Airline Alliances The Airmiles-High Clubs Three Airline Alliances Cover Most Of The WorldWhere Do They Go Next?

Nov 12th 2011 | from the print edition

FOR businesspeople who spend much of their time in the air, the three global airline clubsStar Alliance, oneworld and SkyTeamare all about such goodies as frequentflyer points and access to comfy lounges. For the airlines that belong to them, the main benefit is that the other members hook them up with lots of passengers seeking connecting flights, helping them to fill their planes. Since the alliances started in the late 1990s, they have steadily signed up new members. Until recently SkyTeam, which includes Air France, KLM and Delta, was the laggard. But it has gained altitude by signing, among others, China Eastern and China Southern, two of Chinas big three carriers. Star Alliance, which includes Lufthansa, UnitedContinental and Singapore Airlines, remains the biggest, having signed up Air China, the third of the mainlands big three. Oneworld, which includes British Airways, American Airlines, Iberia and Cathay Pacific, will soon welcome aboard Indias Kingfisher. Now there are few big network airlines left to be nabbed. The juiciest prize still on offer is LATAM, a giant to be formed next year through a merger of Brazils TAM and Chiles LAN, which will dominate the skies of South America. TAM now belongs to Star and LAN to oneworld, but regulators will force the merged carrier to choose. Star has already signed up two Latin American rivals, AviancaTaca and Copa, but it is not impossible to imagine it jilting either of these, if that were necessary to be allowed to admit LATAM.

Oneworld needs LATAM even more: as the only alliance to lack a member in mainland China, it cannot afford to drop two BRICs. In Indias big but chaotic market, oneworld is sorted, but Star and SkyTeam are said to be chasing Jet Airways. Star spent years negotiating with Air India, the deeply troubled flagcarrier, but suspended talks in July. The Arabian Gulfs three superconnectors Emirates, Etihad and Qatarare unsigned, but are growing so quickly that they see little need for allies. That leaves just a few independent carriers with long-haul networks. Virgin Atlantic is one: its bid to buy bmi, Lufthansas money-losing British offshoot, seems to have failed, with BAs parent company the likely buyer. The question is whether Virgin can continue in splendid isolation when all around it are in cosy cooperation. Somewhat like the European Union, the alliances have variable geometry: members do not have to join all initiatives, and non-members sometimes take part in selected activities. Each alliance has at its core a group of carriers which pool their flights in the huge transatlantic market. Americas Department of Transportation has given these ventures immunity from antitrust prosecution. The European Commission has approved oneworlds transatlantic venture, with conditions, but is still investigating the other two. A report by London-based Aviation Economics notes that the transatlantic ventures are a good source of profits in an otherwise hard marketbut if they start to look too successful, regulators may get tougher. The alliances have encouraged their members to co-operate on such things as buying cabin interiors, to obtain better prices from suppliers. But progress is slow: only a handful of Star members are taking part in its project to buy aircraft seats jointly. A consultant to one of the alliances says he has spent two years trying to persuade its members to agree on a joint check-in desk at one airport. SkyTeams boss, Michael Wisbrun, says even simple stuff like this saves a lot of money, so he is urging his member airlines to make it their priority. As the alliances struggle both to broaden and deepen further, they face being unpicked by their customers, as ever more of them build their own flight itineraries using online portals, which can result in big savings. Oneworlds boss, Bruce Ashby, says the alliances are aimed at offering seamless service to business flyers who care more about convenience than price. The trouble is, such passengers are also sensitive to the big variations that still exist between each alliances member airlines. Those used to plush Asian and European business-class cabins are often dismayed when they transfer to their airlines American alliance partner, where the service is poorer andhorrorsthe seats dont always convert to fully flat beds.

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