Airline AlliancesMade understandable by Bonsai Team©

What is an Airline Alliance?

• No Generally accepted definition

• “Substantial” agreement

• Multilateral & Multinational

• Combination of route networks

• Common marketing brand

Deep reasons

• Solution to enter markets• Regulatory framework

oTaking over a foreign airlineoDomestic services in a foreign market

Second best way

Why such an alliance?

• Economies of scales & scope

o Service on hubso Maintenanceo Operational

oLess advertising costsoLarge scale marketing campaignsoEnter new markets

o Economies of traffic density

Synergy

costs shared

Marketing assets

Why such an alliance?

• “Branding” Better service

o Simpler travelo More network routeso Optimized scheduleso Better priceso Full range of services

o Frequent Flyer Programs

More customers!

Main hurdles

• Regulation State agreements Antitrust laws

• Fear from small airlines:o Asymmetry, Instabilityo Losing independence

• Difficulty of consensus

Types of airline alliances

• Strategic Alliances

o Joint Business Flightso Poolingo Franchisingo IT Sharing

Types of airline alliances

• Marketing Alliance

o InterliningoCode-Sharingo Joint services/engineering

/maintenance

Apparition of these alliances

• 1944: ASA – Strict nationality provisionsAfter WWII: “Flag carriers”

• US Deregulation several domestic airlines alliances with regional

feeders

• Europe: deregulation starts 1986

• 1989: Northwest & KLM: codesharing

• 1992: Common Aviation MarketCommunity Ownership

Apparition of these alliances

• Privatization of almost all the “flag carriers” stays national symbols

• “Open Skies” Agreements End of the bilateral system

Liberalization : major catalyst

Share of the world’s air traffic

“The Airline Industry Guide 2003/04” Airline Business

Airline Alliances Today

• 3 main alliances

Market Share

STAR ALLIANCE

CHRONOLOGY

• 1997 - Air Canada, Lufthansa, Scandinavian Airlines System, Thai Airways International and United Airlines. • 1999 - Ansett Australia, All Nippon Airways, and Air New Zealand.• 2000 - Singapore Airlines, BMI, Mexicana, and the Austrian Airlines Group.• 2003 - Asiana Airlines, LOT Polish Airlines, and Spanair .• 2004 - US Airways, Adria Airways, Croatia Airlines and Blue1.• 2005 - TAP Portugal, America West Airlines (merging with US Airways).• 2006 - Swiss International Air Lines and South African Airways.• 2007 - Air China and Shanghai Airlines.• 2008 - Turkish Airlines and EgyptAir.• 2009 - Continental Airlines and Brussels Airlines

Launch date: 1997 World’s first and largest airline alliance Five founding airlines: Air Canada, Scandinavian Airlines System, Thai Airways International and United Airlines Full members now: 26 and 3 more companies are expected to become members in 2010. The creation of Star Alliance was a milestone in airline history because of its size. It sparked the formation of rivals: Skyteam and One world.

Star Alliance

• Lufthansa + United• World largest airlines grouping

2000 aircrafts173 destinations130 countries

SKYTEAM

CHRONOLOGY

• 2000 - Aeroméxico, Air France, Delta Air Lines, and Korean Air• 2001 - CSA Czech Airlines and Alitalia • 2004 - Continental Airlines, KLM and Northwest Airlines• 2005 - Malév Hungarian Airlines, Air Europa, Copa Airlines, Kenya Airways, Romania's Tarom as sponsored members.• 2006 - Aeroflot• 2007 - Air Europa, Copa Airlines, Kenya Airways and China Southern Airlines• 2006 - Swiss International Air Lines and South African Airways.• 2007 - Air China and Shanghai Airlines.• 2009 - Continental Airlines and Copa Airlines move to Star Alliance.• 2010 - Vietnam Airlines and Tarom are expected to become members

Launch date: 22 June 2000. SkyTeam is the second largest airline alliance in the world. Four founding airlines: Aeroméxico, Air France, Delta Air Lines, and Korean Air The company slogan is “Carrying more about you” SkyTeam also operates a cargo alliance called SkyTeam Cargo.

SkyTeam

• Air France+ Delta Airlines

496 Destinations117 countries289 lounges

ONEWORLD

CHRONOLOGY

• 1999 - American Airlines, British Airways, Cathay Pacific, Finnair, Iberia, Quantas• 2000 - LAN• 2007 - Japan Airlines, Malév, Royal Jordanian, • 2009 - Mexicana

Launch date: 1 February 1999. Oneworld is the third largest airline alliance after SkyTeam and StarAlliance. Six Foundings airlines: American Airlines, British Airways, Cathay Pacific, Finnair, Iberia, Quantas. The alliance has the biggest expansion in its history when Japan Airlines, Malév and Royal Jordanian. Oneworld was voted the world’s Best Airline Alliance in 2002, 2004 and 2005 Business Traveller Awards and named the World’s Leading Airline Alliance for the seventh consecutive year at the 2009 World Travel Awards.

oneworld

• British Airways + American Airlines561 Destinations131 countries380 lounges

Market share by network capacity

Emirate’s model

• Incorporation and growth: an Emirates’ strategic option -> the largest airline in the Middle East

• The Gulf War had helped Emirates by keeping other airlines out of the area.

• A partnership agreement with US Airways entered in the fall of 1993

• 1993 - Cooperation agreements with Cyprus Airways

• 1994 the sixth largest airline in the Middle East.

• Emirates received a 10 year contract to manage SriLankan Airline

Facts about airline alliances

• Fragmented sector6 main 30% market shareConsolidating

• 70% codeshare agreements• 50% linked FFP• Only 15% joint ground/inflight facilities

• Centered around 1 American & 1 European

• Alliances with independent airlines• Also for cargo airlines: WOW Alliance, SkyTeam Cargo, ANA/UPS

Alliance

THANK YOU!Any questions?