forwarding traffic via CX from there. Its only two routes but that route pushes a lot of connecting traffic into LAX and DFW. I doubt they will want to lose that business.

  18. Totally agree that Guangzhou and Hong Kong are two very different markets. For people from the mainland side it is much easier to fly from CAN instead of HKG. Oneworld definitely has a huge gap for mainland China. Meanwhile, China Southern and China Eastern seem to somewhat overlap within Skyteam, as Chinese airlines are not as hub-based as US airlines. It only makes sense if China Southern joins Oneworld. I am surprised this didn’t happen even sooner.

  19. I doubt most skyteam customers would be sorry to see China Southern leave, since they are absolutely clueless when it comes to customer service

  20. OneWorld members by ruler have the veto power against any airline in their own region trying to join the alliance, and that was how HNA was said to be rejected by OneWorld.

    Yet I’m more curious about SIA. If CX joins Star Alliance then SIA is almost guaranteed to leave and I wonder if it may join SkyTeam since the alliance is weak is South Asia, South East Asia and Oceania?

  21. @Issac yet it is very likely that CZ is seeking for a change. As far as I know it has been confirmed that CZ is issuing questionnaires to its staff asking how likely they would see a change of alliance.

  22. @Hong Konger

    Air China’s the second largest owner of CX and Shenzhen Airlines is also controlled by Air China if I recall it correctly. Don’t think Air China will be against the idea of CX switching over to SA.

    In addition, Shenzhen may be a regional airline, but its fleet size (170+) is larger than EVA and TG

  23. @ Z. I would hardly consider SkyTeam as weak in SE Asia – excluding China Southern they have Garuda , Korean , China Eastern , China, Xiamen and Vietnam

    As for Oceania, these carriers cover all the principle destinations and Air France flies to Tahiti

    Air France KLM also has a codeshare agreement with Singapore Airlines and Silkair

    Believe me, China Southern won’t be a big loss service wise they are the bottom of the barrel

    I believe you mean Southern Asia , although they partner with jet airways

  24. CZ joining oneworld seems logical, though I would be much more happy to see Hainan Airlines joining oneworld instead. CX leaving oneworld would be a plain disaster for oneworld in Asian market. JAL has very limited and specific coverage, while MAS and Srilankan are both utter crap in terms of hard product and service (MAS also has ridiculous surcharges on reward bookings). If CX happens to leave oneworld, it would make BAEC useless for Asia as well. I do hope it doesn’t happen though: oneworld should not be interested to lose CX, while CX will have much more competition in *A (EVA, SQ, Asiana) than it has in oneworld (in oneworld it has none, essentially: it rules the market in Asia).

  25. @Icarus : “I would hardly consider SkyTeam as weak in SE Asia – excluding China Southern they have Garuda , Korean , China Eastern , China, Xiamen and Vietnam”

    You’re only counting based on number and airlines and maybe number of passengers. Other than KE and *maybe* CI, and that’s a big fat maybe, the rest aren’t exactly the crown jewel for anyone.

    Piling up on mediocrity doesn’t make something strong all of a sudden.

  26. Well, Cathay prices are always high, and award availability via OW never that great, so maybe it’s no big loss. China Southern’s hub is very close to HKG anyway

  27. Geographically Guangzhou (CAN) and Hong Kong (HKG) are quite close but I would consider them as a different market. People who fly CZ are not that interested flying with CX. I go to Foshan (a city between Guangzhou and Hong Kong) frequently from Sydney for business. It is about 2 hours by ferry to Hong Kong yet I still try to avoid flying via HKG since it is a pain to grab your luggage and going into the ferry terminal in downtown, or via Shenzhen. Public transport is a pain, and there are only limited flights between HKG and CAN (iirc only two Cathay Dragon flights daily) .

    If CZ joins OW, I actually think they may provide some feed to CX on routes that CZ don’t serve (or can’t compete with CA / MU).

  28. @Lucky well, if this is the case, why AA still don’t operate a route to Guangzhou?
    The answer in short, is Guangzhou is a terrible hub for connecting Chinese domestic flights given its location.
    OneWorld could afford to lose Hong Kong since connecting world financial hubs is one of most attractive aspect of OneWorld.

    Same, for SkyTeam, they can’t afford lose China Southern. Can you think any other SkyTeam airline good for Kangeroo routes?

  29. One point many seem to miss is that if CX joins *A it will be pretty much kissing bye-bye to the mainland feed via HKG, on their subsidiary KA (Cathay Dragon). Granted, it’s not the shortest route if you’re coming from Europe or North America, but for OW members it’s just about the only option outside of PEK and PVG, given JL’s very limited second-tier mainland routes via NRT/HND. With *A, they will be up against CA’ massive network out of PEK, with additional competition from NH, OZ, ZH, and coming from the south also TG and SQ. *A also has more direct international-mainland service on CA, UA, LH etc. than OW carriers offer.

