Air Berlin + OneWorld = What?

Like many other people, I went "Hub?" with the announcement of Air Berlin joining Oneworld.

I recognize that many people think that AB is a LCC carrier but it has been Hybrid for a long time and fails the classic categorizations - FF Program, Connections, GDS Participation, Full Service Flights, Premium Service etc etc. It does indeed operate 3 separate business models:
LCC like,
Regular/network services,
Charter carrier.

For a detailed look - go to Anan.Aero who has done a nice job in assessing the move.

So I can only think of two reasons.

Reason A - OneWorld wants a PR story as its a lite news week after Farnborough.

Reason B - OneWorld wants to tweak the nose of the Kaiser (aka LH).

Let me know if you can think of another reason

Cheers

OneWorld, A New Force?

OneWorld has come back from the brink of extinction that so nearly doomed its existence. Now aggression has returned to the team.

So having retained JAL - the team has plugged a hole in their environment by signing Kingfisher as the Indian airline. This leaves as a foregone conclusion that Jet Airways will now partner with Skyteam or risk being left out in the cold. In turn this means that there will be a falling into the ranks by many of the unaligned carriers.

The likely independents are the stalwart holdouts - Emirates and Virgin.

So what's next - I think we will see a fair degree of activity with the Alliances over the next 12 months. With Transpacific and Transatlantic alliances being formed and BA/QF immunity on the Kangaroo route seeing renewal last year - there will be some added complications emerging but things should settle down into a regular pattern. Ultimately I believe that Alliances will reduce the competition. I remain hopeful that independent players will pick up the slack.

Cheers

OneWorld Breathes a Sigh of Relief

JAL Stays with OneWorld and announces AA as its "new" partner.

In what the WSJ called a "come from behind" victory for AA - it would seem the legal risks became the big issue.

Anti competitive restrictions could have been pretty intense. There were 2 challenges. AMR had already threatened a protracted legal battle if Delta teamed up with JAL. And the other issue would have been a potential anti-competitive challenge.

So OneWorld can breathe a sigh of relief. However does this make JAL better or (more correctly in y opinion) more viable? The jury will be out for a while on this one.

Cheers

Its Offical - JAL Defects To Skyteam

Well Not Quite Official but on Monday according to many sources in Japan it will be.

So let's look beyond the headline and consider the impact. For JAL its not business as usual no matter what happens. The airline is in deep trouble and the lifeline it has now is not without limits - least of which will be time.

OneWorld will take a major blow as a result of the defection. American is not likely to take this lying down so we can expect there will be some legal knots to work out. This will take some significant amount of time.

Skyteam like Star is developing a two tier membership. JAL and DL will develop a formal Transpacific Immunity Pact that will mirror the ANA-UAL pact and indeed it will resemble the Trans Atlantic Immunity requests that have resulted in pacts on the Transatlantic such as A++ (LH, UA, AC and CO) and the Skyteam version (DL, AF/KL).

The obvious strengthening ties between the various hubs will occur however perhaps we can peer beyond this and look at the impact on lesser members of the Alliances. If OneWorld is to remain viable AA and BA have to get closer. Also they have to find another Asian Partner. KAL and CA are interesting possibilities. If Air China can tolerate Eva Air the surely CX can coexist with either KAL or CA. However QF may emerge as a powerful force not through mainline but through the footprint of JetStar.

There is going to be a lot of shuttle diplomacy over the next few months as the carriers jockey for position in their respective relationships.

With the opening up of markets in Asia - indeed Open Skies coming to the ASEAN nations - we can expect competition to emerge and indeed start to make a lot more sense with the lowering of tariffs and freedom of movement improving.

It will be interesting. For now - let's sit back and watch the battle for Japan play out.

Cheers

JAL: Gloves vs. Honey from OneWorld

So having tried to sweeten the pot to (by some reports) nearly $2Billion, the OneWorld group are now resorting to some subtle and not so subtle threats if JAL moves to rival alliance Skyteam.

According to Aviator.Aero:

American Airlines warns alliance partner Japan Airlines JAL of lengthy and messy fight if it switches allegiance to Delta Air Lines.

Ouch

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

Not A Great Day For AA/OneWorld

All humour aside, OneWorld received two bits of bad news yesterday.

Firstly from Asia came the news that the Japanese Government is unlikely to provide a full bailout for JAL. JAL's stock in recent days has risen on reports that Delta has won the dance card of the old lady JAL.

