See below the list of current and pending members of the Global Alliances.
Partnerships and KLM Royal Dutch Airlines are intertwined: KLM and Northwest Airlines first joined forces in 1989 when KLM acquired a 20% holding in the US carrier, then the two pioneered the industry's first modern joint venture in 1997, subsequently been imitated not just by trans-Atlantic peers but by airlines across the world. Partnerships today are even more prevalent and critical for KLM. The trans-Atlantic deal has expanded and KLM has a JV with Kenya Airways, among others.
But it is Asia where KLM's breadth of partnerships is most evident and also where there are expansion opportunities, as KLM COO and Deputy CEO Pieter Elbers told CAPA at its recent World Aviation Summit in Amsterdam.
The launch of European flights by China's Sichuan and Xiamen Airlines could see KLM form a deeper partnership, adding to its existing relationships with China Eastern and JV partner China Southern. KLM's historical relationship with Malaysia Airlines has continued despite MAS joining oneworld in 2013, and KLM has also added one-time foe Etihad Airways as a partner. KLM would like a partner in Japan, its second-largest Asian market, and ideally hitch on Air France's relationship with JAL. Mr Elbers describes a stable if limited relationship with SkyTeam heavyweight Korean Air. The growth in partnerships comes as Asia widens its lead over North America as KLM's largest long-haul market.
The year 2013 will go down in Aegean’s history as a year to remember. The Athens-based carrier has already packed a lot into its short life since it commenced operating scheduled passenger services in 1999. In that time, it has transformed its fleet; moved its head office; experienced growth, decline and a return to growth; seen a significant increase in LCC competition; become a regional partner to Lufthansa; joined the Star alliance; listed its shares on the Athens Stock Exchange; and undergone more than one merger.
2013 will go down as the year in which it acquired Greece’s former national flag carrier, Olympic Air, and in which it reversed a three year period of losses to record an annual profit once more. In the first nine months of 2013, it was back in the black, turning a EUR9 million loss into a EUR59 million profit. Although revenue per passenger growth slowed in 3Q, it stayed ahead of growth in cost per passenger. Nevertheless, with unit costs (CASK) higher than those of LCC competitors, it must now use the Olympic acquisition to drive cost synergies as far as possible.
Aeroflot is seeking to downplay reports from earlier in 2013 that it was considering leaving its SkyTeam alliance, to which it has belonged since 2006. But its relations with the alliance have become strained. Air France-KLM and Delta blocked Aeroflot's request to join their trans-Atlantic joint-venture, Aeroflot Deputy Director for Strategy and Alliances Giorgio Callegari told CAPA at its World Aviation Summit in Amsterdam on 26/27-Nov-2013. Mr Callegari declined to say why Aeroflot was not permitted to join, but said SkyTeam is "basically run by Air France-KLM and Delta" and Aeroflot "belongs in name only".
Mr Callegari's views on certain airlines dominating an alliance are not unique to Aeroflot or SkyTeam. The question for Aeroflot is "where do we go from here?" Mr Callegari said. His answer is to establish bilateral relationships, and namely joint-ventures, in Aeroflot's three key markets, in order of importance: Europe, Asia and North America. Mr Callegari reported "good" relations with SkyTeam's Asian partners, potentially meaning they could be part of a JV. But Aeroflot will likely have to turn to non-SkyTeam members if it is to establish a JV of significant weight in Europe and North America. Such numerous and strong JVs outside of an alliance would be unprecedented, and fuel more speculation about Aeroflot's future in SkyTeam.
United Airlines plans a realignment of its Pacific operations centred on increasing direct flights rather than stop-overs in Tokyo as the weakness in Japan’s currency has dragged down the carrier’s results in those markets for most of 2013. United is also building a strategy to directly serve non-traditional gateways to China as competitive capacity increases have also pressured the carrier’s Pacific performance.
