Comment
Global alliances need to adjust
April 1st 2013
Anyone who believes the days of global alliances – Star, oneworld and SkyTeam – are numbered is ignoring reality. Read More »
They are, and will remain, a critical element in the industry’s endeavours to find sustainable profitability. While some observers and analysts mutter about alliances reaching their use-by date the facts prove otherwise.
They continue to attract new members, such as Malaysia Airlines’ recent full enrolment in oneworld, and Qatar Airways’ decision to join the same group. That in itself is significant because until now major Gulf operators have eschewed alliance membership.
Besides, there is no ignoring the fact, as our main story Is the alliance ‘club’ losing its clout? points out, the 58 members of the three major alliances operate nearly 10,000 aircraft, hold a 77.1% share of the global passenger market and turn over annual revenue of $391.83 billion, 86% of world airline income.
They are a vital marketing tool, allowing members to offer global networks they couldn’t achieve with their own fleets.
Generally, they have not been able to bring huge savings to members through such things as joint aircraft purchases, because individual airlines retain their brands and won’t accept generic aircraft. They do, however, bring savings in consolidation of IT systems and other essential back office services.
There is no doubt, however, that global alliances are adjusting to changing times. For a start, consolidation is leading some carriers to hop from one alliance to another. In today’s tough operating markets, alliance members are increasingly pragmatic.
Alliance benefits aside, there is a trend towards deeper bilateral arrangements between carriers, not only within alliances, but between alliance members and non-alliance members, as well as between airlines that are members of different alliances.
Air New Zealand (a Star member) had no qualms about linking up with Cathay Pacific Airways (oneworld) because it needed a partner in Hong Kong. Qantas Airways’ (oneworld) tie-up with Emirates Airline (strongly anti-alliance) is a deal born of economic necessity for both carriers.
Qantas chief executive, Alan Joyce, believes alliance membership and extra-alliance bilateral arrangements are keys to future success. He is right. Global alliances, bilateral co-operation with whoever best suits the circumstances and the emergence of “virtual” alliances such as Etihad Airways’ strategy of investment in like-minded partners are variations of the partnership model.
Virgin Australia’s formation of a grouping that includes Star, SkyTeam and non-alliance airlines, are also part of a trend that should ultimately help the industry reach the profitability levels it strives for.
