The chances of an airline alliance surviving are increased threefold if there are equity links between the partners, according to an analysis of all airline alliances undertaken by Boston Consulting Group. The same analysis, presented at a recent IIR/Airline Business conference, shows that the survival rate of intercontinental alliances is half of that for accords involving domestic or regional operations.
These conclusions are based on the 200 airline alliances which existed in 1992. Three years on, BCG's research reveals that:
* Only 26 per cent of non-equity alliances are still in operation, while 73 per cent of equity based alliances survive.
* The survival rate of domestic alliances is 65 per cent and that of regional alliances is 59 per cent, but only 33 per cent of intercontinental alliances are still in existence.
* The total number of airline alliances has doubled to 401.
* Of today's alliances, 70 per cent involve codesharing.
* Equity based deals involve more fundamental forms of cooperation, such as joint sales and marketing, integrated frequent flyer programmes and cost sharing.
Clearly mere survival is only part of the story, since a failed alliance may still exist in name. But the data suggest that equity plays a decisive role. BCG's John Lindquist conceded that alliances with equity links were more difficult to withdraw from, but said that equity-based alliances enjoyed the advantages of board representation and a stronger organisational structure.
Lindquist believed the failure rate of airline alliances would stay high. He said codesharing was a zero-sum gain, since it attracted passengers at the expense of other carriers. 'The relative benefits will decline as codesharing proliferates, especially without equity and cost savings.'
At the same conference, Cyril Murphy, vice president international affairs at United Airlines, said the carrier's 12 codesharing alliances increased United's daily departures by 25 per cent, by adding around 555 flights a day to United's own 2,210 flights. Murphy said United had 215,000 advance bookings for codeshare flights, compared with 104,000 at the same time last year.
The Lufthansa alliance has added 11 German points to United's network as well as 23 points in Europe, the Middle East and Africa. United's other alliances cover a total of 59 points.
Wolfgang Prock-Shauer, vice president corporate planning at Austrian Airlines, said the block space agreement with Delta had helped to transform Austrian's Vienna-New York route, from a loss of Sch70 million in 1993 to a profit of Sch15 million ($1.5 million) in 1994. The Vienna-Zurich shuttle, operated by Austrian and Swissair, produced a 6.4 per cent increase in passengers in the first quarter of 1995.
Source: Airline Business
