COLIN BAKER LONDON The five contenders in the global alliance race are shown below with their tally of members and associated carriers, as of mid-June this year. Also shown are estimated shares of world scheduled passenger traffic for 2000.
KLM/Northwest "Wings"
| KLM/Northwest | ||||||
| Passenger traffic & shares 2000 | Group revenue $ bn | |||||
| Core members | Date joined | RPKs billion | World share | Pax million | World share | |
| Northwest Airlines | Jun-89 | 127.3 | 4.2% | 58.7 | 3.6% | 11.4 |
| KLM | Jun-89 | 60.3 | 2.0% | 16.2 | 1.0% | 6.4 |
| Malaysia Airlines | Jul-01 | 34.9 | 1.2% | 15.4 | 0.9% | 2.4 |
| Total | 222.6 | 7.4% | 90.4 | 5.5% | 20.2 | |
| Associated carriers* | ||||||
| Transavia | KLM stake | 9.3 | 0.3% | 3.8 | 0.2% | 0.4 |
| Kenya Airways | KLM stake | 2.7 | 0.1% | 1.5 | 0.1% | 0.3 |
| Sub total | 12.0 | 0.4% | 5.3 | 0.3% | 0.7 | |
| Note: Traffic is for scheduled mainline only. Figures in italics are estimates | ||||||
Highlights: Despite efforts by the two core partners to play a lead part in industry consolidation, this alliance is roughly back where it started, a bilateral relationship between KLM and Northwest. An agreement signed with Malaysian Airlines (MAS) in June could, however, provide renewed impetus.
History: KLM and Northwest agreed to a far-reaching alliance deal back in 1989, which included common purchasing and a frequent flyer programme. It was the first to receive US antitrust immunity and was given the tentative name "Wings", although it was never formally launched as such. The partnership hit turbulence as a boardroom row erupted over KLM's attempts to build a sizeable equity stake in its partner. The Dutch group has since sold its stock.
Membership: KLM has seen attempts to expand its alliance reach in Europe come to little over the past couple of years. The deal with Italian flag carrier Alitalia was terminated last year, and an equity-backed link with Braathens of Norway is also unravelling.
KLM had originally won the contest to net Alitalia as an alliance partner back in 1998. The deal was hailed by both sides as a "virtual" merger and work had started on merging operations of the two carriers. However, KLM withdrew from the deal early in 2000 saying that it had lost patience with the shortcomings at the Milan Malpensa hub and uncertainties over the Alitalia privatisation process. Instead KLM once more entered into merger talks with British Airways, but these too ended without agreement in September.
Likewise, KLM's relationship with Braathens, which was also seen as a deep-seated alliance backed by a 30% equity stake, is due to come to an end in 2003. SAS plans to acquire the Norwegian carrier.
Northwest, meanwhile, has seen its attempts to forge a link with Continental Airlines, backed with a potentially controlling equity link, fall foul of the regulatory authorities in Washington.
The latest agreement with MAS, however, under which the Malaysian carrier will expand its relationship on an exclusive basis, will no doubt offer some relief. Codesharing between MAS and Northwest should begin later this year.
Future moves: Both Northwest and KLM have been the subject of recent takeover speculation. However, the persistent failure of the industry to consolidate, and the close ties between the two carriers, mean they are still together. KLM has recently tentatively renewed contact with BA, but as yet still lacks a major European partner.
IT: IT integration has mainly been bilateral. KLM and Northwest are looking to extend the compatibility of loyalty programmes, and a single integrated IT platform is seen as a long-term possibility.
