Why Airlines Bother to Sponsor Sport Teams – BNET Headwinds
Delta announced it was sponsoring the Lakers, and that spurred me to write this post.

How Airline Alliances Get Put Together, Middle East Edition – BNET Headwinds
SkyTeam has snagged Saudi Arabian, not necessarily a great prize but it’s the best available in a region that’s mostly alliance-free.

December Airline Traffic: Don’t Even Bother, As Winter Weather Skewed Everything – BNET Headwinds
December traffic roundup, but the weather really messed things up.

In the Trenches: Tax Season Approaches – Intuit Small Business Blog
It’s tax time, and I’m not taking any chances. I’m getting professional help.

Let’s start with a map showing in which countries each alliance has a presence. This assumes that all announced members actually become members and it doesn’t include non-alliance partnerships. (For example, Gol may work with American but it’s not part of oneworld.)

Now let’s think about some of the major changes that altered this map in recent months. The list is enormous.

• oneworld member Mexicana went under, leaving Aeromexico’s Skyteam presence as the only one in Mexico
• Avianca and TACA merged and then decided to join Star Alliance
• Copa decided to join Star Alliance
• Aerolineas Argentinas decided to join Skyteam
• LAN acquired AIRES to give it a presence in Colombia

And that’s all pretty recent. Crazy stuff, right? So now we see Star Alliance having a stranglehold on Central America now that TACA and Copa will be in the same alliance. LAN rules the southwest of the continent with Avianca-TACA making strides in the northwest. And then there’s Brazil.

All eyes are on the most important market in Latin America these days. The big player in the country, TAM, is currently part of Star Alliance, but there is plenty of speculation about what will happen after its merger with LAN is completed. Will LAN come to Star? Will TAM go to oneworld? Or will the airlines both keep their respective alliances? My money is on the latter, if they can figure out a way to walk that tightrope.

Then again, Star has given itself a little cushion here. If TAM goes to oneworld, then Star will have the option of trying to help Avianca grow its Brazilian subsidiary, if it thinks it’s necessary. And LAN might want to bring TAM into oneworld to try to push off American’s growing relationship with Gol, right? This is better than a Mexican soap opera.

The one thing we can all agree on now is that Skyteam is mostly left out of this game. Sure, Aeromexico is a part of Skyteam but that’s far from where this fight is taking place. It’s a different market entirely. And Aerolineas Argentinas? Yeah, that’s one mess of an airline. As a government-owned entity, it’s not going anywhere, but it’s not exactly the alliance prize of Latin America.

Latin America is booming and there are a handful of very well run airlines down there (most prominently, LAN). This is going to be a fascinating area to watch as alliances look to cement relationships to give the best coverage in the region.

How the Southwest-AirTran Merger Creates a Labor Problem – BNET Headwinds
The Southwest-AirTran merger presents an interesting problem. What can Southwest offer to labor to make this merger interesting?

Delta’s ScottEVest Ad Rejection Turns into PR Blunder – BNET Headwinds
It’s just a vest, but the company owner is turning it into a David versus Goliath story. It doesn’t seem correct to me, but he’s winning the PR battle.

Antitrust Immunity Enables New British Airways, American Airlines, and Iberia Flights – BNET Headwinds
The joint venture between American, British Airways, and Iberia is now in effect, and the airlines are celebrating by launching new routes.

Antitrust Immunity Deals: How U.S. Airlines Avoid Foreign Ownership Restrictions – BNET Headwinds
My editor at BNET asked me why all these antitrust deals were happening in this industry. The answer? Foreign ownership rules.

Cranky: One of my big questions is always, how do you measure yourself against other alliances? What do you look at to say, this is how we want to prove that we’re the best alliance out there?

Leo: There are two dimensions. One is global coverage. How many destinations can you open to your customers globally? That’s easy to measure. The second one is of course, the quality of the service, which is more difficult to compare and also not easy on an alliance basis to really get reliable feedback from the customers. We work on interviewing the customers and trying to get their feedback but it is, so far, next to impossible to compare them on an objective basis with the other alliances. You can only have the individual preferences of the customers which may be very much determined by where they live and what level of service is available by the various airlines in their hometown.

But generally speaking we recognize that SkyTeam, in terms of global coverage, the number of destinations, is lagging somewhat but not much, behind Star. They have a larger number of carriers but to some extent they’re overlapping, which is something we try to avoid. We look to only attract members where they add something to the existing network, so it’s complementary not overlapping.

Passengers carried, Star is bigger. There’s no doubt about it. In terms of quality of service, it’s extremely difficult to get a good picture. All in all, we see our position as a very clear number two, just behind Star and significantly ahead of oneworld.

