Today, US Airways and TAM both officially join oneworld, making that alliance significantly bigger. I had the chance to talk to Kurt Stache, American’s Senior Vice President of International Strategic Alliances about the switch. But the most interesting part of the discussion was when I poked into other topics, including what the future holds for the Alaska Airlines partnership and why the JetBlue deal unraveled.
Cranky: Let’s start with the basics. The oneworld alliance is growing significantly with both US Airways and TAM coming in. Can you talk about the entry of both, which are already connected to oneworld members? Does that make a difference in inducting them? What’s the process been like?
Kurt Stache, SVP International Strategic Alliances for American Airlines Group: You’re right, it is an interesting situation because US Airways and TAM [were] both members of Star and then they both flip over to the oneworld alliance [today]. It is really the first time as far as I can recall where there’s a big switch from one alliance to another through a merger. Particularly if you look at the United States where Delta/Northwest and United/Continental were in the same alliance when they merged, and so this has been different. It’s a lot of effort that goes into cutting over. Opposed to a carrier that’s joining an alliance for the first time, this is a situation where the carrier is actually divorcing from one and joining another. That’s a much bigger task or effort, if you will.
Cranky: What are some of the complexities of doing that just from a behind-the-scenes perspective?
Kurt: The big challenges are certainly on the IT side of it and then from an educational perspective both for the customer and for our own employees. This has been a 9 month effort. In the US Airways case we have them unwinding from Star and joining oneworld. So we’ve had to manage the exit with all the Star carriers and then work with all the oneworld carriers to make sure that our systems talk to each other. [We had to make sure] that the US Airways frequent flier system is able to earn miles and redeem miles on the platforms of the oneworld carriers.
Same with the elite database. If you’re an elite with US Airways you’re accruing all these Star benefits. Now that will no longer happen but you’ll earn all these oneworld benefits. So making that cutover happen is a big effort. As you know we just closed the merger 3 months ago and we’re already bringing US Airways into oneworld so it’s a big achievement.
Cranky: Yeah, it’s incredibly fast, but as you said, it’s 9 months of work so you’ve been working on it [before the merger closed]. One thing I’m curious about with US Airways, I know some of the existing partners are going to continue beyond the end of the Star Alliance relationship. Is that right?
Kurt: Yeah, there are a handful of carriers within Star that will continue the relationship with US Airways. As you know, until American has a single operating certificate, the US Airways brand and operating certificate is still out there. During the time between now and receiving our single operating certificate when the US Airways brand will sunset, some carriers have chosen to continue to cooperate with the US Airways network, at least for the next 12, 18 months. And of course we have some that are not part of Star that have a relationship with US Airways that will continue. Going forward, we’ll decide which carriers we want to have a longer term relationship under the new American Airlines.
Cranky: So the ones that are sticking around, it’s really just, “we might as well hang around while US Airways still exists.” It may turn into some longer down the road but that’s not the case right now?
Kurt: Specifically to the Star guys, their governance structure allows them to continue for a certain period of time to cooperate with US Airways. But once that brand is gone, in most cases if not all the relationship will have to terminate. Star’s governance structure doesn’t allow most carriers to work with American because United has exclusivity.
Cranky: I forgot they’re more tightly wound than oneworld.
Kurt: We don’t have that in oneworld. Any airline in oneworld can partner with any other airline. We have the flexibility to pursue other opportunities, but Star and SkyTeam have much stricter limits on the level of cooperation that can occur with carriers outside of the alliance. We think that’s one of the benefits of oneworld. We think it’s important that carriers have flexibility to partner with carriers that are important to their network, to generate the economics required to make the airline work and give customers what they want.
Cranky: Let me ask you about one of my favorite things about oneworld, the global support centers. I had a chance to see one last June, and it’s great. I’m wondering if you can talk about those support centers, if they’re planning on continuing, if they’re planning to grow, and if US Airways will have someone in those centers to help out now?
Kurt: In general the answer is yes. The support centers are in our larger oneworld hubs with a lot of connections. Yes, US Airways customers will have access. We haven’t determined if we’ll create support centers in the large US Airways hubs but I suspect over time we’ll do that. In places like Philadelphia, we don’t have one today but we’re looking into it. And I suspect we will.
Cranky: I’ll shift gears here. I want to talk about domestic partnerships. JetBlue is over, as we’ve seen. A lot of people are wondering what will happen with the Alaska partnership. You have extensive codesharing. Is there any news on that or any expectation on when we’ll know more about that partnership?
Kurt: We’ve had a very long and good relationship, a strong relationship, with Alaska. Our intent is to continue growing that partnership with Alaska. There’s a great synergy between us and Alaska because Alaska has great coverage on the West Coast. The new American, while we have a fantastic, arguably best network in the world, the West Coast is probably the area where we’re least strong, so that’s a nice fit with Alaska and vice versa. We see further opportunities to grow that relationship.
Cranky: Any thoughts beyond just growing through additional codesharing? Strengthening benefits for frequent fliers? There’s already a heightened level of cooperation.
Kurt: I won’t, I can’t give out any specifics but suffice it to say that we’re certainly in discussions with Alaska about other areas of deeper cooperation.
Cranky: Can you talk about the JetBlue partnership? I’ve seen the public statement, but I don’t know if you can talk more about the decision to end that.
Kurt: The reason that partnership ended is legacy American Airlines had a network on the East Coast that wasn’t as strong as US Airways or Delta or United for that matter. So there was an opportunity to start building upon that with JetBlue given their East Coast network. Now that we’ve merged with US Airways and have that network on the East Coast, there’s just no longer a fit. There wasn’t a need to work as closely with JetBlue because we have by far the strongest East Coast network of the major carriers. It was a natural outcome of the AA/US merger.
Cranky: I definitely see how the Northeast network is stronger, however in New York you’re still number three behind United at Newark and Delta with their split hub at LaGuardia and JFK. Looking in New York, there still wasn’t enough benefit to building more ubiquity of service?
Kurt: You raise a good point Brett, but when you think about our presence in New York, we still have a large presence in New York and we serve the cities that matter. What we’re interested in from our network in New York is to serve the Transcon markets like LA and San Francisco. The top business markets in the US. And certainly internationally, London, Sao Paulo, Tokyo… large cities across the globe. And we do that with our oneworld partners as well.
But when you look at our new network, you’ll find that Philadelphia has much greater connectivity and many more destinations. All the airports in New York are slot-constrained. There’s only so much growth that can be achieved there. We have the ability to connect people from places like Buffalo and other cities in the northeast via Philadelphia in a very efficient manner. So that provides a great source of feed for our long haul network out of Philadelphia. In New York we’ll continue with our strong local position. So really, again, JetBlue has what I would say similar access to Kennedy as we have in Philadelphia so we felt it wasn’t necessary to continue the relationship.
Pretty strong words about the importance of the Alaska Airlines partnership that I hadn’t heard since the merger. That was definitive while the JetBlue answer was squishier to me. It just brushed on the question of New York itself while focusing on the network throughout the Northeast. But clearly JetBlue doesn’t fit into the plan. As for oneworld, it’s a happy story all around with a lot more connectivity in the group starting today with the entrance of US Airways and TAM.