It seems that SkyTeam is finally getting on board with the theory that having all members use common fare buckets for award bookings makes life easier for everyone. A couple weeks ago it was confirmed that Vietnam Airlines is updating their booking classes on April 1, 2013. Next up would appear to be China Eastern Airlines. Effective July 1, 2013 the carrier will be using the same booking classes – X for economy awards and O for business awards – as Vietnam Airlines and most other SkyTeam members.
I ran a couple quick checks on my award inventory search tools and was surprised to find that China Eastern wasn’t among the airlines included in the list. I have access to the inventory so there is no reason to be excluding them. Needless to say, I’ve righted that problem. They will now be an available option on the award search and award alert tools. Like most of the other award searches the UI isn’t particularly beautiful, but the data should be accurate.
Also of note is that I expect the Shanghai Airlines award classes to change at the same time. They are currently the same as those of China Eastern, which makes sense since Shanghai is owned by China Eastern. Based on that assumption I’ve updated my award search tools for both carriers, not just the one.
Back when Vietnam Airlines joined the SkyTeam alliance it seems that they ignored the common believe shared by most airlines that award inventory should be severely limited. They used revenue booking classes for both business and economy awards and, especially in business class, had very few limitations on the inventory. Alas, it seems that all good things must end some day. In the case of Vietnam Airlines that day appears to be March 31, 2013.
Starting in April the award buckets are changing. Currently business class awards book into J class and economy awards into U class. The new booking classes will be O for business class and X for economy. There are a few negatives which come from this change. Most notably, with the inventory now separate from revenue bookings Vietnam Airlines can more tightly control access to the seats. And, from what I can see in a few test scans of their inventory, they are tightening down pretty badly. I’m having trouble finding any seats from Ho Chi Minh City to Singapore over the next several months, for example. And even where the inventory is still available it is more often than not in economy class, not business class, where the seats are showing.
Another negative of the change is that, by separating the awards into dedicated fare buckets, the ability is earn points on an award ticket is going to disappear. Sure, you shouldn’t have been able to in the first place but loopholes like that exist in a few places. This one is getting closed up.
I do see the X and O inventory still available in limited instances so it isn’t that Vietnam Airlines is hiding the inventory from the public GDS interfaces. That means the seats will still be open to searches and alerts through the interfaces I have on the Wandering Aramean Travel Tools site. But with the limited inventory out there in the new buckets, I am rather saddened. Vietnam Airlines was a great option for getting around within southeast Asia as a SkyTeam partner. Seeing that award space drying up is no fun at all.
It seems that Aerolineas Argentinas is looking to grow their international route map significantly. The carrier is looking to add five new destinations around the globe, including three in the United States. The carrier is apparently in the process of negotiating access to these markets through bilateral treaties. Given that Aerolineas Argentinas only has five destinations currently outside of South America this would be an enormous upgrade to their route map. The proposed destinations are Atlanta, Las Vegas, Detroit, Guangzhou and Tel Aviv.
As best as I can tell there is no way that the Guangzhou flight can be served non-stop. Detroit and Atlanta are both hubs for SkyTeam partner Delta so if they can negotiate the treaties picking up traffic in one of those to carry on to China sortof makes sense, but it seems unlikely that such access will be easily forthcoming. Tagging it on to Tel Aviv might make sense, but I have no idea what the traffic demand is on that local hop or if they could secure traffic rights.
Or I suppose it is possible that my French is bad enough that I’m completely misunderstanding the story I’m reading and getting some of these details from. But I’m pretty sure that’s not the case.
After several weeks of speculation Delta, Singapore Airlines and Virgin Atlantic have come to an agreement which will see Delta acquire a 49% ownership stake in Virgin Atlantic for $360mm. Delta’s stake will come from Singapore Airlines; Virgin Group, headed by Sir Richard Branson, will retain their current 51% share and control of the company. The Virgin brand and operating certificate will remain intact. The deal is still dependent on approval from regulators on both sides of the Atlantic. The airlines expect the deal to close by the end of 2013.
Delta and Virgin Atlantic also intend to establish a joint venture operation for trans-Atlantic operations. The joint venture will not, at least for now, include other SkyTeam partners. It will, however include:
- A fully integrated joint venture that will operate on a "metal neutral" basis with both airlines sharing the costs and revenues from all joint venture flights.
- A combined trans-Atlantic network between the United Kingdom and North America with 31 peak-day round-trip flights.
- Enhanced benefits for customers including cooperation on services between New York and London, with a combined total of nine daily round-trip flights from London-Heathrow to John F. Kennedy International Airport and Newark Liberty International Airport.
- Reciprocal frequent flyer benefits.
- Shared access to Delta Sky Club and Virgin Atlantic Clubhouse airport lounges for elite passengers.
