But beneath the surface a lot of valuable work has taken place and the fact that few new major alliances emerged was a positive sign that many carriers are pursuing concrete results from their existing alliances rather than rushing out to conclude new ones.
Admittedly, the number of available major partners is limited, but as the decision by European Quality Alliance partner SAS to hold talks with Lufthansa shows, none of the existing agreements is set in stone. Some of the careless flirtations of the past are bound to end in divorce and make way for deeper, more meaningful - and mutually beneficial - relationships. After the frenzied exchanges of the past, it is time for consolidation.
Certainly, some important lessons have been learned. Alliance-making is no longer the fashionable, ill thought-out trend that it was. Having learned from experience, many carriers are looking for real economic and financial paybacks - and often finding them in numerous small agreements rather than in the grand strategic marketing alliance.
Among the existing major strategic alliances, there has been a definite trend towards trying to reap greater benefits, and to quantifying them. The Northwest-KLM alliance, unique in that it benefits from US anti-trust immunity, continued to go further than other partnerships in boosting the number of joint services and codeshare points, coordinating schedules and pricing, and marketing a joint business class product.
Anti-trust immunity for other US-European alliances such as Lufthansa-United and Delta-Swissair-Austrian remained very much a live issue, with some carriers under the impression that the US offer of open skies to nine European countries left room for diplomatic pressure, and the Germans being offered the chance to reopen talks with the US over their capacity-limiting bilateral.
Meanwhile the European Commission continued its efforts to discourage bilateral deals with the US, with the European transport commissioner Neil Kinnock threatening legal action at the European Court of Justice against the six European Union states included in the US offer.
At presstime British Airways' attempts to expand on the benefits from its 25 per cent investment in Qantas, by pooling resources and setting prices with its partner on London-Australia routes, remained bogged down with the Australian Trade Practices Commission, though a final decision was expected by early May. The two partners had spent many hours explaining the proposal to the TPC, and were reportedly making some modifications, in an attempt to reverse the commission's draft decision rejecting it. Qantas has calculated that the cooperation would benefit it by up to A$60 million annually ($44 million).
BA continues to reap substantial operational benefits from its extensive codesharing with USAir. Figures from the US Department of Transportation's codesharing study, completed early this year by Gellman Research Associates, showed a net gain of $27.2 million a year for British Airways, versus $5.6 million for USAir. A more recent study by the US General Accounting Office estimates the benefits to BA at $100 million (see p64). While BA does not share in USAir's losses, the troubled US carrier has suspended preferred dividends, so BA is not gaining the financial returns it had hoped for when it purchased its stake.
Meanwhile the Global Excellence Alliance, alias Swissair, Delta Air Lines and Singapore Airlines, was strengthened in November by a new codeshare and block space agreement between Delta and SIA on the latter's Singapore-New York service via Europe. The carriers already codeshare on three other routes and are examining ways to cooperate on schedules coordination, passenger and cargo handling and joint marketing. The Delta-Swissair alliance was also expanded to include Swissair's EQA partner Austrian, through the first trilateral codesharing and block space agreement on Austrian's Vienna-Geneva-Washington flights.
Perhaps the most significant new development in the past year was the conclusion of a codesharing pact between Lufthansa and Thai International, which both have an agreement with United Airlines. The deal, struck last October, theoretically offers the prospect of a global alliance between all three partners, though the impasse in Thai-US bilateral talks has put a marketing deal between United and Thai International on hold. Meanwhile United and Lufthansa continued to codeshare extensively on each others' services.
Despite a few high profile failures, the number of alliances that were abandoned was pretty much compensated for by new partnerships. New entrants to the alliance movement included TAP Air Portugal, Asiana, EVA Air, Air Hong Kong, Croatia Airlines, Air Aruba, Cayman Airways, Riga Airlines and Transaero.
Air France, meanwhile, was not alone in completely reviewing its alliance strategy, as part of its wider financial restructuring. The carrier acknowledges that its agreement with Continental has been abandoned while its pact with Aeromexico remains on hold. However possible new accords with American Airlines and Japan Airlines are being carefully examined and, in a fortunate change of attitude compared to the previous management, alliances are being given less priority than efforts to return the airline to profitability.
