Alliance Panel at the Phoenix Aviation Symposium

The panel on alliances turned out to be one of the more interesting ones at the Phoenix Aviation Symposium. It could have been because the always entertaining American’s SVP of Government Affairs Will Ris ended up joining in, or it could have just been the content itself.

The discussion started with the broad question - why were alliances formed? The answer, according to Christian Click, VP Corporate Office for Star Alliance was that alliances were created to provide global reach, seamless service, and worldwide recognition for travelers. Of course, I think the real answer is that they were created because airlines saw the opportunity to make more money. But those are saying the same thing - all those customer-facing improvements will help bring in more money.

Fred Thome of United was asked whether United was happy with the alliance experience, and not surprisingly, the answer was, “Yes, it’s been essential.”

The discussion quickly turned toward the topic of antitrust immunity (ATI). This has been the hot topic lately as Rep Oberstar (D-MN) recently introduced a proposal that would put an automatic expiration date on these deals. The panel, however, was unanimous in agreeing that ATI was key until cross-border mergers are allowed for US carriers.

Will Ris took the discussion and made his case for the proposed link-up, including ATI, between American and British Airways. The link has been tied up with the government for quite some time, and the true success of the oneworld alliance is thought to hinge on this.

This is a natural progression that we’re seeing here, skewed by the fact that we have unusual laws in our industry. Because out natural tendency would be to consolidate on a global basis. Is [an alliance] worth it? It’s worth it in the sense that if your competitors are doing it, by god you better be in one of those networks. We do live now in a world of alliance competition. We’re either going to have two or three. If [oneworld] doesn’t work that’s going to be bad for the consumer.

Bartosz Czajka of LOT Polish Airlines also agreed that ATI was essential, though he was clear that the benefits of an alliance don’t approach the full benefits of a merger. “Codesharing is not enough to be really attractive to an airline. You need an ATI and then a joint venture when you have a situation where you have metal neutrality. The alliance has its limits. The costs synergies stop at some point. We don’t buy aircraft together, for example. . . . Even with a joint venture, you need to agree on certain things. With a merger there’s only one cashbox and that’s even better than a joint venture.”

But the view from the low cost carrier world was a bit different and not as willing to jump toward the end game here. Stephan Nagel of Air Berlin didn’t think that alliances were necessary, but he did think it would continue to move toward partnerships thanks to Southwest. “Southwest is seen as the mother of all low cost carriers, so when they start [partnering internationally], others will follow.”

Fred Thome, reading often from his notes on stage, brought the discussion back to the customer for a second. “You have to focus on what the consumer wants or you’re out of business.”

But when talk turned to the true benefit to customers of combining alliance partners in a single facility at an airport, it wasn’t the customer experience that was driving the move but rather dollar signs. Klick noted that the consolidation of Star Alliance carriers at Paris/Charles de Gaulle saves a total of $2 million per year for the Star carriers.

Ultimately, Ris put it all in perspective by suggesting that airlines focus on giving customers what they value and not necessarily what they want. When you provide what customers value, whether it’s an alliance or anything else, you’ll get it right more often.