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.

US Airways and Continental See Different Fortunes with United at Washington/Dulles – BNET
As Continental ramps up Dulles, US Airways cuts back. Clearly they’re each seeing different opportunities with United.

Three Reasons Why Delta Slashed First Class Fares Between New York and the West Coast – BNET
Delta made some pretty steep cuts to First Class fares between New York and LA/SF last week. Here’s why I think they did it.

Airlines find coach travelers willing to pay extra for perks – Chicago Sun Times
This week, the Sun Times took on the issue of fees, and I was asked to comment.

This particular route is an interesting one. There is a great deal of traffic, and that’s probably why TACA and American both fly it. But why is Continental going in? It’s possible that they see a marginal opportunity and it’s a way to improve utilization, but I’d like to hope that this is the beginning of Continental’s move into an expanded role between LA and Latin America.

United used to serve the San Salvador route from LA, but they pulled out within the last couple years. Continental has a strong presence in Latin America, but ever since the airline packed up its headquarters and left LA for Houston more than 20 years ago, it hasn’t had much of a presence in LA at all. So the route may or may not have been on their radar before (they’ve tried limited Mexico night flights from LAX in the past), but now with Continental joining the Star Alliance and becoming a tight partner with United, could this be recognition of a greater opportunity?

It always surprised me that United never really tried to penetrate the LA to Mexico business markets. That’s Continental’s specialty out of Houston. So now if we combine Continental’s Latin experience and capabilities with United’s strong LA presence and feed, I’d like to think that Continental may see a golden opportunity.

Do I know anything in particular about this? Absolutely not. But it makes a lot of sense. It would be great to see someone try to tap into that market.

• Keep it Going – Lufthansa could continue to operate bmi as is, but this is highly unlikely. The airline is wasting slots on many smaller short haul routes, and it still has no Transatlantic presence out of Heathrow. Something will change. Besides, they’ve already announced the long haul Manchester flights go away in the New Year, so things are changing no matter what.




• Bring in Lufthansa’s Brand – Lufthansa could try to pull an Air France-style setup where bmi would disappear and Lufthansa could become a major player under its own name, especially on Transatlantic flights from London. This isn’t likely to have positive results, as Air France has shown. And there’s no reason to kill whatever local brand-loyalty there is already. I think it’s unlikely.


 

• Sell Pieces – Lufthansa could decide to cut out the pieces it likes. Maybe it wants to keep all the London slots and sell everything else to another regional carrier in the UK. I’d see this might be plausible and then it could keep what it wants to develop out.

 


• Tie Up with Virgin – This one could easily happen along with the previous one. Take the London slots, merge with Virgin Atlantic, and create a very strong London brand that’s far greater than what Virgin has now. Oh, and yes, bring Virgin Atlantic into Star Alliance. Virgin is clearly interested. Virgin’s CEO even says:

Everyone has speculated that it would make sense for Virgin Atlantic and BMI to combine their long-haul and short-haul networks. There is now a major opportunity to do that. I am sure that Lufthansa realises this could be a really good example of the right industry consolidation.

So, we’ve got a very interesting situation developing over there. If Virgin joins with Lufthansa, this would be a great gain for the Star Alliance and it would clearly not make BA happy. I’d say that might be the best bet right now and it’s one that Star Alliance members should be happy about. Since London Transatlantic flying is really hurting right now in the financial crisis, the time might be right to make this happen for a relatively low price.

Edited 11/6 @ 526p to reflect the purchase price of 400 million euros and not the absurdly low 400 euros. Oops.

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.

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It makes perfect sense to me, of course. Airlines price their seats based on supply and demand, so if you book early when the plane is empty (high supply) and you travel on an uncrowded day (low demand), you’ll likely find the best price. I’m simplifying, of course, but you get the idea. People hate the lack of transparency and the fact that they don’t seem to get more for paying more.

It certainly doesn’t help that airlines use the same systems to sell tickets that they used 30 years ago. Those systems are very rigid in what they can and cannot do, so even though there are plenty of great ideas out there, very few can be implemented without major changes.

That’s where Air Canada has excelled.

Why Air Canada? Well, it probably helps that they have the lion’s share of the market up in Canada, so they can experiment without nearly as much consequence as someone down in the US. Still, they’ve done some very innovative things that have made them a model in terms of revenue generation.

First, start with their new tiered fare structure. They have five different fare groupings. The lowest, called Tango, is bare bones. You only earn 50% of the miles you fly, there are change fees for everything, and you have to pay $12 just to get an advance seat assignment. That is followed by Tango Plus, Latitude, Latitude Plus, and finally Executive Class (which is their premium cabin). For a full explanation of the difference in classes, go here.

It’s rare in the airline world, but with these fare groupings, you can now see what you’re getting by paying more. Of course, this only works if you have the right interface for customers, so Air Canada did a major makeover on their website. If you searched for a flight from Vancouver to Toronto, for example, here is what you would see.

