Recently I found myself delving into a wonky discussion about airline alliances. The question came up – do they really matter anymore? Even considering the rise of the joint venture, which has been problematic for some alliance members who are on the outside looking in, I still think there is real value when it comes to alliances.
We’re approaching the 20-year anniversary of the modern alliance. When Star Alliance launched in 1997, it was a powerhouse. But 1997 was a long time ago and the world was very different. There were a lot more airlines flying in a much more restrictive environment. Creating an alliance helped to bring together some of those various airlines to help them stand out. It allowed deeper and easier connections into partner airline networks. At the time it seemed revolutionary and other airlines raced to follow. In 1999, oneworld came along with SkyTeam following a year later. The three alliances set the tone for future consolidation along partnering lines.
But the seeds for something deeper were planted back in 1992 when the US and the Netherlands signed an open skies agreement allowing carriers from each country to effectively have unrestricted access to flying between the two countries. US policy made open skies a requirement to enable further cooperation between airlines across borders, and this meant the Dutch carrier KLM had a leg up. KLM and its brother-from-another-mother Northwest were granted anti-trust immunity. By 1997 they had a joint venture effectively merging Transatlantic operations.
The benefits became clear very quickly, and other airlines looked to do the same as soon as they could get their governments to sign open skies agreements as well. United and Lufthansa signed their Atlantic+ joint venture which eventually incorporated Air Canada and the Lufthansa-owned carriers. American and British Airways fought for years but finally had theirs approved (along with Iberia) once open skies deals were signed. But it wasn’t just in Europe, and the number of joint ventures has exploded recently.
When Japan opened up, ANA and United got together as did American and Japan Airlines. Delta has locked up its virgins (that’s Virgin Australia and Atlantic) and Aeromexico. American is working on a Qantas one now, and it has announced LAN as well. United and Air New Zealand are coming together. This isn’t a trend that’s going to change until cross-border mergers are allowed. Only then will joint ventures go away… in favor of outright combinations. We’ve already seen airlines take bigger stakes in each other for strategic reasons. They wish they could do more.
With all this happening, alliances have taken somewhat of a back seat. Some members who haven’t been invited to the joint venture party talk about there being a hierarchy within the alliance. It has led some to question whether it’s still worth belonging. Questioning, however, doesn’t mean action. Very few airlines have left an alliance without planning to join another.
So is there enough value when it comes to alliances? Yes, there is. But not all alliances are created equal.
Star, for example, is so strict on membership that you’re either in or out with no real ability to partner outside the alliance (except in rare instances where the alliance can’t meet a need). But oneworld has always had a much more open concept feel to it. That’s how American can partner with Etihad even while Qatar is in the alliance. And it’s how Qantas can tie-up with Emirates. This feels like the right path to me and helps airlines do what they need most.
From my perspective, there are three big points of value in an alliance.
1) Benefits across brands for frequent flier members
For the casual traveler this just means having the ability to earn miles in their home airline’s program. But for the frequent flier it’s an entire suite of benefits ranging from priority check-in/security/boarding to increased bag allowance, lounge access, and seat assignments blocked for elites. These benefits ensure that when elites are traveling outside of their home market, they’re highly likely to stick with a partner of their home airline.
2) Help during irregular operations and schedule changes
This to me is the most important benefit of an alliance, and oneworld does it best from what I’ve seen. Why? Well, oneworld has a requirement that if someone is holding separate tickets on a single trip involving two alliance members, they are treated as a single conjuncted ticket when it comes to reaccommodation issues. That is hugely helpful and I think a very important part of the puzzle. There are also oneworld Global Support Centers (http://crankyflier.com/2013/06/27/the-awesome-but-little-known-oneworld-global-support-centers/) that help to fix those missed connections between alliance partners. This is a tremendous benefit that should be touted more, because it can help push people to use alliance partners.
3) General consistency and safety of offering
Airlines can’t just join an alliance because they feel like it. There are a whole lot of entry requirements ranging from technology to safety that have to be met. Not everyone meets them. (Just ask Air India which kept getting denied by Star Alliance before finally getting its act together.) It’s a stretch to say that experiences are consistent, but they’re far more consistent than they would be otherwise.
The key point here is that not every airline can enter into a joint venture with every other partner. So having something looser, like an alliance, is still beneficial even if it is in a less impactful way.
[Original orgy image via Shutterstock]