oneworld
| oneworld | ||||||
| Passenger traffic & shares 2000 | Group revenue $ bn | |||||
| Core members | Date joined | RPKs billion | World share | Pax million | World share | |
| American Airlines | Sep-98 | 187.6 | 6.2% | 86.3 | 5.2% | 19.7 |
| British Airways | Sep-98 | 118.0 | 3.9% | 36.4 | 2.2% | 13.7 |
| Qantas | Sep-98 | 64.1 | 2.1% | 20.5 | 1.2% | 5.3 |
| Cathay Pacific | Sep-98 | 47.2 | 1.6% | 11.9 | 0.7% | 4.4 |
| Iberia | Sep-99 | 40.7 | 1.3% | 24.5 | 1.5% | 4.1 |
| Finnair | Sep-99 | 12.6 | 0.4% | 7.5 | 0.5% | 1.2 |
| LanChile | Jun-00 | 9.9 | 0.3% | 4.3 | 0.3% | 0.8 |
| Aer Lingus | Jun-00 | 7.6 | 0.3% | 6.3 | 0.4% | 1.3 |
| Total | 487.7 | 16.2% | 197.7 | 12.0% | 50.5 | |
| Associated carriers* | ||||||
| TWA | 43.8 | 1.5% | 26.4 | 1.6% | 3.3 | |
| Affiliates 23 regional airlines is affiliated to the alliance | ||||||
| Note: Traffic is for scheduled mainline only. Figures in italics are estimates | ||||||
Highlights: oneworld has been regrouping in 2001, following the collapse of merger talks between British Airways and KLM which at one point seemed to threaten the future of the whole alliance.
History: Founded in September 1998, oneworld has been held back by the inability of its two core members - BA and American Airlines - to gain antitrust immunity across the Atlantic. With the UK and US elections out of the way (and new transport ministers in place), the two partners are looking to resurrect the process. This is directly tied to open skies talks between the UK and USA, due to resume later this year. They will also need to satisfy the competition directorate in Brussels, which effectively blocked the deal last time by demanding the surrender of an uneconomic number of slots at London Heathrow.
Last year brought some edgy moments for oneworld, with merger talks between BA and KLM raising question marks over the future of the BA-American partnership as KLM insisted that its Northwest link was sacrosanct. As BA explored the possibilities, other oneworld members too appeared to be considering their options. When the KLM talks collapsed in September, plenty of fences needed mending.
Membership: BA and American founded oneworld alongside Cathay Pacific and Qantas in late 1998, with Iberia and Finnair joining a year later. Aer Lingus and LanChile brought the total to eight last year. With American's takeover of TWA now complete, the latter will be integrated in oneworld at some stage. The alliance also has 23 regional affiliates, the newest being Kenya's Regional Air in June.
Future moves: Although it is facing heavy odds, the Qantas bid for Air New Zealand would be a major feather in the oneworld cap, and a blow for rival Star. Less welcome is the attention SAS is paying to Finnair, oneworld's Scandinavian partner. The main speculation in Europe, however, concerns future moves from Swissair and KLM. BA and KLM have recently been in contact again, while Swissair has long been seen as a good fit for oneworld, and already codeshares with American.
Governance: Like Star, oneworld has been establishing an alliance management team, based in Vancouver and headed by Peter Buecking, former sales and marketing director at Cathay Pacific.
IT: At an IT level, oneworld has not yet followed its major competitors in establishing a central communication platform, relying instead on a bilateral approach - at least for the time being. BA and American rely on different global distribution systems - Amadeus and Sabre.
