Airline Alliances Continue To Expand Network Scope

<B>Airline Alliances Continue To Expand Network Scope</B>

By David Jonas

Amidst a relative lull in the comings and goings of airline partnerships, the major carrier groupings continue their integration efforts by expanding codeshare agreements, establishing GDS designators and developing other alliance-wide links.

SkyTeam, which includes founding members Air France and Delta, and AeroMexico and Korean Airlines, last month implemented Sabre's Alliance Manager, enabling Sabre-connected agencies to view flights and frequent flyer programs across the entire alliance. A unique alliance code within the GDS is aimed at increasing alliance brand recognition. "SkyTeam is the most recent alliance to recognize the significance provided by a stronger CRS," said Sabre's Scott Alvis, senior vice president of travel supplier distribution solutions. "This will show that they are committed to providing the better service," .

Oneworld and the European Qualiflyer group also use Alliance Manager. Amadeus and Galileo, meanwhile, also offer integrated alliance displays, both of which already are used by the Star Alliance (BTN, July 19, 1999).

While SkyTeam may lose out on enlisting Malaysia (BTN, Aug. 14), it remains in pursuit of Thai Airways. Air France reportedly has offered to create an Asian hub in Thai's Bangkok base of operations. Publicly, however, Thai has remained committed to the Star Alliance. In the meantime, SkyTeam members have sharply increased codeshare flights across the Atlantic and to several beyond destinations.

Highly coveted antitrust immunity between American Airlines and Sabena/Swissair kicked in last month. American now is free to integrate sales and marketing, including corporate contracting, with the already-immunized European duo (BTN, Sept. 6, 1999). The immunity means American now can offer tangible alliance benefits to corporations with European travel needs after years of efforts to integrate with British Airways yielded very little.

As part of the official alliance launch, Sabena began daily nonstop service between Brussels and Dallas/Ft. Worth. The agreement also means 81 new North American codeshare destinations operated by American, and American codes on all Swissair flights between the United States and Switzerland.

Meanwhile, American's larger alliance, Oneworld, introduced a multiairline air pass for Europe and North Africa that charges users a flat fee according to the length of their journey. Travelers must buy at least two sectors, ranging from a flight of up to 249 miles for $60 to a flight of 1,200 miles or more for $190. Oneworld has four members in Europe--Aer Lingus, British Airways, Finnair and Iberia--which between them serve 200 destinations in 50 countries in the region. The Visit Europe pass--which can be purchased only outside Europe--primarily is aimed at leisure travelers but could be used by business travelers with a fairly rigid schedule. Sectors can be left open but travelers are advised to select their flights before coming to Europe. Alterations are possible but incur a fee.

One example of an itinerary using the Oneworld pass is London-Dublin-Paris-Madrid, which would cost $320. However, the price does not include passenger taxes, fees or charges, which can be steep. For instance, a one-way flight from France to the U.K. incurs taxes and service charges of around $55.

Bilaterally, American recently expanded codeshare agreements with fellow Oneworlders LanChile and Qantas.

The Star Alliance is looking to bring Austrian Airlines, one of its newest members, under the umbrella of multilateral antitrust immunity now enjoyed by United, Lufthansa and SAS. In a joint application to the U.S. Department of Transportation, the carriers said the expanded alliance will better position them to "compete with their principal transatlantic competitors." The airlines further noted approvals of similar proposals from Northwest/KLM/Alitalia and American/Sabena/Swissair.

British Airways and KLM continue their talks on a possible merger after agreeing to extend an exclusivity period, with many hurdles impeding progress. "It would appear that the ability of BA and KLM to consummate their merger in any total form is contingent on the United States and the United Kingdom reaching a more liberal bilateral aviation agreement," said Sam Buttrick, airline analyst at PaineWebber, speaking last month at the National Business Travel Association annual convention in Los Angeles. "However, if the United States and the United Kingdom do reach a more liberalized agreement, then BA and American Airlines could pursue and move their alliance forward." Currently, AA and BA are merely fellow Oneworld members with little cooperation permitted. Buttrick noted that "British Airways has been unable to extract the same amount of benefit from American that United has extracted from its relationship with Lufthansa."

KLM, meanwhile, is facing a damage claim by Alitalia after the Dutch carrier scrapped virtual merger plans. Alitalia, which has refused to return $93 million invested by KLM for development of Alitalia's Malpensa hub, said financial losses exceeded preset limits and therefore is entitled to a damage penalty of $232 million. Alitalia currently is seeking a new alliance. Long-time KLM partner Northwest Airlines this fall will discontinue service between its Detroit hub and Milan. The route, established as part of the Alitalia alliance, has suffered from weak traffic.