THE PARTICIPANTS The Debate


PETER DUNKIN AVIATION ADVISOR AND EXECUTIVE COACH


cross-country mergers or takeovers, although this is now starting to change. This is where alliances come in as they provide a way to get around everything from bilateral agreements to licensing and control regulations. Carriers envisage the great blue sky of global free trade in aviation. To realise greater cost and revenue synergies,


the next logical step for airlines is to merge. The BA/Iberia merger (to be called International Airlines Group) will create Europe’s third biggest airline after Air France-KLM and Lufthansa, with some 419 aircraft flying to over 200 destinations. But apart from the financial savings (estimated


to be about £350million a year by 2015) the merger will play to each airline's strengths – BA on the North Atlantic and Iberia to Latin America – while also giving the opportunity to both airlines to develop services from their London Heathrow and Madrid-Barajas hubs. The other new phenomenon that travel managers in North America and Europe will need to deal with is the rise of the transatlantic joint venture. Primarily featuring North Atlantic members of the three global alliances, the joint ventures have secured anti-trust immunity that allows them not only to set schedules and prices but also offer unified agreements to corporate clients. One such transatlantic joint business is American Airlines, British Airways and Iberia. It is an agreement to share revenue and reduce costs, co-ordinate networks and schedules and co-operate commercially on routes between the European Union, Norway and Switzerland and the US, Canada, Mexico and US territories. The joint business agreement should improve customer service with better connections, network, frequency and frequent flyer benefits also enabling the airlines to operate more efficiently, reduce costs and increase their ability to invest in new products and services. Corporate clients should see benefits in enlarged compliance from their travellers and greater coverage of physical locations in addition to joint sales agreements from the three airlines. Currently buyers have to negotiate with each airline on an individual deal but in the future they will be offered one deal from the three airlines which should reduce duplication, complexity and potentially cost. Another benefit is combined fares and itineraries where a customer can book one sector on BA and Iberia and another on American Airlines, which gives more choice of schedules and routings as well as more fares. For example, if the cheapest fare classes are


not available on the BA flight on both sectors but they are on the AA flight, a customer will get the benefit of being able to book one-way on one airline and one-way on another.


The challenges for the joint business agreement


will be consistency of product across the airlines and unified communication and strategy – the reputation of this joint business agreement could be damaged if the three airlines cannot control or align with each other.


THE AIRLINE Richard Vaughan, divisional senior vice president commercial operations worldwide, Emirates Airline Emirates has never belonged to, nor has any plans to join an alliance. We see them as having significant anti-competitive elements and believe that our membership in one would be an artificial brake on our own business plans. Unless you are the lead participant in an alliance, individual airline members are compromised by their implicit or implied collective decision-making. In the recent past, there has been consolidation


" Currently buyers have to negotiate with each airline individually – BA, AA and Iberia – but in the future they will be offered one deal from the three"


of airlines on an unprecedented scale; the airline map of Europe and the world is being re-made, often with airline alliances being the vehicle or stimulus for this change. But the speed and nature of this consolidation forces us to ask whether the consequences have been fully thought through. The entry- level for new airlines, for example, is many rungs higher on the ladder now given that so many countries and regions face the prospect of consolidated carriers dominating their markets, irrespective of the so-called ‘remedies’ agreed to as part of regulatory approvals. Airline consolidation also presents a threat to the future of regional or secondary


airports. The great hubs of the world – Frankfurt, London Heathrow, New York JFK – will always prosper, but the thinner economics of markets like, say Brisbane, Nice, Newcastle or Stuttgart, can be exposed and impacted by consolidation as airlines coordinate their schedules. We also find it disingenuous that some leading alliance airlines remain determined to thwart other non-alliance carriers like Emirates from providing fair and reasonable competition through such carriers lobbying for state protection via air traffic rights. Some quarters in Brussels have told Emirates


that there is only room for two or three airline groupings in Europe for example. Emirates disagrees with this statement, but even if it becomes fact, competition from other quarters will be more important than ever. Fair market access and open competition is


good for Emirates, customers and the global economy. In the midst of an unparalleled consolidation of our industry and extraordinary economic times, Emirates argues that the merits of competition are now more important than they ever have been.


Peter is an industry advisor and accredited executive coach with 30 years experience in international aviation. He has held senior commercial roles with British Airways, Delta Air Lines, and as part of the start up team for Etihad Airways. He is a Fellow of the Chartered Institute of Marketing and has served as a director on the UK Board of Airline Representatives (BARUK). A regular industry speaker, he has many articles published in the travel and aviation press.


ADRIAN WOODWARD DIRECTOR OF GROUP SUPPLIER AND INDUSTRY RELATIONS, HRG


Adrian began his career with Thomas Cook before joining GTM Travel Management as CEO in 1995. In 1998 he joined HRG as a management consultant before taking up the role of general manager partner operations in 2001. In September 2009, in addition to his partner responsibilities, Adrian became responsible for HRG’s relationships with its global suppliers. He is a member of the Institute of Personnel Management and the Institute of Training and Development.


RICHARD VAUGHAN DIVISIONAL SENIOR VICE PRESIDENT COMMERCIAL OPERATIONS WORLDWIDE, EMIRATES AIRLINE


Richard is responsible for all commercial activities of the airline across its rapidly- expanding global network that presently spans over 100 destinations in more than 60 countries. He joined Emirates in 2004, bringing with him more than 42 years of travel industry experience. Previously he was general manager for the Concorde Group of companies in Western Australia, where he managed the group’s various business units, including Concorde International Travel, World Aviation and several local operations of the group.


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