Airline alliance

An airline alliance is an agreement between two or more airlines to cooperate on a substantial level. Most of the largest passenger airlines worldwide are members of one of three major alliances: the Star Alliance, Oneworld, or SkyTeam. Alliances also form between cargo airlines, such as that of WOW Alliance and SkyTeam Cargo. Alliances provide a network of connectivity and convenience for international passengers and international packages. Alliances also provide convenient marketing branding to facilitate travelers making inter-airline codeshare connections within countries. This branding goes as far as including unified aircraft liveries among member airlines.^[1]

Rationale

Benefits can consist of:

• An extended network: this is often realised through code sharing agreements. Many alliances started as only a code sharing network.
• Cost reduction from sharing of:
  • Sales offices
  • Maintenance facilities
  • Operational facilities, e.g. catering or computer systems.
  • Operational staff, e.g. ground handling personnel, at check-in and boarding desks.
  • Investments and purchases, e.g. in order to negotiate extra volume discounts.
• Traveler benefits can include:
  • Lower prices due to lowered operational costs for a given route.
  • More departure times to choose from on a given route.
  • More destinations within easy reach.
  • Shorter travel times as a result of optimised transfers.
  • A wider range of airport lounges shared with alliance members
  • Faster mileage rewards by earning miles for a single account on several different carriers.
  • Round-the-world tickets, enabling travelers to fly over the world for a relatively low price.

Airline alliances may also create disadvantages for the traveler, such as:

• Higher prices when all competition is erased on a certain route.
• Less frequent flights: for instance, if two airlines separately fly three and two times a day respectively on a shared route, their alliance might fly less than 5 (3+2) times a day on the same route. This might be especially true between hub cities for each airline. e.g., flights between Detroit Metropolitan Wayne County Airport (a Delta Air Lines fortress hub) and Amsterdam Airport Schiphol (a KLM fortress hub).

Issues

The ability of an airline to join an alliance is often restricted by laws and regulations or subject to approval by authorities. Antitrust laws play a large role.

History

The first airline alliance started in the 1930s, as Panair do Brasil and parent company Pan American World Airways agreed to exchange routes to Latin America. The first large alliance started in 1989, when Northwest Airlines and KLM agreed to code sharing on a large scale. The modern day alliance was started in 1990 under the African Joint Air Services (AJAS) Accord between Tanzania, Uganda and Zambia in 1990 leading to the launch of Alliance Air in 1994 with South African Airways, Air Tanzania, Uganda Airlines and the governments of Uganda and Tanzania as shareholders. A huge step was taken in 1992 when the Netherlands signed the first open skies agreement with the United States, in spite of objections from the European Union authorities. This gave both countries unrestricted landing rights on each other's soil. Normally landing rights are granted for a fixed number of flights per week to a fixed destination. Each adjustment takes negotiating, often between governments rather than between the companies involved. The United States was so pleased with the independent position that the Dutch took versus the E.U. that it granted antitrust immunity to the alliance between Northwest Airlines and KLM. Other alliances would struggle for years to overcome transnational barriers or still do so.

The Star Alliance was founded in 1997, which urged competing airlines to form Oneworld in 1999 and SkyTeam in 2000.

In 2010 Richard Branson, chairman of the Virgin Group, announced his intention to form a fourth alliance among Virgin branded airlines (Virgin Atlantic; Virgin America; and the Virgin Australia Holdings group of airlines).^[2] Then in September 2011, Branson said that Virgin would join one of the existing alliances;^[3] this idea was repeated in October 2012.^[4] In December 2012, Delta Air Lines purchased Singapore Airlines' 49% stake in Virgin Atlantic for £224 million.

On February 14, 2013, it was announced that American Airlines and US Airways would merge, retaining the American Airlines name and would remain in the Oneworld alliance (and with US Airways leaving the Star Alliance group).

In South America, LAN Airlines and TAM Airlines began their merger in 2012. In March 2014, with the merger complete, TAM left Star Alliance and became part of LAN in Oneworld.

Alliances

Membership and market data for the largest airline alliances

Airline Alliance Market Share By Network Capacity 2007

Notes

• In 2005, SkyTeam launched its Associate Program, whereby existing codeshare agreements (such as with Continental Airlines and Copa Airlines) can be integrated into SkyTeam's marketing (shared loyalty programs, etc.).^[10]
• On June 19, 2008, Continental Airlines announced that it would be leaving SkyTeam on October 24, 2009. It began to participate in Star Alliance on October 27, 2009 as part of a codesharing agreement with Star Alliance charter member United Airlines (Continental Airlines cut its codeshare ties to Delta Air Lines and Northwest Airlines).^[11][12] United Airlines and Continental Airlines merged in 2010.
• As the table shows, the three alliances combined fly 58.7% of all passengers.
• Avianca and TACA, listed as separate airlines, are considered as one member of Star Alliance.^[13]
• Olympic Air joined after merging with Aegean Airlines. It is now an affiliate of Star Alliance
• US Airways is currently in the process of merging with American Airlines. The airline joined Oneworld as an affiliate member on March 31, 2014.^[14]

Notes and references

External links

• Oneworld: http://www.oneworld.com
• SkyTeam: http://www.skyteam.com
• Star Alliance: http://www.staralliance.com