SkyTeam’s Chairman on Plans to Stop Being a “Very Clear Number Two” (Across the Aisle)

The SkyTeam alliance got together in New York yesterday to shake hands, kiss babies, and generally feel good about things. See, they were celebrating the alliance’s ten year anniversary with a meeting in New York. While I couldn’t be there, I did get 15 minutes on the phone with Leo van Wijk, the SkyTeam Chairman. (You might remember him from his days running KLM.) Leo had a lot to say, so let’s stop dawdling. Here’s my latest Across the Aisle interview.

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