Analysis
SHIFTING ALLIANCES
Consolidation and competition is changing the global airline world and putting pressure on traditional alliances, explains David Churchill
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TUCKED AWAY ON the Virgin Atlantic website is a small – albeit significant – announcement that from the middle of next month (June 11) the airline’s codeshare and frequent- flyer partnership with US Airways will come to an end. This means, for example, that connecting flights to US cities such Pittsburgh and Phoenix from Boston and Los Angeles (both Virgin hubs) will no longer be bookable via Virgin. And Virgin travellers will no longer earn frequent flyer points on US Airways flights. In the great scheme of world aviation, this may seem a relatively minor matter – of interest to a comparative few travel buyers and business travellers. Yet it is one of the many intriguing ripple effects starting to be felt
from the growing wave of a rapidly changing global airline world, as carriers merge, shed old alliances and create new ones, and jockey for position in an industry where, traditionally, change means more losers than winners.
REDUCED COMPETITION But while change in the airline world is a fact of life, there are clear implications for corporate buyers and travellers – not least the potential reduction in competition that consolidation and alliances can bring. “While it might be beneficial for the airlines to pool their resources, and optimise their operations and networks, it also allows them to control the number
of seats available on their flights, as well as the price of these seats,” says travel buyer Anda Zarina, recently at Ignis Asset Management. “This means some routes may become effective monopolies which would reduce choice and increase the cost of travel, especially as consolidation means less profitable routes face having fewer and more expensive flights available, particularly those connecting to regional airports.” Lynn Walker, travel buyer with Ball Packaging, agrees that consolidation can have an adverse impact on the competitive level on certain routes. “A reduction in competition is always less beneficial to the buyer of any product or service,” she points out.
MAY/JUNE 2013
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