Brand And Alliances - Game, Set - MISMATCH

I flew on Delta this week - the last leg of a long round the world trip which saw the Professor flight more than 23 different flights on a wide variety of airlines.

Onboard I was forced to watch a Delta commercial. With Donald Sutherland's soothing voice as the narrator the ad was very nice - part of the new campaign by NYC based Weiden + Kennedy. (Click on the link and then hit the PLAY button).

The ad extols Delta's people and how they make a difference. And almost uniformly I agree as a long time Delta flyer with getting on 1.7 million miles of actual Delta flown miles.

Small little problem - Delta's service is now often provided by so many different people. Specifically lets look at my flight.

A DL operated flight from LHR to MSP and then an Alaska Airlines codeshare from MSP-SEA.

At LHR I checked into the Skyteam desk - manned by Cobalt (KLM and AF owned ground handling company) personnel. Nary a DL person in sight. The local team at LHR T4 is but a handful of DL staff now. I used the Skyteam lounge - also manned by Cobalt personnel who could not help me with my flight information or fixing a seat problem. They referred me to a phone number.

At MSP I checked onto an Alaska Airlines flight - with DL personnel at the Gate. Who were the only DL people at any of the multiple touchpoints along the ground. At SEA - my bag complaint was handled by Alaska who outsourced the bag management to another company.

So you see the great idea of the product being backed by the good people of DL is not actually a truth. Because Delta's people dont actually service you. Someone else does. And don't get me started on certain of Delta's partner AF where shall we say Gallic humour and customer service are somewhat apart.

Years ago DL was involved in the Quality Alliance with SQ and SR. It was a super idea. They placed flight attendants on each other's aircraft. It really did do a lot for the customer and created a much better experience.



The alliance mania - merger in all but name - does little to support a brand value. And when the branding is focused on your direct employees - this is when it really comes apart. Delta is not the only one currently guilty of this sin. Cathay Pacific is also doing the same thing. And believe me the CX experience is nothing like that on some of the CX code share flights. Just because the chaps who experience it (Frequent travellers like myself) doesn't mean you can ignore the basic fact that your services are outsourced and the quality sucks.

Time for the GML Change at CX

Every so often Cathy Pacific which is still run by the John Swire Group - one of the last Taipan businesses in Hong Kong - changes its folks around. There is a general move into the and out of the airline. Of late the number of such changes at a senior level have become less and less. So the Swire people tend to specialize earlier and stay with the airline in a more focused role.

So the latest round of GML changes as reported in Speed News looks like this:

James Barrington, currently Director Sales & Marketing, will become Director Corporate Development. Rupert Hogg, currently Director Cargo, will become Director Sales & Marketing. Tomasz Smaczny, now General Manager Information Management, will become Director Information Management. The current incumbent in the Director Information Management role, Edward Nicol, is retiring after 35 years’ service with the Swire group. In Flight Operations, Richard Hall, currently General Manager Aircrew, will take up the position of Director Flight Operations – a post currently held by Nick Rhodes. Mr Rhodes will become Director Cargo. Ian Shiu, the current Director Corporate Development at Cathay Pacific, has been appointed a Senior Director of John Swire & Sons (HK) Ltd with a brief which covers staff matters in Hong Kong and strategic developments in Mainland China and Taiwan.

So now you know...

Cheers

JAL Stock Almost Worthless, BA Steps Up Noise

BA is offering benefits to JAL valued at between $164-240 Million - surprisingly roughly what the DL arrangement will deliver. However examination of the deal shows that it contains something that JAL doesn't really want. Not that BA has a lot of cash to dole out anyway given its pension deficit.

For example slots at LHR. Especially since JAL canceled one of its flights to LHR in 2009 to save money - so it already has a daily slot available!!!

Still the offers are getting tempting. With the cash deal now gone, OneWorld partners are scrambling to secure the ailing (see stock charts!!!) carrier. However noticeably quiet in all of the conversations has been Cathay Pacific. Actually the Hong Kong based carrier stands to gain if JAL exits the alliance.

So the battle continues. But I stand by my prediction that DL will win bar some last minute squeaking. And there does seem to be a lot of it...

Cheers

HKG Traffic Falls again

6% might not seem like a lot but for the first 5 months of 2009 this is not good news. Worse is that the losses are not abating. May's numbers shows pax were off nearly 13%. Cathy must be suffering badly as the majority of these are going to be business travelers cutting back.

Even the airport is predicting more bad news for June

With China in the doldrums and Swine flu further compounding matters, the recovery will not necessarily be arriving any time soon. Finally the impact of the loss of the trans-shipment (flight from Taiwan can now go direct) Cathay's poisition is looking pretty awful at the moment.

Freight continues to collapse which is the worrying thing for everyone.

Yields are going to stay low for a long while yet.

Cheers

Cathay to BA - Go Away!

