Just recently I wrote about how the real threat posed by the Middle East airlines to those in the US was fifth-freedom flying — flights that operate from an airline’s home country to a second country and then carry local traffic beyond to a third country — and not the stuff flowing over their own hubs. With a ton of aircraft on order, the Middle East carriers are all looking at how to best place this capacity. All three of the big airlines, Etihad, Emirates, and Qatar, see opportunities outside of their home countries. They’re just going about them differently. From the US, Emirates has chosen to fly its own airplanes to Europe. Etihad and Qatar, however, have gone a different route. They prefer to buy into a European airline and then transfer airplanes to those airlines instead. Etihad has done this for awhile (with poor results, I might add), but it’s fairly new for Qatar. In fact, last year’s uncharacteristic purchase of a chunk of Italy’s Meridiana is its first big test.
Emirates has operated fifth-freedom services around the world with mixed results. For example, it has long flown many flights between Australia and New Zealand, but it has pulled back recently in favor of letting its joint venture partner Qantas do that. But that kind of short-hop market is a different dynamic than what happens on longer legs. It has flown from Australia to Southeast Asia for years, and it has tepidly entered the US-Europe market as well.
So far, the only fifth-freedom flying Emirates does to the US is from Milan to New York/JFK and from Athens to Newark. The latter is a highly seasonal market that previously hasn’t been able to support service in the winter months. I doubt things are any different now, but Emirates uses its cost structure and subsidy to serve it anyway. The former is a bigger market with a lot of service, and it’s about to get even more crowded with this new Qatar deal.
Just recently, Qatar picked up 49 percent of Meridiana, the second airline of Italy. (You know things are bad when you’re the second airline behind Alitalia.) Previously, Qatar had made wise investments in companies like IAG, successful airlines that didn’t have a survival problem. Qatar may have had some minor, lower level influence on strategy, but really, they were more interested in solidifying partnerships. They were along for the ride. With Meridiana, things are different.
In Meridiana, Qatar picked up a struggling airline and is apparently going to Etihad-ize it. Etihad, of course, has picked up struggling airlines for years. In Europe, its most recent (mis)adventures involved buying hefty stakes in airberlin, Alitalia, and the regional Darwin. It was able to dump a lot of airplanes into those airlines, and it helped reshape their route maps. Etihad’s airlines poured money into new liveries and service standards. Etihad tried to turn these airlines into an Etihad feeder with service levels that were worthy of Etihad itself. Two of these three airlines are now gone, and Alitalia is, as always, circling the drain. Etihad has brought in a new CEO and has walked back its acquisition strategy. It’s hard to consider this strategy a success, yet somehow, Qatar wants to emulate it.
Meridiana flies old airplanes on less popular routes. To the US, for example, it flies only to JFK from both Palermo and Naples. The onboard product is substandard, but tickets are cheap. And since no other airline flies those routes nonstop, it’s a nice little niche. Qatar, however, has grand plans.
Apparently Qatar thinks Alitalia is vulnerable enough that it can make a run at remaking Meridiana as Italy’s national airline. First, it wants Meridiana to revert to an old name and become Air Italy. Then, Meridiana will take on some of Qatar’s A330s in a much-needed fleet refresh. It appears to be ending the niche Naples and Palermo routes, and instead will enter the already-crowded Milan to JFK route (as well as Milan to Miami).
But wait, there’s more. Meridiana is going to build up Milan into a mini-hub of sorts. Service will start next summer from Malpensa Airport to Catania, Lamezia Terme, Naples, Palermo, and Rome. This sounds like a bad plan all around.
If Alitalia survives (likely with a Lufthansa tie-up), then Meridiana will already have to deal with that steaming mess. But on top of that, Italy is a market with huge low-cost-carrier penetration. Both Ryanair and easyJet are crawling all over that country, and it’s unlikely that Meridiana is going to win on short-haul.
For long-haul, well, I suppose it depends on how American reacts. Qatar is a member of oneworld, but relations with American are frosty these days. If American were to overlook that and codeshare with Meridiana, then it could feed the airline in both New York and Miami. But this would also require American to reverse course from this summer when it ended codesharing with Qatar over this Middle East fight. If American is truly trying to fight Middle East carriers flying from the US to Europe (or anywhere not via their home hubs), then they should want nothing to do with this Meridiana scheme.
If there’s anything that can help make this a success, it’s the participation of IAG. Since Qatar bought a piece of IAG, that airline is likely to be much more welcoming of this new deal. In fact, if Lufthansa buys up Alitalia, this could be IAG’s way to get a big Italian presence. But so far, it has little to offer. Malpensa has a small Vueling operation which would undoubtedly be somewhat helpful, but that’s really about it. IAG’s assistance would help, but there are no naturally-large traffic flows that will come out of this.
Frankly, I have no idea why Qatar wants to involve itself in this, but it’s known for doing impulsive things. If Alitalia can’t make things work with its substantial partners, then there’s no reason to think Meridiana has a better chance.