Qualiflyer
| Qualiflyer | ||||||
| Passenger traffic & shares 2000 | Group revenue $ bn | |||||
| Core members | Date joined | RPKs billion | World share | Pax million | World share | |
| Swissair | Mar-98 | 35.9 | 1.2% | 15.1 | 0.9% | 9.6 |
| Sabena | Mar-98 | 19.7 | 0.7% | 10.9 | 0.7% | 2.2 |
| Turkish Airlines | Mar-98 | 16.5 | 0.5% | 11.5 | 0.7% | 1.4 |
| AOM/Air Liberte | Mar-98 | 16.1 | 0.5% | 8.0 | 0.5% | 1.0 |
| TAP Air Portugal | Mar-98 | 10.4 | 0.3% | 5.3 | 0.3% | 1.0 |
| Volare Group | Mar-99 | 7.7 | 0.3% | 1.9 | 0.1% | 0.3 |
| LOT Polish | Jan-00 | 5.5 | 0.2% | 2.8 | 0.2% | 0.7 |
| Crossair | Mar-98 | 3.5 | 0.1% | 6.3 | 0.4% | 0.8 |
| Air Littoral | May-00 | 0.8 | -% | 1.5 | 0.1% | 0.2 |
| Portugalia | Jan-00 | 0.4 | -% | 1.0 | 0.1% | 0.1 |
| Total | 116.5 | 3.9% | 64.3 | 3.9% | 17.4 | |
| Associated carriers* | ||||||
| South African A/ways Swiss stake | 17.6 | 0.6% | 5.7 | 0.3% | 1.6 | |
| Note: Traffic is for scheduled mainline only. Figures in italics are estimates | ||||||
Highlights: The whole future of Qualiflyer seems ready to unravel following the boardroom meltdown at the Swissair Group, which among other things resulted in the departure of the chief executive who launched the Qualiflyer concept.
History: The alliance was launched by SAirGroup (which has now reverted to the Swissair name) in March 1998. It is essentially a European grouping, with Swissair losing its US and Asian members when longstanding partners Singapore Airlines and Delta Air Lines went elsewhere. Founding partner Austrian Airlines, which had many joint operations with Swissair, also left to join Star in March 2000.
Swissair had pursued a strategy of building equity stakes in other carriers around the world. It already held a 49%stake in Sabena, which was to have grown to a controlling 85%, so effectively sealing Europe's first cross-border merger. Sabena and Swissair are already both run through a joint management company, but the future of that merger now hangs in the balance unless Sabena can stem its losses. The group also bought into France through AOM/Air Liberte and Air Littoral. However, with its own crises looming, Swissair has had to abandon funding for the loss-making French carriers. AOM/Air Liberte has filed for bankruptcy, while Air Littoral is also close to collapse.
Membership: Alongside Swissair, Sabena and TAP, the membership of Qualiflyer are largely second-tier European carriers, with LOT Polish Airlines and Portugalia joining early in 2000. Swissair's charter division, based around LTU, Balair, Volare and Crossair, is also affiliated to Qualiflyer and was once viewed as becoming a standalone business.
Future moves: The Qualiflyer alliance remains in a state of limbo in the wake of Swissair Group's highly publicised financial d‚bƒcle. Although the partners are putting a brave face on things, most industry observers accept that the alliance could be close to dissolving. Swissair's first priority is to fix its own finances and to deal with the losses coming out of France and Belgium. Once it has done that the group is expected to look for a place within one of the major global alliances, with oneworld a potential front runner. A codeshare between American Airlines and Swissair/Sabena was agreed last year.
Swissair Group is seeking to divest itself of its French interests, and may well follow a similar strategy at Sabena. The depth of integration between the parties means divorce will not be cheap.
Governance: Swissair and Sabena have a joint management team and the grouping was early to turn its frequent flyer programme (FFP)into a standalone company, although Turkish Airlines is not part of this. Despite the uncertainties, Qualiflyer chief executives continue to meet, and joint operations such as the FFP, call centres, airport organisations and sales offices continue.
IT: Swissair and Sabena have almost totally integrated their IT requirements with the aid of Swissair Group subsidiary Atraxis. The latter also serves most other Qualiflyer partners.
