On the other hand, senior executives in the Oneworld alliance assert that even the liberal approach the group takes vis-a-vis its members' outside activities has its limits, and Air Berlin may soon have to ask whether membership still makes sense. Oneworld CEO Ashby says there is “an informal obligation to serve traffic flows within the alliance first” and that Air Berlin “is a test case for flexibility.” He makes clear that “when the majority of things is outside, [alliance membership] becomes absurd,” although Ashby stresses that Air Berlin is “nowhere close to that.”
Recent comments by Air Berlin CEO Wolfgang Prock-Schauer indicate that the airline may be closer than Ashby believes. Prock-Schauer notes that Etihad alone delivers more traffic to Air Berlin than the entire Oneworld alliance.
Etihad CEO James Hogan is convinced the days of alliances are waning. “The traditional airline alliances have evolved into slow-to-respond, bureaucratic organizations which struggle to deliver added value to their member airlines, many of which are no longer compatible with each other,” he told the International Aviation Club in Washington recently. “If we look at the consolidation currently occurring throughout the airline industry, we are also seeing more fragmentation within the alliances,” he observes. “This is going to continue as members seek ways to operate profitably in a very competitive environment with high fuel costs and generally slower global economic growth.”
Of course, Hogan promotes his own “equity alliance,” consisting of Etihad and airlines in which it holds minority stakes: Air Berlin, Air Seychelles, Virgin Australia and Aer Lingus. The central idea of his version of alliances is that they should be bound by equity and cut costs as much as possible, which is where the three global groups have largely failed.
Realizing meaningful cost-savings between alliance partners generally requires harmonization of asset and capital strategies between partner carriers—a common fleet and branding, and compromises that drive consistency across the travel ribbon. “For an airline management team that has a fiduciary responsibility to its shareholders, it is not an easy decision to head down the path of long-term, difficult-to-reverse cost-related changes,” Diamond points out.
In contrast, the types of revenue-side marketing cooperation that are common features of alliances, such as network connectivity and harmonized pricing, are easily reversible. “Therefore, in order to get meaningful cost savings, you need some congruence in shareholder goals, which is where equity stakes help,” Diamond says while emphasizing that “not every airline is willing—or in a position—to throw capital at other airlines, and assume the attendant risks.”
Tap the icon in the digital edition of AW&ST to see how the airline alliances compare around the world in main hubs, flights, seats and ASKs per week, or go to AviationWeek.com/alliances
Global Alliance Numbers
|Member Airlines per Region|
|Middle East & Africa||1*||3||3|
|Aircraft in fleet||2,473||2,734||4,570|
|*Plus one member-elect|
|Sources: Airline alliances|