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

Less than four years later, that seemingly endless pool of eligible members is looking pretty shallow, especially in some geographies. The assumptions of service levels and perks that were unquestioned in 1997 when the first alliance, Star, emerged, have long ago become tattered by industry realities and we are seeing some interesting exceptions to the formerly rigorous entrance requirements.

Air Berlin enters oneworld

Nothing is more telling of that change than the announcement that Air Berlin, for much of its history a charter carrier, has been invited into oneworld.

In much of the world, Air Berlin is hardly a household name. Begun by an American in 1979, the company started charter operations with two B707s operating between Berlin and Palma de Majorca.

• In 1989, with the fall of the wall, the company became German owned; with ownership changing again in 1992.

• It was only in 1997 that the airline offered “seat only” purchases as opposed to an inclusive package.

• The following year it began its Majorca shuttle between German cities and the Spanish coast.

• In 2002, the carrier became a fully scheduled passenger airline, operating city shuttles within Germany and to surrounding countries.

• 2004 brought a shareholding in Austria’s NIKI, touting the deal as being the first alliance between low cost airlines.

• By 2006, the airline’s stock was listed and it acquired the Munich-based carrier, dba.

• Continuing its acquisitions in 2007, it added LTU, a long-haul German carrier operating primarily from Dusseldorf and Belair, a Zurich-based Swiss charter company previously known as Balair and owned by Swissair.

• By 2008, Air Berlin was Germany’s second largest airline and was named the “World’s Leading Budget Airline”.

• In 2010 the carrier garnered the Business Travel “best short-haul airline” award.

See related report: Air Berlin joins oneworld – “the last member in Europe”

Definitely a hybrid

The airline currently has operating bases in four European cities, Berlin (AB), Dusseldorf (LTU), Zurich (Belair) and Vienna (NIKI). Air Berlin is the marketing carrier for this wide range of service offerings, ranging from its own city shuttles to the long-haul, and often-seasonal flights offered by LTU and Belair.

To New York, as an example, one can fly from Dusseldorf on an A330 according to the following (diminishing) schedule. 

Dusseldorf-New York (JFK)

Days	Depart	Valid
MTWTSS	1330	until 9/9
MTWSu	1330	9/12-9/20
MWThSu	1330	from 9/22
F	1345	continuous

Source: OAG

Service is single-class with the exception of the A330-200s, which are configured with 24 Business Class seats and operates to various long-haul destinations across the carrier’s (LTU) network. The A330-300s lack these seats.

While snacks are included in the fare, passengers may choose to preorder hot meals at additional cost and (European) free standard baggage allowances apply.

The carrier describes itself in its Corporate Profile as "offering a high product quality combined with above-average service, while still keeping prices low. This allows Air Berlin, as the only European airline in this segment, to position itself between the traditional scheduled airlines and the so-called low-cost carriers with their severe [inflight] service cutbacks."

Alliance contributions

The news of Air Berlin’s invitation was touted on numerous oneworld related websites, including the following outline of the airline’s in-between status.

“While it has been named the World’s Best Low-Cost Airline seven years running in the World Airline Awards run by the Skytrax airline quality organisation, it now offers the full-range of services associated with a full-service network carrier, including its frequent flyer programme topbonus, and, for premium passengers, lounges, priority check-in and, for all passengers, free alcoholic and non-alcoholic drinks and meals or snacks on every departure.”

German presence lacking

It is also clear that oneworld lacks a significant presence in Germany. As Europe’s largest economy, this is a noteworthy hole in the alliance’s network. BA, Iberia and Finnair serve multiple German cities, but the interconnection between domestic points as well as direct access to non-alliance hubs disadvantages the alliance in this important market. Air Berlin solves some of those problems.

However, on the other side of the equation, the flights of oneworld’s long-haul partners, American, Cathay, Japan Airlines and Qantas all end in Frankfurt where Air Berlin’s distribution possibilities are somewhat limited as displayed in the following table:

Air Berlin from FRA

Berlin

Catania

Hamburg

Ibiza

Kerkyra

Olbia

Palma

Rhodes

Thessaloniki

Vienna

Source: OAG

This is not a list of connecting points likely to humble Star.