SkyTeam
| SkyTeam | ||||||||
| Passenger traffic & shares 2000 | Group revenue $ bn | |||||||
| Core members | Date joined | RPKs billion | World share | Pax million | World share | |||
| Delta Air Lines | Sep-99 | 173.5 | 5.7% | 105.7 | 6.4% | 16.7 | ||
| Air France | Sep-99 | 70.8 | 2.3% | 39.0 | 2.4% | 11.4 | ||
| Korean Airlines | Jul-00 | 40.5 | 1.3% | 22.1 | 1.3% | 4.9 | ||
| AeroMexico | Sep-99 | 12.8 | 0.4% | 8.8 | 0.5% | 1.1 | ||
| CSA Czech Airlines | Mar-01 | 3.6 | 0.1% | 2.5 | 0.7% | 0.4 | ||
| Total | 301.2 | 10.0% | 178.0 | 10.8% | 34.6 | |||
| Associated carriers* | ||||||||
| Air France stakes in African carriers | ||||||||
| Aeroflot | AF pact | 18.0 | 0.6% | 5.1 | 0.3% | 1.3 | ||
| Note: Traffic is for scheduled mainline only. Figures in italics are estimates | ||||||||
Highlights: SkyTeam made significant progress last year in its bid to make up lost ground to Star and oneworld. The alliance appears to have built momentum, and is beginning to consolidate gains, including agreement on a joint IT approach.
History: Alliance leaders Delta Air Lines and Air France finally signed a deal in June 1999, cementing their existing partnership. The alliance, which includes Aeromexico as a third founder member, initially struggled to find new members, losing out in bids to attract bmi british midland and Austrian Airlines. Two other new entrants arrived last year, however, and more are promised.
Air France and Delta have benefited from the 1998 open skies deal between France and the USA, which is due to be phased in by 2003, and may actually be implemented ahead of schedule in 2002. Air France and Delta may then apply for full antitrust immunity, although the carriers estimate that SkyTeam already has 60-70% of the cost savings that would be possible with a full alliance. A feature of the alliance has been the significant growth in transatlantic traffic as Air France seeks to regain what it sees as some rightful market share which was lost to rivals during its years of struggling to reorganise.
Membership: Despite a number of delays, Korean Airlines finally came on board in July last year, adding to the three founding members. SkyTeam is working to improve operational standards at the Korean carrier. CSA Czech Airlines joined the alliance in March.
Future moves: SkyTeam continues to be aggressive in its search for new members and there has been no shortage of speculation over potential new recruits. Talks between Alitalia and Air France have gradually become more intensive over the last year. The two carriers appear comfortable with a deal, but it is now up to Italy's new government to give its blessing as Alitalia's majority shareholder. Elsewhere in Europe, a partnership with KLM is seen as a possibility if other options narrow for the Dutch carrier.
In Asia, SkyTeam has been looking to benefit from Thai's concerns over the entry of rival Singapore Airline into Star. This would provide a badly needed presence in South-East Asia. Both Air France and Delta were also involved in the bidding process for Air India, and may try again to reach a deal if the current privatisation process fails.
Elsewhere, Air France has been courting Aeroflot (as has Star) although this is a long-term target, given the need for deep-seated reform at the Russian carrier. A Brazilian partner, either TAM or Transbrasil, is also a possibility. Air France has a codeshare with TAM, while Delta has a similar agreement with Transbrasil, although any decision here is likely to have to wait until an expected restructuring of the Brazilian airline sector is completed.
IT: Skyteam has followed Star in introducing a stand-alone common-user IT platform. It was introduced in May under the name SkyTeamNet. Air France has been working with CSA to bring its IT systems up to scratch since the Czech carrier joined SkyTeam last year. SkyTeam has yet to establish the same level of alliance management as main rivals, Star and oneworld.
