Jaan Albrecht
The Star Alliance’s 15th birthday this month reminds me that a global airline alliance is one of the most fascinating concepts in the history of commercial aviation. It’s also an example of the airline industry’s creative thinking aimed at increasing revenues. However, unlike some of the questionable practices I described in “Decoding Air Travel,” this one has dramatically improved the customer experience.
It’s fascinating for me personally, because it combines my two passions and areas of expertise, international affairs and air travel. In fact, what alliance executive teams do every day is nothing short of diplomacy. International negotiations and dispute resolution are two of their specialties, and a big part of their duties is selecting new members, not unlike NATO and the European Union.
When Star was formed in 1997, the idea was not only to represent its members’ best interests — that’s primarily the job of trade associations — but to boost business by feeding passengers from one carrier to another in the smoothest possible way. Soon, airline diplomacy began in earnest — first among alliance members, which after all are rivals in a fiercely competitive industry, and then with airports, transportation authorities and governments around the world. The other two global alliances are Oneworld and SkyTeam.
“Much of what we do is diplomacy,” Jaan Albrecht, Star’s former CEO, told me when I first met him in the alliance’s Frankfurt office in 2008. “We try to educate airports, publics and governments about the benefits that come from a network like ours.” Albrecht is now CEO of Austrian Airlines, a Star member.
The benefits for customers that come with an alliance membership are both tangible and intangible. The first category includes interline ticketing and check-in, harmonized schedules to provide seamless connections, worldwide lounge access, mileage-earning and redemption opportunities, as well as elite-status recognition across the alliance, and round-the-world and other special-fare products.
It’s also important to appreciate the intangible benefits. The most important to me is that the experience on an alliance’s various carriers is so similar and yet so different. I like the predictability created by consistent and aligned policies — knowing how things work and what to expect gives me comfort at the airport and in the air. At the same time, I love the individual touches that each airline adds to the travel experience, based on its national, cultural and even corporate uniqueness.
For example, Scandinavian Airlines and Thai Airways are both Star members, and technically there is no difference which one you are booked on — you will earn miles, check-in all the way through to your final destination and access their lounges anywhere in the world. But when you enter a lounge or board a plane, you will never confuse Scandinavian with Thai.
Critics of the alliance concept usually argue that consumers suffer, because closer cooperation among airlines leads to higher fares. They refer to special arrangements, known as anti-trust immunity exceptions, which are granted to some carriers so they can coordinate fares, schedules and inventory on certain routes. The largest members of the three alliances have received such waivers on intercontinental routes. Some have gone a step further, securing approval to operate certain routes as a joint venture. Price-fixing is illegal, so these carriers needed the exceptions to publish identical fares — and if you compare their tariffs, you will see they are indeed identical.
When granting the immunity, the Department of Transportation is careful to exclude routes on which the only existing service is provided by the carriers seeking the waiver — those exclusions are known as “carve-outs.” So the government is supposed to protect consumers, and it seems it’s doing its job. Overall, there is no question in my mind that airline alliances have had a positive impact on customers.
All three alliances have had troubles lately, as member-carriers have experienced hard times, filed for bankruptcy or disappeared all together. But that’s the nature of the airline business. My only criticism is that none of the groups has done a good job at reaching out to a broad audience to explain and promote the benefits I described above.
Here is the current membership of each alliance:
Star Alliance
Adria, Aegean, Air Canada, Air China, Air New Zealand, All Nippon, Asiana, Austrian, Blue1, Brussels, Croatia, EgyptAir, Ethiopian, LOT Polish, Lufthansa, SAS, Singapore, South African, Swiss, TAM, TAP Portugal, Thai, Turkish, United, US Airways.
Accepted future members: Copa, Eva, Shenzhen, TACA.
Oneworld
AirBerlin, American, British, Cathay Pacific, Finnair, Iberia, Japan, LAN, Qantas, Royal Jordanian, S7.
Accepted future members: Kingfisher, Malaysia.
SkyTeam
Aeroflot, AeroMexico, AirEuropa, Air France, Alitalia, China Airlines, China Eastern, China Southern, Czech, Delta, Kenya, KLM, Korean, Tarom, Vietnam.
Accepted future members: Garuda Indonesia, Aerolíneas Argentinas, Saudi Arabian, Middle East, Xiamen.
Continue reading about Why airline alliances are good for fliers
The Indian government is engaging in apparent blackmail of the Star Alliance, following the global airline group’s rejection of Air India’s membership application. New Delhi’s threat to take away traffic rights from Star members is about to test the diplomatic skills of both the affected carriers and the alliance leadership.
As I wrote in August, Star really, really wanted to add Air India to its network, because of the large and fast-growing Indian market. It spent more time, effort and money on helping Air India meet the membership requirements than it has with any other candidate. At the end, however, Air India’s entrenched corporate culture and internal Indian politics became unbearable, and the alliance gave up.
New Delhi wasted no time devising retaliation. Within weeks of Air India’s rejection, the government informed Austrian Airlines and Swiss International Airlines that their traffic rights are in danger, as reported extensively in the Indian press. The official reason was the two carriers’ ownership, in which Germany’s Lufthansa has controlling stakes.
That, of course, has been the case for years, and no one believed this was the real reason for India’s threat. It made another move, refusing to grant landing rights in New Delhi to Lufthansa’s Airbus 380. This time, Indian officials didn’t even try to hide the linkage to Air India’s failed Star application, accusing Lufthansa of sabotaging the Indian bid.
A couple of weeks later, reports appeared in Indian newspapers that Star and Air India had resumed negotiations. That sort of made sense, given India’s multiple threats, but the only sources in those stories were Indian officials — confirmation from Star was suspiciously missing.
So I did a little digging, and it turns out Air India has had no official contacts with the alliance since talks broke down in the summer. There may have been unofficial contacts, but a resumption of negotiations doesn’t happen unofficially.
It’s high time the Indians rethought their priorities and tactics. Blackmail is not the best strategy to earn international respect and recognition for your national carrier.
In the very first column I wrote about Star in 2008, I argued that leading an airline alliance is essentially practicing international diplomacy. The main subject in that piece, then-Star CEO Jaan Albrecht, recently became CEO of Austrian Airlines, so one of his first orders of business was dealing with India again. As if he didn’t have enough of that in the last four years.
Related stories:
AirIndia had no chance with Star Alliance
Is India going too far in curbing airfares?
UAE mixes aviation and foreign policy
Continue reading about India tries to blackmail Star Alliance
Trying to figure out how airlines determine fares is utterly futile, but that doesn’t necessarily dampen my curiosity. On a recent visit to the Star Alliance headquarters in Frankfurt, I sought insights into how the global group sets its popular round-the-world fares.
I always enjoy dropping by the alliance’s modest office — not only because it’s an easy walk from the airport terminal, but also because just about everything it does is unique and pioneering in the industry. With 27 member-carriers, one would think it’s a grand operation, so I was surprised that fewer than 80 people work there.
As regular readers of this column have no doubt noticed, I’m a fan of airline alliances. Skeptics often point out the potential negative impact on competition and fares, but government regulators have designed mechanisms to maintain fair practices. Obviously, airlines have formed groups like Star, Oneworld and SkyTeam to boost their business, but, as I’ve written before, what is good for a company doesn’t necessarily have to be bad for customers… MORE
Continue reading about Round-the-world fare mysteries revealed
