Alliances
Last updated 2018 United Airlines, B.767, Munich airport with the city of Freising, 2013 (WS) During the days of Pan American’s “round-the-world” route, great airlines were eager to have a route network spanning the globe. However, they lost money by flying almost empty on the remotest sectors. Airlines had to find an answer. Already in 1959 Air France, Lufthansa, Alitalia and Sabena were reported having concluded a marketing agreement “Air Union” – forgotten now. An early example was Alas de America, an alliance formed in 1996 comprising Aeromexico, Mexicana and AeroPeru, in which Delta held a 33% share (according to R.E.G. Davies). Alliances of standard carriers were the solution, intensifying global marketing agreements, not to be confused with mergers. By sharing the traffic within an alliance, airlines could give away unprofitable route sectors to the alliance partner of the relevant region, operating more economically. As newcomers were eager to join an alliance, strong limits had to be set. “For aspirants it is very expensive to become a member of one of the three large global alliances”, commented Jens Flottau in Sueddeutsche Zeitung (Jan28, 2011): “The newcomers have to invest millions mainly into the information technology, must prepare their frequent-flyer programs and have to do over timetables and routing (…). The advantage, mainly a rise in revenue, is coming not immediately”. In 2000 already, among the three most important alliances, Star Alliance achieved 650 billion RPK (revenue passenger kilometers), Oneworld 492 billion and SkyTeam 367 billion. They held an estimated market share of 21.5%, 16.3% and 12.2% in the ICAO global scheduled traffic record. Together with the much smaller Northwest/KLM Wings and the Qualiflyer alliance, the airline groups forming these alliances attained 1,852 billion RPK in 2000, compared to ICAO’s c.3 trillion RPK. It meant that the alliances had an impressive 61.4% share in total scheduled traffic.
Star Alliance It was initiated by Lufthansa under Chairman Juergen Weber without intention of creating mergers. In 1994 and 1995 already Lufthansa established the biggest route network by cooperation with United Airlines and Thai Airways. In 1997 Star Alliance was formed in Frankfurt by Lufthansa, United, Air Canada, SAS and Thai International, then joined by VARIG, Ansett Australia, Mexicana, ANA, Singapore Airlines, Air New Zealand, Asiana, and other companies. Important was the accession of US Airways in 2004, TAP in 2005, Air China in late 2007, signed on occasion of chancellor Angela Merkel’s state visit, then Turkish Airlines and Egyptair in 2008, Continental in 2009, Ethiopian and Aegean Airlines in 2010. Mexicana has left in 2004, caused by its ownership by Cintra, Shanghai Airlines left on account of being acquired by China Eastern, Ansett and Varig have collapsed, TAM of Brazil abandoned Star Alliance after fusion with LAN, while TACA joined its partners Avianca and Copa as Star Alliance member. Spanair collapsed in 2012. In 2008 AiRUnion of Russia had announced to join Star Alliance, but then it failed. Air India had disputes since 2007, then stopped, but in 2014 Air India got membership. Around 2012 participation of Jet Airways of India and EVA Air of Taiwan was reported being expected. When in late 2013 US Airways was incorporated into the American Airlines Group, it changed to Oneworld. Star Alliance members were listed by Wikipedia in 2015: Adria Airways, Aegean Airlines, Air Canada, Air China, Air India, Air New Zealand, ANA, Asiana, Austrian Airlines, Avianca, Brussels Airlines, Copa Airlines, Croatia Airlines, EgyptAir, Ethiopian Airlines, EVA Air, LOT, Lufthansa, SAS, Shenzhen Airlines, Singapore Airlines, South African Airways, Swiss, TAP, Thai Airways, Turkish Airlines, United Airlines. Affiliates are not mentioned here.
From Qualiflyer to Star Alliance In 1992 Swiss citizens voted against the EU and Swissair CEO Otto Loepfe developed the secret plan ‘Alcazar’, targeting a future merger between Swissair, Austrian Airlines, KLM and SAS in order to avoid international isolation. The plan however was fiercely criticized and Loepfe’s successor Philippe Brugisser built up the independent SAir Group with 49% shares in Sabena, AOM (formerly Air Outre Mer, both carriers collapsed) and LTU, and did not achieve membership in one of the leading alliances. The Swissair Group undertook the courageous attempt to start the Qualiflyer alliance together with Sabena, Austrian Airlines and others. However, Swissair’s longstanding partner Singapore Airlines and also Austrian joined Star Alliance, and with the breakdown of Swissair and Sabena in 2001, the Qualiflyer alliance ended. Mysteriously by some trade press had been reported a Swiss intention to stop the passenger trains Zurich - Munich. LOT, in late 1999 entered by the SAir Group, joined the Star Alliance in 2003. For Qualiflyer partner TAP of Portugal with its astonishing African routes, Star Alliance membership in 2005 came as a rescue. South African Airways was rescued in 1999 by the SAir Group with a 20% stake, but after the group’s collapse, the amount was paid back and in 2006 it joined the Star Alliance. The new flag carriers Swiss and Brussels Airlines joined Star Alliance with acquisition by Lufthansa – see the chapter Mega Groups.