Then today the US Dept. Of Justice nixed the BAAABI (BA, AA, Iberia) Alliance. However this is last one may not be that bad. The DoJ also tried to nix the CO/Star Alliance partnership. The DoT is the ruling authority in the case. They could well do the same and rule in American's favour.

Finally our hope is that the injuries sustained in the accident to AA 331 are minimal - so far there are reports of injuries but no fatalities. The aircraft (Boeing 737-800) whose route was DCA-MIA-KIN, broke in three pieces after a landing overrun tonight in what was pretty foul weather. So far 40 injuries have been reported and 3 possibly serious. The aircraft has been reported to be one of the older 738s in AA's fleet.

Cheers

JAL Gets Lifeline - Short Term - And What of the Future?

JAL - still reeling from the huge losses - has secured a brief lifeline from its troubles. In Japan the line between government and industry is not as clearly defined as in other economies. This is not a criticism - just a statement of observation. The loan was secured from a company (Development Bank of Japan Inc) 100% owned by the Japanese Government's Ministry of Finance.

According to media reports in Japan the size of the loan is over 100 billion Yen (approx $1.1 Billion) roughly equivelent to the past 6 months worth of losses.

Effectively JAL its management and the Government entity charged with fixing broken companies in Japan - Enterprise Turnaround Initiative Corp. of Japan - has 6 months to right the ship. This is hardly enough time for them at the moment to do that. So the clock is ticking.

It seems that a Billion here a Billion there is the game for JAL. The ETI Corp and JAL have three basic tasks in front of them. In a normal economy and in a normal world any of the three would be regarded as a significant challenge. These are not normal times.

The Three Challenges are:

1. Restructure the corporate financial structure of JAL all without appearing to file the equivalent of Chapter 11.
2. Restructure the company work practices and functions to streamline the company and make it effective as an entity against the competition of ANA and in a new more competitive local market.
3. Secure an international partner who will help power the business to a sustainable position outside of the domestic market.

I have commented before that the size and scale of JAL's issues are greater than most people had imagined. The amount of unhappy people will be legion. These range from workers who will lose their jobs, to investors who will lose their stock value to bankers who will also be out their cash. At this point I find it hard from the international perspective to see how American/OneWorld can benefit JAL more than Delta and Skyteam.

Against this backdrop are some interesting negotiations on OpenSkies between Japan and the USA. The new Japanese Administration are getting a baptism by fire. I can only wish for the best for everyone concerned. But as in many cases the answers do not lie in the old ways. The Government of Japan has an opportunity to foster the development of a new order in Air Transport in Japan. Opening the market to Low Cost Air services would be a way to expand the market and ultimately to turn one of the most closed markets into a true example of open competition where land (high speed rail) and air can compete fairly. Lowering the cost of flights to Japan could open up a huge tourist market. Perhaps the Japan of 2010 is ready for this.

Now that's a thought

Cheers

Alliances - Face Heightened Scrutiny

The good old days of carte blanche acceptance of Alliances may be coming to an end.

The Oneworld proposal seems stuck in no man's land. It was supposed to be given the green light (with changes of course) last week, but so far nada.

On both sides of the Atlantic - the regulators are watching much harder. The last approval (Continental + Star) was given the all clear by the DoT over the objections of the DoJ. It wont be that easy next time round. On the EU side - the regulators sent a 400 page document to the participants. Probably this will mean that there needs to be slots to be surrendered at LHR which seems to be over Willie's dead body.

This is a song that is going to be sung for quite a while yet.

Cheers

Gol Is American's New Gal

with TAM running around with Star in her eyes, American is clearly feeling jilted. This means that the rearranging of the deckchairs is going on in LATAM. So the JJ/AA code shares look like being swapped for UA/CO based Code Shares. So this puts American at a disadvantage. Not to be outdone (well they waited a while before they started officially dating), so now the American Broad has a new gal - GOL.

AA with up to 69 flights a week US to Brazil clearly needed a new dancing partner. So AA and Gol (yes another LCC interlining) will go steady for a bit. Whether it becomes more, remains to be seen.

And over in the blue corner remains Skyteam with almost no one in LATAM to dance with.

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

Tears for BA?

British Airways seems to be struggling with its attempts to sleep with its family members.

The Qantas proposal seems to be highest on the agenda but the big hidden question is whether the Oz Government will allow the merger to go ahead without a concession on the Transpac routes. If they do - then you can be sure that the WTO would have something to say about that and for sure Emirates and Singapore Airlines will be screaming blue murder.

