Posted by Seth on October 22, 2010 under frequent flyer, News | 
The SkyTeam alliance, oft faulted for their lack of coverage south of the equator, is working to rectify that situation with the announcement this week that Aerolineas Argentinas is expected to sign an agreement to join the alliance later this month. The carrier will aim to be fully integrated into SkyTeam at some point in 2012.
The move will open up a number of new destinations for SkyTeam in South America. It will also open up a number of routes to connect the dots between other cities served by the alliance. With the uncertainty presented by the recently announced LAN/TAM merger and those carriers participating in OneWorld and Star Alliance, respectively, this move ties up one of the larger carriers in the continent as part of SkyTeam.
Personally, I’m hopeful that they can be integrated quickly and that I can use points from various SkyTeam programs for interesting frequent flyer redemptions, including Ushuaia and the antipodal routing of Buenos Aires – Auckland – Sydney. I don’t know why, but I really want that line on my map.
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Posted by Seth on August 27, 2010 under News |
One of the conditions handed down by the European and US authorities for the approval of the American Airlines – British Airways anti-trust immunity application was the ceding of slots for service between London and certain US airports. Delta has decided to take advantage of this opportunity. They have applied to the appropriate authorities to serve both Boston and Miami from London’s Heathrow airport. Based on the limited number of slots at Heathrow currently held by the SkyTeam alliance, it appears likely that the application will be approved. If awarded the new service Delta would operate 10 daily frequencies from Heathrow to 6 different US gateways:
- New York JFK: 3x daily
- Boston: 2x daily
- Miami: 1x daily
- Minneapolis: 1x daily
- Atlanta: 11x weekly
- Detroit: 10x weekly
In addition to the new London service, Delta is also looking to beef up its presence in the Raleigh Durham market. Noting a significant increase in traffic from RDU this year, the carrier is adding 14 daily frequencies, increasing service by more than 25%. Included in these additions is service to three cities not currently served by Delta from RDU of which two have never seen Delta service from RDU. Additionally, Delta has recently opened a SkyClub lounge in RDU, demonstrating their commitment to the market.
Of course, it is entirely possible that part of the traffic increase is based on the fact that Delta has been running a rather significant promotion for flights from RDU and that when the promo ends the volume will decrease as well. Then again, maybe the fact that the region is pretty stable is really what is driving the expansion. Delta will be competing against Southwest on three of the routes. A number of the new frequencies are on the somewhat miserable CRJ-100 aircraft so that might not be so great either, but who knows.
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Posted by Seth on July 21, 2010 under News |
Following on the approval granted by the EU last week, the US Department of Transportation has approved the request from American Airlines, British Airways, and Iberia to have anti-trust immunity on their service in the highly competitive and lucrative transatlantic market. The approval was granted 12 years after AA and BA initially requested such permission and after being denied repeatedly for most of that interim period. The approval is not without conditions, but generally they are minimal compared to the benefits that the airlines will receive from this approval.
The airlines will be required to give up 4 daily slot-pairs at London’s Heathrow airport, two of which will be ear-marked for service between London and Boston. This divestiture requirement is less strict than that required by the EU and significantly less than some competitors, namely Virgin Atlantic, would have liked to see. The DoT dismissed Virgin Atlantic’s concerns rather abruptly,
Furthermore, Virgin Atlantic’s analysis of the constraints at Heathrow airport does not prove that the agreements are anti-competitive and should, therefore, be disapproved. We directly addressed the issue of Heathrow access in the Show-Cause Order. Even though the immunized oneworld members will collectively hold almost half of Heathrow slots, there are still a number of other competitors at Heathrow. There are also some important mitigating factors that Virgin Atlantic does not adequately consider. First, since the provisional application of the U.S.-EU open-skies agreement, at least three major airlines have begun serving the United States from Heathrow, and the overall U.S.-Heathrow market has enjoyed an expansion and diversification of services.27 The new entrants have enhanced competition and will continue to exert competitive discipline in the market when the joint venture is implemented.
The DoT is correct that there have been a number of new entrants into the Heathrow market but those companies have paid a sizable sum for those slots. Moreover, fares have increased significantly in the US-London market. It is not clear that competitive discipline has truly remained even with the competition, and this approval will reduce competition in the market.
Also interesting in the filings is the support that the oneworld partners received from parties who are exposed to potential harm from the move in terms of reduced competition. The Dallas-Ft. Worth airport authority supported the application even though BA and AA are the only carriers offering non-stop service to Heathrow from the airport. The fact that is is a major hub for AA certainly doesn’t hurt the claim, but ultimately both the airport and the DoT are supporting the idea that connecting traffic is sufficient to preclude anti-competition concerns.