    Of course, the cross-shareholding with CA can address all that. But the CX/KA hub model as it has existed for a long time will pretty much evaporate.

  30. This is kind of strange because China Southern is not a stand alone company. It’s together with China Eastern, which also owns Shanghai Airlines, so are you saying that the entire group – China Eastern, China Southern, and Shanghai Airlines would move?

    It would be quite a mess for the airlines and for passengers if this transition happened with only China Southern moving.
    Firstly, where would the China Southern flights dock? Currently they dock with Skyteam flights. Secondly, many of their flights are codeshared with China Eastern and are branded together with China Eastern, so how would this work?
    Thirdly, for passengers it would create quite a mess because often times China Southern flies to places that China Eastern doesn’t and vice versa.

    Also, I don’t agree with your analysis about Guangzhou. Most people consider The Bay region as one region rather than a specific airport.

    Often times it is quite cumbersome to get to Guangzhou because of its close access to other nearby international airports, so many people do so via Hong Kong and then take a train or a ferry. There is a direct ferry between Hong Kong Airport and Guangzhou without entering Hong Kong, and you even get the airport tax money back!

    Especially if you are traveling domestically in Mainland China, sometimes flights to Shenzhen for Hong Kong or Zhuhai for Macau are be cheaper than flying directly in. And also in some cases Guangzhou offers non-stop flights domestically in China were as there may not be from other places in The Bay area, and it’s just about an hour’s bullet train between Guangzhou and Shenzhen or Zhuhai.

  31. Possibilities notwithstanding, I’d greatly welcome the addition of CX to *A… It’ll mean both earning potential for many credit cards in Asian nations would credit to either *A frequent flyer program. And that’s a great boost to the Star Alliance.

  32. I hate to see Cathay leaving OW and China southern in it will not make it balance since the Cathay has better product even though service is terrible. However as many have said, SQ will not be happy, not sure will they be able to stop it from happening. However I would love it for them to leave A* and go to OW. That will be a good swap then. OW will have execellent products with Qatar, SQ, JAL etc

  33. @Iamhere
    China Southern does not stand together with China Eastern. China Eastern owns Shanghai Airlines, China Southern owns Xiamen Airlines (Lucky’s new favorite) and is the largest stakeholder of Sichuan Airlines (Lucky’s another new favorite lol). If China Southern decides to join OneWorld then Xiamen will move as well, which means OW will also have two airlines in China, which makes it a balance (CA/ZH for Star, MU/FM for SkyTeam and CZ/MF for OW).

    @Yvonne
    I really don’t get this rhetoric of OW having better products. Sure OW has some good airlines like Qatar, JAL and Cathay, but are they significantly better than SIA, EVA, ANA, or are they even better than these Star carriers? Not to mention OW also has very mediocre airlines like S7 and BA.

    Meanwhile it would be very interesting to even envision this alliance swap happens. Once Cathay joins, Star Alliance will have monopoly or near monopoly on some of the world’s busiest routes like HKG-TPE, HKG-SIN, HKG-BKK, HKG-SEL and HKG-TYO, I wonder if such a monopoly will take place without some resistance…

  34. I would not really be happy to see CZ leaving Sky Team. I am flying them many times per year from Europe to China in BC (good rates from Europe to China) – and always happy. No complaints. They already had fully lie flat when AF and KLM did not yet have it. Nice lounge in CAN.
    And I was also happy to earn a lot of miles and flights using China Eastern and China Southern for local chinese flights. Indeed I was only getting my Silver Status at Sky Team in the past with the domestic flights in CZ and MU (before getting gold by flying C class). That was a nice effect.

  35. I really cannot see Cathay leaving OW for *A, the logistics would be very, very daunting.

    @Mark I can’t see how *A would be a better move for Cathay. AA provides plenty of feed already through LAX, ORD, JFK, and a potential MIA route CX has been discussing. It would be difficult if not impossible to move all or most of the five daily CX frequencies into JFK to EWR (where they only have one daily flight) and wildly expensive for them. Likewise in Europe they would lose any flow at their key hub of LHR, where they also have five daily frequencies. Are they supposed to just shift all of these to FRA? For Canada they already have a stand-alone agreement with AC.

    This also ignores the fact that they would be giving up their lucrative SE Asia regional feeder flows to SQ, TG, and Eva, they’d have to be insane to do that.

    For those saying the one world alliance relationships are no good, remember CX was a founding member of OW and has had a close relationship with BA (and its predecessor BOAC) for decades, well before OW was founded. For them to leave now would be the ultimate case of cutting off one’s nose to spite their face.

  36. All this speculation also ignored the fact that QR is now the 3rd largest shareholder in CX after Swire and Air China, which makes it seem even less likely they would leave OW.

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