Rebuffing any thought of a possible tie up between the declining valued BA and the greater value but smaller Cathay Pacific - its CEO - Tony Tyler wasted no time is telling Willie, Martin and the boys (via the article in the Telegraph)that they were welcome as OneWorlders but no more than that at Cathay City.

In a battle of the top dogs, Cathay Pacific chief executive Tony Tyler - a Swire man - said his airline has no intention of merging with British Airways, which is worth half as much as the Hong Kong-based carrier. In an interview in the Telegraph , he said he does not agree with BA chairman Martin Broughton who stated in early January that the Oneworld alliance will fall apart if the BA tie-up with American Airlines fails. while Cathay has been hit by the recession and has cut capacity growth for 2009 from 6-7% to broadly flat, it is seen as being more profitable than its London based Alliance partner.

British Airways hopes for a partnership now seem to be looking a tad thin. The Iberia merger is all but dead - killed by the free fall in the pound and the poor British Carrier's performance, Qantas and BA never made it past the first date despite having been engaged and almost married successfully before. With the new Obama Administration in power - the prospects for a tighter alignment between AA and BA don't look quite so good unless Gordon and Barack want to make nice and Fly Mandy wants it.

Here is the full article - worth a read.

http://www.telegraph.co.uk/finance/newsbysector/transport/4402441/Tony-Tyler-plane-speaking-from-a-merger-sceptic.html

Cheers

Asia Action - CX and MH - Different Challenges

The markets in Asia are not immune from the global recession.

Two carriers are facing different variations on the challenges.

For Cathay Pacific, there is a general downturn just after they bet the farm on growth from China. At the same time fortress Hong Kong is experiencing a fundamental change which few thought possible. Taiwan - the rebel province is now becoming more important and with the establishment of direct Taiwan-China air services CX is seeing traffic evaporate.

From 18 to 138 flights a week is a huge jump in traffic. And CX is seeing none of it. If it goes to 200 or even higher - same thing. Much of that traffic is new but a significant amount of it is siphoned off from CX.

For MAS - their seminal moment came over two years ago. The new management team has stabilized and now made the perennial sick airline well. And they have come to a modus operandi with Air Asia. Now it is becoming a player in the consolidation. Today talks are under way with Qantas for a joint relationship which could range from code-share all the way through to a JV and even cross equity stakes. (Are you listening BA?)

Different Challenges - Different Worlds - Different Answers

Cheers

DOJ nabs guilt pleas from 5 more airlines nets $504 million

Nearly doubling the fines it had levied on bad airline behaviour in coluding on cargo rates earlier this decade, the US DOJ announced that 5 more airlines have now copped a plea.

In this latest round AF-KL Group comes out as the bad guys. Of the 5 airlines named and shamed (and fined) they paid the lion's share of the fines $350 Million for Air France, KLM and Martinair. The balance of the fines came from 2 other airlines - Cathay Pacific and SAS.

The airlines also agreed to cooperate with the DoJ which would indicate that there are more guilty parties waiting to be caught and fined. Whether one of them will end up in jail like the Qantas man remains to be seen. For sure there is likely to be some civil suits filed once the criminal cases are all done.

So the US Government was funding part of today's fight in Iraq courtesy of some foreign airlines. I am sure there is a moral in here somewhere.

Cheers

Timothy

Little Trouble in Big China - the China Eastern Saga

Some of you (us) might be just a little confused in the shenanigans going on over at China Eastern. I know I am.

This doesn't make sense.

Singapore Airlines (SQ) made a play To take a minority stake in the Chinese airline (MU). It made sense. Bringing in Western Style discipline but with a distinctly Asian style that SQ has made all its own. Bringing MU up to World class standards wa very attractive to all concerned.

However not EVERYBODY agreed.

China's big fish airline Air China (CA) doesn't like too much competition. It is much happier if there is fractured and unaligned or weak competition. Oh yes and CA's parent China National Aviation Corp sits on MU's board. So just before the end of last year, China National Aviation Corp started making public noises about how it didn't like the merger and that it would offer a lot of money for a much larger stake in MU. Before you can say Kung Fu - they veto the Tamasek/SQ deal and then offer $1.9 Bn for 30% of China Eastern.

To nobody's surprise this was rejected by MU's management and board. At the same time Air China offered a tie up alliance with MU. Again rejected.

Now comes news that MU has jumped into the other side with an alliance with fellow struggler China Southern (CZ). Are you keeping up so far?

So let's see if we can sort out the alliance players here.

MU is not a member of any alliance.
SQ is in Star
CA just joined Star
CZ just joined Skyteam
CX (CA's partner and cross shareholding) is in OneWorld.

So what is the likely outcome?

For veteran China watchers like us... this is just another nice example of the convoluted arrangements in the Middle Kingdom. It will ultimately have a happy ending. Just don't expect one any time soon and the outcome will be a true example of face saving and complexity.

Got it?

And another thing... are alliances really that useful for consumers?