As DFW pointed out in its reply, the connecting services available in the nonstop overlap markets discipline the fares charged for nonstop service. For example, in the case of the Dallas/Ft. Worth-London route, which concerned Virgin Atlantic because it will effectively have one competitor in the nonstop market following the transaction, we determined that approximately one-quarter of the passengers already use connecting services in the overall city-pair.
The approval of this request was not at all unexpected, though the very light divestiture requirements are somewhat so. The DoT has previously approved similar deals for SkyTeam and Star Alliance; continuing to deny similar benefits to oneworld would amount to a regulatory competitive disadvantage being applied to the carriers. Fares will be higher in many cases, not lower. It is rare that reducing competition results in anything else; that the DoT can suggest otherwise is disheartening. It is even more confusing when considering the restrictions that the DoT applied to the proposed Delta/US Airways slot swaps which would have similar impact on competition.
The DoT release can be found here and the full report here.
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Tags: American Airlines, Boston, British Airways, frequent flyer, Iberia, London, New York, New York City, OneWorld, points, SkyTeam, Spain, Star Alliance
Posted by Seth on July 14, 2010 under frequent flyer, News, points |
In a move that will create the third largest airline in Europe, EU regulators have approved the merger of British Airways and Spanish carrier Iberia. The approval was expected for some time now and does not come as much of a surprise. The two carriers will continue to operate as distinct brands in their respective markets. No word on whether they will be combining their loyalty programs or which other back-office operations will be combined, though many are expected to be.
In addition to the merger approval the EU has also approved – with conditions – the ability for the new British Airways to operate with their USA-based partner American Airlines with anti-trust immunity (“ATI”). The ATI deal gives the OneWorld partners the ability to coordinate schedules, inventory and fares on transatlantic markets where the carriers operate, including the European Union, the United States, Canada, Mexico, Puerto Rico, Norway and Switzerland.
The approval of the ATI brings OneWorld into the same arena as the other two global alliances, SkyTeam and Star Alliance. Those two have recently increased their TATL ATIs (Alitalia just joined the SkyTeam group in the past couple weeks) so this move will have all three on a level playing field as they compete for much coveted traffic in the TATL market. But, as noted above, the approval does come with some strings attached.
Over the next ten years the OneWorld ATI members will have to cede airport slots at New York City’s JFK airport and also at London’s Heathrow or Gatwick airports. New entrant airlines looking to start service into London or Spain will also be guaranteed “favorable terms” for add-on segments on the BA or Iberia networks for onward travel once they get to Europe. From the EU Commission release:
Concretely, the parties offer to make available landing and take-off slots at London Heathrow or London Gatwick airports, at the entrant’s choice, on routes to Boston, New York, Dallas and Miami. The number of slots will allow one or more competitors to operate a total of 49 more return flights a week between London and the four affected destinations in the US.
On the London-New York city pair, the parties also propose to provide the competitor with slots at New York John F. Kennedy airport.
In addition, BA, AA and IB undertake to provide access to their frequent flyer programmes on the relevant routes, allowing passengers of new entrants approved by the Commission to accrue and redeem miles on the parties’ frequent flyer programmes.
The parties also propose to allow fare combinability and offer special prorate agreements in relation to the routes of concern, which would enable competitors to offer tickets on the parties’ flights and facilitate access to connecting traffic.
Neither of these approvals is much of a surprise. Other airlines and alliances have passed the BA/AA behemoth by in recent years in terms of coordination of operations and this move lets the two start to catch up. The conditions levied on the ATI are not all that burdensome, either. Giving up a total of seven daily slots in London isn’t too much of a burden on the carriers that control such a significant portion of the market there. The JFK slots are actually likely more of an issue for those carriers but they do have enough to make it work when the requests come in.
No word yet on whether AA and BA will be able to remove the limitations on their frequent flyer programs that preclude earning or redemption on flights between the USA and London on the other party or what other synergies they expect to realize. Still, this move definitely will give OneWorld a bit more leverage in the market.
Tags: American Airlines, British Airways, frequent flyer, Iberia, London, New York, New York City, OneWorld, points, SkyTeam, Spain, Star Alliance
Posted by Seth on June 23, 2010 under News |
SkyTeam, one of the three major global airline alliances, is celebrating its 10th anniversary this week with events in New York City. Included in the celebration were several announcements regarding new members as well as a press conference where Leo M. Van Wijk, the CEO of SkyTeam, spoke on both the history and the future of the alliance.
Van Wijk had a number of interesting comments about the history of SkyTeam, including its pre-cursor in the “Wings” alliance and the details of its recent growth from just a few carriers to the current 13. The alliance has grown over its 10 year history to now serving nearly 900 destinations across 169 countries with 13,000 flights. Not too shabby.
