The wedding bells are ringing again. If successful, this month's three major new airline alliances will all change the balance of power in their respective markets. But will they work?
It has become clear that the essential ingredients of a successful alliance are a clear strategy, identifiable benefits for both parties, and an ability to work through the detail and find ways to make the alliance function. The latter ingredient requires management focus, employee support and a willingness to make compromises for the good of the alliance. These elements will not be there without the first two ingredients - the strategy and the identifiable benefits.
Applying this logic to this month's selection of alliances produces a picture which is unclear at best.
Take the two European alliances. SAS needs Lufthansa because the European Quality Alliance has failed, and SAS cannot provide a comprehensive worldwide service on its own. However its employees, and some managers, will be fearful that the carrier will be swallowed up.
Lufthansa's position is different. Together with the existing Lufthansa/Finnair alliance, SAS brings dominance of the Scandinavian market and some interesting secondary hub possibilities, but Lufthansa could survive quite nicely without the SAS agreement. This inequality of purpose could cause problems.
Sabena and Swissair also have clear but different motives. Sabena needed a rich partner to inject some badly needed capital, and Swissair needed an entrée into the European Union's single market, in which it is restricted by Switzerland's lack of EU membership. But are these airlines really compatible? There are some synergies, such as alliances with Delta, network duplication in Africa and partial use of the French language. But there are major differences in culture and market perception.
Turning to the impending Pacific alliance, Air New Zealand's planned purchase of 49 per cent of News Corporation's stake in Ansett Australia also invites scepticism. Ansett probably has little say, since the issue is being decided at shareholder level, but it does have something to gain - an ally in its increasingly difficult competitive battle with Qantas, and some much needed expertise in international markets.
But Air New Zealand's overtures to Ansett arose chiefly because of the Australian Government's decision to abandon the trans-Tasman single aviation market, under which Air NZ would have gained Australian domestic traffic privileges in its own right. Is this a good basis upon which to build a successful alliance?
A sceptic could justifiably claim that all three alliances represent little more than marriages of convenience. Converting them into success stories with measurable benefits for all parties will require a great deal of thought, some careful planning, and a significant investment in management time.
The deciding factor may well be managers' ability to transmit the strategy behind the alliances, and the detailed plans for them, to employees in order to motivate them to make the alliances work.
Source: Airline Business
