My Take: Will China Southern Join Oneworld, Will Cathay Pacific Join Star Alliance?

Yesterday it was announced that China Southern will be leaving SkyTeam as of January 1, 2019. This is something that has been rumored for a long while, though many wondered if it would ever happen.

What’s interesting here is that China Southern is leaving SkyTeam, while their subsidiary, Xiamen Air, will continue to be in SkyTeam.

While perhaps a subtle distinction, China Southern claims that they’re not leaving SkyTeam, per se, but rather have chosen not to renew their contract. This announcement was made on the 10 year anniversary of China Southern having joined the alliance to begin with, so it makes me wonder if they have to pay less for leaving the alliance because of that.

The added wrinkle here is that there have also been rumors for quite a while of China Southern joining oneworld and Cathay Pacific joining Star Alliance. This suggests that the two may be related, or perhaps that China Southern is highly unlikely to join oneworld while Cathay Pacific is in the alliance.

Since China Southern has taken the first step of leaving an alliance, let’s revisit this topic.

What could happen with China Southern

Now that China Southern has left SkyTeam, there are a few things we could potentially see happen:

  • China Southern could join oneworld
  • Cathay Pacific could leave oneworld and join Star Alliance
  • China Southern could choose to just not be part of a global alliance, and instead focus on partnerships and joint ventures with specific airlines

Why China Southern might join oneworld

China Southern has suffered from second-tier status in SkyTeam. That’s because Delta basically runs SkyTeam, and they have invested in China Eastern, so they get a lot more love from Delta than China Southern does.

The thing potentially pointing China Southern towards oneworld is that American recently invested in China Southern. The airlines are cooperating more closely, so it wouldn’t be totally crazy for the airline to join oneworld.

However, the big thing standing in the way of China Southern joining oneworld is that Cathay Pacific is a founding member of the alliance and has veto rights. Logically they wouldn’t want an airline based less than 100 miles away from their home airport to join the alliance, as it would be a direct competitor.

Why Cathay Pacific might leave oneworld and join Star Alliance

This is a rumor that has been around for eons. 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.

Qatar Airways is now the third largest investor in Cathay Pacific, though we also know they aren’t happy with oneworld.

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.

My take…

I was surprised when I read that China Southern was actually leaving SkyTeam. On one hand I feel like there must be more to this, and now we’re just waiting for the other shoe to drop.

On the other hand — and this is what I’m actually leaning towards — I think there might not be more to this for now. I could see China Southern just not belonging to an alliance and instead focusing on closer partnerships and joint ventures.

Meanwhile I still don’t see the logic in Cathay Pacific joining Star Alliance, and don’t think it would actually happen. I could be wrong, but I just don’t see it. That’s partly true because I think some founding Star Alliance members (like Thai Airways) would veto it, and partly because I don’t think it would necessarily even be a better fit for Cathay Pacific.

So for now my money is on China Southern just focusing on partnerships. They still have a joint venture with Air France-KLM, and that could remain unchanged. Similarly, I could see them forming a joint venture or closer partnership with American.

Really this may just all be a sign of the continually decreasing value of the global alliances.

What do you think — will Cathay Pacific join Star Alliance, will China Southern join oneworld, or what’s going on?

Comments

  1. So is being the founding member of an airline alliance like being an original member of a band? Do they hold some special gravitas that others don’t?

    Darryl Jones has played with the Rolling Stones for far longer than Brian Jones did (decades longer) but people don’t think of him the same way. Is China Southern like the Darryl Jones of SkyTeam?

  2. With 5 members (TG, SQ, OZ, CA, BR) already crowding and covering the region, *A needs CX like one needs a root canal and vice versa.

  3. This could trigger a major realignment in that part of the world with CZ to Oneworld, CX to Star Alliance, and SQ to SkyTeam.

  4. It’s only a matter of time before Air China buys the rest of Cathay Pacific that they don’t already own . . . perhaps delayed a bit due to the decline in the RMB against HKD this year. At some point, CZ will be in OW, and CX will be in SA.

  5. Star Alliance is a much bigger Alliance than the other 2, so it’s normal that they have several different airlines in Asia. I don’t think that would be a factor preventing CX to join. They have 11 in Europe and that’s not a problem.

  6. @lucky, based on a flyer tea post (Chinese version of flyer talk) The chances of joining ow is 90%, sa 9%, the remaining 1 is for been alone

  7. @Tony
    I don’t see SQ joining skyteam soon. There more likely to not be in any alliance and have individual partnerships (which they already have with the Virgins, AF-KLM, Alaska, Jetblue and many others) than joining skyteam.

    Imo alliances aren’t as useful as 10 years ago. For example, Delta has stronger partnerships with non-skyteam airlines (like GOL and Virgin Atlantic) than most of the skyteam ones. AF-KLM has partnership with JAL and Qantas, which are both Oneworld airlines.

  8. @chub
    It’s harder for an airline like SQ to go it alone. SQ doesn’t have a domestic market to speak of. The geography is also a big negative for SQ. It has a quality product but still needs partners more than most airlines.

  9. @chub : “For example, Delta has stronger partnerships with non-skyteam airlines (like GOL and Virgin Atlantic)”

    Strong partnerships with the ones they have major equity stakes in ? zzzz

    And nothing says “premium experience” quite like a 10-hr flight down to GRU then thrown onto a LCC for the final leg.

