Things in the Sky

What purpose does an alliance serve? Well, in many cases it is a merger without the mess of one. One airline might want to work with another but not necessarily combine with it. Perhaps the best example of this situation is Continental’s new partnership with United. In other cases, countries restrict foreign ownership. In the EU, non-EU investors can only invest up to 49.9% in the the company, and in the US it is even stricter. So an alliance allows the airlines to work together but remain separate.

In other cases, I think, the separate airlines are kept as part of national pride. For example, take Alitalia. If Lufthansa would have offered to help but only if Alitalia became part of Lufthansa, I think many would be angry that Italy’s national airline would go away.

Anyway, back to my main topic. Yesterday it was reported that Cathay Pacific was interested in a takeover bid of British Airways. While at first it appears that such a deal violates the previously mentioned EU rule, apparently because Cathay is 40% owned by a British firm, it is allowed. The partnership certainly makes sense. The two airlines are already in oneworld, and as such are already working together.

I think that I found this story interesting not because of this specific partnership, but in terms of existing partnerships and future ones. I would not be surprised at all to see future deals like Cathay and British. Lufthansa has already acquired other carriers. With all three alliances in possession of or looking for antitrust immunity, I think in the future we will be seeing more and more consolidation.

Anyway, I just found that news story interested. Tomorrow I’ll be going back to earnings. I’ve already skipped over a couple of reports from the past few days, and JetBlue, AirTran, and US Airways released today.