B6GUY

With US Airways' entrance into the Star Alliance, I was interested on your thoughts to the following:

- How big is too big for an alliance?
- What are the major strengths and weaknesses of each of the major alliances?
- Which airlines would you like to see added or removed from some of the alliances?
- Which is your favorite or least favorite alliance?

Scott

Excellent poll topic!! Because I work for an anchor airline in the Star Alliance, my bias is obvious. My contribution will be from a labor viewpoint, as I don't purchase tickets and have a cogent consumer standing.

Alliances are here to stay; indeed they will deepen and likely evolve into equity partnerships as well. I firmly believe the current U.S. administration will champion the cause of increased foreign ownership of domestic airlines. On the positive side, alliances extend the network reach to locales simply unavailable or economically unviable. Lufthansa can transport customers from Dusseldorf to Kansas City utilizing the services of UAL. Passengers from Harrisburg PA can fly UAL to ORD and NRT and enjoy seamless service throughout Japan on All Nippon.
My fellow workers at UAL are deeply distressed to see a degradation of international flying in favor of key members of Star. Translated, this equals fewer jobs in an industry already under assault. Alternatively, entrepreneurs such as Richard Branson dearly wish to establish an operation in the U.S. Before you jump for joy and proclaim "let it happen", consider the enormous market the U.S. offers. How can the British, let alone the Thai's, Mexicans, Japanese, Brazilians, etc offer a reciprocal opportunity?

I'll pause for responses before dangling the "big guns".

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uniTED takes wing Feb 12, 2004

NYCAAer

Interesting questions. oneworld was formed as an afterthought when the Star Alliance was formed. American had serious discussions with both Air France and Lufthansa before teaming up with British Airways in 1996, which is a bit of a joke because they control between 60-70% of the U.S.-U.K. market. With AA's vast number of flights to Britain, AF or LH would have made more sense. At one point it looked like there would be a pairing between AA, AF & JL.

Last week AA & BA received final approval to codeshare on each other's flights, on BA's flights beyond LHR/LGW to points in Europe, the Middle East, Africa & Asia; and on AA's flights from its U.S. gateways to more cities in the U.S., the Caribbean & Latin America.

Although I voted that Star is the strongest alliance hands down, for the sheer number of carriers it has, I think SkyTeam is an alliance to watch. It has strategically located hubs & a lot of cooperative effort between the SkyTeam carriers with very little route overlap.

BHopper88

i think the skyteam will become one of the strongest with Continental and Northwest being the most financially stable airlines of the big 5 at the moment...

By the end of the year it will be NWA - Continental - Delta, and then in europe, Air France - KLM - ALITALIA among others...

sure sounds like a mighty combo to me...

DELTA MOVES INTO THE DETROIT MIDFIELD LATER THIS SUMMER

B6GUY

While oneworld might have been formed to combat Star, I believe the potential of oneworld is superior to that of all others...

1) Fewer members; however, dominate players in their respective markets (BA- Europe, CX- Asia, QF- Australasia, AA- USA/Caribbean and the Lan Family)

2) Finnair exploits Northern and Western Europe

3) Strong Brand loyalty - BA and AA

However, if I had it my way I would include JAL, Emirates, SAA and one more S. American carrier... maybe TAM.

On SkyTeam- I HOPE THEY NEVER GET ANTI-TRUST IMMUNITY... Any alliance that includes 3 of the BIG 5 doen't need anti-trust immunity they need to be in court trying to defend how they ever came to exist...!

NYCAAer

For some reason, JAL has been reluctant to join any alliance. TAM has had a marketing agreement with American for quite some time, but their pending merger with Varig will move them into Star.

An alliance between DL, NW & CO is too big & how the regulators even gave it the go-ahead boggles my mind. There were anti-trust concerns raised when UA wanted to buy US, so how is this any different?

BHopper88

with the NW-CO-DL alliance from what i understand they have to give up slots in all of the major hubs they share together... so some of the low fare airlines can come in and or compete better.

Plus this is not like UAL merging with USairways since they still will be competeing with each other "for the most part".

again why isnt this any different with the alliance with UNITED and USairways with the HUGE grip on the airports from CLT, DC all the way north to Boston.... you have hubs in CLT,IAD,PIT,DCA,BOS,PHL, among others THAT SOUNDS LIKE A MEGA FORTRESS

but then again in many ways it saves the big 5, in stead of say Continental going under or USAirways going the way of TWA... it keeps the airline going and making more money... alliances are way better for the airline as a whole then mergers... AA learned this from TWA and Reno Air, and NW learned this HUGE from Republic....

