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 News, frequent flyer, 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 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 March 31, 2010 under News, frequent flyer |
American Airlines and jetBlue announced an agreement today that will see the carriers begin to sell flights on each other’s metal and also shift a number of landing slots around. American will cede eight slot pairs at Washington, DC’s National Airport to jetBlue in exchange for twelve slot pairs at New York City’s JFK airport. jetBlue will remain the leading carrier at JFK measured by frequencies even after this swap. At the same time, in conjunction with the five slot pairs at National that they are expected to acquire from US Airways, jetBlue will be able to build a significant operation up very quickly at the airport starting late this year.
In addition to the slot swap the two carriers have announced plans to offer interline connections to each others’ flights at JFK and in Boston. American Airlines’ customers will be able to leverage jetBlue’s position as the leading domestic carrier at both of these airports by booking single tickets through for routes where AA doesn’t offer service but jetBlue does. At the same time, jetBlue customers will be able to book connections onto AA’s international flights through the two airports. American is second only to Delta in international operations at JFK, offering connections to London, deep South America, Tokyo and a number of destinations in continental Europe. AA is also a leader in the transatlantic market in Boston.
It should be noted that, at this time, the agreement does not specify code-sharing between the two carriers or interline ticketing beyond the very specific destinations. It is a very limited partnership, at least for now. Mostly it means a single ticket can be issued for the connections and that luggage can be checked at the originating jetBlue station for outbound long-haul international travel.
Of course, any discussion such as this one leads to questions about additional tie-ups in operations and in the loyalty programs. And, this announcement still leaves plenty of opportunities and options, but no definitive answers on most of those issues. Will jetBlue be joining up with OneWorld, the global alliance that AA is a major player in? Not right now but the future is wide open? What about jetBlue’s interline agreements with partial owner Lufthansa and with Aer Lingus? Both of those will continue as they have been operating previously. Oh, and still no details on how the frequent flyer loyalty programs will integrate in terms of earning points or other benefits across the new partnership.
For American this seems to be a move to retain market share in the transatlantic market. They currently offer very few onward destinations for passengers connecting through JFK who aren’t staying in New York City. The move will allow them to increase that coverage significantly with a minimal investment. For jetBlue the ability to attract customers who are keen to travel more outside the Americas is a significant hole in their route network that they will be able to better fill now.
In many ways this partnership seems to be placing jetBlue into a role similar to that of Alaska Airlines. They provide a broad regional coverage and partner with a number of different airlines from a variety of alliances. They don’t have to declare loyalty to just one alliance and they don’t have to fully integrate their loyalty scheme with those programs. They forge alliances of convenience and partner to fill strategic gaps. Customers from both sides win and the airlines are able to grow without significant capital outlay.
At this point it probably doesn’t make too much sense for jetBlue to join one of the global alliances, particularly given their strong position at JFK and Boston and their ability to strike opportune partnerships to improve their route footprint with whichever partner presents that opportunity to them at a particular connection point.
Tags: Aer Lingus, Alaska Air, American Airlines, Delta, frequent flyer, JetBlue, London, Lufthansa, New York City, OneWorld, Tokyo, Washington DC
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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Posted by Seth on July 16, 2008 under Uncategorized |
The American Express Membership Rewards program has been around for a long, long time, allowing the accrual of points for redemption on a variety of airlines, hotels, stores and even casino chips at one point. The participating airlines seem to vary at any given point in time depending on whether AmEx is willing to pay and whether the airline is willing to sell the points. In the past week or so AmEx has quietly added a new airline transfer partner to the US-based Membership Rewards program – the Spanish carrier Iberia. Iberia is the second Membership Rewards partner to participate in the OneWorld alliance, bringing another means of accessing redemptions within that alliance to the Membership Rewards program. That’s the good news.
American Express will transfer your points to Iberia at a ratio of 1,400:100. The reward charts are pretty granular, with flights within Spain or to the Balearics or Gibraltar only 900 points for a round-trip ticket (so only 12,600 AmEx MR points) in “Tourist Full” class, which seems to have no inventory controls. Flights are 1/3 cheaper for “Blue Class” which is limited inventory from what I can tell. Flights from Spain to the USA, Canada, Mexico, the Caribbean and Central America are only 4,750 points (or ~66,000 MR points), again in the “Tourist Full” class which seems to not be inventory restricted. They also offer one way rewards, with some fares just being 1/2 of a round trip and some (the transatlantics) having a premium attached. But these are only on Iberia-operated flights. When you start getting into partners the numbers go up pretty quickly, which is the bad news.
The redemptions are based on total miles traveled and class of service, with the breakdown looking like this:
| |
Miles Required
|
| Total miles traveled |
Coach |
Business |
First |
| 0 – 600 |
18,200 |
35,000 |
53,200 |
| 601 – 1,000 |
22,400 |
44,800 |
65,800 |
| 1,001 – 2,000 |
28,000 |
54,600 |
82,600 |
| 2,001 – 4,000 |
33,600 |
75,600 |
99,400 |
| 4,001 – 5,000 |
39,200 |
82,600 |
116,200 |
| 5,001 – 8,000 |
44,800 |
88,200 |
133,000 |
| 8,001 – 12,400 |
56,000 |
112,000 |
168,000 |
| 12,401 – 18,000 |
77,000 |
154,000 |
232,400 |
| 18,001 – 25,000 |
105,000 |
210,000 |
315,000 |
| 25,001 – 30,000 |
110,600 |
221,200 |
331,800 |
| 30,001 – 35,000 |
133,000 |
266,000 |
399,000 |
| 35,001 – 40,000 |
154,000 |
308,000 |
462,000 |
| 40,001 – 50,000 |
176,400 |
352,800 |
529,200 |
The numbers at the top of the chart aren’t terrible, but when you start getting into ‘Round The World ticket distances, particularly in the premium cabins, the numbers are pretty bad.
So if you’re looking to get around within Spain or between Spain and something nearby, this looks like a decent option. For longer flights or partner flights the numbers aren’t so great. Then again, the rates of redemption in Mexicana, the other OneWorld partner don’t seem to be all that great either (70K in coach between N. America and Europe versus 44,800-77,000 on Iberia), so this might not be so bad.
More options is always good, even if not all the redemption values are terrific.
Happy Flying!