  10. @Tony
    Yea, I get what you’re trying to say. I was about to use Emirates as an example, but they benefit a lot off geographical location, which SQ doesn’t have
    And Skyteam imo is pretty saturated in SE Asia, with Vietnam Airlines and Garuda nearby. So for SQ I feel like they’re either going to stay in Star or be unaligned. SQ doesn’t participate greatly in their Star partnerships anyways (ex: SQ uses AS instead of UA to feed their SFO-SIN flight), so idk what they’re going to do in Skyteam, unless they manage to revive their ’90s partnership with Delta.

  11. A bigger question than who CZ might invite to prom is what usefulness alliances have in a world where so-called “regulators” are happy to ignore antitrust laws and let airlines simply form JVs. Especially given the numerous examples of airlines doing interline and codeshare agreements with whoever they please, why would an airline /want/ to be in an alliance?

  12. @tda

    +1 to that. From an FF standpoint, the issue I have with 1W to Europe is those damn BA fuel surcharges. Sorta makes it a non-starter. JAL is a decent partner, but their J award space seems a little tight, and TBH, their route network isn’t as comprehensive as CX’s.

    CX is a *huge* partner for AA/1W in that part of the world.

  13. Asdf – Ha ha! Delta, KLM and Air France = Mick Jagger, Keith Richards and Charlie Watts. Poor China Southern can’t get no satisfaction

  14. When SQ joined Star TG voted no but did not have any veto right. Being founding member does not give veto right. All are equal.

  15. Now we might see CZ moving into and AA moving back to Terminal 3 in PEK, which is a significantly better terminal, on the lounge front, not so much.

  16. Sorry but I can’t imagine where this speculation about CX joining star came from besides the Air China relationship. It makes ZERO economic sense, they would have to codeshare across their most competitive SE Asia connecting routes, and why on earth would SQ allow that anyway given they have just launched nonstops to the States?

  17. I doubt that CX would quit ONEWORLD. Never has a founding member of an alliance defected.
    Another problem is that it would cost money to leave and then it drastically changes CX’s business model. They’d have no help in JFK. They use AA to Latin America where AA is king. That would be lost. They’d lost LHR, SYD, MEL and all of those 1W hubs. Sure they’d get some Star alliance help but how much would they get? That’s a big unknown.
    I also cannot see SQ, TG, BR allowing/voting for CX’s entry. And CX would have to come to some agreement with UA. I’ll bet that CZ will join ONEWORLD. They are probably negotiating right now. But they had to leave Skyteam in January to avoid paying any exit fees.

  18. @Peter Cathay already partner with JetBlue on some flights, though not many. If they were to leave OneWorld, CX could easily funnel through B6 at JFK and BOS. The rest of the US airports already are UA hubs or have other partnerships.

  19. Cathay leaving OW makes no sense since OW is the alliance of their biggest destinations: Tokyo, Sydney, London Heathrow, LAX, JFK, Chicago. IF you erase Cathay from OW at those cities they would be lost, well weakened. Asia is to crowded with Star airlines so what would CX bring that EVA, Thai, Asiana, ANA, Thai and Singapore don’t cover ? SQ would probably hate CX being in the same alliance.

  20. @Paul – out of your list, TYO/LAX/NYC/ORD have as much presence in Star as in OW. Also calling ORD one of Cathay’s biggest destinations is amusing at best.

  21. @Jetblue

    I’m sure you are a Jetblue fan but Jetblue cannot get CX’s customers to South America or the rest of Latin America. Jetblue doesn’t have Flagship First Class dining which is the reason why CX left JFK’s terminal 7 to AA’s Terminal 8. And do you think that if CX left their alliance that United would allow them to team up with Jetblue??

    UA & CX compete way too much for them to be in the same alliance.
    Founding members don’t leave their alliances
    and I seriously doubt that BR, SQ, TG would allow CX entry. There are way too many Asian carriers in Star.
    CX will stay where they are.

  22. Well, considering that Cathay Pacific is a major co-founder of Oneworld, I think it’s highly unlikely that it will withdraw from Oneworld and join Star Alliance. However, China Southern Airlines becoming a member of Oneworld may be a possibility.

  23. As mentioned earlier, *A members are required to vote in new members unanimously.
    All full members are equal, and it only takes one full member to veto a *A membership application. TG originally wanted to vote no on SQ decades ago, but it took negotiating for them to change their minds accordingly.

    This is opposed to the Oneworld method where the founders have the veto rights.
    Having said that, I can’t really see TG, SQ, BR, et al agreeing to any CX application (they would all veto accordingly) if they were planning to defect from OW to *A.

  24. While Cathay joining Star Alliance would be a boon for consumer-passengers, that’s nothing more than a wish list for now. Cathay as a oneworld founder would have more rights than being a newcomer to Star.

    I still wish they would, though. More Star options in Asia!

  25. IMO given the financial situation at CX they would not risk it to leave oneworld and give up all those close ties they have with their OW brothers, and their *A partnerships for now definitely is not strong at all, Air China might have a big part of CX but don’t forget CX’s mother company Swire also has the same amount of shares in Air China, they have equal shares in each other! CZ might be based in Guangzhou but don’t forget they also have a secondary hub in Beijing which they will definitely expand when the new Daxing airport opens. That way OW can make BEIJING their newest hub which I’m sure they would be very happy about. With CZ joining oneworld, CX really has very little to lose in my opinion, CZ can open up hundreds of network in Mainland China for them that they don’t serve with CX Dragon.

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