NYCAAer

AA never would have purchased TWA & Reno if Carty were not at the helm during those lousy 4 1/2 years. AA is stuck with the mess Carty left behind, while he still owns $30 million worth of Dell Computer stock & sits on Dell's board of directors. He got away with it, but his reputation didn't. One article on the web was titled "Carty- Disgrace is the Best Teacher."

Even if DL, NW & CO have to give up slots at hubs they share, how about cities where they don't have a shared hub? I don't think any of them share a hub. The only exception is a stretch, too, with CO's hub at EWR & DL's huge international gateway to Europe at JFK.

Scott

Take a time trip with me 5, 10, and 25 years into the future to examine the possible evolution of alliances. The key theme is globalisation.

FIVE YEARS: Foreign ownership of U.S. carriers is increased to a majority stake. Special arrangements are made to ensure the viability of CRAF (Civil Reserve Air Fleet) flying to meet the needs of the military during wartime. Richard Branson is a happy camper.

TEN YEARS: Alliances place blocks of orders with manufacturers; specifications are harmonized for all members. Fleet balancing ensures partners have the jets during peak seasons - aircraft are subleased as necessary. Long-range planning is underway to shift key personnel among "units" with a common language. Even subsidiary needs are bundled, such as office computers, uniform vendors, and parts warehouses.

TWENTY FIVE YEARS: Storied air carrier names such as United, American, Delta, BA, Lufthansa, JAL, Varig, Aeroflot, etc. may not exist. But everyone will know the names of a handful of behemoth networks, such as Star Alliance, One World, SkyTeam, etc.

There will be 3 mfgrs of diecast aircraft: Gemini, Aeroclassics, and SMAC. A very popular hobby, as enthusiasts long for the days of variety!

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Fly the Friendly Skies of United

uniTED takes wing Feb 12, 2004

B6GUY

WOW! There is such excitement in this post (Thank you all for making this thread full of usefull insight and industry opinions!)

I think we all can agree that the CO-NW-DL tie-up can be damaging to the US passenger market. It is true that the three do NOT share one hub - EWR, CLE, IAH, MSP, DTW, MEM, ATL, CVG, SLC...

I would hope regulators will enforce reductions on the NYC-Europe routes for both CO from EWR and DL from JFK, otherwise I see nothing but limited options for passengers in the NYC area.

RE: US/UA... Well at the time of the merger proposal we were in a different airline environment, the timing of that merger was completely off. If UA was too bid for US during this environment, there could probably be some concessions that could be made to see it through... And today, US would need any help it could get, and UA might also be in need of some help also.

RE: AA/TW/QQ - The AA/QQ merger was a win for the AA network on the West Coast, regardless of the cost and disruption is caused during the integration (I was an AAer during that time). AA/TW had too have been the largest business-dupe of a long time. The way AA swarmed into bankruptcy court and cherry-picked the remains of TW exclusively was amazing... HOWEVER, they are paying for that cutting-edge business acumen TODAY!

NYCAAer

The only problem with AA's purchase of Reno Air is that the routes are either no longer operated or being switched over to American Eagle regional jets, & it's difficult to compete with WN in the north-south California corridor, which even JetBlue has admitted. I think the only good thing to come out of the QQ acqusition is that AA obtained a lot of slots in California, especially SJC & LAX.

BHopper88

ok for one, i miss worded saying about the sharing.... part of the deal with the DOT all 3 airlines (delta, northwest and continental) have to give up slots in all their hubs... as with access to slots that are not used during non peak times..

plus they had to limit the amount of flights between the hubs.. ie D*****L

i really dont see how this alliance would hurt the american travel network (ie hurt fares offered)

to this day NW and CO still compete on fares offered and has brought prices down. Fares have not skyrocketed on flights from DTW to CLE or to EWR or IAH....

plus the positives sure seem to outlimit the negitives... with freq flyer programs being linked it just makes things better for freq fliers...

so saying that this alliance would hurt the flying public is somewhat BS.... especially if the DOT allows the alliance of BA/AA to be allowed into LONDON... an airport where DELTA, CONTINENTAL nor NORTHWEST flies a direct flight into heathrow....only UNITED and AMERICAN fly into their so they control the fares... so really the only "LOW FARE" airline into LHR is virgin.....