Air France continues to cooperate with CSA on Paris-Prague services despite the sale of its stake back to the Czech government. Air France chairman Christian Blanc has said the carrier will sell its 37.5 per cent stake in Sabena back to the Belgian government if Sabena wishes to go ahead with a deal under which Swissair would purchase a large equity stake, giving it a foothold in the European Union. At presstime the only obstacle to that deal was an investigation by the Commission into a reduction by the state of Sabena's social security contributions, considered essential to pave the way for an agreement with Swissair.
Alitalia was the only other European carrier to drop some of its more significant alliances, including agreements with Taca, Mexicana and USAir. Codesharing with USAir from Washington and Philadelphia to Rome has been overtaken by Alitalia's more comprehensive agreement with Continental via New York/Newark. Plans for a comprehensive marketing agreement with Varig have been abandoned.
Elsewhere in Europe, the European Quality Alliance remained shrouded in uncertainty as talks continued between SAS and Lufthansa. While cooperation between Swissair and Austrian remains close, SAS has remained relatively aloof barring the feeding of some traffic from its Scandinavian hubs into Zurich and Vienna. SAS's only codeshare with an EQA partner, on Copenhagen-Chicago with Austrian, has been dropped.
Marks for the most intriguing memorandum of understanding go to TAP Air Portugal and Iberia - the two unprofitable southern European flag carriers plan to explore close cooperation including possible joint services to Africa. Meanwhile TAP reaps the award for the most notable increase in alliance activity over the past year. Between May 1994 and April 1995 TAP went from zero marketing pacts to concluding codesharing agreements with British Midland and Delta Air Lines, and a comprehensive marketing agreement with Varig, in addition to the MoU with Iberia. However British Midland is a close second, having added five new codeshare agreements during that period.
Alliance sceptic American Airlines made aviation alliance history when it finally abandoned its longstanding opposition to major codesharing agreements between US and European or Asian carriers, and admitted it could do such deals with Air France and Japan Airlines. American also began joint operations and codesharing with LOT Polish Airlines in January.
Among other notable developments in Asia, Garuda finally began to implement longstanding plans for closer cooperation with KLM. Joint freighter service between Jakarta and Amsterdam from April and an aircraft maintenance and overhaul joint venture are due to be followed by passenger cooperation on Indonesia-Europe sectors from mid-1996. Malaysia Airlines was markedly active, concluding new codeshare and block space agreements with British Midland, Virgin Atlantic, Ansett Australia, Ansett New Zealand, Myanmar Airways and Aerolineas Argentinas.
Elsewhere, noteworthy new partnerships included a codesharing and block space agreement between Asiana and Northwest; codesharing and block space agreements between Virgin Atlantic and Delta; codesharing between America West and Continental; and cooperation between EVA Air and Garuda; Air Mauritius and Air Austral; Turkish Airlines and Tarom; United and Cayman Airways; and KLM and Air Aruba. Among the partnerships to disappear were: Air Canada-Air New Zealand; Olympic-Austrian; SAA-Austrian; SAA-Varig; and Emirates-Cyprus Airways.
On the equity front there were few changes, though KLM boosted its stakes in Northwest Airlines, Transavia, Martinair and Air UK. SAS also raised its holding in British Midland's parent Airlines of Britain from 34.9 to 40 per cent, while Lufthansa increased its interest in Lauda Air. British Airways sold its charter subsidiary Caledonian Airways to UK company Inspirations; Swissair decided to close its charter operation, Balair/CTA and absorb the operations into Crossair and the main carrier; and Lufthansa bought a stake in UK carrier Business Air.
In Asia-Pacific, Cathay Pacific took a 75 per cent controlling stake in Air Hong Kong, Malaysia Airlines took a 40 per cent interest in Royal Air Cambodge, and Air New Zealand explored taking a 49 per cent holding in Ansett. In Africa, Air Afrique invested in Air Mali and South African Airways became a 40 per cent shareholder in Alliance, a joint venture with the national airlines and governments of Tanzania and Uganda.
Source: Airline Business