The numbers do not tell the whole story. In his prepared remarks Van Wijk noted that the alliance has a tremendous presence in North America and continental Europe, but that there are also regions where they are not so strong. Specifically, Latin America, India, Southeast Asia and the Asia-Pacific regions were acknowledged as needing better coverage. Van Wijk stated that the alliance was in conversations with several unnamed carriers in these regions to fill the gaps.
At the same time, however, Van Wijk made it clear that SkyTeam is not interested in growing to have as many members as possible. Rather, they are much more concerned about finding strategic partners who fill specific route coverage areas.
[W]e do not necessarily aim to be the biggest alliance, but we do strive to be the most effective, meaning that we want to offer our customers a global network based on complimentary [route networks] instead of overlap….
[O]ne of China’s leading airlines, China Eastern, yesterday signed an agreement to formally begin the joining process to SkyTeam…. And we intend to add more Asian carriers to our group, thus firmly positioning SkyTeam as THE alliance for Asia.
Certainly a noble goal, but with the limited number of unaffiliated carriers in the regions in question, adding new members will be difficult, especially should the alliance choose to only choose partners with limited overlap in the existing route plan that existing SkyTeam partners operate.
Another significant focus of the SkyTeam alliance in the immediate future is the effort to “Enrich the seamless SkyTeam experience. The alliance is working to improve service consistency across the partners and expects to be able to co-locate airline operations in six airports per year. This co-location will be just one part of the effort towards “intensifying the cooperation between our members,” and working “more effectively to deliver on the promise to our customers.”
The prepared remarks were interesting enough, but the more candid and revealing bits of the discussion came during Q&A portion of the event. Specifically the questions focused on the opportunities for SkyTeam to increase their coverage. Van WIjk did note that “[T]he greatest need – and the greatest challenge – is in Latin America.” Looking at the list of unaffiliated carriers in the LatAm region that challenge is quite real. There are very few opportunities there for growth without a major defection from a currently allied or committed carrier.
Van Wijk was also asked how SkyTeam plans to compete against Star Alliance considering the likelihood that Star Alliance is likely to son have the world’s largest carrier in the combined Continental-United Airlines behemoth. The response was quite simple and certainly in line with what one would expect of a CEO, if not a bit far-fetched:
[SkyTeam’s] global coverage certainly has some light spots compared to Star Alliance, but it is up to par.
Yes, there are certainly a large number of destinations served by the alliance, but connectivity between destinations in the lesser served regions is much more sparse and the number of routes with such limited connectivity is much higher than Star Alliance currently experiences. While overlapping route maps may prove to be somewhat less valuable to the individual carriers they are incredibly valuable to the customers that the alliance members must woo. Overlap will force competition on quality rather than scarcity. That improves the customer travel experience which will generate more business in a manner that is beneficial to all parties. Hopefully SkyTeam will realize this and alter their approach to growing the Alliance.
Posted by Seth on June 10, 2010 under News |
Both the SkyTeam and oneworld global alliances have grown their membership ranks this past week. Vietnam Airlines became an official member of SkyTeam effective today. Earlier in the week Indian carrier Kingfisher announced its intentions to join oneworld during a meeting in Germany.
I’ve actually flown on both carriers and enjoyed the service and product. I think that oneworld is getting the better deal here – Kingfisher has a ton of coverage in India and a few long-haul routes, too – but SkyTeam needs to beef up their presence in SE Asia significantly and the addition of Vietnam Airlines definitely helps on that front.
Posted by Seth on April 10, 2010 under frequent flyer, News |
Delta announced yesterday a new program to recognize many of their elite customers, as well as many partner elites, under the new branding “Sky Priority.” The new program, rolling out on Thursday, April 15, will offer a consistent set of benefits for a broad group of the carrier’s most frequent fliers, but will also leave a few out in the cold.
The idea behind the program is to provide a consistent and improved experience, from booking through baggage claim, for frequent fliers. It will apply to Delta’s top three elite tiers (not to Silver Elite – whoopsie) as well as SkyTeam Elite Plus members and anyone traveling in the premium cabins. They’ll have dedicated check-in facilities, priority baggage handling and boarding, things that very frequent fliers have come to expect from their airlines and things that are generally provided already.
Perhaps the most significant new development is that these Sky Priority customers will now be compensated a bit when they are seated in coach. Should the upgrade not clear (or the passenger not be eligible, like SkyTeam E+) a coupon will print out with the boarding pass offering a complimentary premium beverage or snack from the Buy-on-Board collection. Quite a nice nod to the folks who didn’t get the upgrade.
Overall the program looks nice, except for excluding the Silver Elites from the free snack/drink, and it definitely is a legitimate enhancement to a frequent flyer program in an era that has mostly been seeing cuts, not improvements.
More discussion of the program is here.
