Air India’s entrenched corporate culture and internal Indian politics cost the carrier membership in the global Star Alliance. Although Star’s leadership went out of its way to help the airline meet the group’s more than 200 requirements, it finally gave up the futile effort last week and suspended accession talks.
Not surprisingly, Air India has been trying to assign blame to anyone but itself, pointing a finger at Lufthansa and accusing it of sabotaging the Indian carrier’s potential membership. Regrettably, it appears the airline has learned little from the nearly four-year experience. It needs to do some serious soul-searching if it wants to survive.
Star showed remarkable patience and continued to hope against hope that Air India would live up to its promise and achieve the necessary standards in safety, customer service, on-board experience, operations, etc. The alliance makes decisions based on consensus, and all its members voted to invite Air India in late 2007. The accession process is rather costly for both the candidate and the alliance, so no member voted lightly and fully expected the invitee to become to join the group.
They all underestimated the problems they would encounter. Air India was initially supposed to come on board in March 2009, but Star agreed to extend the qualification period. It really wanted its carriers to gain broader access to the large Indian market.
Star CEO Jaan Albrecht, about whom I’ve written several times, has been saying for years that one of his top priorities is filling the three major “white spots” in the alliance’s network: Brazil, India and Russia. Brazil’s TAM joined in 2010, though its merger with Chile’s LAN has created uncertainty about the new airline’s future allegiance. There is no obvious Russian carrier to be seriously considered at this time.
So it was very important for Star to full the big South Asia “white spot.” Albrecht himself made repeated trips to India in the last year in a tortuous effort to save Air India’s faltering bid.
However, the reality is that Air India never truly had a chance with the oldest and largest global alliance. I felt several times during this process that having Air India as a member anytime soon was more wishful thinking than a realistic expectation. In fact, many frequent travelers feared that Star might lower its standards to accommodate India’s national carrier.
To the alliance’s credit, that didn’t happen. Rejecting Air India’s application was the right decision, no matter how the carrier tries to spin the outcome. The group’s attention in India is now focused on Jet Airways, which is already a code-share partner of several Star carrier, and possibly Kingfisher Airlines — they both have a much stellar reputation than Air India’s.
Star was founded by United Airlines, Lufthansa, Air Canada, Scandinavian (SAS) and Thai Airways. Today, it has 27 members from 25 countries, which have more than 4,000 aircraft in their fleets and fly over 600 million passengers a year on 21,000 daily flights to 1,160 airports in 181 countries.
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Continue reading about AirIndia had no chance with Star Alliance
As if the existing methods to overcharge travelers weren’t enough, some airlines have just found a new way deeper into your pockets. It comes in the form of sophisticated software designed to increase prices based on your desperation and lack of choice. Will you fall for the latest gimmick?
The new application is courtesy of Amadeus, one of the major distributors of airline and other travel-related data worldwide. This week, it announced the launch of “Active Valuation,” an “IT solution that enables airlines to maximize revenues across multiple channels,” or to charge you more for something you can otherwise get at a lower price.
Amadeus was surprisingly open about how it will help carriers to take more of your money, although it makes marketing sense to point that out in order to attract airlines to sign up. Amadeus already has contracts with several major airlines, including Lufthansa, Singapore Airlines, Brazil’s TAM, the United Arab Emirates’ Etihad and Air Baltic. The first three carriers are members of the global Star Alliance.
“‘Active Valuation’ works by enabling the application of sophisticated business logic to dynamically adjust the yield (revenue expected) of an airline product, according to the context in which a booking is made,” Amadeus said in a statement posted on several travel news sites.
“These yield modifiers are used in a seamless manner in order to perform an origin and destination calculation,” it added. “This allows a dynamic segmentation of customers, taking into consideration their characteristics, the point of sale used and any connecting flight data, in order to better capture their willingness to pay.”
My feelings about this statement are strong and mixed at the same time. On one hand, Amadeus obviously deserves credit for developing a new product that will no doubt boost its business. On the other hand, “Active Valuation” sounds like a recipe for screwing consumers over big time.
How does this work? If you live in the United States and want to buy a plane ticket between two European cities, you may be paying more than someone who makes the purchase in Europe. The airlines are banking on your lack of knowledge about European fares and betting on your willingness to spend more money than a European traveler, who can distinguish a good fare from a bad one.
As Amadeus pointed out this week, airlines have been doing similar tricks for years through their inventory management and are now simply expanding them. “For example, when a customer requests availability information for a multi-leg journey, the solution automatically considers the complete value of the trip and delivers appropriate availability information to the customer,” it said.
What does that mean? Let’s say you need to go from Washington to Hong Kong — there are no nonstop flights on that route, so you’ll connect in Chicago. Let’s assume that the Washington-Chicago flight has availability in the lowest booking class, as does Chicago-Hong Kong. However, when those two segments are “married up” to produce your connection, the lowest-priced seats would often disappear, and you’d have to pay for a higher booking class, which could mean hundreds of dollars more.
None of the major U.S. carriers uses Amadeus, but American Express and Carlson Wagonlit, two of the country’s largest travel agencies, do. It also powers online booking engines, such as Expedia and CheapTickets. Plus, if Amadeus figured out how to do those new gimmicks, its competitors won’t be far behind.
So how would you fight against all those airline attempts to “maximize revenue”? Demand an addition to the Passengers Bill of Rights? Complain to your congressman? Good luck. We live in a capitalist society, and every company has the right to maximize revenue in any legal way it can find — although some have found questionable methods, such as the fake “direct” flights I wrote about last month.
As you might have guessed, my approach is education — learn as much as possible about what the airlines do, and about the entire air travel system, and beat them at their own game. If you don’t know that something is happening, how would you know how to avoid it?
In my last column, I explained why corporate travel lacks innovation. One of the reasons is companies’ heavy reliance on old-style travel agencies, which in turn rely on computers to tell them what to do. The result is millions of dollars in unnecessary spending.
The Amadeus announcement is another reminder that if you keep using the old approach, you will continue to waste money. My method is simple: having mastered the system and its intricacies, I rely on my knowledge and experience buying tickets and flying around the world — that’s how I beat the computer.
Is that good enough advertising for my “On the Fly” Seminars and the Kralev International advisory services?
In all seriousness, this summer I decided to dedicate myself to travel education, even though such a concept doesn’t even exist, and I’m probably the only person who uses the words “travel” and “education” together. I’ll continue to preach it until people start listening.
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Continue reading about Airlines find new way to overcharge fliers
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