Star Alliance
| Star Alliance | ||||||||
| Passenger traffic & shares 2000 | Group revenue $ bn | |||||||
| Core members | Date joined | RPKs billion | World share | Pax million | World share | |||
| United Airlines | May-97 | 201.9 | 7.2% | 87.2 | 5.6% | 18.0 | ||
| Lufthansa | May-97 | 86.2 | 3.1% | 41.9 | 2.7% | 12.9 | ||
| United Airlines | May-97 | 204.2 | 6.8% | 84.5 | 5.1% | 19.4 | ||
| Lufthansa Group | May-97 | 92.2 | 3.1% | 47.0 | 2.9% | 14.0 | ||
| Air Canada | May-97 | 72.4 | 2.4% | 23.5 | 1.4% | 10.7 | ||
| Singapore Airlines | Apr-00 | 70.7 | 2.3% | 14.8 | 0.9% | 5.8 | ||
| All Nippon Airways | Oct-99 | 62.6 | 2.1% | 49.9 | 3.0% | 11.5 | ||
| Thai Airways | May-97 | 41.3 | 1.4% | 17.7 | 1.1% | 3.1 | ||
| Varig | Oct-97 | 26.6 | 0.9% | 10.9 | 0.7% | 3.0 | ||
| SAS | May-97 | 22.6 | 0.8% | 23.2 | 1.4% | 5.2 | ||
| Air New Zealand | Mar-99 | 21.0 | 0.7% | 7.8 | 0.5% | 1.6 | ||
| Ansett Australia | Mar-99 | 15.8 | 0.5% | 11.8 | 0.7% | 2.2 | ||
| Mexicana | Jul-99 | 8.3 | 0.3% | 7.8 | 0.5% | 1.0 | ||
| Austrian A/I Group | Mar-00 | 7.2 | 0.2% | 8.0 | 0.5% | 2.0 | ||
| bmi british midland | Jul-00 | 1.9 | 0.1% | 7.1 | 0.4% | 1.1 | ||
| Total | 646.8 | 21.4% | 314.0 | 19.1% | 80.6 | |||
| Associated carriers* | ||||||||
| Virgin Atlantic | SIA stake | 29.5 | 1.0% | 4.3 | 0.3% | 1.4 | ||
| Spanair | SAS/UAL | 5.4 | 0.2% | 5.1 | 0.3% | 0.6 | ||
| Braathens | SAS takeover | 3.8 | 0.1% | 7.1 | 0.4% | 0.8 | ||
| Total | 38.7 | 1.3% | 16.4 | 1.0% | 2.8 | |||
Highlights: With a head start and greater global reach than any of its rivals, Star has been concentrating on increasing the depth of co-operation among its 13 members.
History: Founded in May 1997 by Lufthansa, United Airlines, SAS, Thai and Air Canada, Star now has 13 airline group members. Due to its size, the alliance is evolving around three geographical groupings, the Americas (led by United), Europe (led by Lufthansa) and Asia (where the importance of Singapore Airlines is increasing). A number of joint ventures in Europe and across the Atlantic have been also established.
Membership: The most recent membership additions have been from Europe. Austrian Airlines defected from Qualiflyer in March last year, bringing with it group members Lauda Air and Tyrolean Airways(figures given in the above table are for the group). bmi british midland followed in July 2000, despite strong overtures from SkyTeam. Around the same time, Star also dealt a major blow to oneworld as Air Canada secured the takeover of Canadian Airlines.
Star has also built an impressive Asian line-up. Thai Airways was in from the start and Singapore Airlines (SIA)its near (perhaps too-near)neighbour finally came aboard early in 2000 after an extended courtship. Singapore allies Ansett and Air New Zealand joined in 1999 and All Nippon Airways also became the only Japanese airline to commit to a major alliance. SIAalso now owns 49%in Virgin Atlantic.
Future moves: Most geographic areas are now covered, with the major exceptions being China and Russia. Air China is being lined up for entry, although it needs to come up to speed in various areas - pilot training included. In Russia, Lufthansa's courting of Aeroflot also represents part of a long-term strategy. However, SkyTeam has also been active looking for a deal with Aeroflot and is now courting Thai in Southeast Asia, following the entry of SIAinto Star.
Despite persistent speculation (mainly emanating from Spain) that Spanair will join Star, this appears unlikely in the short-term. The large number of existing members - each of whom would need to give their blessing to any new additions - would seem to count against it.
Governance: Star is still based around a series of bilateral commercial agreements, with its governance rules covering just two sides of paper. However, it is looking to extend the depth of the alliance.
Star has been building a management team, headed by Jaan Albrecht former boss of Aeromexico's cargo unit Aeromexpress. This head office has been based in Los Angeles, although a London office is to open in the near future. Star is reaching the stage where further integration will involve cooperation in areas that have traditionally been off-limits, such as revenue management and frequent flyer programmes. One possibility being examined is to establish neutral but jointly owned standalone companies to take on this shared work.