New Qantas CEO Joyce (another Irishman running an Anglo speaking Carrier) is pouring a little cold water on the BA story. However he is throwing buckets on a 3 way. There is no way - in his opinion that the Kangeroo is looking to consummate anything with the Spanish. So Iberia is getting even more PO'd waiting. It will probably end in tears.

In all of this AA is remarkably quiet. Perhaps to counter the other noise AA should put out a counter slogan to Virgin Atlantic's famous "BA-AA No Way" paint job with one like this: "AA-BA Some Way Please"

Cheers

Rumour of the Day - QF+BA again

OK so who is smoking the bad stuff, yesterday's rumour from the weekend was Etihad buying Emirates. Today its a marriage of Qantas and BA.

There is no way that the Oz regulators would ever allow this. Why? Because the first casualty will be to open the Pacific routes that SQ and EK covet so greatly. However there might be something in the back story - IE that the IB-BA engagement is having troubles.

QF and BA already get the synergies that they want from their prior liaison and the OneWorld Alliance.

Hey give me some of this stuff - it must be good!

Far Out Man..............

Star's new 3 Amigos - TAM, COPA, TACA

Ten years ago - Airbus cut a milestone contract for narrow bodies with 3 Latin American Carriers - TAM, LAN and TACA. This mega deal as it has turned out allowed all 3 to get basically the same airplanes at a sweetheart deal. It became known as the Three Amigos deal.

A decade on and Star seems to be doing the same thing with COPA replacing LAN (a firm member of Oneworld) and now having its own 3 Amigos.

COPA by dint of its relationship with Continental will join as an associate, exiting like its its buddy CO from Skyteam. TAM replaces Varig. The odd one out seems to be TACA who keeps its own counsel. Taca will continue to go its own way but I suspect that Delta is going to be wooing and wooing Sr Kreit. So dont count this one as a permanent done deal.

However this creates a big hole in south America for Skyteam. They need to fill it. Can anyone guess if Avianca/Synergi will be visiting Atlanta any time soon?

The Party's Getting Started - TAM is the Star!

Yes friends the new Star of Latin America is TAM. TAM has been unanimously voted in as the next airline to join the Star Alliance. Not really a surprise but it fills a hole nicely.

So what's next - Oneworld is likely to want to get closer to LAN and then there is TACA still sitting out there, currently they have code shares etc with Iberia, Avianca and United. The odd one out at the moment is Skyteam who doesn't have anyone south of Aeromexico.

Let's Salsa!

Whose missing in the Star Crossed Love Fest?

The announcement today of Continental's formal application to join the Star Alliance and join with United Airlines and 8 other Star members in creating a gigantic transatlantic alliance has a missing member.

It looks like US Airways is being cold shouldered here.

Additionally a special "gang of 4" (AC, CO, UA, LH) has been formed to compete with the other SkyTeam "gang of 4" (AF, KL, NW, DL) and the proposed "gang of 3" (BA, AA, IB) Oneworld members to create another transatlantic JV.

I hope you are following so far.

Well the Skyteam4 made a great deal of noise about this when they started 3 services LHR-LAX, SLC-CDG and JFK-LYS. True seamless experience right?

Actually no.

I tried to purchase a ticket and upgrade from LAX-LHR using my super wonderful status on DL and was told (in no uncertain manner) that no this was actually an Air France flight and that therefore no upgrade for Delta passengers was allowed.

So much for this great idea. This new Star love fest (sans US Airways) should be a true seamless service but like many things in the airline business - its all show and PR rather than any actual substance.

When will they ever change? Comments directly to the Professor or leave them here.

Cheers

Timothy

Hurray! Someone is listening. CO rejects UA and US.

Larry Kellner and the Houston Oilers are to be congratulated - no urge to merge this time around.

Staying independent is now a prudent course. Merging with a bigger United or a sick US Airways might lead to Houston losing another home team.

Let's hope AMR seems this the same way and doesn't pursue either of the ugly sisters.

The WSJ is speculating that AMR will attempt to persuade CO to jump from Skyteam to OneWorld. CO was careful to leave that door very publicly open. Of course Star would benefit enormously if they dumped at least one of the two sick US airlines and replaced them with CO. With two transatlantic hubs (EWR and IAH) CO is a better bet than either UAL or US for Star.

Interesting... curiouser and curiouser.

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?