Two airline joint ventures competing for corporate business between the United States and Japan are expected to launch on April 1, with fares for coordinated services available for booking as soon as next month, but joint corporate contracts will require a longer-term effort.
The joint venture between Oneworld partners American Airlines and Japan Airlines in the late spring or early summer will begin discussing joint contracts with corporate clients, officials said, with the goal of transitioning them to joint transpacific deals by year-end. The joint venture between Star Alliance members United Airlines and All Nippon Airways, meanwhile, could take longer to do so, as ANA director of market development Gary Weiss noted it could be up to two years before all corporate clients transition to joint agreements.
The U.S. Department of Transportation in November granted antitrust immunity to the two joint ventures, enabling them to coordinate scheduling, pricing, corporate contracting and network planning between the United States and Japan. Each expect to debut some joint activities, including revenue sharing, collocation at some airport terminals, scheduling and public fare offerings, by April 1, which is the beginning of the two Japan-based airlines' fiscal year and marks the start of many airlines' summer schedules.
At the heart of both alliances, in part modeled after similar joint ventures operating across the Atlantic, is the concept of metal neutrality, whereby airlines sell services on partner carriers with equal vigor as their own since they share revenue on the combined business.
"Some of the easier programs to do are the non-corporate contracts," Weiss said, "the travel agency, any commission agreement and/or any net fares to the consolidation market. We're 99 percent sure all of that will go live April 1. Corporate is a little longer-term. The number-one idea across all three carriers is the benefit of the customer. None of us has gone to a corporate customer and said, 'Here's your joint-venture offer.' As these things expire on a stand-alone basis, there will be gentle conversations among all of us, including the customer, to see what would be best."
AA vice president of the Eastern sales division Jim Carter said, "This is evolving. We are taking a phased-in approach. We will probably be out to customers in the late-spring, early-summer timeframe to start discussing how this value proposition enhances the relationship between a company and Japan Airlines, American Airlines and, of course, Oneworld."
JAL vice president of passenger sales for the Americas Steve Smith added, "We hope to get some out as early as this spring, and then we'll probably transition the rest of them hopefully by the end of the year. Our goal would be to see if we can get everything in place by the end of the calendar year."
While the exact shape of corporate agreements remains to be disclosed by either joint venture, Weiss said, "The corporate buyers aren't going to really see much different than what they're used to now. I can't speak to discount levels, but I can certainly speak to the outline of the contract: last-seat availability, down-bucketing and things like that. You've seen it on the Atlantic for the past year and a half. I think the go-to market strategy will be very similar to that type of product, where multiple carriers will be harmonized at discount levels throughout the selling classes."
Anticipating some of the corporate suspicion of substandard deals that accompanied the rollout of transatlantic joint venture contracts, ANA's Weiss said, "It isn't the 800-pound gorilla that everyone may make it out to be. I think many accounts will be pleasantly surprised about what this offer will be. [With] over half of the contracts currently, customers will be very happy with the new offering, because either they didn't have the other carrier in their program, or it's a better condition, or it's a more broad condition than what they have right now. I'm not saying there won't be times when we ask for a little bit more of a yield improvement—of course, it would be crazy not to do that if you're running an airline. But there's a lot of benefit to be gained from a lot of customers out there."
Expansion On The Horizon
Officials from both joint ventures said their initial focus is between the United States and Japan, though the joint businesses likely would be expanded to more countries.
The AA-JAL joint venture, for example, initially applies to nonstop flights on 10 routes, including those between Tokyo's Narita and Haneda airports and such North American points as Chicago, Dallas/Fort Worth, Los Angeles, New York, San Francisco and Vancouver. "It is expected to be expanded upon obtaining the required approval from authorities of third-party countries to add routes linking destinations beyond Japan and North America," the carriers noted in a statement.
Among those, AA and JAL await Chinese government approval to include Beijing-Chicago, Shanghai-Chicago and Shanghai-Los Angeles services in its joint business.
The ANA-United joint venture on April 1, meanwhile, will cover routes between Tokyo and various points in the United States, including Chicago, Houston, Los Angeles, New York, San Francisco, Seattle and Washington, D.C. The joint venture also extends to service between Incheon in South Korea and San Francisco as well as between Hong Kong and Newark, though the carriers would require further approvals to expand to additional countries.
"We think every country will indeed go along with it, with maybe some minor exceptions," Weiss said, noting that various countries are evaluating proposals. One major exception is China, which he said is excluded from antitrust immunity.
The joint-venture carriers could handle additional countries where ATI does not extend like alliance agreements, "so with the OK from the customer, it really is not an antitrust situation," Weiss said. "If the customer wants a joint bid, it is something we can do together."
A New Competitive Landscape On The Pacific
The joint ventures will shift the competitive landscape between Japan and the United States, a shift DOT ruled in its final approval to be pro-competitive.
Based on July 2010 OAG data cited by DOT, the immunized Star carriers would have nearly 36 percent of the seats connecting Japan and the United States, while the immunized Oneworld carriers would have 26 percent. Meanwhile, immunized SkyTeam carriers, which were not involved in this most recent antitrust-immunity request, hold about 34 percent of the market, DOT said.
Though Delta Air Lines' attempts last year to court JAL as its partner failed, the carrier has the opportunity to advance an antitrust-immune transpacific relationship with SkyTeam partner Korean Airlines. Delta executive vice president of network planning, revenue management and marketing Glen Hauenstein during the carrier's fourth-quarter earnings call this week said he sees an "upside in exploiting the ATI we do have with Korean," though he gave no details on imminent plans.