Made understandable by Bonsai Team© Airline Alliances Made understandable by Bonsai Team©

What is an Airline Alliance? No Generally accepted definition “Substantial” agreement Multilateral & Multinational Combination of route networks Common marketing brand

Deep reasons Solution to enter markets Regulatory framework Taking over a foreign airline Domestic services in a foreign market Second best way

Why such an alliance? Economies of scales & scope Synergy Service on hubs Maintenance Operational Less advertising costs Large scale marketing campaigns Enter new markets Economies of traffic density Synergy costs shared Marketing assets

Why such an alliance? “Branding” Better service More customers! Simpler travel More network routes Optimized schedules Better prices Full range of services Frequent Flyer Programs More customers!

Main hurdles Regulation State agreements Antitrust laws Fear from small airlines: Asymmetry, Instability Losing independence Difficulty of consensus

Types of airline alliances Strategic Alliances Joint Business Flights Pooling Franchising IT Sharing

Types of airline alliances Marketing Alliance Interlining Code-Sharing Joint services/engineering /maintenance

Apparition of these alliances 1944: ASA – Strict nationality provisions After WWII: “Flag carriers” US Deregulation several domestic airlines alliances with regional feeders Europe: deregulation starts 1986 1989: Northwest & KLM: codesharing 1992: Common Aviation Market Community Ownership

Apparition of these alliances Privatization of almost all the “flag carriers” stays national symbols “Open Skies” Agreements End of the bilateral system Liberalization : major catalyst Share of the world’s air traffic “The Airline Industry Guide 2003/04” Airline Business

Airline Alliances Today 3 main alliances Market Share

STAR ALLIANCE CHRONOLOGY 1997 - Air Canada, Lufthansa, Scandinavian Airlines System, Thai Airways International and United Airlines. 1999 - Ansett Australia, All Nippon Airways, and Air New Zealand. 2000 - Singapore Airlines, BMI, Mexicana, and the Austrian Airlines Group. 2003 - Asiana Airlines, LOT Polish Airlines, and Spanair . 2004 - US Airways, Adria Airways, Croatia Airlines and Blue1. 2005 - TAP Portugal, America West Airlines (merging with US Airways). 2006 - Swiss International Air Lines and South African Airways. 2007 - Air China and Shanghai Airlines. 2008 - Turkish Airlines and EgyptAir. 2009 - Continental Airlines and Brussels Airlines Launch date: 1997 World’s first and largest airline alliance Five founding airlines: Air Canada, Scandinavian Airlines System, Thai Airways International and United Airlines Full members now: 26 and 3 more companies are expected to become members in 2010. The creation of Star Alliance was a milestone in airline history because of its size. It sparked the formation of rivals: Skyteam and One world.

Star Alliance Lufthansa + United World largest airlines grouping 2000 aircrafts 173 destinations 130 countries Lufthansa + United World largest airlines grouping

SKYTEAM SkyTeam is the second largest airline alliance in the world. CHRONOLOGY 2000 - Aeroméxico, Air France, Delta Air Lines, and Korean Air 2001 - CSA Czech Airlines and Alitalia 2004 - Continental Airlines, KLM and Northwest Airlines 2005 - Malév Hungarian Airlines, Air Europa, Copa Airlines, Kenya Airways, Romania's Tarom as sponsored members. 2006 - Aeroflot 2007 - Air Europa, Copa Airlines, Kenya Airways and China Southern Airlines 2006 - Swiss International Air Lines and South African Airways. 2007 - Air China and Shanghai Airlines. 2009 - Continental Airlines and Copa Airlines move to Star Alliance. 2010 - Vietnam Airlines and Tarom are expected to become members Launch date: 22 June 2000. SkyTeam is the second largest airline alliance in the world. Four founding airlines: Aeroméxico, Air France, Delta Air Lines, and Korean Air The company slogan is “Carrying more about you” SkyTeam also operates a cargo alliance called SkyTeam Cargo.

SkyTeam Air France+ Delta Airlines 496 Destinations 117 countries 289 lounges

ONEWORLD Launch date: 1 February 1999. Oneworld is the third largest airline alliance after SkyTeam and StarAlliance. Six Foundings airlines: American Airlines, British Airways, Cathay Pacific, Finnair, Iberia, Quantas. The alliance has the biggest expansion in its history when Japan Airlines, Malév and Royal Jordanian. Oneworld was voted the world’s Best Airline Alliance in 2002, 2004 and 2005 Business Traveller Awards and named the World’s Leading Airline Alliance for the seventh consecutive year at the 2009 World Travel Awards. CHRONOLOGY 1999 - American Airlines, British Airways, Cathay Pacific, Finnair, Iberia, Quantas 2000 - LAN 2007 - Japan Airlines, Malév, Royal Jordanian, 2009 - Mexicana

oneworld British Airways + American Airlines 561 Destinations 131 countries 380 lounges

Market share by network capacity

Emirate’s model 1993 - Cooperation agreements with Cyprus Airways 1994 the sixth largest airline in the Middle East. Emirates received a 10 year contract to manage SriLankan Airline Incorporation and growth: an Emirates’ strategic option -> the largest airline in the Middle East The Gulf War had helped Emirates by keeping other airlines out of the area. A partnership agreement with US Airways entered in the fall of 1993

Facts about airline alliances Fragmented sector 6 main 30% market share Consolidating 70% codeshare agreements 50% linked FFP Only 15% joint ground/inflight facilities Centered around 1 American & 1 European Alliances with independent airlines Also for cargo airlines: WOW Alliance, SkyTeam Cargo, ANA/UPS Alliance

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