The SkyTeam alliance last week officially welcomed to its ranks Continental, KLM and Northwest airlines, providing the global partnership a significant boost in its competition with the Oneworld and Star alliances. Meanwhile, China Southern Airlines is positioned to become the first Chinese carrier to join a global partnership after inking a preliminary deal with SkyTeam. Along with Russian carrier Aeroflot, China Southern is expected to join late next year.
SkyTeam executives said the new additions mark "the single-largest airline integration in aviation history" and claimed the alliance now holds the first or second position "in every major market in the world," including 10 hubs contributed by the newcomers. In all, the alliance members fly more than 14,000 daily flights to 658 destinations in 130 countries, combining for the second-largest global network behind Star and ahead of Oneworld.
"We can offer multinational companies a single contract or a single system to handle their travel needs," said Northwest CEO Richard Anderson.
Each of the three primary alliances overlaps global corporate travel programs to varying degrees, with varying levels of inter- and intraregional joint contracting. "If you can get 50 percent to 70 percent of your spend on an alliance, you should consider it," said Joe Preimesberger, vice president and director of corporate travel at Science Applications International Corp., during the National Business Travel Association conference in Orlando this summer.
To further position themselves as a viable option for global corporate travel programs, SkyTeam members may pursue expanded antitrust immunity. "It may be possible to have antitrust immunity among United States carriers for international flying," said Paul Matsen, Delta chief marketing officer. Though he did not offer a timetable as to when Continental, Delta and Northwest might apply for such immunity, Matsen said such integration would improve SkyTeam's ability to serve multinational corporate clients by more closely linking sales programs and pricing. No pair of domestic carriers currently enjoys such freedoms.
Matsen said "there is no precedent" for antitrust immunity between U.S. carriers for domestic operations and indicated the alliance had no plans to make such a request with the U.S. Department of Transportation. Bilateral antitrust immunity within the alliance currently includes links between Northwest and KLM and between Delta and existing SkyTeam members Air France, Alitalia, CSA Czech and Korean Airlines. The Star Alliance also features immunized transatlantic links, but American Airlines and British Airways have been unable to secure antitrust immunity within their Oneworld alliance.
Matsen also said to expect "a steady flow of codeshare filings in all combinations." New and incumbent carriers already have in place extensive codesharing agreements. "For top-tier corporate customers with a high degree of international traffic, corporate agreements still are important tools, and that is where alliances become so critical," Matsen explained. "That is where we are developing integrated sales programs and rewards programs."
In addition to leveraging the combined network, SkyTeam announced reciprocal frequent flyer programs and elite level recognition among all member carriers, discussed joint fuel purchasing and cargo synergies and highlighted the benefits of an increasing number of co-located airport facilities.
Meanwhile, KLM CEO Leo van Wijk said Northwest and KLM "are looking at a joint purchase for the 7E7," Boeing's newest jetliner now in development, but emphasized that the carriers still are very early in the process.
New and incoming partners already have established a level of cooperation. For example, Delta and KLM this month activated reciprocal electronic ticket interlining. SkyTeam's intention is to establish complete alliance interline e-ticketing by the end of 2005.
Member carriers are not collaborating on global distribution system relationships, however. Van Wijk said such cooperation would require expanded antitrust immunity and Delta CEO Gerald Grinstein said, "I look at the GDS as being airline by airline."
The alliance next year hopes to make deeper inroads into Asia by adding Aeroflot and China Southern, which claims to be the largest carrier in the People's Republic of China. China is among the fastest-growing travel markets in the world and the recently completed Baiyun International Airport would provide the alliance with a hub in Guangzhou, in addition to China Southern's Beijing services.
China Southern previously established codeshare ties with founding SkyTeam members Air France, Korean Airlines and Delta—which plans to request authority for service to China—and incoming member KLM.
As it adds members, SkyTeam closely is watching developments at Alitalia. Majority-owned by the Italian state, Alitalia at press time was working to avoid bankruptcy. SkyTeam executives downplayed the turmoil and would not speculate about the impact on the alliance of a potential Alitalia shutdown. "We all know Alitalia is in dire straits. Rome was not built in one year and the same is true of alliances," said Air France chairman and CEO Jean-Cyril Spinetta. "Alliances are a method for each partner to cope with the situation. In crisis periods, the solution is to coordinate systems more closely."
"Alitalia can continue to play a big role in this alliance," said Giorgio Callegari, Alitalia corporate vice president of alliances and international relations.
Oneworld Losing Steam?As the other two primary global groupings add members and expand their combined networks—Star now claims 15 members and several regional affiliates—Oneworld has not grown its roster in more than four years. Swiss International Airlines was poised to join this spring before terminating a relationship with British Airways and canceling Oneworld plans
(BTNonline, June 3).Though Oneworld founders British Airways and Qantas said there would be no changes to their relationship following BA's recent divestiture of its 18.25 percent stake in the Australian carrier, what had been the alliance's tightest bond no longer is defined by commitments inherent in ownership. Both carriers said they are assessing potential new consolidation in their operating regions. BA executives repeatedly have said the carrier's top priorities are internal rather than alliance-based.
Meanwhile, Irish carrier Aer Lingus said its decision to transition to a single-class configuration on all short-haul routes impacts its Oneworld participation
(see story). "Aer Lingus will review this matter with the other members of the alliance," the carrier said in a statement. "While we are looking at our options, no definitive decision has been made."
Aer Lingus' network contribution to Oneworld represents a fraction of total airports served and daily flights offered, but its departure nevertheless would be a setback for the alliance.
In other Oneworld news, the alliance is positioned to become the first to offer global interline e-ticketing. American Airlines this spring completed links to all other members, and remaining bilateral connections are expected by year-end.