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Alliances now key as fuel, labor costs continue to increase
October 31, 2009
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On Wednesday, U.S.-based Continental Airlines left the SkyTeam Alliance, which includes local leader Korean Air and Air France, and joined the Star Alliance. Currently, there are three major passenger air groups: Star Alliance, SkyTeam, and Oneworld. It’s been over a decade since Star Alliance, the first airline grouping, was established in 1997, and the importance of partnerhips is still growing amid high fuel and labor costs. Austrian Airlines moved from the smaller Qualiflyer group to Star Alliance in February before Continental became the 25th member. Other members include Korea’s Asiana Airlines, Lufthansa and Turkish Airlines. “You want an alliance with someone who is not a competitor,” said Jeff Smisek, president of Continental Airlines, in an interview with the Wall street Journal. “We are strong where [other Star members] are weak, and we are weak where they are strong.” Industry experts say that the Continental switch was influenced by last year’s merger of SkyTeam members Delta Air Lines and Northwest Airlines, which made Delta the world’s largest passenger carrier. All three airlines focus on domestic U.S. routes, and Continental was afraid it would be unable to compete in the same alliance with the giant new Delta. “It is difficult for airlines to survive industry competition without being part of an alliance,” said an official from Asiana Airlines. “On the other hand, airlines in the SkyTeam alliance will be affected as passengers there will stop earning joint mileage.” Quickly responding to the alliance switch by Continental, Korean Air, a SkyTeam member, said yesterday it will hold a media briefing next week with alliance member chief executives including Cho Yang-ho, chairman of Hanjin Group, which owns Korean Air; Delta CEO Richard Anderson, and Pierre-Henri Gourgoen, chief executive of Air France. One area still untouched by the move toward alliances is low-cost carriers. “There is a gap in the cost in terms of service between [big] passenger carriers and budget airlines,” said the Asiana Airlines official. “There aren’t enough overlapping services to make alliances cost-effective.” An official at Jeju Air, Korea’s first budget airline to offer international flights, agreed there was no need for an alliance, since most low-cost carriers are local-only. By Lee Eun-joo [angie@joongang.co.kr] |
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