Cranky: When you hear from your customers and you look at what Star is doing, what are your priorities? How are you going to become number one?

Leo: Our mission is to be the leading alliance. You become the leading alliance by offering a better level of service, consistency, and seamlessness in connections. Alliances are about connections. For every customer, generally speaking, a direct service with one carrier is preferred over a stopover or a transfer. But once that is not available, and in many cases, that is not available if you fly complex international and intercontinental itineraries, the ease of connectivity and the level of service consistency is the key differentiating factor.

While in the last decade, we have invested primarily and focused on trying to reach global coverage, now that we have achieved that to a large extent . . . I think for the next decade going forward, the competition between the alliances will be in the area of service consistency and seamlessness in connections and transfers.

Cranky: Do you have any specific projects in particular to help facilitate that?

Leo: One that’s very important but not easy to achieve in the short term is co-location at airports. . . . we’re working very hard at this point in time to have a program where we try to build co-location situations, which means all the SkyTeam airlines, or a large part, in one and the same terminal at major international airports.

From there . . . is it a home base of the one carriers, or is it an important business city? For instance, like in London where we have no home carrier in SkyTeam, we jointly operate a facility in Terminal 4, operate a joint lounge, which kind of creates the connectivity and the seamlessness that we’re looking for. So we have used the Terminal 4 London/Heathrow situation as a showcase and a template for future development.

Cranky: And what have you found with London? Is the facility working well? Is there anything you’d change?

Leo: I would say that the lounge and the new standards that we’ve introduced, we’re all very happy with. The joint check in service as a first step is quite good, but what we have not been able to achieve at this stage but we will be able to introduce at a later stage, is to have joint IT applications for check-in, E-services, etc where currently the level of development and interchangeability between SkyTeam partners is not fully at par. So that’s an area where we certainly will focus our attention to focus that further.

Cranky: Here in the US, Delta is branding its premium customers under the SkyPriority name, but that doesn’t translate to people who get benefits throughout the alliance. Is there an effort to standardize the definition of elite or from the alliance perspective do you just have to deal with what the airlines give you?

Leo: One of the complexities in operating in the different parts of the world is that the situations are not necessarily identical. So you have to allow for flexibility to adapt to the local circumstances and the competitive circumstances, but generally speaking, within SkyTeam we have aligned the various frequent flier groups and it is one of the elements for new members that is mandatory to align your frequent flier program . . . to the SkyTeam standard.

So whether you are with Air France/KLM or Vietnam Airlines as our newest member, . . . they aren’t identical . . . because of local circumstances, but the basic setup is identical throughout SkyTeam.

Cranky: You mentioned Vietnam Airlines. A lot of activity is in Asia lately – you have China Eastern coming in, Vietnam just joining, of course you already have China Southern. It would seem there is some overlap there. I know you said you’re trying to avoid that, so what is the strategy in Asia right now?

Leo: Well, between China Eastern and China Southern, there is very little overlap to be honest. China Southern has its main hub in Guangzhou, in the southern part of China whereas China Eastern has its main hub and stronghold in Shanghai. They jointly have a number two position in Beijing so collectively we will see that they have a network that covers all of China.

It is not so different as what we’ve seen in the US with . . . Delta which has a total coverage with multiple hubs in the US and Air France/KLM having a dual hub situation in Europe where KLM covers the northwest part of Europe and Air France the southwestern part of Europe and they’re highly complementary. That’s the same case in the Chinese market which is rapidly growing and geographically as big if not bigger than the US and Europe. I don’t see it as an overlap. They’re very much complementary.

Cranky: So where do you see the biggest holes in terms of coverage right now?

Leo: We did not have a partner in Southeast Asia. With Vietnam Airlines in, the region is covered very well but we can see further additions in Southeast Asia. Clearly the Indian subcontinent . . . is a market where we have not positioned ourselves yet so that’s a white spot we’re strategically focusing on. The two other areas where we feel we can improve our competitive position is in Latin America and Africa.

We have a good position with Kenya Airways in Nairobi, basically the only real hub in Africa. But we believe that with the further growth of the African market, additions to the position in SkyTeam in Africa are certainly, maybe not necessarily the highest priority, but certainly something strategically we’re looking for.

Cranky: What about Australia? I know there’s not much of a presence there yet, but with Delta and V Australia working together and a lot of talk about what Virgin Blue is about to become, is that an area that you’re keeping an eye on as well?

Leo: No, not really to be honest. It is a market that is very difficult to get access to. It is clear that the only real operator with a market position that is of interest is Qantas and they’re in oneworld, so . . . . But there are different ways to deal with access to Australia and Australian markets. So we’re looking at ways to enhance our position not necessarily by finding an Australian partner because that’s not necessarily there, but there are different ways to deal with it.

