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.
I understand why the dumped Jetblue. The reasons above make sense and consensus called it right after the merger closed. But if the investment was already made to link systems and processes, why drop it now? Why not wait until the networks are really synergized and it truly is an obsolete partnership? Surely through pricing they could push people to AA/US metal, but keep the JB option open. Though I wonder how many people actually used this partnership…
How is this different than AS-DL where the partnership is likely ending, but winding down slowly? (I know scope/scale of agreement is different, but similar idea that the legacy feed network is not fully in place and the partnership is likely still beneficial)
Noah – This was a much smaller and less significant partnership than Delta/Alaska. It was really just a mileage partnership. So my guess is, you either step up and make it better or you abandon it. Because it wasn’t doing much as it was. American looks at JetBlue and probably could have let it go, but why? JetBlue is increasingly competing with you, so why would you want to help them?
The comments about Alaska are very interesting. I wonder if in the coming weeks, AS announces it is dumping Delta and forming an exclusive partnership with American. From Kurt’s comments, it sure sounds like some sort of deal is in the works. Would definitely boost AA’s presence in the northwest and help Alaska’s bottom line recover from the loss of the Delta partnership. I’m wondering what kind of impact such a move would have on Delta’s Seattle plans. There doesn’t seem to be much more room for them to grow there, gate wise. Can they build enough feed for their international plans?
Ben in DC – I don’t think you’ll see anything exclusive out of Alaska. They like offering multiple options to suit their needs. It works well for them to be more open.
“””””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.”””””
See if both AA and US had not killed off PSA/RenoAir/AirCal they would have had a west coast market and been even bigger after the merger.
AFAIK, AA and US should’ve bought the opposite airline. AA should’ve taken PSA and US should’ve taken AirCal for fleet similarities.
Although, the US/HP merger managed to kill the LAS night hub…. The issue is there are just less people on the west coast than the east coast.. but that keeps changing.
I’m wondering why not only the codeshare was dumped with JetBlue but also the interline protection agreement as well. That goes above and beyond not needing the network in the northeast.
It was a growing and aggressive WN that killed off the old PSA/Reno/AirCal networks and caused UA to circle the wagons around SFO and outsource most western flying to SkyWest and Mesa. I don’t understand why AA had to learn the same lesson….twice….but whatever.
The AS remarks make total sense and I think that their relationship will deepen as DL’s sours. His remarks also indicate that they are committed to keeping, and growing, PHL on the domestic and international front. But I agree with Noah that dropping B6 before networks are integrated and synergized seems a bit premature.
OneWorld is incredibly weak in Canada and the upper Rocky Mountain/Dakotas region. As a US Airways FF based out of PHX, I’ll miss Star Alliance in those areas.
They want to serve “the top business markets” from NYC, yet they dump ATL/MSP/DTW to use the slots for a bunch of one-stoplight Virginia cities? That doesn’t make any sense.
They probably see a huge amount of DL loyalty in those markets, whereas they can get a pretty good fare premium in the smaller VA cities.
While Philly might not be slot restricted, it certainly is delay prone.
I believe it falls under the larger NY air traffic control system.
B,C,D, and E terminals are old with narrow hallways.
Customs could have been more efficiently designed.
US Airways massive F terminal (commuter and regional flights ) is in a completely different building..
The attitude of the USAirway’s employees their leaves a lot to be desired. ( In fairness pay is low and labor relations have had their highs and lows.)
Wouldn’t be my first choice for an international gateway.
look at USAIRWAYS website, and click on the merger section,scroll down and you will see ,where the two carriers route systems are shown merged ,and this is a STUPID MERGER-all AA got was a DCA and CLT HUBS,with the Shuttle and some more Europe flghts/ USAIRWAYS got the better deal–you watch, the new AA will dump PHX hub and shrink and eventualy PHL also/ AA said they are weak on the west coast and DL is going after ALASKA AIRLINES to buy them
Actually, AA needed the merger more than US. Remember, when the merger was announced, US was consistently profitable while AA was bankrupt. It’s really US buying out and taking over AA.
PHX and PHL aren’t going anywhere. They are strong hubs for US and there is no other place to put that traffic. I can see JFK hub eliminated, as well as ORD and LAX shrinking some.
REALY DUDE, PHL OVER NYC , COME ON and the PHX hub is sooo small compared to LAX-AGAIN PHX OVER LAX? REALY- THE 2 MAJOR BUSINESS AND LARGEST US CITIES- NYC AND LA DUMPED AS WELL AS CHICAGO[?], DONT THINK SO
NYC, LA, and Chicago are highly competitive markets, and AA has been losing market share in Chicago and NYC over the years. US has many more flights out of PHX than AA at LAX and the same is true with PHL vs JFK. Remember, AA will be run by Doug Parker – the same man who “dumped” NYC a few years ago when he gave 130+ LGA slots to Delta in exchange for around 40 DCA slots. Parker likes to focus on smaller markets with minimal competition over a bigger super competitive one.
Stephen – Parker likes to focus on smaller markets with minimal competition over a bigger super competitive one.
He had no choice with US – they didn’t have the network to compete. If they shrink in Chicago or LA, that will undermine the network and feed for international. UA and DL will crush them. They’ll stay competitive in NY, LA and CHI.