24 July 2010

So OneWorld makes 3 across the Atlantic.

So the homogenization of the airline world is almost complete. With now more than 90% of the traffic across the Atlantic under the control of the 3 Alliances the airline world has become something of a boring place.

From a strategic perspective I believe that the creation of this risk sharing – mergers in all but name – alliances create as many issues as they solve. From a user’s perspective – IE the flyer, and as speaking as a frequent flyer, I cannot say that the rewards of the so called “seamless” experience are that great. Frankly I believe they are still a myth in the mind of the airline marketing departments. Let me illustrate this with a simple pair of examples from Star/Atlantic Alliance Plus:

Star Alliance – Transatlantic Alliance A++ AC,CO, LH UA. LH has first class as does UA. CO and AC do not. UA and CO have premium economy, AC and LH do not.

An itinerary NUE-FRA-YYZ-IAH-CCS-IAD-FRA-NUE should be (logically) possible all on A++ carriers and Transatlantic. Not so – the CCS legs are outside of the alliance and therefore have to be either added as a separate flight or as one ways. Any solution would up the price significantly.

I use these to illustrate the issue not to pick on Star/A++ specifically. I believe that the airlines have a long way to go to make the experience truly hassle free. However I think it is getting better. But it takes a very long time and the hype decidedly does not live up to the delivery. I hope that the regulators are paying close attention to the issue. When these alliances anti trust immunity comes up for renewal. I hope that they look at the issues for the customer. In my view the benefits to the customer should be considered as follows:

1. Better choice of schedules – ie more not less flights
2. Lower fares or at least no comparative increase in fares. I also think that the consideration of Frequent Flyer miles should be added to the equation, so that the currency of FF miles be considered as part of the cost equation.
3. Ease of use – to get from A to B should not be harder. Therefore in considering the value of an alliance – the customer issue of nonstop vs connections should also be considered. For example did the alliance reduce the number of nonstop routes in the broader market?
4. The hassle factor. Did the Alliance truly reduce the amount of trip hassle for the customer – of all types not just premium traffic.

If we are truly to regard this as a benefit then a truly objective and transparent mechanism for assessing Alliances should be put in place. I believe that players have the right to set their own standards in an open market. However when the marketplace is restricted to only 3 major players with such a large percentage of the market – then the standards of care and customer value must be put at a high premium. This includes the ability of the governments to force the players to undo their arrangements. Currently these standards are not in place and all that seems to have happened is a lot of talking without consumer consideration. Given how much money the airlines are going to make this year as a result of their oligopoly power – I think this should be a consideration. And with OneWorld now the third man in – we have to be very careful.


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