Posted by Seth on December 10, 2009 under points |
Ending a relationship that has spanned over 20 years, Delta and Singapore Air have announced an end to their frequent flyer partnership. As discussed by Lucky and Gary the partnership will be coming to an end on May 15, 2010. The rewards on Singapore Air used to be a great value for folks collecting SkyMiles. Now that the premium seats are much harder to find (though I’ve got a couple for Christmas!!) the value really isn’t there so much. Plus, with Delta growing their global footprint directly and also with their membership in SkyTeam and Singapore Air’s membership in Star Alliance it doesn’t really make sense for the partnership to continue from any perspective.
Get working on those redemptions if you’re still interested. The clock is ticking.
Posted by Seth on December 1, 2009 under News |
It is hard to pick up top-tier airlines to join a global alliance these days. Most that want to be in an alliance already are and the others that are desirable are either happy going it alone or working slowly towards other options. So it is always interesting to read the announcements of which airlines are joining up. The past couple weeks have seen some announcements out of SkyTeam and, well, they are interesting.
First up is the official word that Vietnam Airlines and Tarom will become members in June 2010. I had the pleasure of flying on Vietnam Airlines for a couple domestic flights a few years ago and they seemed to be a pretty well run organization. They’ve announced orders for four Airbus A380s with expected deliveries in the coming years and they’re expanding their international coverage. Plus the economy in Vietnam seems to be still growing so they seem like a nice addition, especially if there are options for transit visas.
Tarom, on the other hand, is a rather notable question mark. They have one true long route – Bucharest to Dubai at just over 2100 miles. The next farthest destination is London at just over 1300 miles. OK, so they’re a regional player. More options is always a good thing and I’m sure it is great for them to get in the alliance, but it just doesn’t seem all that special to have them joining up. Coverage of Eastern Europe will be phenomenal with both Tarom and Czech Air in the alliance, so that is something. Tarom will be joining as an Associate member of the alliance and will be adopting the FlyingBlue loyalty scheme from Air France as part of this move. That probably isn’t great for their direct customers but it means having the alliance so a fair trade.
The last move – somewhat unexpected to me – is that Garuda has also announced intentions to join SkyTeam. Yup, Garuda, the Indonesian airline that just a couple years ago was blacklisted from flying to Europe because of safety and maintenance concerns. But now they’re back, with service from Jakarta to Amsterdam via Dubai returning in June 2010 and ten Boeing 777s on order to allow for non-stop service in the coming years. So I suppose they are getting better, but they really had nowhere to go but up. Maybe having them in the alliance will force them to continue their improvements.
So there aren’t a whole lot of options out there and SkyTeam is doing the best they can. Their coverage in SE Asia is about to get a serious boost and they own Eastern Europe. I suppose things could be worse.
Posted by Seth on November 18, 2009 under News, points |
The dance of buyouts and other aid offers surrounding Japan’s JAL sped up a bit overnight with Delta leading the effort from SkyTeam to offer over USD$1Bn in cash and loans to the beleaguered carrier should they be willing to defect from the OneWorld alliance. American Airlines offered back a similar amount, though without the need for $300MM in alliance-switch penalty guaranties. Yes, things are truly interesting over in Japan these days.
But with the two airlines in question hemorrhaging cash these days there is a rather important question that needs to be answered: Where are they getting the money to make such offers?
The answer, it would seem, has a lot to do with frequent flyer points. Lately the only way the airlines seem to be raising any cash is by selling their points to credit card companies. Both American and Delta have recently signed deals to raise funds from Citibank and American Express, respectively. So the airlines are selling a ton of points to third parties and then turning around to use that cash in an attempt to buy JAL. Yup, they’re trying to buy an airline with points. Not quite as crazy as getting a boob job using points though almost certainly a better value on a dollars/point ratio.
As for the actual effects of the loans/merger/buyout/bailout/whatever we’re calling it, that isn’t particularly clear. JAL holds the largest share of takeoff and landing slots at Tokyo’s Haneda airport and they are definitely worth a fair amount of money. Of course, that value depends on having a Japanese economy that is functional and able to push passengers onto the flights.
Perhaps Delta is looking to recreate the Pan American route network buy purchasing 5th freedom rights around the world. Then again, that didn’t work out so well for Pan Am.
And maybe they’re actually trying to drag SkyTeam out of its current position of the “we got picked last” alliance, though I’m not really sure that picking up an almost bankrupt carrier really helps on that front. Still, having the JAL route network would be a huge boon for SkyTeam, though perhaps not quite as significant as the hit OneWorld will take from losing their only representation in that region.
It doesn’t seem likely that anything will actually be decided in the immediate future so there will be plenty of time to watch this one play out. And it should be a rather entertaining dance to watch.
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