As the first of the global airline alliances celebrates its 10th anniversary, we look at the impact they have had on the industry. Sheron Crossman reports When five international airlines came together on May 14, 1997, to form what was to become the world's largest airline consortium, Star Alliance, noone could have predicted the mind-blowing impact it would have on the way the airline industry does business. Or, indeed, the way in which we all fly. Today, some 80% of total airline capacity in terms of available seat kilometres is tied up with one of the three major alliances – Star, Skyteam or oneworld, between them carrying two-thirds of all air travellers. And no one seems more surprised at their global success than the alliances themselves. Speaking at Star Alliance’s 10th birthday celebration, CEO Jaan Albrecht ommented: “We have defied many sceptics who saw us as a marketing gag which was only going to last two years. Today, nearly 30% of global air travellers use the services of our member carriers or, seen from an overall industry perspective, two-thirds of worldwide travellers are with one of the three airline alliances.” Why anyone should be surprised at the growth of the big three is less clear. The benefits, at least for them, are obvious. Many alliances started as only a code-sharing arrangement, but the extended and optimised network that joining an alliance provides has supplied the airline industry with its very own Shangri-la. Passengers can be ticketed to destinations far beyond the reaches of a single carrier’s own network, giving partners a global marketing platform that non-members haven’t a hope of competing with. Then there are the obvious cost reductions through sharing of sales offices, maintenance and operational facilities, staff at check-in desks and boarding gates, and investment and purchase benefits from high volume discounts. Travellers gain, too, from lower prices as a result of cheaper operational costs on a given route, more departure times, more destinations within easy reach and shorter travel times due to optimised transfers. Faster mileage rewards are possible by earning miles for a single account on several different carriers, and there are round-the-world tickets, allowing cut-price global travel. Plus the allimportant use of alliance partners’ lounges. But there are disadvantages: higher fares when all competition is erased on a particular route, for example, or less frequent flights – two airlines might well each fly three times a day on a given route, whereas the alliance might cut this to only four in total. However, there’s little doubt alliances are alive and well and in 2008 could become even more powerful at least in the UK. Next March, British Airways (oneworld) is set to move into London Heathrow's gleaming new Terminal 5, while the rest of the airport is reorganised by alliance groups. Star Alliance members will be found in Terminal 1, the rest of oneworld in T3 and Skyteam in T4. From the perspective of the business traveller, the wide network of alliance routes currently available makes life far simpler in terms of ticketing and checked-through luggage, never mind all those frequent flyer programmes, upgraded tickets and access to achingly inviting business lounges, offering refuge from the masses. Star Alliance is the biggest of the three groups with 23.6% market share. As part of its 10th anniversary celebrations it has launched a global customer promotion, ‘the way the Earth connects’. To enter, customers must register and fly an international segment on any of the 17 Star Alliance member carriers between May and November to win an all expenses paid round-theworld luxury trip. In addition, Star is launching Biosphere Connections, assisting with flights for field workers from three environmental agencies. Skyteam ranks second with a 20.7% market share. In addition to China Southern Airlines, the following carriers are on track to become future associate members: Air Europa, (sponsored by Air France), Copa Airlines (sponsored by Continental Airlines), Kenya Airlines (part owned by KLM), Middle East Airlines (sponsored by Air France) and Tarom (sponsored by Alitalia). Oneworld is third in size, capturing 13.5% of the market. Revenues from fares and sales rose more than 10% last year to almost $675 million, the most financially sound of the three alliances, it claims. These results will only grow in 2007 with its additional member JAL, and new associates Malév Hungarian Airlines, Royal Jordanian and affiliate new member LAN.
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