Writing in this month”s issue of the leading industry publication ”Regional Airline News” Russell Hubbard, IBA Group”s head of commercial services, discussed the word ”Alliances” and how their growth is affecting the smaller carriers.
With the disbanding of the Qualiflyer Group there are now three global alliances ” oneworld, Star Alliance and SkyTeam. Collectively they operate around 5,500 aircraft, even higher if all their related carriers are included, employ around 700,000 staff and claim to account for almost 30,000 departures every day. No doubt constituent airlines will complain to ABTN that they are not mentioned but in Europe at least oneworld is led by British Airways, Star Alliance by Lufthansa and Skyteam by Air France.
Hubbard makes the point that what the public is not aware of but is vital to the whole Alliance concept is the role played by regional carriers such as American Eagle, British Mediterranean, Regional Air, Air Nostrum, Britair, Comair, Atlantic Southeast, Chautauqua, Sunstate, Eastern Australia and CityLine. They provide a valuable feed and also give the majors a presence in markets that would otherwise be non-viable for them to serve.
He notes that the so-called low cost carriers, whose trademark point-to-point networks preclude them from interlining, are not embraced in the global alliances. Their self-contained distribution systems are the opposite of the aims of the three collectives.
”For an independent airline, there would appear to be three choices ” stay totally independent; join the big boys in a large alliance, or take the low cost model and avoid alliances altogether. Depending on the local operating climate there is no right or wrong answer, but the more mature markets of North America may point to some clues”.
Rather than becoming tied to a single alliance partner, some of the US regional airlines operate services for several of the ”majors”. SkyWest Airlines boasts partnerships with United, Delta and Continental, while Chautauqua Airlines operates codeshare agreements as US Airways Express, American Connection and Delta Connection. With a different cost base, union influences and revenue diversity, these carriers are able to turn their flexibility into negotiating muscle with their larger partners.
The forces in the European market are different from those in the US and the strong geographic and hub presences of the US majors still largely dominate the industry.
”There has long been a feeling that major consolidation in the airline industry is inevitable ” even talk that Europe could end up with just three or four full service carriers built around BA, Lufthansa, Air France and possibly one other,” suggests IBA. ”These are extreme thoughts, but look at the motor car industry (not dissimilar in age to commercial aviation) where the number of producers around the world has consolidated to the point where they can really be counted on the digits of one hand.”
Mr Hubbard”s point is that that a small number of ”mega-carriers” will be to the detriment of the industry and could easily impact service standards negatively. ”In the end, economics will prevail, but economic activity, like the aviation industry, runs in cycles. Retaining flexibility is the best answer ” flexibility that can be turned into revenue generating muscle,” he says.
Some European independent regional carriers, who do not have alliances, are doing well. Most operate something close to niche routes, but others compete on major city pairs. The successful independents do have a common theme ” offering routes and timings that meet passengers” needs and above all a customer service ethos that is all too often lacking from their competitors.
ABTN believes that regional airlines will continue to flourish and expand in spite of the budget carriers. O”Leary”s recent words were not directed in this area and one can only suppose he agrees that there is a role for the specialist operator. The Qualifier demise was bad news for Air Littoral and others, LOT, hardly a regional carrier, escaping without too many bruises. Eastern Airways in the UK is keeping its sovereignty and in the US the new Independence Air shows you can walk away from a major group and start again with a new name and brand. Even those with not that good a memory may recall Valuejet became Airtran (for different reasons). There is no right or wrong answer, but maintaining autonomy and keeping control of service quality wherever possible does keep the options open. The IBA comments are worth considering as a professional observation of a crystal ball. One just wonders who will be around at the same time next year.