With British Airways sponsoring the carrier’s membership (it is also shepherding Kingfisher into the alliance next year), one might assume a substantial Air Berlin presence in the UK. But that too would be a faulty conclusion. Air Berlin’s operations in the London area are limited to Stansted/Dusseldorf. And it supplies no service between the UK and its namesake city, Berlin.

Maybe there is additional benefit to other alliance carriers?

Finnair benefits?

Further into its press release the following statements promoted the addition. “As regards the codeshare agreement with Finnair, Joachim Hunold (Air Berlin’s CEO) remarked: ‘Finnair is a superb bilateral partner for Air Berlin and provides our passengers with excellent access to the Asian markets via the Finnair hub in Helsinki.’”

The response by Mika Vehviläinen, President of Finnair, was: “As one of the first airlines to have joined oneworld, Finnair is delighted to welcome Air Berlin as a new member of the alliance. The bilateral agreement will provide Air Berlin passengers with first-class access to destinations in Asia via our Helsinki hub. In return, our clients from Finland will have extensive access to destinations in southern and western Europe.”

Those seem to be rather high expectations given the Aug-2010 Air Berlin flight schedule from Helsinki as compared with the Finnair Asia Pacific arrivals schedule. For the record, Finnair operates its own services to both Berlin and Dusseldorf. Air Berlin’s schedule does not display what most might call “extensive access”.

Air Berlin from Finland

To	Days	Time
Berlin	MTWTF	0635
	Sa	0640
	MTWTF	1310
	Sa	1835
	Su	1910
Dusseldorf	MTWTF	1825
	Sa	1220
	Su	1655

Finnair's Asia Pacific arrivals schedule

BKK	0640
NRT	1520 MWFS
	1620 TTSu
SHA	1455
BJS	1425
SEL	1405
HKG	0605
DEL	1330

Source: AY

Synergies may develop over time through schedule alterations, but it is difficult to see the immediate benefits of the Air Berlin membership to Finnair.

And American

The previously shown schedule to New York, reduced as the high season wanes, makes it challenging to understand how American benefits from the European carrier. In addition to New York, Air Berlin operates three times weekly between DUS and both Miami and Los Angeles. The benefits to American are certainly minimal.

Perhaps there is another explanation

The rhetoric notwithstanding, as observed earlier, there are not a lot of traditional carriers available to alliances in many regions. As a result, the tight requirements that previously were enforced are being relaxed as alliances seek to offer their members a broad network.

In Canada, some non-Star airlines are using WestJet for onward carriage and American’s closer bonds with JetBlue are designed to enhance its presence in New York vis-à-vis Delta. In the Australian market, Virgin Blue is a codeshare partner for Delta Air Lines, Virgin Atlantic and others.

Still beneficial

Ignoring the hype, oneworld will still gain a large, important European player and will see its presence in Germany greatly enhanced. These are important considerations that will grow the alliance’s European presence.

However, there are trade-offs involved in the transaction. Despite the brave words about increased connectivity and network growth; absent some substantial schedule revisions those benefits are difficult to see—certainly at present.

And the alliance that removed Aer Lingus for its perceived departure from the norm is now welcoming a carrier that is unabashedly claiming its position as an alternative service model. (Aer Lingus is meanwhile now considering joining a competing global alliance).

But with “corrections”

It is true that the standards that applied in 2006 have already been bent from their initial form by all the alliances. In the late 1990s, carriers charging for bags or failing to offer meals would have been dismissed outright. In continuing to offer free alcoholic and non-alcoholic drinks, Air Berlin outdoes its US partner, American in terms of perks still offered enroute.

In the end, if alliances continue to count broad networks as the key component demanded by their members, there will be a lot more of these less-traditional marriages and Star, which early-on adopted a more-is-more outlook, will be vindicated.