The adjustments are freeing up some aircraft for redeployment into new markets from United’s Houston Intercontinental, Washington Dulles and Chicago hubs for new service to Europe, which perhaps seems like a safer option at the moment even as the region is on an at-best slow trajectory to economic recovery.
The success of these planned network shifts necessarily depends on execution, an area where United has faced challenges with respect to the merger with Continental. Now, getting it right will be central to the airline's Asian strategy.
Airberlin delivered a 14% year-on-year increase in EBIT in 3Q2013, recording a positive quarter for the first time this year. The quarter also saw airberlin’s first reduction in unit costs (CASK) this year, reflecting good progress in the cost-cutting aspects of its Turbine restructuring programme.
However, the quarter also saw airberlin’s weakest RASK performance of 2013 and profits were not sufficient to restore a positive equity position to its fragile balance sheet. As a result mainly of a weak pricing environment, it has abandoned its previous FY2013 target for a breakeven EBIT result and set a softer target for year-end net debt reduction.
Airberlin CEO Wolfgang Prock-Schauer told analysts on the 3Q conference call that the relationship with Etihad was for the long term and that it “gives us time really to restructure the company properly”. This commitment looks likely to be tested again soon.
South African Airways (SAA) faces a pressing need to start moving forward with its new strategic plan, which includes pursuing expansion within Africa and cutting unprofitable long-haul destinations such as Buenos Aires. The new business plan, which was initially completed in Apr-2013, represents a critical step in finally fixing the long floundering carrier. But SAA has not yet implemented any major components of the plan although most of the pieces have secured the required layers of approval.
Under the new strategic plan, SAA will increase operations within Africa while cutting unprofitable long-haul routes and potentially hand more domestic routes to low-cost subsidiary Mango. SAA could also start operating alongside new partner Etihad on the Johannesburg-Abu Dhabi route, using the capacity freed up from axing highly unprofitable long-haul services, as it increases its reliance on partnerships to provide a stronger network beyond Africa.
The continued delays in implementing the long-term turnaround plan are costly as SAA continues to bleed. It needs to move quickly to build on its position in the intra-Africa market, with more flights from South Africa and a possible new base in West Africa, as competition within Africa is starting to intensify. SAA also needs to finally move forward in acquiring new widebody aircraft, which were identified in the plan as essential for a sustainable long-haul operation.
Star Alliance considers new platform for low-cost airlines, targeting Brazil's Azul & India's IndiGo
The Star Alliance is looking at following SkyTeam in offering a partnership platform for low-cost and hybrid carriers. Star sees the new platform, which would fall short of full membership but provide a model for selected LCCs to work with members, improving coverage in key markets.
Star has started to court Brazilian LCC Azul and Indian LCC IndiGo to join the potential programme, which would facilitate connections with participating Star members. Star has been trying to find a solution for India since 2011, when efforts to bring in Air India as a planned new member were suspended, while earlier this year Brazil’s largest carrier, TAM, began the process of transitioning from Star to oneworld.
But Star’s plan for a hybrid and LCC platform is controversial. Some Star members are against the concept of bringing in LCCs, fearing it could water down the alliance’s offering. Star’s pursuit of Azul is particularly controversial as at the same time the alliance has begun working at bringing in full-service carrier Avianca Brazil.
Lufthansa chairman and CEO Christoph Franz told Bloomberg (9-Oct-2013) that his airline is in discussions with Star alliance partner Air China over a possible commercial joint venture to allow for better connections between Europe and China: “In the future, we will not only link our mutual hubs, but it will be important to also have direct links between major European markets and Air China’s hubs, and the other way round.”
China is an important market for Lufthansa, which already operates joint ventures with partners on routes to North America and Japan. It has a long history of collaboration with Air China in various forms, albeit often with an underlying competitive tension. A new JV would require the two to align their goals in the Europe-China market and could bring the portion of Lufthansa’s ASKs operated under such partnerships close to one half.
