China Southern has announced it will no longer be part of the Skyteam alliance. In disclosures to the Shanghai and Hong Kong stock exchanges, the carrier has said it will not be renewing its membership from the 1st January 2019.
This announcement comes on the day the carrier should have been celebrating its 11th anniversary of the alliance membership. The full announcement, released on the company’s official Weibo page, read:
“The board of directors (the “Board”) of the Company wishes to inform its shareholders and potential investors that, based on the needs of the Company’s development strategy and to better align with the new trend of cooperation model in the global aviation industry, the Company decided not to renew its SkyTeam Membership Agreement from 1 January 2019 and will complete the transition arrangements in 2019. During the transition period, the Company will work closely with SkyTeam on a cooperative process to ensure a sound transition for customers and partners. The Company will explore the possibilities to establish new partnerships with advanced airlines around the world, promote bilateral and multilateral cooperation and provide quality services to passengers around the world.”
As China’s largest airline by passenger numbers, carrying over 100 million passengers each year, the departure of China Southern will be a huge blow for the Skyteam alliance.
Where will they go?
The carrier says they plan to seek partnerships with other airlines and have previously expressed an interest in joining forces with American Airlines. AA has a minority investment in China Southern, which could lend credibility to such a deal being breached.
With American being a founder member of Oneworld, could China Southern be eyeing a deal with the rival alliance? If they did, they would be the first mainland China carrier to join. However, with Cathay Pacific a long standing member of Oneworld, and a neighbouring rival of China Southern, it’s possible they would rebuke such a move.
China Southern already codeshares with American Airlines, as well as Oneworld’s British Airways and Qantas. If the carrier was to join Oneworld, it would overtake both Skyteam and Star Alliance as the largest alliance by fleet number. At least it would be, until Qatar leaves.
What will this mean for Skyteam?
Based in Guangzhou, the carrier is one of the longest standing members of Skyteam, having been a part of the alliance since November 2007. It will be the first time a member has left since the exit of Northwest Airlines in 2010.
In terms of capacity, China Southern are the second largest airline in the alliance. Delta Air Lines are the biggest, with China Eastern coming in third. All three are markedly larger than any of the other members.
China Southern has the largest fleet in China and the 5th largest in the world, with 786 relatively new, modern aircraft in operation. They have previously said they plan to expand their fleet to over 1,000 by 2035.
Skyteam will also be saying goodbye to one of their largest hubs at Guangzhou. China’s third busiest airport and the world’s 13th busiest, Guangzhou shifts around 66 million passengers a year. Expansion of the airport is ongoing, with capacity planned to be increased to 100 million passengers by 2022.
There have been rumblings about China Southern quitting Skyteam for some time. Last year, there were apparently internal discussions regarding exiting the alliance, around the same time that American Airlines finalised a $200m investment in the carrier.
This was spurred by their reaction to a large investment from Delta Air Lines in fellow Skyteam carrier China Eastern, back in 2015. After this, China Eastern and Delta went in together on a deal with Air France-KLM, strengthening their partnership and leaving China Southern somewhat out in the cold.
Skyteam are being fairly ambivalent about the whole situation. Their Chief Executive, Kristin Colvile, commented,
“Network has always been the foundation of SkyTeam. Our new value proposition retains that strong integrated network and combines it with our continued focus on improving customer experience through technology. China Southern has been a valued member of SkyTeam. We respect its decision and wish it well.”
The impact on passengers
Skyteam has said it will work closely with China Southern to ensure the transition is seamless, and that the impact to passengers and partners is minimal. China Southern themselves have said they do not expect the move to have a significant impact on its operations.