Airline alliances
CAPA (Centre for Aviation) Word Aviation Summit in Amsterdam in late November. One was entitled ‘Everything you want
A
to know that’s (sic) wrong with airlines’, suggesting that most “don’t have sustainable business models and that regulators, nationally and bilaterally, are out of step with what’s good for the industry and economy”. The other asked: ‘Where are Alliances headed? – global, multi-lateral and bilateral’, suggesting that the current role played by these, or their applications for business travel buyers, can be confusing. Given the current parlous state of most airline finances, radically shifting market fundamentals and increased regulatory challenges since the formation of multi- carrier partnerships in the late 90s, it is small wonder that the way forward for the big three global alliances, in particular, begs the question. At surface level, it could indicate that the
matchmaking among their 50 or so par- ticipating airlines is poorly communicated or represents less than joined-up thinking for the universally joined-up benefits they purport to provide. Or that the jigsaw of ‘marriages’, ’partnerships’ and ‘one-off’ couplings – or who might be bedding down with whom in future – is bewildering and requires more clarity. Spurred by mergers or ownership changes, the arrivals and departures of Star Alliance, oneworld and SkyTeam members have continued unabated since their early days, adding to a general air of confusion and perplexity. And not for the first time, following the latest spate of new signings, membership
brace of topically related and provocative work sessions faced airline chief executives and industry experts attending the
reshufflings or strategic manoeuvrings among the big alliances, as well as among major unaligned carriers, their collective credentials or idiosyncrasies for procurement and pricing purposes are confronting buyers. Driven by economic expediencies, challenged by stringent anti-trust immunity (ATI) issues and embroiled in both inter- and intra-territorial gang warfare, the big alliances appear at first glance to be self- serving bureaucratic minefields whose global programme coverage is largely superfluous to workaday corporate purch- asing based on more immediately tangible or controllable joint ventures or bilaterals. The big three have grown exponentially
to become effective marketing umbrellas for individual joint member scheduling integration to and through many of the world’s major air hubs, according to Barry Rogers, air practice partner and director for TCG Consulting. But overall they have yet to provide cohesive global procure- ment platforms. “The net result is that few companies are
contracting directly with the big alliances,” says Rogers. “In part, this is because in total they do not have ATI, which means buyers inevitably end up contracting separately with airlines that are part of those big alliances.” He says the trend is towards the breaking
up of alliance agreements, with companies reverting to contracting with joint venture operations that have ATI. “The advantages of contracting globally
with a big alliance have withered on the vine over the years because if they don’t have ATI they’re not allowed to co-ordinate pricing or discounts. They’re not allowed to co-ordinate targets or commitments.” Even the global contracting process itself
– getting all the signatures from the different airlines – can be cumbersome, adds Rogers. In addition, because of individual legalities or permissions involved at any one time, global sales teams may not always sure of what they are offering and procurement may not always be certain about what they’re getting. “Although we still have a number of clients
with long-standing global commit-ments or agreements in place with the big alliances, we’re seeing very few companies entering into new ones,” adds Rogers. Alliances offer specific discounts to corporate clients only on routes on which they are already codesharing, adds Maxime Marembaud, director of air solutions, CWT Solutions Group EMEA.
METAL NEUTRALITY
Winning anti-trust immunity (ATI), or not stifl ing competition, is a chief component for alliance members on key routes. For example, Virgin Atlantic and SkyTeam leader Delta Air Lines needed ATI in order to launch their new joint venture on the North Atlantic from March this year. Despite open sky agreements, such as between the US and EU and US and Japan, alliances increasingly need to prove their metal neutrality, or comprehensive partner operating equality, for regulators. Coined by the industry, metal neutrality is a term meaning the partners in an alliance are indifferent as to which operates the metal (aircraft) when they jointly market services. The US Department of Transport (DoT) warns: “Without a metal neutral sales environment, the partners have a strong economic incentive to book passengers on their own aircraft in order to retain a larger share of the market, which may not be in the best interest of the consumer or the alliance as a whole. “Metal neutrality may be achieved through revenue and/or comprehensive benefi t sharing arrangements.”
➔
“ Although we still have a number of clients with long-standing global
agreements in place with the big alliances, we’re seeing very few companies entering into new ones
”
THE BUSINESS TRAVEL MAGAZINE 73
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92