Airline consolidation to bring pros and cons, convention told

Consolidation in the global airline business is to gather pace over the next five years, according to industry experts.

Speaking at the Global Business Travel Association’s annual convention this week, a panel of senior travel executives said joint ventures (JVs) and mergers would have both a positive and negative impact on the corporate travel community, and could hasten the demise of the big three airline alliances: Oneworld, SkyTeam and Star Alliance.

Bob Brindley, principal and vice president of
 Advito, the research arm of travel management company (TMC) BCD Travel, said future activity would be driven by those involved in the three major transatlantic JVs.

When US Airways merged with American Airlines it left Star Alliance to join Oneworld, but more significantly it became part of the relationship with British Airways, Iberia and Finnair.

United Airlines and Lufthansa, both Star Alliance carriers, formed their transatlantic partnership a little more than a year ago, while Skyteam’s Delta last year bolstered its JV with Air France-KLM and Alitalia by buying a 49% percent stake in Virgin Atlantic.

“An alliance is really just a marketing relationship and the partners, technically, remain competitors,” said Brindle.

“A JV is where there is ownership and sharing of costs and revenues and in [the next] five years we’ll see consolidation in all its forms, most likely the big three JVs adding partners in different parts of the world.”

Brindley predicted consolidation would result in less choice for corporate travel buyers and mean many would have to focus on working with one or two JVs to obtain worthwhile negotiated fares and discounts.

“Buyers won’t be able to work with them all, and that may mean taking tough decisions and leaving some partners behind,” he said.

The exception to the rule, according to Brindle and fellow panelist Yon Abad, a director at the Carlson Wagonlit Travel (CWT) Solutions Group, would be those buyers whose travellers are buying high-yield, unrestricted tickets.

“If you are a customer who buys a lot of high-yield tickets it makes you more desirable to an airline and gives you far more leverage. They will be at your door trying to get as much business as possible,” said Abad.

On the plus side, the panel said that though consolidation and shrinking capacity were making choice more limited, carriers were investing more in product and service in order to win business.

Aside from the transatlantic JVs that predominantly include legacy carriers from North America and Europe, GBTA delegates in Los Angeles heard it was the cash-rich airlines from the Middle East that would shape the future of aviation.

Holly Hegman, founder and editor of aviation news website, said Qatar Airways, Emirates and Etihad were turning the business upside down.

“They don’t need alliances,” she said. “They are cherry picking [the airlines] that will bring them the most money.”

She cited Etihad’s equity alliance with airlines such as Air Berlin, Jet Airways and Air Seychelles as the model of the future, and said all eyes should be on the imminent merger with ailing Skyteam carrier Alitalia.

Sourced from Travel Weekly


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