The first thing you might notice is that it looks a lot like the Southwest website. It shows you every available flight and then which fare classes are open for sale on those flights. Even better than that, they have tabs at the top showing the lowest fares for five days on either side of your chosen date, just in case you’re flexible. It makes it very easy to get a good picture of the fare landscape.

One thing I like as a former revenue guy is that they change fares within each fare group. You may have to squint, but look at the first flight as compared to the second flight. In Tango, you’ll pay $168 for the first one, but $194 for the second. Even within each category, they’re looking to match supply with demand. It may still hearken back to the black box idea of revenue management from the customer perspective, but it’s a good middle-ground that offers good transparency for the customer as well as the ability to revenue manage for the airline.

Now, in their latest move, Air Canada has taken things one step further to actually creating a world of a la carte pricing. So now, let’s say you want the Tango fare. When you select it, you’ll go to this screen.

This was just launched last week, and I think it’s great. The idea is to get to the point where every person can pay a different fare and actually feel good about doing so.

You don’t care about earning miles? Well, save $3. Air Canada will give you the discount so they don’t get the liability of those miles on their books.

You don’t need to check bags? Great, save $4 for not using the resources to get your bag in the belly of the plane.

Do you know you won’t change your flight? Excellent, save $6 on that one as well.

The best part about this is the presentation. US carriers will often tack on fees for various things. Air Canada could easily have said that there is a $4 fee for checking bags, but instead, they give you a $4 discount for not checking bags. It’s the same thing (assuming they can bump the base fare up $4 – something they can probably do in Canada), but the customer ends up feeling good about it.

So is this the future of ticket sales? I really hope so. It makes a lot of sense to tailor tickets to each person’s needs if you can. Let each person choose what they want and the buying process becomes much more pleasant as well as transparent.

Will the US carriers try this? Probably not in the near future, at least not the big guys. First, it requires a big change on the tech side. More importantly though, if competitors don’t go along with it, there is a lot of risk involved. If there was one big airline I’d expect to give something like this a shot, it’s US Airways since they have been known to take risks, but most of the others are probably too conservative to do it right.

In the meantime, Air Canada will continue to innovate. They’ve announced that they’ve signed on with ITA Software to replace their reservation system internally. That new generation software can only open up additional opportunity to improve the purchase process for everyone.

Well, Upgrade: Travel Better points out the sneaky move by US Airways to cut that time to a mere 18 months now. Once you click into the page on the US Airways site, you find that this new policy goes into place on Jan 31, 2007. If you need more than 18 months, you have the option to pay $50 + $.01 per mile to reactivate the account for another 18 months. After that point, they’re gone forever. The horror!

Wait . . . I like this idea.

If you can’t earn a single mile in over 18 months, what’s wrong with you? It’s not like you even need to fly. You just need to earn with any partner. That means you could get the credit card and earn miles, you can stay at a hotel, rent a car, and you can even buy some friggin’ flowers to get miles. If it’s not even important enough for you to do one of those things in 18 months, then you really don’t care too much about your miles, and the airlines should be able to wipe them off their books.

For a long time, Philly has been a nightmare of a baggage problem for US Airways. You may remember a couple winters ago when they had the meltdown at Christmas and tons of bags were lost. After that incident, the airline blamed the workers for walking out on the job, but it was later determined that management had left the airport severely understaffed.

That, in a nutshell, explains the oh-so-terrible labor relations at the old US Airways. Now that America West has taken over, they’re trying to right the ship, but it’s going to be a long road. Yesterday’s article in the Philadelphia Inquirer took a look inside the baggage operation for US Airways in Philly, and it found some pretty ugly stuff. Try this one for starters:

While most US Airways veterans are white, many recent hires are African American. Often, the two groups hang out in different break rooms. Some white workers won’t help pay for DirecTV in one break room, complaining that the set is always tuned to BET.

“The issues are generational, but they manifest themselves racially,” a veteran said. “It’s pretty ugly.”

And that’s just the tip of the iceberg. You’ll have to read the article to get an accurate impression of life at US Airways, but definitely keep in mind that it does seem a bit sensationalized.

Even with that in mind, this is a pretty ugly story. It’s a great example of why taking over US Airways won’t be as smooth for America West as it has seemed so far. The old US Airways employees are angry over pay cut after pay cut, and the change in way of life. As the article notes, working on the ramp used to be a good job you could have for life. Now, it’s considered something for people to do for a few years and then get out. The pay is much less, and that is reflected in the quality of the new hires. Apparently, the pay had even been cut too much, because the new America West management has already raised wages since taking over. This clash between older, highly skilled workers and green new hires is indicative of the difficulty the airline will face in trying to merge these workforces. Even they decide to operate the airlines separately, the problems will remain.

It’s going to take someone who can command respect in Philly to turn that ship around. They’ve gone through so many senior leaders over the years that finding someone who will simply stay around for a couple years might be considered a victory in itself.