News that Austrian Airlines had chosen to forego its long-term partners for the bright lights of Star has been accompanied by the inevitable analysis about new signs of break-up among the global alliances. On reflection, the move seems to confirm an more fundamental theme - that airlines, on the whole, are not yet ready to let go their individual identity or loose control of their key markets in pursuit of a broader alliance strategy.
Certainly there may prove to be a strong business case for Austrian to join its powerful German neighbour within Star. There was a chance that it could have become exposed if or when the Qualiflyer grouping unravelled further, or as many predict if its leader, the SAirGroup, looks to join forces with oneworld. The earlier Delta Air Lines decision to link with Air France, effectively signalling divorce from SAir, had left the grouping without a dependable North American arm.
There is also little doubt that the Lufthansa/Star link is a safer bet, at least at present, than joining the still embryonic Air France/Delta group whose only other member is Aeromexico.
Yet there are other reasons too for Austrian to look beyond its long-running relationship with SAir. Not least, is the issue of control. The Swiss group had made little secret of its desire to raise its shareholding in Austrian, or of its broader belief that equity counts louder than words in the alliance game. Almost all of its deals are backed with a holding. The near-50%stake it holds in Sabena has allowed the group to set about bringing it together with Swissair under a single management umbrella.
Austrian was not enthusiastic at the prospect. Signs of unease with its acquisitive Swiss partner had shown through before, but the Austrian management were said to be near incandescent when they recently discovered SAir quietly negotiating with All Nippon Airways for the shares that it has historically held in the Austrian carrier - a leftover from a previous round of alliance making.
In theory, the choice of Star could be equally threatening to Austrian's independence, given the geographical proximity of Lufthansa's hubs in Frankfurt and Munich. In practice, that is unlikely to be the case. Austrian has pinned much of its future on use of Vienna as a fast, efficient connecting hub, especially to the markets it has cultivated into Eastern Europe. It seems near inconceivable that competition authorities would allow Lufthansa to control the whole of this market even if it wanted to. In truth, Lufthansa may have other more important battles to fight.
So for Austrian and its Vienna hub, where plans are in hand to more than double terminal capacity, there is every prospect that Star membership will leave it free to pursue a semi-independent expansion. A safe solution which perhaps appealed to the risk-averse Austrians more than the excitement and uncertainty of joining with Air France/Delta and potentially having to fight it out with Star/Lufthansa.
The defection was greeted, in public at least, with a resigned shrug by the jilted parties. Such realignments have, after all, been widely predicted. Current wisdom is that the core of the alliances will remain solidly wed despite a flurry of wife-swapping around the edges.
Yet even among the core alliance members there have been signs of anxious partner-watching, especially where a traffic flow is more important for one of the partners than the other. So Lufthansa appears to be following closely as United Airlines hikes capacity across the North Atlantic. British Airways and American Airlines have shown similar unease at times within oneworld. Continental has yet to sign up to a full partnership with KLM on the North Atlantic and there are hints that it may resist if the deal on offer in any way cuts across its present strategy.
Perhaps most spectacular was the boardroom bust-up three years ago when Northwest accused KLM of attempting to rest control of the company. That was ultimately resolved before it actually got to the courts but bruised the relationship nevertheless. Yet throughout the bitter war of words, the operational alliance barely faltered and has if anything strengthened. It has done so because it made commercial sense for both, rather than any grander strategic theory.
That may also be the lesson to glean from the Austrian decision - that whatever the rhetoric, global alliances are still today fragile creatures, most firm when based on old-fashioned mutual self-interest. That may develop into more in time, but there are some fundamental issues of trust to resolve first.
Source: Airline Business
