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While many industry watchers await a third attempt by American Airlines and British Airways to secure antitrust immunity for a transatlantic alliance, other carriers are working to build new or expanded partnerships. Continental Airlines and United Airlines"this week" expect to file a request to establish an immunized joint venture, and previously unaffiliated Southwest Airlines and WestJet are planning a U.S.-Canada codeshare relationship.
Thrust forward by the U.S.-Europe aviation treaty and the four-way joint venture being built by Air France, Delta Air Lines, KLM Royal Dutch Airlines and Northwest Airlines, global alliance maneuvering and potentially more large-scale mergers will affect a growing number of global travel programs.
"It is hard to determine if you are partnered with the right alliance," said Rose Stratford, BCD Travel senior vice president of supplier relations, speaking in May at an Association of Corporate Travel Executives conference and referring to new services and code shares on transatlantic routes. "Maybe there will be more individual contracts than alliance contracts. There are a lot of dynamics that you need to think about. You need to balance commitments."
"Select carriers have also begun offering corporate discounts in markets where they currently do not operate but have announced future service," according to a Carlson Wagonlit Travel report. "For travel buyers planning future negotiation strategies, it is important to inquire about the expansion plans of a preferred carrier in relation to Open Skies. Knowing which airports they plan to operate in and out of, as well as what connection opportunities will open with alliance partners, offers travel buyers valuable insight."
Many in the industry now are anticipating an American Airlines-British Airways-Iberia Airlines announcement on a three-way, antitrust-immunized joint venture. AA and BA twice pursued such a course before determining in 2001 that the price set by regulators--surrendering hundreds of takeoff and landing slots at London Heathrow--was too steep. With several additional carriers now operating transatlantic routes to and from Heathrow, the competitive environment is much different and warrants deeper AA-BA cooperation, according to executives.
"We are at a reasonably significant competitive disadvantage against United and Lufthansa across the North Atlantic, which enjoy immunity, and of course Delta, Northwest and KLM-Air France, which enjoy immunity," said Gerard Arpey, CEO of AA parent AMR Corp. "That allows those companies to participate in a wide range of marketing, sales and pricing activities and frequent flier activities that we are prevented from doing."
"As we sit here today, there will be 16 new-entrant services across the Atlantic out of Heathrow, and those are slots that people found a way to get," added AMR CFO Thomas Horton. "The arguments for remedies would seem to be an artifact of the past."
A fellow oneworld member part-owned by British Airways, Iberia would bring its strong position in the Spanish market. Noting a "monopoly" between Madrid and New York, HRG distribution services director Tony Berry speaking in May during the ACTE event said, "You can see why BA is very interested in looking at an acquisition or at least an agreement with Iberia to get hold of that lucrative route."
Meanwhile, United said it, along with Continental and eight other Star Alliance members, this week would ask the U.S. Department of Transportation "to allow Continental to join the group of carriers that already hold antitrust immunity" for transatlantic operations.
United CEO Glenn Tilton said the airlines "expect to next pursue a similar agreement for Latin America," followed by close cooperation on Pacific routes. He also said United and Continental "are identifying the path to create additional customer benefits" by closely coordinating frequent flyer programs and airport lounge networks.
At the same time, Continental is expanding a codeshare arrangement with Virgin Atlantic--one of the few sizable, international carriers not affiliated with a global alliance. From 10 August, Virgin will place its code on Continental's new Newark-Heathrow service. Virgin already code shares on Continental's Newark-London Gatwick flights, and Continental places its code on several Virgin routes between London and U.S. gateways.
Southwest Eyes Canada
Outside the realm of global, multi-carrier alliances, Southwest Airlines plans to apply its newly announced WestJet partnership to meaningfully expand outside the U.S. market for the first time--a development it has contemplated publicly for a few years. Pending government approval, it intends to share codes on transborder and intra-Canada routes operated by WestJet by "late 2009," and use its Web site to sell such itineraries.
As a foil to dominant Air Canada, WestJet has expanded its network to 49 North American destinations, including notable operations in Montreal and Vancouver. The carrier in 2006 began picking up corporate clients whose travel buyers were discouraged by Air Canada's distribution policies. WestJet also grabbed the high-profile business of Wal-Mart in early March 2007, after Air Canadatold the world's largest retailer in January of that year that it "would not be renewing" a contractual arrangement due to contract underperformance.
Focused on growing corporate volume, WestJet at the time said it planned to "leverage" the Wal-Mart relationship "to appeal to a broad range of corporate business travelers--anywhere from local to international organizations." With the new partnership, WestJet would gain access to Southwest's U.S. operation, which already handles more domestic U.S. passengers than any other carrier's.
A Southwest official said the airline plans to provide access to WestJet inventory via the Swabiz corporate booking portal, but added that it's "too early" to provide details on joint selling to corporate accounts.
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