Despite the general lack of modern technology in the quaint little community of Ottumwa, Iowa I was able to keep informed on some of the news stories making the rounds in the airline/travel community. While there was a lot going on, a few of the recent news stories all seemed to have a similar theme in common: the oneworld airline alliance. It has definitely been a rough year for oneworld, and the news in the last few weeks doesn't seem to be trending upwards either.
First, a little background....
The oneworld alliance is a collection of airlines across the globe who have agreed to collaborate in order to provide a higher level of service to their customers. The members include American Airlines, British Airways, Iberia, Finnair, LAN, Royal Jordanian, Cathay Pacific, Japan Airlines, Malev, Mexicana, and Qantas. Additionally, S7 Airlines from Russia and Kingfisher Airlines from India are on deck to join the alliance in 2010 and 2011, respectively. The alliance allows members to code share and sell tickets on another members plane as if it were their own plane. For example, I live in Chicago and am a loyal American Airlines (AA) customer. Unfortunately, AA doesn't fly to South Africa. In the age before alliances, I would have had to have flown AA and switched over to another airline to reach my intended destination. Now, I can simply log onto AA's website and book at ticket to South Africa. I'd take AA to London or Madrid and then connect to a British Airways or Iberia flight. My ticket will say its an AA flight, and I will earn miles and benefits as if it were an AA flight. Additionally, I will have lounge access and all the preferential treatment loyal airline fliers receive from their home airline. The idea of an alliance is to make global travel seamless for the traveler as the airlines cooperate on policy, procedure, and in general attempt to maintain a similar standard of service.
While I do not believe in any way, shape, or form that the oneworld alliance is anywhere near falling apart, it certainly seems like they have been struggling to maintain the quality level of service they've been known for in the past. Some examples:
- In the earlier part of the year, Japan Airlines (JAL) was struggling with the possibility of bankruptcy. Plagued with financial issues left and right, the Japanese carrier was looking to cut costs and increase revenues wherever they could. The corporation entertained the idea of leaving the oneworld alliance for the SkyTeam alliance. While many oneworld carrier do have flights into Japan, SkyTeam rival member Delta Airlines trounces oneworld member American Airlines in the all important US-Japan connecting traffic market. The drama unfolded over several months when JAL finally announced plans to remain in the oneworld alliance. The JAL crisis revealed some of the vulnerability in oneworld's alliance strategy. Where as other alliances admit airlines much more freely, oneworld seeks to bring in "quality" carriers who do not provide redundant, overlapping service. With minimal overlap in the alliance, the loss of JAL would have cut oneworld's access to the crucial Japan/China/Korea markets that are vital for business travel. JAL's exit would have left Cathay Pacific (CX) as the only Asian partner. While a quality airline, CX hardly serves enough destinations in China, Korea, and Japan to allow oneworld to claim any substantial coverage in Asia where JAL to leave. Regardless, JAL's choice to remain in oneworld didn't come without a price, as the airline has decided to slash routes and capacity to reduce losses. JAL remains in the alliance, but its a weaker partner then it was before.
- Also facing financial crunches, AA and British Airways (BA) are currently negotiating with a few of their unions about work hours and pay among other things. BA has already suffered through a short flight attendant strike, and there are more announced on the horizon. The BA flight attendant union seems to strategically pick times of the year with high passenger traffic to go on strike, making the disruptions much more apparent and thus raising awareness of the dispute with the flying public. Similarly, AA is currently in negotiation with two of its employee unions that seem to be making very little progress. The possibility of a strike grows every day, which would cause more then a little bit of heartburn for the general flying public in the US as well as with frequent fliers on AA.
- oneworld's South American partner, LAN, announced last week that they plan to merge with another major South American carrier, TAM. TAM, unfortunately, is not a member of the oneworld alliance, but claims membership in the rival Star Alliance. You can already see where this becomes problematic. Once the two carriers merge, the question becomes which alliance will they choose? LAN is a South American powerhouse airline, which has a long and strong history with some of oneworld's carriers. Yet, while TAM is a new, up and coming airline and fairly new to the Star Alliance, the immense number of partners LAN would gain in the Star Alliance seems very lucrative. oneworld currently has 11 members with 2 confirmed pending members. Star Alliance currently has 28 members with 2 confirmed pending members. While the oneworld crew has a strong reputation for excellence, Star Alliance's combination of massive numbers as well as several well respected airline (Singapore Airlines, Thai Airways, United, Continental, Lufthansa, Asiana) makes for an alluring change. With oneworld's policy on not admit partners that would overlap existing service, the loss of LAN would reduce the alliance's ability to service South American destinations drastically.
- The last bit of news has been brewing for a few weeks but seems to have really exploded in the last few days. Newest oneworld alliance member Mexicana, has declared bankruptcy. The first rumblings of trouble began when Canadian government officials refused to allow several Mexicana flights to depart from Canadian airports as creditors began to call on the airline's outstanding debt. This led to Mexicana indicating bankruptcy was looking like an option and claiming its financial woes were largely based on the salaries of its flight attendants and pilots. Soon after, the airline ceased to sell international tickets on its website. While no future ticket sales were being made, the airline insisted that future flights would still operate. With bankruptcy now declared and a significant revenue stream severed, it looks less and less likely that Mexicana will be able to fulfill its obligation to passengers who have already purchased tickets. Combined with the possibility that LAN might leave the alliance after its merger, oneworld's position in Latin and South America looks like it could be in jeopardy.
While its clearly not the end of the alliance, oneworld has struggled in 2010. Considering oneworld is the alliance that I participate in as a member of AA's AAdvantage program, I have a vested interest in seeing that they continue to be profitable and successful. Here's hoping they can get their act together and make some big changes in the near future.
Safe Travels,
Leo
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