14 August 2008

BAAABI it's warm inside. The Alliance of Champions?

So the news was not exactly unexpected that the BAAABI alliance would finally come to fruition.

So replicating the DLAFKL structure of a formal JV - the partners think they can get around any of those silly objections from the regulators. And it looks like it works.

Now in context the Alliance across the Atlantic has some winners and losers. Clearly people like Virgin Atlantic and BMI will be none too happy. And of course the beasts are going to start creating two tiers in the Alliances. So Finnair and other lesser mortals in One World will suffer somewhat. But this will go a long way to reducing the footprint and competition across the Pond. Is that good?

I will go out on a limb and say probably not.

Unless of course that the BAAABI Alliance has to give up both slots and routes/frequencies to make this happen - then it could be interesting. But who can this benefit?

I can't see others jumping in quickly. Here is the text of the email sent to BA's premium traffic members



Dear Mr O'Neil-Dunne,

I am writing to you to ensure that you are one of the first to hear about the latest news from British Airways. Today we have reached agreement with American Airlines and Iberia to form a joint business, which if approved, will enable us to co-operate on flights from the UK and Continental Europe to the US, Canada and Mexico.

We plan to file for worldwide anti-trust immunity from the US Department of Transportation. The European Commission will also review the deal. If successful, we will be able to form a closer working relationship providing significant benefits for customers. All three airlines will continue to operate under our separate brands.

Closer working will create opportunities to enhance customer benefits. It will enable us to better align schedules giving more access to destinations and improving connections through key airports. Other benefits for customers include greater opportunities to earn and use frequent flyer miles on the other airlines' transatlantic network along with enhanced frequent flyer tier features. Our Executive Club members will continue to be able to enjoy lounge access with British Airways and its oneworld partners as they do today.

Our overall aim is to continue to deliver an upgraded travel experience to you. Financial efficiencies that the joint business agreement will give British Airways will help us to continue to invest further in our products and services, despite the demanding economic environment that the airline industry faces.

It is both a challenging and exciting time for British Airways and I will ensure that you are updated on developments as the proposed venture nears completion.

Warm regards,

Woody Harford
Senior Vice President, Commercial, Americas

1 comment:

John S said...


I heartily agree with your conclusion regarding the proposed alliance.

The structure may pass regulatory muster, but in the end, the price and availability of trans-atlantic trans-continental travel will be adversely affected.

Market dynamics are likely drive the current players to create new alliances, resembling more consolidation to gain economic power. Multi-national anti-trust issues and treaties will be tested.

Competition from new entrants on existing or new routes will be nearly impossible without access to incredible amounts of capital.

The real loser becomes the customer - you and me.