IT JUST COMES DOWN TO THERE ARE ONLY 3 AIRLINES/ALLIANCES in the US/WORLD... STAR, SKYTEAM, and ONE WORLD... and the rest are the mighty low fares.... so really if the alliances go forward (SKYTEAM-WINGS) it gives more options for airlines like frontier, ATA, Airtran, Southwest, and JETBLUE to get more slots in the mega hubs...

THUS A WIN / WIN for passengers

BUT THATS JUST MY OPINION

NYCAAer

The AA-BA alliance has received final approval from regulators on both sides of the Atlantic, but not in the form originally conceived by the 2 airlines. They are NOT allowed to codeshare on flights between the U.S. & London-Heathrow, for anti-competitive reasons. AA will place its code on BA flights from LHR & LGW to other destinations in the U.K., Europe, the Middle East, etc. BA will place its code on AA flights to cities in the U.S., Caribbean & Latin America which BA does not fly to.

As for "low fares" into LHR, all 4 carriers offer frighteningly low fares from the U.S. to London all the time, & it's not always Virgin who starts the fare wars, either. Last winter, BA offered a round-trip fare of $160 to London from any city in the U.S. they served, regardless of flight length, which AA, UA & VS were forced to match. You could fly from SFO or LAX for $160 or from BOS or JFK for the same price. This summer, AA offered a fare to LHR from JFK & BOS for $321 r/t, highly unusual for the peak travel season.

London suffers from overcapacity, mostly due to the downturn in business travel, & the airlines are forced to cut the fares to fill their planes. Destinations in Continental Europe which traditionally have a higher percentage of leisure travelers, have been less impacted financially than LHR.

justin

Personally I think the whole alliance thing is an ill found panacea, the airlines saw the alliance system as a way around almost every problem yet there is no correlation between airlines financial performance and their membership of alliances, in fact it is low cost no frills carriers who are going their own independent way that are making money. Star is undoubtedly the strongest alliance yet UAL is in chapter 11, ANZ was renationalised to avoid it folding, Ansett went, Varig is a complete basket case financially and several of the other members are hardly in great shape. As a traveller most routes are already served by codeshares (by airlines which often cross alliance boundaries) and the seamless integration which is the supposed strong point of alliances often seems to break down or offer nothing not offered by non-alliance operators. Maybe I'm hyper sceptical, but my view is that lazy management viewed membership of an alliance as a cheap and easy cure all to avoid the structural reform and changes that many of the established carriers seem unable to make,

Justin

Yukon 880

Justin,

I don't want to run this too far OT or sidetrack the thread, because we have a great exchange of ideas going, but I wanted to pose a few questions:

Are we suggesting that "Independent" (ie, B6 or WN) is the way to go because those carriers are currently making money?

Would "Independent" work in the Global Market of today?

If JetBlue or Southwest made the decision to enter the global marketplace of today, without an alliance partner, would they continue to make money?

I have nothing but admiration for the astute management that has lead JetBlue and Southwest to the admirable position that they are in today, they have exploited their niche, if you will, and I doubt their business plan calls for any deviation from that success.


Don

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justin

I agree, I think airlines like Southwest and Ryanair in Europe have achieved amazing success based on a specific business model that would be dificult to translate into a global network. However, I do think these airlines can teach the global carriers a lot, by concentrating on a customer led product with very tight cost control they have managed to ride the current storm, and even if you look at the domestic US or EU markets the majors have struggled badly. I've found very often the major flag carriers expect the customer to accept what the airline wants them to take rather than following what the customer would like. My view is not so much that the alliance is inherently bad per se, but rather the execution has been bad and that the airlines have seen it not as a way to merely extend their network and co-operate where it makes sense, but extended it into some sort of inevitable juggernaut whereby they have to join an alliance and further that it answers all their prayers in saving them from the consequences of their own poor decisions in recent years. Their are some very successful long haul carriers like JAL who just use codeshares to achieve much the same result of good connections without joining any formal alliance group.

Justin

AAMD11

Oneworld. Quality better than Quantity!!!!

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