Oneworld comes to Russia

S7 Airlines, the third largest Russian air carrier, will join the Oneworld airline alliance as a full member on 15 November. Oneworld will thus considerably strengthen its positions in Russia — the world’s biggest market in terms of territory, ninths largest in population and, according to different sources, either 11th or 12th in the size of GDP at the end of 2009. At present, Oneworld’s British Airways, Cathay Pacific, Finnair, Iberia, Japan Airlines, Malev, and Royal Jordanian operate to one or more of just three Russian destinations: Moscow, St. Petersburg and Yekaterinburg. Another four alliance members – American Airlines, LAN, Mexicana, and Qantas – do not fly to Russia at all.
The S7 membership will expand the alliance’s route network to add 55 new cities and nine new countries: Armenia, Azerbaijan, Georgia, Kazakhstan, Kyr­gyz­stan, Moldova, Tajikistan, Turkme­nistan, and Uzbekistan. The number of Oneworld destinations in Russia, the CIS and Eastern Europe will nearly treble to reach 84 cities in 26 countries. The alliance’s global network will now include 750 destinations in 150 countries; its combined fleet of 2,250 airliners will be performing almost 8,500 daily flights, carrying over 300 million passengers a year. The annual profit of all member airlines will reach 85 billion dollars. British Airways is acting as S7’s sponsor airline: it recommended the Russian carrier for membership and has been supporting S7 through the 18-month alliance implementation program.
S7 general director Vladimir Obyedkov says joining Oneworld will strengthen his airline’s financial position through an increase in earnings from passengers of other alliance members that will be using the carrier’s route network. Another benefit of being a member is that S7 will be able to cut costs by tapping into Oneworld’s shared resources.
Additional synergy will be attained through S7’s close cooperation with Air Berlin, which has also been recommended by BA as a potential Oneworld member. Air Berlin’s membership will further strengthen S7’s positions within the alliance. Until recently the German carrier pursued a policy of non-alignment with international airlines alliances, but globalization and growing competition appear to have made it revise its strategic plans.
In parallel with Oneworld’s expansion, British Airways – the key player in the alliance – is cherishing ambitious plans for its own development. BA CEO Willie Walsh has recently announced that, after the airline completes a merger with Iberia, the newly formed holding company – to be named International Airlines Group (IAG) – could take over several more assets. The shortlist of potential targets includes 12 carriers. It is understood that IAG will not be able to acquire all of them in one go, but Walsh looks seriously set to turn the group into the largest airline in the world.
For these plans to come to fruition, however, BA has yet to successfully merge with Iberia following a large-scale restructuring and cost-cutting program. Only after this goal is achieved and IAG has become the world’s third largest airline by revenue, it will be in a position to expand further. In reality, all successful airline mergers of the past have invariably taken place within one of the three global alliances. This is because joint work under the umbrella of a common organization makes it easier for the merging parties to reach the required level of synchronization.
It is too early to guess whether S7 could become part of IAG and if yes, on what conditions. One thing is clear though: the Russian carrier will have a big Oneworld partner.