Cranky: One last question before I let you go. How important are the antitrust agreements and joint ventures to SkyTeam? Do you expect to see more of that between other carriers?

Leo: Yes. Going forward I think that where the differentiating factor is going to be the seamlessness of the service and the effectiveness of the cooperation. We have seen mergers within the different continents, Air France/KLM and Delta/Northwest, we might see more. . . . I don’t beleive that we’ll see mergers between different continents because of the complexity and the manageability of that on the one hand.

At the same time we have proven that if you can operate under antitrust immunity in joint ventures with an intense form of cooperation, [that can] provide a very good alternative. . . . that is probably the model going forward – to intensify the cooperation within the alliance between carriers on different continents rather than seeing mergers.

Cranky: Thanks very much for your time

Leo: My pleasure

Now let’s take a look at SkyTeam. In short, when Delta, Northwest, and Continental start flying to Heathrow in March, they’ll be in BA’s old Terminal 4. The rest of the carriers won’t move until early 2009, when a major terminal renovation will have been completed. Anyone who has flown BA out of that terminal lately knows that it is in desperate need of some help.

I’d like to list the Star Alliance changes here as well, but I haven’t been able to find them. In fact, while oneworld and SkyTeam have been on top of the changes, Star Alliance has been silent. I sent the alliance a request and their response left me wondering if they actually meant to insult my intelligence or if they just don’t speak English very well.

We would like to inform you, however, that the Star Alliance is a network of 19 individual airlines. Operational matters are handled by the airlines themselves. Therefore, for more information, you will need to contact the individual Star Alliance member airlines directly.

Really? You guys aren’t an airline yourself? No sh**. Well, I also asked United directly and spokesperson Robin Urbanski told me that the airline will be moving to Terminal 1, but it’s unclear when that might be and that will happen on June 1. Clearly, this alliance is a little less organized, probably because the changes aren’t coming as quickly as with the others.

We know that the airlines in Terminal 1 will stay there for now. Terminal 2 will be demolished starting this year, so those guys have to move somewhere. On March 27, BA moves nearly all of its domestic and European flights out of Terminal 1, so I have to assume that everyone from Terminal 2 will move in before their terminal disappears. Will the Terminal 3 airlines move at the same time or will they stay longer? My guess is that they won’t move immediately because there’s no urgency. Here’s how they stack up right now along with my best guesses as to where they’ll go. The only thing I know for sure is that US Airways will go to Terminal 1 when it starts service to the airport on March 30.

Update 3/25 @ 822a – Star has put out a press release with much more guidance. All Star carriers will be expected to move to Heathrow East in 2012 when the terminal is completed, but I haven’t included those changes in here.

Of course, not all airlines are in alliances. Virgin Atlantic, for example, will stay in Terminal 3, so you won’t see any changes there. All other unaligned airlines (except for former oneworld member Aer Lingus which will be in Terminal 3) will end up in Terminal 4. Again, I’m not entirely sure when that might happen, but one thing is clear . . . there will be a lot of confusion at Heathrow until things settle down, and that could take years.

If you have to go to the airport in the near future, leave plenty of time and bring lots of patience. If you have the misfortune of connecting through Heathrow, especially while these changes are in progress, may God have mercy on your souls.

Click for more on Heathrow and more on BA. And click if you’d like to subscribe via RSS or daily email.

First up, SkyTeam. Air Europa, Copa Airlines, and Kenya Airways all signed up as associate members. Air Europa is based in Spain and flies to sun spots around the world so that frozen Europeans can warm up. Copa, formerly partially owned by SkyTeam member Continental, connects North and South America through its hub in Panama. Kenya Airways is probably the most exciting addition because it opens up an entire new continenta. From its Nairobi home in East Africa, the airline flies to Europe, Asia, West Africa, and Southern Africa.

Now, I’m not exaclty sure it was it means to be an associate member, but it probably means they have to get coffee and pick up dry cleaning for the primary members. I imagine the rules for joining as an associate are less strict so it’s easier to join. In the end though, they will have earn/burn ability for frequent flier miles, codesharing, and lounge sharing so the customer will benefit.

SkyTeam’s US members are Northwest, Continental, and Delta, at least until some merger happens and changes everything around.

Next up is oneworld. They said yesterday that as of April 1, Malev, Royal Jordanian, Japan Airlines (JAL), and all its affiliates will join the group. Also that day, Aer Lingus will leave the alliance and go it alone saying that everything is just fine, they’re at the controls, flying the plane, free to pursue a life of religious fulfillment.