Etihad Airways has delivered on its pledge to unveil a new US destination, revealing Los Angeles as its fourth market in the country. Once the new service begins in Jun-2014 a new competitive element will be introduced between the Middle East and the US as Etihad’s new service creates new pressure for Emirates. At the same time, Etihad’s codeshare with American will be expanded to cover the new service even as rival Qatar readies to officially joined American-anchored oneworld. For the moment American appears comfortable having two Gulf partners, and does not see the need to cut any of its existing ties as its relationship with Qatar deepens.
Emirates remains the largest carrier operating between the US and the Middle East by a wide margin, but Etihad’s latest move shows that it is working to close the gap. Once Etihad’s new service begins, it will compete with Emirates on three of the four US routes it operates – JFK, Washington Dulles and Los Angeles – with more competition likely to ensue in the not too distant future.
A new air services agreement recently forged between Mexico and Indonesia opens up an opportunity for a codeshare between Aeromexico and Garuda, which in early 2014 will be joining the Mexican flag carrier in the SkyTeam alliance. The expected partnership should result in the first of many codeshares between carriers from Southeast Asia and Latin America.
Southeast Asian and Latin American carriers are starting to seek out opportunities to partner with each other as ties and trade between their regions increase. The current lack of partnerships between Southeast Asian and Latin American carriers give Gulf and European carriers an advantage in carrying passengers between two of the world’s fastest growing aviation markets.
Aeromexico is the only Latin American carrier serving Asia, where it sees opportunities for expansion using its new Boeing 787 fleet. But Aeromexico only serves North Asia and will need to rely on partnerships to serve Southeast Asia.
Now that Japan has awarded the allocation of prized daytime international slots at Tokyo Haneda airport, it will soon become evident if airlines will add a service from Haneda or merely transfer an existing Narita service to Haneda. Japanese carriers are more likely to grow, while international carriers are more likely to shift flights to the more convenient geography of Haneda.
ANA emerged strongly from the process, receiving 11 slots to JAL's five. ANA can now have up to 24 daytime Haneda flights to JAL's 18. This uneven distribution repeated the 2012 domestic Haneda slot allocation in which ANA received eight and JAL three. But JAL received almost as many blue-chip destinations as ANA. The difference is in secondary points, which JAL perhaps would have liked - but is not nearly as upset as its rare public outcry suggests. Indeed, JAL's higher operating margin will likely see it achieve a disproportionately higher profit from the slots. Both ANA and JAL could see a boost of around USD100 million.
The focus is on Haneda, prompting some to raise the question of Narita's future. But with ample services left, and a new and growing LCC business, Narita has a place too as Japan fully starts its plan of having dual hubs in Tokyo rather than mainly international flights at Narita and domestic flights at Haneda.
India's evolving global alliance mosaic: Star/SIA-Tata, oneworld/Air India-Qatar; SkyTeam/Jet-Etihad
Breathtakingly rapid changes in India are exposing a whole new panorama of the country's future international airline status. Just over two years ago, Star rejected Air India as a member, and the following year oneworld placed the admission of member-elect, Kingfisher on hold due to the carrier’s financial challenges. India's airlines were basket cases and its regulatory constraints promised to keep it that way. Today, thanks to some important (and long overdue) liberalising moves by the government, the country is shaping up as a potentially well balanced centre for each of the major BGAs.
Etihad clearly will have the first mover advantage, with its equity investment in Jet now having received regulatory approval to proceed, along with a substantial increase in seats in the Indian market. Meanwhile though, the long term pickings are so rich that other groups can no longer ignore the pressure to make a move.
All that is needed now is for India to remove its "5/20 rule" on international operations and - astonishingly - the country could leap from international dysfunctionality to commercial coherence in one bound. The impact for the national economy would be enormous.
But - there are one or two more barriers to be cleared. In India there always are. Perhaps this time the government will get it right, but don't bet on it just yet. And, although the alliances may be interested, they will remain wary of Indian pitfalls.