Oneworld In 1998 British Airways, American Airlines, Cathay and Qantas founded the Oneworld alliance, realized in 1999. Canadian Airlines International was among the initiators, but in 2000 it was integrated into Air Canada, a Star Alliance member. The Oneworld headquarters were relocated from Vancouver to New York. For the North Atlantic traffic, Oneworld first had to overcome odd antitrust regulations. Oneworld was soon joined by Iberia, Finnair, LanChile and Aer Lingus. The failure of merger talks between British Airways and KLM in 2001 had threatened the alliance. British Airways held a 25% stake in Qantas. When its Australian competitor Ansett had collapsed, negotiations about an equity alliance between Air New Zealand and Oneworld partner Qantas started. Swissair’s successor Swiss ended negotiations with Oneworld when the takeover by Lufthansa had come into consideration. Gulf Air, already code-sharing with American Airlines, became keen to join an alliance, possibly Oneworld. Unaligned partnership with Japan Airlines already was more significant. In 2007 Royal Jordanian Airlines joined Oneworld. Aer Lingus and bankrupt Malev have exited and aspirant Kingfisher collapsed. Qatar and Sri Lankan entered next. British Airways and Qantas’ were rivaling on account of Qantas’ new cooperation with Emirates. Air Berlin, entered by Etihad, joined Oneworld in 2012 and collapsed in 2017. In 2013 the merged LATAM, South America’s largest airline group, has definitely become a Oneworld member. And with the merger of US Airways into the American Airlines Group, Oneworld became still more important. Oneworld members were listed in 2015: Air Berlin, American Airlines, British Airways, Cathay Pacific, Finnair, Iberia, Japan Airlines, LATAM, Malaysia Airlines, Qantas, Qatar, Royal Jordanian, S7 Airlines, Sri Lankan. Mexicana had joined in 2004, but later it was inactive. When in 2015 the Irish government agreed on a sale of Aer Lingus to the British Airways IAG Group, the return to Oneworld became logic. In 2018 Qatar’s membership has become disputed. In 2019 Royal Air Maroc joined Oneworld.
SkyTeam Skyteam, started by Air France, Delta Air Lines, Aeromexico and Korean Air in 2000, became the third among the important alliances. Already in the same year it was joined by CSA Czech Airlines and in 2001 by Alitalia. In 2003 KLM filed for SkyTeam membership. A marketing alliance between Delta, Northwest and Continental however was a question for the U.S. Department of Transportation. In 2004 Aeroflot, courted also by Star Alliance, signed a MoU with SkyTeam for full membership. China Southern Airlines joined SkyTeam in 2007. Continental changed to Star Alliance in 2009, anticipating its merger with United. Copa of Panama left with its connection to Continental and Star Alliance member Avianca. Northwest Airlines disappeared, being integrated into Delta Air Lines in 2010. Wikipedia listed in early 2013 the SkyTeam with headquarters in Amsterdam, comprising Aeroflot, Aerolineas Argentinas, AeroMexico, Air Europa (of Spain), Air France, Alitalia, China Airlines (of Taiwan), China Eastern, China Southern, Czech Airlines, Delta Air Lines, Kenya Airways, KLM, Korean Air, MEA, Saudia, Tarom, Vietnam Airlines and Xiamen Airlines (of China Southern), in 2014 followed by Garuda Indonesia Airways. And alliance membership can lead almost to a takeover. In 2013 Korean Air entered Czech Airlines with a 44% share (according to B.I. Hengi). In 2013 Russian media have rumored that Aeroflot could leave SkyTeam. In 2019 China Southern left SkyTeam.
Delta Airlines bought in 2015 a tiny minority stake of 3.55% in SkyTeam partner China Eastern and in 2017 China Southern signed an agreement to sell an equally minuscule share to American Airlines, whereupon Li Xiaojin, a professor in aviation economics, commented: “As global airlines operate on a slim profit margin, they need to maintain revenue and minimize costs through mergers and acquisitions” (China Daily, March29, 2017). In 2003 Flight International (Oct14) had pointed out future possibilities: “South African Airways is already pursuing an alliance of African carriers around the continent.” But South African, Egyptair and so many other ones joined Star Alliance. At the turn of the century, Star Alliance was the leader with 650 billion RPK, followed by Oneworld and SkyTeam. Later SkyTeam leapt ahead of Oneworld, e.g. in 2007 with a share of 25.7%, behind Star Alliance with its 29.1%. Compared to total global RPK, the three important alliances at that time held a share of 76.3% in global traffic. Remarkable is the fact that still after the first decade of the 21st century some famous airlines, e.g. Emirates or Etihad, had not joined one of the three important alliances. But Emirates started cooperation with Qantas and JetBlue, Etihad with Lufthansa, Japan Airlines with Garuda and all the cooperations cannot be listed here. Apart from the alliances, during the first years of the new century there were already more than 500 marketing agreements among more than 150 mainline passenger airlines, and the number rose steadily. Code-sharing for certain routes emerged everywhere, impossible to survey and confusing for the passenger. For an updated list of the leading alliances’ members see Wikipedia.org. Such a list is not the item of this historical analysis, facing the steady coming and going of alliance members. For mergers beyond alliances see the next chapter Mega Groups. |