Malev is based in Budapest (Hungary), Royal Jordanian in Amman (Jordan, duh), and JAL in Tokyo. They all fly to destinations on several continents. American is the US airline in this alliance.

Hong Kong’s Dragonair, along with LAN Ecuador and LAN Argentina will join sometime later this year as well marking a pretty strong expansion by the alliance.

On the heels of Delta’s New York/JFK – Phoenix and Salt Lake City – Charlotte announcements which I documented here, we get today’s announcement of new Salt Lake City – Pittsburgh flights. Yup, that’s the same Pittsburgh that US Airways considers a hublet these days.

The airline says it will begin one daily flight on a CRJ-900 regional jet on March 1. That’s right – almost 1,700 miles of good regional jet fun.

As I mentioned before, this appears to be just pure spite for US Airways. Bob Cortelyou, the head of Network Planning for Delta, was quoted in the release as saying “Delta continues to compete on every coast . . . .” This isn’t aimed at the local market – this is supposed to steal traffic between Pittsburgh and the West Coast from US Airways. It is also irresponsible asset utilization at its finest and yet another reason why US Airways could do a better job managing this airline.

And on that front, US Airways put a release out today saying that they hope to begin due diligence soon. I’m not sure why they put the release out. Maybe Delta is dragging its feet in the hopes that US Airways will just forget about it or something, and US Airways wants to point this out for all to see so that they can get things moving again.

One thing I do find very interesting is an article in USA Today which claims that US Airways will not fight for control of Delta if Delta management doesn’t want them to do so. Doug Parker made this statement at a meeting with USA Today reporters and editors yesterday. This seems very strange to me, because Delta management has been clear that they aren’t interested for months now. I’m not sure what would make Doug think that they’re going to change their minds, but maybe he knows more than we do.

Beginning early 2008, Delta will install truly lie-flat seat in Business Elite, the airlines premium service on international flights. Not including Eos, which only flies between New York and London, Delta is the first US carrier to go with an all lie-flat product in business class.

They’ve chosen the seat pioneered by Virgin Atlantic in Upper Class a few years ago. Since that time, Air Canada and Air New Zealand have also purchased that seat. The unique feature of this seat is that it doesn’t face forward – it’s in a herringbone format so it’s angled inward. That allows them to fit more seats on the plane while giving a great deal of privacy. Here’s what it will look like:

As you can see, it’s a very nice looking product. Even though the seat has been bought from Virgin, this appears to be a slight change to their product. On Virgin, the seat back flips forward to turn into a bed. That makes a very comfortable bed even though the seat leaves a little to be desired. Upon reviewing Delta’s seat, it appears to work differently.

If you go to the press release, you can see more photos. From those pictures, it appears that this seat reclines into the bed position without flipping over. This may hurt the quality of the bed but the seat itself may be more comfortable. We’ll have to wait and see.

And yes, we’ll be waiting a long time. Early in 2008, only the two new long range 777s get the seats. The rest of the 777s don’t get it until fall 2008 and the 767s, the bulk of the airline’s international fleet, won’t be done until 2010.

Update (at 124p):

Silly me for reading the press release too fast. Delta used a little wordplay here:

“The airline also expects to offer a lie-flat option on its 767 aircraft. These modifications are expected to be complete by 2010.”

I took that to mean that the 767s would get the same lie-flat option, but it appears that they will get just “a lie-flat option.” This means it could be a different seat entirely, but no plans have yet been finalized. For now, it’s just the small fleet of 777s.

Today, he finally issued a ruling saying that the flight attendants will not be allowed to strike at this time and the matter has to go back to the bankruptcy court for further proceedings. I’m not sure exactly what that means yet.

This all goes back to the interpretation of the Railway Labor Act (RLA) which binds airline employees as well as those that ride the rails. Now a little history.

Airlines and its employee unions/workgroups/etc come to agreement on a working contract. These contracts are for a set period of time, but they never expire. When the time period is up, they become amendable. If negotiations fail and mediation (National Mediation Board) is unsuccessful, both side enter a 30 day cooling off period. After that, they are entitled to self-help, which can include strikes.

This is fairly straightforward, but it entered a gray area when Northwest voided the flight attendants’ contract. See, the airline was given permission by the bankruptcy court to impose a contract that would dramatically reduce pay. As soon as they did that, the flight attendants argued that since they never agreed to this contract, the RLA didn’t apply. So they wanted to strike without going through all the hoops required in the RLA.

I’m not a legal scholar by any means, but I side with the flight attendants here. They are working under a contract that they never agreed to work under, and they should be permitted to seek self-help. Of course, my opinion sadly holds no legal value, so we’ll just have to see where this one goes. Appeals are flying as we speak.