Lufthansa, bmi and SAS recently received permission from the European Commission for their joint venture, while United and Lufthansa plan to extend their co-operation to cover all transatlantic flights over the next couple of years. However, Brussels is threatening to put an end to cross-border cooperation between neighbours Lufthansa and Austrian.
IT: Last September, the alliance launched StarNet, a stand-alone multi-user communication platform which enables members to keep their own legacy systems. This cuts down on the costs associated with a complete systems overhaul, and means leaving would be less painful. bmi is moving over to IT technology supplied by Lufthansa Systems, which is also used by other European Star members.
Unaligned
| Major unaligned groups | |||||
| Passenger traffic & shares 2000 | Group revenue $ bn | ||||
| Core members | RPKs billion | World share | Pax million | World share | |
| Continental | 103.2 | 3.4% | 46.9 | 2.8 | 9.9 |
| Japan Airlines | 76.4 | 2.5% | 38.6 | 2.3 | 15.4 |
| US Airways Group | 75.7 | 2.5% | 60.6 | 3.7 | 9.3 |
| Southwest Airlines | 67.9 | 2.3% | 63.7 | 3.9 | 5.6 |
| Alitalia | 41.4 | 1.4% | 26.7 | 1.6 | 5.0 |
| America West | 30.8 | 1.0% | 20.0 | 1.2 | 2.3 |
| China Airlines | 25.9 | 0.9% | 7.9 | 0.5 | 2.3 |
| China Southern | 21.7 | 0.7% | 16.8 | 1.0 | 1.8 |
| Emirates | 20.5 | 0.7% | 5.7 | 0.3 | 1.9 |
| Saudi Arabian Airline | 20.2 | 0.7% | 12.6 | 0.8 | 2.6 |
| Alaska Airlines | 19.3 | 0.6% | 13.5 | 0.8 | 2.2 |
| Japan Air System | 18.5 | 0.6% | 21.0 | 1.3 | 3.8 |
Despite the speed with which the global alliances have gathered up members, a number of big airlines are either still in play or have simply preferred to remain out of the game.
Topping the list is Continental Airlines, now only semi-attached to Northwest. US consolidation could yet throw up further permutations depending on the fate of the United/American bid for US Airways.
Europe's recent merger attempts have left significant names back in play. Alitalia and KLM are both in talks with new partners following the failure of their merger, while Swissair and therefore the rest of Qualiflyer could be up for grabs depending on the outcome of the Swiss group's restructuring. SkyTeam and oneworld could both be bidders.
Elsewhere Japan Airlines has so far declined to commit itself to an alliance, although it does have codeshare connections with oneworld. With Japan Air System also independent, only All Nippon Airways is currently attached. Taiwan's two main carriers are also unattached.
Emerging markets such as China, Russia and India, are identified as areas for long-term expansion by the leading alliances. In the Middle East there are few signs of alliance movement, with Emirates so far still proudly independent. Despite the Swissair stake, South African Airways too insists that it does not want to commit to an alliance, preferring to wait a couple of years to see how the ground lies.
Notes Source: Figures are generally for calendar year 2000 except for Australasian carriers (for fiscal year to June). Data in italics indicates an estimate has been used based on previous year figures. Associated carriers = Airlines which have equity or other close links to at least one of the core partners, but which are not closely tied to another alliance. World shares = Estimates only, based on International ICAOpreliminary world scheduled passenger traffic totals for 2000. Total traffic stood at 3,018 billion RPKs and 1,647 million passengers. RPK = revenue passenger km 1 mile=1.609km. Revenues = Group revenues including non-flying businesses for the latest reported year 2000 or fiscal year to March 2001. Note that Australasian carriers report to end June 2000. Passenger traffic RPK = Mainline scheduled services only, excluding regional affiliates. However, Qualiflyer includes core charter and regional members.
Source: Airline Business