The joint venture will definitely give the combined carriers a leg up in the ultra-competitive London market. That said, the combined lift between London and New York City and Newark still doesn’t begin to reach the frequencies at British Airways/American Airlines offer. The 23 total flights daily between the USA and Heathrow will place Delta/Virgin in a solid second place, ahead of United’s 16 but well behind BA/AA’s nearly 40 daily operations.
From a passenger perspective the overall product should be very competitive in both economy and business class. Both Delta and Virgin Atlantic currently offer flat beds for all passengers in their business class cabins. For economy class the AVOD systems on both carriers should provide sufficient entertainment to distract the passengers from their tighter seating quarters. Virgin Atlantic has a proper premium economy cabin which Delta does not offer; there may be some work to reconcile that difference at some point. On the ground the Virgin Clubhouse lounges are some of the nicest business class operations, particularly in New York and London. Delta’s SkyClubs are not at the same level but in shared markets customers will have the benefit of access to both.
Delta has been looking for a way to get at more slots into Heathrow. They picked up a couple when British Airways was forced to divest them following their acquisition of bmi but that wasn’t enough to significantly change their operations. The partnership with Virgin Atlantic will open up access to many more slots eventually. And the price point was quite reasonable. Of course, Virgin Atlantic has been losing money in recent quarters so it might become a more expensive investment over time, but at least initially it looks like a positive opportunity for both carriers.
It is no secret that Singapore Airlines has tried to divest themselves of their 49% ownership stake in Virgin Atlantic from time to time. Might they have found a willing suitor in Delta Airlines? That’s what is being reported in the London media this weekend. To make the transaction work Delta would purchase the 49% stake, the maximum permitted by non-European parties, and Air France/KLM would purchase an additional stake. The SkyTeam partners would then hold a majority of the shares giving them control of the company. For Sir Richard Branson, the airline’s founder and public face it would represent the first time since he started the carrier nearly 30 years ago that he would no longer be in charge.
The move is almost entirely focused on gaining access to Virgin’s slots at London‘s Heathrow airport. The consolidation of British Airways and bmi has changed the competitive landscape at Heathrow making it even more difficult for Virgin Atlantic to compete, particularly without local and regional feed to their operations. A SkyTeam takeover of the slots and routes could see major changes to the destinations served and operational style.
Two years ago Virgin Atlantic hired outside advisors to help them explore options. Two years ago Deutsche Bank was hired to help the carrier consider different scenarios. Delta was linked to the discussions at that time as well but nothing came from it. Perhaps this time around the outcome will be different. Given the recent rumblings that Virgin Atlantic is looking to join one of the major alliances (and my guess that SkyTeam is the best fit) it really isn’t all that hard to see how having the carrier merge into the other airlines rather than just be a partner would offer some competitive advantages.
Keep your eyes and ears open; this one could be interesting…
It looks like the days of independence for London-based carrier Virgin Atlantic may be coming to an end. Speaking in an interview with Bloomberg in Mumbai on Friday Richard Branson indicated that the carrier is looking to join up with one of the big three and that "to survive we need to have an alliance." So, which will it be??
There’s virtually no chance of oneworld being the alliance. The vicious competition between Virgin Atlantic and British Airways, as well as the massive domination at Heathrow, simply exclude that from reasonable consideration. Singapore Airlines holds a huge minority stake (49%) in the carrier and Singapore is a member of Star Alliance. But that doesn’t necessarily mean they would join up. In some ways it is better for Singapore Air to have the diversity of their investments in both alliances rather than just one.
There are two levels of membership in the alliances these days; which level of participation Virgin is looking to reach could drive which they ultimately join. As just a member the competition issues are relatively minimal. There will be codesharing and frequent flyer reciprocity but that won’t severely shift the competitive balance in the market. If Virgin is looking to join one of the Anti-Trust Immunity (ATI) agreements, however, that will likely change things significantly.
Getting in to the ATI will require approval from government authorities on both sides of the Atlantic. Those approvals are rather more strict and look at the competitive balance more significantly. At first blush SkyTeam is more likely the winner if ATI membership is desired. Star Alliance has many more destinations in North America served from London than SkyTeam does. And Virgin’s lack of short-haul service means that, for the ATI, it is all about London.
Keep your eyes and ears open on this one…it will be interesting to watch.
Yesterday was apparently THE day to make news if you’re running an airline and looking to change the face of the global alliances. The oft-suspected (and occasionally flatly denied by the CEO) joining of Qatar Airways into the oneworld alliance was the major news that everyone expected. The ascension of Qatar into the alliance is expected to take 12-18 months and British Airways – recently a loser in the Qantas/Emirates deal – will be the sponsoring carrier for Qatar.
Not quite as expected was the announcement from Etihad and AirFrance/KLM that they were going to be building out a major code-sharing arrangement. Not only that, but Air Berlin – ~30% owned by Etihad – is also getting in on the deal. Air Berlin is also a oneworld member and Air France/KLM represents a huge chunk of the SkyTeam group. Or, to quote Doctor Peter Venkman, "dogs and cats living together… mass hysteria!" Okay, maybe not mass hysteria, but the move does represent the largest codeshare agreement between two alliance members from different alliances that I’m aware of.
