Air Berlin joins oneworld – “the last member in Europe”

The intention is to add Air Berlin to the recently approved American/British Airways/Iberia anti-trust agreement. oneworld Managing Partner John McCulloch said that with the limited number of partners in Europe, the addition of Air Berlin would be the last in Europe. The alliance hopes other alliance partners will sign codeshare agreements with Air Berlin as well. "We hope to get agreements with British Airways and Iberia by next summer," said McCulloch, who added the alliance had now filled out its European network.

"We are done now," he said. "As you know we have never looked at adding carriers for the sake of network coverage and we are excited about the addition of the Air Berlin network and its expansion plans."

Trans-Atlantic enhancement

Newly minted American President Tom Horton agreed. "This has been a big week for oneworld with the approval of the antitrust agreement which is a big step forward," he said. "Now we are adding a very important airline in Central Europe. I think, with the ATI, we have the ability to sit down and discuss the future of Air Berlin within the trans-Atlantic joint business agreement."

American has six flights a day to France, so oneworld has substantial operations in France and, of course, through our partnerships with British Airways and Iberia there is ample connectivity to North America."

The codeshare agreement with Air Berlin, the second largest carrier in Germany and the fifth largest in Europe, not only adds more cities to American's network throughout Europe, but will also offer customers a smoother, more convenient travel experience. American, a founding member of the oneworld alliance, currently serves Germany with service to Frankfurt from its Dallas/Fort Worth and Chicago gateways. With hubs in Berlin and Dusseldorf, Air Berlin offers service to more than 160 cities in Europe, Russia and the Middle East as well as to six cities in North America - New York, Miami, Los Angeles, San Francisco, Fort Myers and Vancouver.

Horton told CAPA during the press conference that the Air Berlin relationship is more comprehensive than what it now has with JetBlue at New York's Kennedy which is an interline agreement which was expanded last week to include frequent flyer cooperation. "It may well grow beyond that in the future," he said. "This deal with Air Berlin has the airline joining oneworld which brings a whole set of attributes with it. In terms of a bilateral relationship it will be a frequent flyer deal and a very fulsome codesharing arrangement across the Atlantic and at either end for both carriers, so it is a very robust partnership bilaterally."

Horton also said that initially American will codeshare on 12 routes with Air Berlin - six trans-Atlantic and six within Europe. He also noted that American has flown to Air Berlin's hubs at Dusseldorf and Berlin in the past. "The presence Air Berlin brings on this end may well offer us an opportunity to expand our presence in Europe with our own flying but that will unfold over time."

In addition, Air Berlin will codeshare on 26 American routes. From New York's JFK gateway, American offers nonstop service to 56 cities. From its Miami hub, American offers service to 30 cities in Mexico, Central and South America. From its Los Angeles hub American serves 31 cities, including four Hawaiian destinations.

Additionally, the agreement allows customers traveling on codeshare flights to earn mileage credits in American's AAdvantage or Air Berlin's topbonus frequent flyer programs. American and Air Berlin are exploring a more comprehensive agreement that would include mileage redemption in addition to accrual across each carrier's networks.

Air Berlin CEO Joachim Hunold told reporters that it has been looking for an alliance partnership mostly at the request of its growing corporate travel network. "We were always aiming for a partner and we nearly had one but it disappeared into Star Alliance," he said. "Luckily we found that American Airline fits much better and is bigger than we originally thought, especially flying into JFK, Miami and Los Angeles. We expanded our corporate contracts with major companies throughout Europe by over 1,300 and they have been asking us for a good alliance. We looked into both oneworld and SkyTeam and found this one fit. Our network has a long-haul gap and, on the oneworld side, it had a gap in Central Europe. We have a very strong footprint not only in German, but in German-speaking countries such as Austria and Switzerland and this year we expanded into Italy."

See related report: Morphing global airline alliances: Is Air Berlin good for oneworld?

Integration of a hybrid model

Both he and Horton defended the union when questioned how they reconcile the high-quality oneworld experience and joining with a low-cost carrier. "Just because you are low cost does not mean you are no frills," he said. "There is a big difference. We wouldn't have so many business travelers if we were no frills."

Horton agreed. "Air Berlin is a very high quality airline and is more of a hybrid carrier more along the lines of JetBlue with many attributes of a full-service airline and yet with low costs," he said. "They have a terrific product. We are not the only alliance faced with question involving reconciling bag fees on one and not another partner. I think, early on, the key is to communicate so folks know precisely what to expect. Over time my guess is more and more of these relationships will take the form of joint ventures with antitrust immunity and you'll see more comformity on service, product offerings and pricing attributes. This is a great deal for American and oneworld and helps fill out a presence in Central Europe so it's a great fit. The networks are very complementary with Air Berlin having service to some 50 cities that will be new to oneworld of the 160 cities it serves worldwide. This is a terrific expansion in the network for oneworld."

McCulloch also agreed about the quality of Air Berlin. "I've flown Air Berlin twice now long haul and once you get on you immediately see that, whatever the understanding of Air Berlin, you'll get a surprise," he said. "It has business class on long haul. It is true on the hard product, it differs from some of our other carriers, but not all oneworld carriers have lie-flat seats. It has meal service and frequent flyer programs. We haven't yet audited Air Berlin, but we are hoping to learn from them in terms of the way we work. Air Berlin sits on a quality spectrum that fits very well with oneworld. It is somewhat of a hybrid today but certainly in terms of its flexibility and its ability to move fast as well as its business acumen it is a very impressive partner. Yes we have work to do, but we have work to do as well with others in oneworld and I have no doubt we are in good hands with Air Berlin."

When asked if there would ever come a time when alliance members would shuck their individual identities in favour of oneworld livery and identity, McCulloch told CAPA no. "Our strategy is very solidly with individual carriers maintaining their relationships with their customers," he said. "That builds on the brand. But we wouldn't build a brand that overlays that and tries in some way to assume that relationship with customers. People have been writing about that for 10 years now but the restrictions on ownership and capital ownership would indicate that alliances have a role to play. No, there won't be the global airline of the future. The relationships you are seeing amongst the big groups, I think, is pretty permanent now unless there is some consolidation overlay or ownership change."

AMR Chair and CEO stated: "We're very pleased to announce this partnership with Germany's second largest airline, Air Berlin, which has established itself as a highly respected European airline over the last two decades. This relationship will add significant value for our customers by substantially growing our worldwide network. It gives our customers wide access to Germany, Europe's biggest economy, as well as many other business and leisure destinations. And their US service complements three of our strategic cornerstone markets - New York, Miami, and Los Angeles."

Hunold added: "We at Air Berlin are very pleased about establishing our bilateral cooperation with American Airlines starting in the winter season of 2010/2011. We have agreed with our friends from American that we will link our hubs on both sides of the Atlantic, and that we will enter into an extensive codeshare relationship, covering all our flights over the North Atlantic and flights to selected destinations in the US and in Europe."

oneworld looking to emerging markets

McCulloch is now turning attention to Latin America, China and other regions. "We look at Brazil as one of the key parts of the world for alliances and we are working on figuring that in," he said. "Of course we are discussing with carriers down there and looking at other options within the group. We already have the best carrier in American and also have a strong North American partner flying into Latin America with Mexicana." He agreed that the competition with other alliances to attract new members is always a "beauty contest."

Horton reminded callers that it is already expanding American's bilateral relationship with Gol in Brazil, calling it a good partner. "We'll see where it goes down the road."