Chairman Charts SkyTeam Airport, Loyalty Program Coordination

Former KLM president and CEO Leo van Wijk last summer took on the role of SkyTeam chairman and since has focused efforts on further integration and cooperation among members. Van Wijk this month spoke with BTN airline editor Jay Boehmer about alliance's antitrust immunity efforts, further coordination among carriers for loyalty programs and collocation at airports.

BTN: The U.S. Department of Transportation granted six SkyTeam carriers transatlantic antitrust immunity. What does that afford the alliance?

Leo van Wijk: As you indicated, it only applies to six carriers and I think the only one on the North Atlantic that is not incorporated is Continental Airlines. It allows us to coordinate capacity and pricing and will allow us to make our product offering and pricing more aligned than before. Before, we had the joint venture between KLM and Northwest where we could do that; Air France and Delta had it, but we could not do it jointly. Certainly, as we have a more joint product offering out of London Heathrow, it's important to align among more carriers. It means more coordinated flying and in particular more coordinated fares for the corporate market.

Another element that we will introduce among all SkyTeam carriers, which will certainly help in this environment, is that we will start a mileage upgrade program, where you can have upgrades from one carrier to the other. That will be available as of summer next year, but that requires also that we have a more coordinated fare structure. Otherwise, it's difficult to implement.

BTN: Is the upgrades program only available on the North Atlantic as well?

Van Wijk: In principle, that will be a program that will not only be available in the North Atlantic, but we will start on the North Atlantic. We will test it in the fall of this year between the U.S. and the U.K. and France first. Then we will roll it out in the course of 2009, in principle, among all the SkyTeam carriers that can participate, because it does require certain IT functionality that is not available for all SkyTeam carriers. But the majority of the major carriers will be ready by that time to implement it, and not only on the North Atlantic.

BTN: Going beyond ATI, DOT also gave approval for the four-way joint venture between Air France/KLM, Delta and Northwest. Does the joint venture put those four carriers in a different league than the other SkyTeam members?

Van Wijk: What you can say is that an alliance can be focused on codesharing only and then maybe frequent flyer mile exchange. The next step is to coordinate capacity and pricing, which is made possible by ATI. Then if you want to go a level deeper, as we have done between KLM and Northwest, you share all the revenues and costs and thereby your bottom line on a particular route. That's what is going to happen within this context between Air France-KLM on the one end and Delta-Northwest on the other end. And given the fact that Delta and Northwest are going to merge, it's not so much a joint venture between four carriers, but a joint venture between two merged carriers on both sides of the Atlantic. That makes it much more simple to implement it and extend it to corporate contracts.

BTN: Do you expect Continental to maintain its presence in SkyTeam?

Van Wijk: Any update will have to come from them. It is clear—and everyone projected—that the potential merger between Delta and Northwest could trigger a domestic consolidation issue that might put Continental in a situation to look for different alternatives, particularly from a domestic point of view. That's what's happening. They're reviewing their position, but that by no means makes it certain they will make a decision to go with another alliance. They stated at our meeting in Istanbul that they are still very positive about SkyTeam as such, but the domestic situation—provided they find an alternative in their best interest—might trigger them to switch their alliance. That's driven by the domestic realities and not the international arena, and another alliance could be better for them than SkyTeam if they link up with another carrier in the United States that is in a different alliance. That situation may exist and may be valid.

We have stated that we would like them to continue to be part of SkyTeam, and we have no problems if they choose another role as such, because they didn't want to apply for the ATI a year ago. It could happen.

BTN: Are there any contractual obligations that keep them tied to SkyTeam for any amount of time?

Van Wijk: There are certain exit procedures, but I don't think they in the end are insurmountable or will keep them in an alliance where their future is not being best served.

BTN: What's the status of collocation at Heathrow?

Van Wijk: The current schedule that we have been informed about that [U.K. airport operator] BAA is going to use as a timeline is that we have expect a full move, a final move, of the carriers that are still in other terminals not before fall or winter of 2009, so before British Airways is really out of the terminal, the refurbishment and reallocation cannot take place. We're looking at a timeframe now where we can really present the full SkyTeam Terminal 4 showcase by the end of 2009.

BTN: Is the goal to expand that and bring SkyTeam members under the same roof at major airports?

Van Wijk: The alliances in the early days were fairly loosely knit, focusing on codesharing arrangements and frequent flyer exchange. We've come to a point where everybody understands that the future of aviation—certainly under these difficult circumstances—is probably to strengthen the alliances. That's why we have laid out, already a year ago, a plan to go into more service integration, like frequent flyer mile upgrades and also go to where it's more advantageous at airports to have joint lounges with the SkyTeam branding, where we have joint checkin areas and a joint departure area.

Certainly in an airport like Heathrow, where we had the opportunity to move to Terminal 4, we have been able to negotiate to be assigned a particular area and take over the British Airways lounge, where we can accommodate all the SkyTeam partners. We have a lot of stimulus to promote the SkyTeam brand and at the same time improve our joint service offering. The third element is we can reduce costs. Certainly in these difficult times that we face with fuel prices where they are, I think everyone understands we should move forward, not only at Heathrow but other airports where we have similar opportunities.

BTN: Which airports are next?

Van Wijk: We have identified one dozen other airports where we have possibilities. Heathrow presented itself as a showcase, where everybody had a great interest to do so. We have other airports like in Beijing and Barcelona, but like I said there are a dozen others, but with different priorities and slightly different options. Heathrow is just a showcase that we can use as a template for other airports to do similar or even identical things.