Soapbox: Staying Relevant
Bruce Ashby, CEO, oneworld Alliance - Global airline alliances are at a turning point but that doesn't mean they're reaching their sell-by date
More than 50 carriers, representing two-thirds of industry-available seat kilometers, are now aligned with either oneworld or our two competitors, with more lining up to join.
Why have alliances proved so successful? It is because they provide benefits to their member airlines and their customers. They expand the reach of airlines’ networks and brands and deliver cost efficiencies. For customers, they provide more convenience, services, rewards, and recognition. In an industry of thin profit margins, these benefits are enormously attractive.
With most of the largest carriers aligned, however, global alliances are at a turning point. Some suggest the expanding number of immunized anti-trust ventures (ATIs) and the gradual relaxation of restrictions on mergers mean alliances may be nearing their sell-by date.
In reality, that’s just not credible. Within oneworld, airline cooperation has been enhanced by ATIs and solidified by mergers; both have helped to maximize benefits to customers and carriers. But the 50-plus airlines now in alliances are not about to merge suddenly into three global mega-carriers or plunge into a vast web of ATIs with dozens of others simply because they belong to the same alliance.
Instead, we at oneworld see a long future of amicable co-existence with those deeper forms of cooperation.
What the gradual trend towards mergers and ATIs does mean, however, is that the continued growth and development of alliances is becoming more complex.
To add to the complexity, many airlines—unaligned and aligned—have deep bilateral ties with, and sometimes investments in, carriers across multiple alliances. Also, many unaligned airlines have no plans to conform to the full-service model maintained by the members of the three alliances.
Alliances need to find effective new models of cooperation if they are to remain relevant to their members. Creative solutions to problems are needed; accepted wisdom often cannot be applied.
For example, it used to be believed that only full service airlines would join alliances. Yet in March 2012, oneworld added airberlin, which only a few years ago was considered a pure low-cost carrier. Of course, the business model of airberlin has evolved since then, as it added product enhancements to attract more customers and grew to become Europe’s sixth biggest airline. These enhancements have made airberlin capable of delivering all of oneworld’s offerings.
Looking ahead, the evolution of today’s low-cost and hybrid carriers coupled with some creative re-thinking of alliance participation requirements will provide a rich field for continued membership growth, extending alliance benefits to new customers.
Meanwhile, as long as there are mergers and acquisitions, alliances will have to cope gracefully with sudden shifts in membership. The merger of LAN (a oneworld member) and TAM (Star Alliance) is one obvious example; the acquisition of bmi British Midlands (formerly Star) by IAG (oneworld’s British Airways-Iberia) is another.
The complexity of airline business demands that carriers use many different tools to enhance customer service and their bottom lines. Alliances alone cannot cure the industry’s ills. But, so long as alliances avoid complacency, they will continue to be an important component of a diverse suite of solutions.