The game is far from over for the global airline grouping, as Delta's deal with Air France demonstrates. But if there is more realignment to come, the SAirGroup is putting its trust in old-fashioned equity.
The course of love never did run smooth. Neither, it seems, do the course of alliance relationships. The latest twist sees Delta Air Lines, long-time partner to Swissair and the Atlantic Excellence grouping, now sign with Air France. The two plan this to be just the start of building a true global grouping alongside the oneworld and Star alliances - although if the Swiss are true to their word, it will not include them.
For some time it has been more a matter of when rather than if Air France would sign with Delta. Both players were at risk of falling behind in the alliance stakes as options narrowed. Delta has been courting a deal with Europe's remaining non-aligned major for at least a couple of years. While its US contemporaries paired with attractive European partners, it had always looked a little semi-detached from its age-old relationship with Swissair, Sabena and Austrian. True, Delta had started to make a bigger commitment since the arrival of Leo Mullin as chairman, but as Swissair's parent SAirGroup itself came close to acknowledging, the chance of tying up with one of Europe's big three was perhaps too much of a pull to be ignored.
The questions, is where they all go from here? As is customary Delta, took the opportunity to accompany the Air France deal with reassurances of its continuing commitment to Swissair and Atlantic Excellence. SAir followed suit. But the Swiss also then promptly followed up with the perfectly timed news that Swissair and Sabena had just signed a codeshare deal with American Airlines. Admittedly the deal is limited to three US cities (at least for the time being) and had been in prospect for a few months. Earlier this year, SAirGroup chief executive Philippe Bruggisser had gone out of his way to stress that a deal with American was not a threat of retaliation against Delta/Air France. It certainly sounded like one. More to the point, Bruggisser has made patently clear that SAir has no intention of getting into bed with Air France.
Perhaps ironically, that could refusal could be more problematic for Air France and Delta than for Swissair and its partners. Despite their individual size, an Air France/Delta alliance on its own would be a relative beginner in the global alliance stakes. Together they would account for less than 10% of world passenger traffic. Star and oneworld are on course to nearly double that share, as shown in the alliance survey in this issue. Naturally, both carriers have existing partners in place around which to form a global grouping, but most of the obvious candidates have been snapped up by rivals.
The dream ticket was for Swissair to bring its 11-strong European Qualiflyer alliance to the party. Mullin had spent time attempting to pull together just such a coalition, but barring an uncharacteristic change of mind by Bruggisser that seems unlikely.
Those financial analysts prepared to place a bet, are looking at the sense of SAir eventually throwing in its lot with BA and oneworld. The carriers share similar shareholder-conscious cultures and the right deal could advance SAir's progress in building world class ancillary businesses in maintenance, catering, cargo and beyond.
The Swiss have a few more interesting cards in their hand too. While other alliances, through accident or design, have been busy building their alliances on the basis of common interest, SAir has preferred to trust in equity investment. It has, or is angling for, stakes in most of the Qualiflyer partners. So far these are only minority holdings, but Bruggisser is betting that they will provide better glue than any number of codeshare arrangements. He yet be proved could be right.
One final piece of news to come out of SAir in the wake of the Delta deal, announced that the group would now accelerate its project to bring Swissair and a rehabilitated Sabena together under a single management company By this time next year the two flag-carriers will operate as one. That is no mean achievement, marking a rare move towards the ultimate goal of mergers, and the cost saving potential they will bring. In a world where airline alliances have often looked more like truces than partnerships, some cold hard equity could buy some added benefits.
Source: Airline Business