And, let us not forget that Emirates may have started this whole thing rolling when they made the deal with Qantas, getting the latter to dump British Airways as their partner on the Kangaroo routes. It shouldn’t come as much of a surprise that analysts are saying that deal was the catalyst for the final push from BA to get Qatar to join up.
So, does Air Berlin now have to leave oneworld? Does Qantas? And does it make sense for either of them to? No, no and no.
For the past 15 years the alliances have been presenting themselves as the only logical way to build a network offering global coverage without actually flying to all the destinations. And there is certainly value in these alliances. But they aren’t the only option.
Several carriers have done reasonably well playing as "partner to everyone" rather than choosing just one pool of partners. The logistics might be a bit more difficult – more different systems rather than a single interface into the alliance definitely is – but that doesn’t mean it cannot be done. And the alliance members still have their bilateral relationships where necessary.
The real value for the airlines likely lies in the anti-trust immune operations. These tend to follow alliance lines but they aren’t exclusively so. And just being part of an alliance doesn’t guarantee participation. In other words, the real money comes not from the alliance but from having the right partners and government approvals.
The alliances are nice marketing arrangements for the airlines. And when they are operating smoothly there are even occasional benefits to the passengers. But the "shake-up" from the big three in the Middle East isn’t going to upset those alliances. At least not yet. Maybe they’ve got a few tricks still up their sleeves.
The annual cycle of business class fare sales for the Thanksgiving holiday weekend has started once again. Tickets much be purchased in the next 10 days or so and all three alliances are participating, as are the non-allied carriers. Fares start around $1600, depending on the city pairs. SkyTeam is running about $100-200 higher than the others on many the dates and cities I checked.
The available city pairs this year seem more restrictive than in previous years and only London is really cheap as a destination. And with the Star Alliance carriers the flights book into P, the new discount business class which isn’t upgradable and earns limited points in most programs. Still, these are pretty good fares to Europe if that is your thing for late November.
The SkyTeam alliance has grown once again, adding Aerolíneas Argentinas, their first South American carrier, to the network. The national airline of Argentina provide access to 52 destinations including 35 airports within the country. Forty of these destinations are cities not previously served by a SkyTeam member carrier.
In addition to the marketing benefits which come through joining the alliance the new partnership opens up a number of frequent flyer-related changes. For starters, the deal opens up a number of new opportunities in Round-the-World tickets, both revenue and award. Aerolíneas Argentinas offers direct flights between Sydney and Buenos Aires, adding a significant link on the map for RTW trips. It also significantly eases award travel within South America because of the new connections and destinations available in the alliance.
From an earning perspective, adding the new airline is just an OK deal for members of partner programs. Delta SkyMiles members, for example, will earn only 25-50% on the cheapest fares. The news is even worse for Flying Blue members, with even more fares earning at less than 100% credit. Yes, the earning is something, but it isn’t much.
On the redemption side the Aerolineas Plus charts are also not so great. Redemption is based on non-stop flights only, similar to the Avios program. Flights within the United States run 16250 points in coach and 32500 in business class. Oh, and those are one-way rates from what I can tell. At least I’m pretty sure that’s what this fine print on the charts means, "El millaje informado corresponde a un solo tramo por lo tanto el pasaje de premio requerirá el doble de millas." And if you want to connect on partners the cost will go up. And there are redemption fees which vary based on destination. Ouch.
Yes, having more choices is always a good thing. And this meets that criteria. But the earn rates are pretty poor. Hopefully decent award availability will make up for that, though I haven’t started looking for it yet.
Scrolling through my regular reading list this afternoon I came across an interesting piece from AeroBlogger, a blog focused on the Indian aviation market. Apparently a story was published in an Indian newspaper this week in which a senior Jet Airways executive, speaking on condition of anonymity, suggested that joining Star Alliance was not in the best interests of the carrier:
We are talking to all three alliances and may not join Star Alliance because they already have a strong member in this side of the world. We do not know how much will we benefit by joining the alliance with Singapore already a member. There is a thinking that the benefits will not be much from Star Alliance and our talks with the other two airline alliances is also on.
Jet Airways was invited to join Star Alliance a while back but was forced by the Indian government to wait until Air India was able to join. They kept waiting for a few years until just over a year ago when the Air India membership in the alliance was formally put "on hold" by the alliance. SkyTeam and oneworld have both also tried to add a partner in the region. Most recently the efforts of oneworld were thwarted when their candidate member Kingfisher hit significant financial troubles just days prior to their intended entry date.
Maybe one of the other two alliances has made a bold, last-minute effort to lure Jet away from Star Alliance. Or maybe they really believe that competition with Singapore Airlines really is so great that the partnership won’t actually work so well. The latter seems quite unlikely to me, but maybe they really do believe it.