Alliances and mergers

Global airline consolidation has a way to go on some continents but it would appear that the era of big deals is over for a while now.  Alliances have been greatly affected by mergers lately and I’ve begun to wonder at their value.

You often hear of airline CEOs talking of the synergies that exist from alliance partners.  In one example, American Airlines has consistently offered very positive feedback on its alliances within Oneworld over both the Atlantic and Pacific Oceans.

But there are others, particularly in the Middle East, who eschew these alliances in favor of direct “one off” agreements with airlines.  The Etihad, Emirates and Qatar airlines all tend to move towards striking regional deals with other airlines that offer direct benefit on specific routes.  (Yes, I realize that Qatar is now in Oneworld and if you think that means Qatar is going to change its approach, you aren’t paying close attention to who runs Qatar.)

I question the value of the global alliances a lot these days.  For example, I question the value QANTAS brings to the table in the Oneworld alliance at this point.  I don’t question what value they bring to the table with Emirates or even what value Emirates brings to QANTAS.  It’s significant and that’s very clear to me.  But how does QANTAS truly benefit Oneworld members at this point?

I’m not sure it does.

I see the power of the joint ventures between airlines such as Delta and Air France/KLM but do those two airlines need SkyTeam to make such a deal?  No, they don’t.  It’s possible to argue that the alliances allowed airlines to get comfortable with each other and even helped standardize IT systems to a degree.  But the value received within those alliances is really between 2 airlines.

I think that mergers are going to muddy the waters even more for alliances.  People often suggest that alliances drive mergers but I’ve noticed that that pretty much isn’t true.  Sometimes the alliance in a merger is a convenience, sometimes it is a nuisance.  There is no strong correlation.

At this point, why does one of the largest airlines in the world need 10 or more alliance partners to succeed?  Why isn’t it more beneficial to arrange independent deals with partners and benefit only from those who add value to your business model?  The answer is that it *is* more beneficial.  And look for more airlines to do it.

Notice that Delta is no longer strongly focused on SkyTeam but very focused on building relationships with a variety of smaller airlines who do add value.  Airlines such as WestJet and Alaska Airlines are good examples.

People argue that alliances need partners in India.  I would argue that airlines need  partners in India.

And it will go that way through the rest of the world too.



Leave a Reply

Spam protection by WP Captcha-Free

Copyright © 2010 OneWaveMedia.Com