Our view: Getting the best out of airline alliances
3 June 2019
An airline alliance - an arrangement between two or more airlines to create networks - have many benefits to travellers and bookers.
Airline alliances are a relatively new phenomenon in business travel. The Star Alliance was founded in 1997, followed by Oneworld in 1999 and SkyTeam in 2000.
Star Alliance is the world's largest airline group, with 27 full members including Singapore Airlines, United Airlines, Japan's ANA, Lufthansa, Swiss and Turkish Airlines.
SkyTeam is the next-largest alliance, including Delta Air Lines, Air France, KLM, Alitalia and Aeroflot amongst its members. Oneworld is ranked third, with 13 member airlines including Cathay Pacific, British Airways, Qantas, American Airlines and Qatar Airways.
Each alliance creates a network that enables member airlines to service customers globally – or as close to globally as their combined routes allow.
Essentially there are four customer benefits. Business travellers have the flexibility to book multi-sector flights with different carriers through one source; itinerary management is simplified, connections more efficient and – sometimes – tickets are cheaper.
Lounge access is a big benefit for business travellers. Gold status in Star Alliance gives travellers access to most lounges –Like Star Alliance, SkyTeam has its own set of airport lounges but just two tiers within its frequent flyer programme. Elite Plus comes with lounge access and extra luggage
Within Oneworld’s Gemstones programme, Emerald status provides access to almost all Oneworld airlines’ first-class lounges. Oneworld will open branded lounges in 2019 as well as launching an app enabling passengers booked on connecting flights with Oneworld airlines to check-in, select seats, download a boarding pass, access lounges and priority security lanes.
This latter development represents the next development phase of the alliance proposition to corporates and their travellers - enabling seamless travel across an alliance’s members. The question is whether alliance members will sanction the necessary investment in enabling technology.
For the travel managers, alliances enable corporates to negotiate with several carriers through a single point, saving time and money on the RFP process. Beyond that, it would not be unreasonable to conclude that the alliance value proposition has not changed much in the last 20 years.
The code-sharing agreements that give travellers a wider choice of carrier also provide access to the terminal facilities of all airlines within the network and the multiple frequent flyer programmes from which business travelers within alliance customers mainly benefit.
Alliances allow both the individual traveller and the company they work for to benefit from their travel. For example, the On Business programme operated by British Airways allows corporates to collect points on any bookings they make with British Airways and their partner airlines Iberia and American Airlines. Alternatively, the corporate can benefit from fare discounts on those airlines of up to 5% off the full fare.. Go to https://onbusiness.britishairways.com/web/ba.
Not all airlines are alliance members though. Emirates is one example, citing the restrictions that alliance membership places on individual carriers. Emirates loyalty programme also adds value to add value to air spend, especially where volumes are not big enough for fare discounts. Go to https://www.emirates.com/english/business-rewards/.
Other loyalty schemes worthy of mention are Etihad’s Business Connect programme https://www.etihadbusinessconnect.com; BlueBiz (operated by Air France KLM) https://www.bluebiz.com/en/ and Qatar Airways’ Beyond Business. The latter is designed for SMEs and offers rewards on all base fares and surcharges, as well as access to the carrier’s main Privilege Club programme. See https://www.qatarairways.com/en/corporate-travel/beyond-business.html .
The Partner Plus Benefit programme operated by Lufthansa (which replaces the old Star Alliance corporate membership programme) allows corporates to collect points on bookings made with 11 partner airlines including United Airlines, Air Canada and SWISS. See https://www.partnerplusbenefit.com/application/gb/en/public/start-page.action.
The alliance market is changing, with airlines turning instead to joint ventures. A JV between American Airlines and Qantas is awaiting sign-off from U.S. regulators, whilst American is also hoping to revive its partnership with Latam. United is pursuing a joint venture with Copa and Avianca, announced late last year, whilst Air Canada does the same with Air China, the first between a Chinese and North American airlines.
Meanwhile, Delta, Virgin Atlantic and Air France-KLM want to combine their various agreements into a single JV. In December 2019, Aer Lingus applied to join the transatlantic JV between American, British Airways and Finnair.
The rise of joint ventures, equity stakes and informal will challenge the status of the alliances by changing the competitor landscape.
Then there’s New Distribution Capability (NDC), the deregulation of airfare and ancillary product distribution via third parties. With the technology coming on-stream, the emphasis is on collaboration as airlines, TMCs and GDSs team up.
The problem here is two-fold. First, the different speeds at which airlines are adopting the new standard, and second the dichotomy between the alliance proposition of consolidation and corporate demand for the bespoke bundling of fares and benefits epitomised by the recent Siemens/Lufthansa agreement which provides fares via an API which gives priority boarding and lounge access to all employees.
The challenge for alliances is how to remain relevant and ensure consistency of approach between member airlines in a new distribution landscape. Ultimately, NDCwill help airlines offer more sophisticated packages to corporate travellers via the TMCs.
The unanswered question is what role airline alliances will play in that process.