The largest omission made on
behalf of leisure clients, is failure to ensure they have frequent flier
membership when they purchase a ticket.
This is because they believe they
don’t fly enough to accumulate enough miles for a bonus ticket or because they
fly a multitude of airlines.
Yet that is the reason that airline
alliances exist. At its core, an airline alliance is an agreement between two or
more airlines to cooperate on a substantial level. Historically, it began with
“codeshare,” an agreement where two or more airlines share the same flight. Back
in 1989, KLM (Royal Dutch Airlines) and Northwest (long ago merged with Delta)
agreed to codeshare their flights. It kicked into high gear when the Netherlands
signed the first open skies agreement. This gave both countries unrestricted
landing rights on each other’s soil.
It took until 1997 for the Star
Alliance to be formed; uniting Air Canada, Lufthansa, Scandinavian Airlines,
Thai Airways and United Airlines. This exclusive club led to competing airlines
to form One World in 1998; spearheaded by British, American Airlines, Qantas and
Cathay Pacific. In June 2002, the last alliance, SkyTeam came into existence, a
union by Delta, Air France, AeroMexico and Korean Air.
From little acorns
grow mighty oaks and today the three alliances combined fly over 60 percent of
the worlds’ passengers. The ability of an airline to join an alliance is often
restricted by laws and regulations and subject to approval by authorities.
Antitrust laws play a large role.
The desired benefits of an alliance
should consist of an extended network; often realized though codesharing
agreements. Potential cost reductions could result from sharing of sales
offices, maintenance facilities and operational facilities, primarily the
Operational staff could also be curtailed in such areas
as marketing and branding. The three alliances love to trumpet the traveler
benefits. These can include: • Lower prices due to lower costs • More
destinations within easy reach • More departure times to choose from • Shorter
travel times as a result of optimized transfers • A wider range of airport
lounges shared with alliance members • Faster mileage rewards by earning miles
on several different airlines • Round-the-World tickets, enabling travelers to
fly over the world for a relatively low price But don’t drink the lemonade so
quickly. Airline alliances also create disadvantages for the traveler, such as:
• Higher prices when all competition is erased on a certain route • Less
frequent flights For instance, if two airlines separately fly more than once a
day respectively on a shared route, their alliance most likely will fly less. My
favorite example is between Amsterdam (KLM’s home city) and Detroit (a Delta
hub). Today, only one airline flies nonstop between the two cities, Delta, with
KLM opting to piggy back on the flights. The price for this monopoly route is
thus 30% higher than flights of identical distances – say Paris to
• Raising the barrier higher and higher with more and more
restrictions to earn that elusive mileage ticket Proponents argue that limited
co-operation in these alliances gives choice and raises standards. Opponents
argue that these alliances are bullying monopolistic cartels and are reducing
competition. Frequent fliers report that whereas earning and redeeming mileage
tickets in the past was relatively easy, the obstacles today are far more
complicated with a paucity of seats available unless reserved months in
So what does this mean for the passenger? In principle,
passengers are concerned primarily about three things: safety, price and
product. The safety issue should be left out of the comparison between alliance
and non-aligned airlines as airlines not aligned – El Al and Emirates are prime
examples – have sterling security records.
I’m less convinced of their
spurious argument that alliances allow airlines to lower their cost base and
pass on those savings to passengers.
Espousing the contrary view are the
executives at Emirates Airlines. They argue that alliances have undue influence
over airports and in particular the allocation of valuable slots. This means
that the barriers to new entrants in the airline market are raised even higher.
In fact, eight out of the top 13 airports in the world have more than a 50%
share by alliance carriers.
Significantly, the two airports where this is
reversed are at Dubai – where non-aligned Emirates dominate – and Ben-Gurion
Airport in Tel Aviv, where El Al holds a large lead over alliance affiliated
Thus, Emirates refuses to join any global alliance, stating
that unless an airline is the lead participant in such an alliance; like
Lufthansa in Star Alliance or Air France in SkyTeam, individual alliance
members’ freedom of action is compromised.
El Al, rebuffed and rejected
by the alliances, reiterates that its ability to effectively compete with
European carriers has been hurt because of their rejections.
carriers flying to Israel are part of a large international airline alliance,”
the airline states. “El Al has been trying to become a member, but for obvious
political reasons, has not been accepted. The fact that we are not able to join
an alliance severely restricts our global operations and destinations
Politics certainly plays a role in keeping El Al out of the
global alliance. After all, Qatar Airways and Royal Jordanian are members of
Oneworld. However, Israeli- Jordanian relations are fairly good and Royal
Jordanian has been flying out of Tel Aviv for many years.
belongs to SkyTeam. But does El Al’s ostracism from this Holy Trinity merely
have a political subtext or is there more to it? It would be safe to assume that
when an airline is seeking membership, there should be a cost-benefit, that
membership of any new airline enhances the alliance as a whole. El Al, while
flying to dozens of cities from Israel with only a handful of codeshares, could
in the same breadth be harmful more than helpful. El Al only flies six days a
week, never on Jewish holidays and employs exhaustive and expensive security
In fact, I’d argue that El Al’s banishment from global
airline alliances stems from a combination of reasons.
In the world of
aviation, El Al is a tiny carrier and it’s challenging for other participants to
see ways in which they substantially enhance an alliance. While El Al doesn’t
offer a true hub and spoke system from Tel Aviv, the market is important for
business and leisure travelers and while it would add value to any of the
alliances, I don’t see the challenges being resolved anytime soon.
largest market from Israel remains the United States. El Al’s lack of a
meaningful alliance allows the Star Alliances airlines to gain and maintain
market share on these profitable routes. Called the North American Alliance, it
combines United Airlines, Air Canada, Lufthansa, Swiss, Austrian Air &
Brussels Air in a myriad of flight combinations with hundreds of options
available. Utilizing sophisticated computer models, these airlines have avoided
antitrust issues by receiving European Union permission to match airfares and
classes wreaking havoc on El Al’s ability to compete on the same
Consumers can fly to dozens of cities on their way to hundreds of
cities in North America with no additional costs. El Al’s partners on her North
American routes are limited to far less partners, American Airlines, WestJet and
Jet Blue being the largest of them.
Unfair competition can be claimed by
El Al. More curious is why One World’s members in Israel, Air Berlin, American,
BA, Iberia and Royal Jordanian have failed to make any joint marketing a
cornerstone of their aviation policy on flights to and from Israel? There is no
doubt that airline alliances remain a contentious issue in the industry. The
Irish carrier, Aer Lingus, elected to cease being a member in One World. US Air
is moving from Star Alliance to One World on March 31 as part of its merger with
American airlines and the stripping of her name sometime later this year.
Vestiges of national control and pride still restrict carriers in full mergers
The results, as we see are alliances. What will be
interesting in the future is if these restrictions do lift as we enter an era of
super-airlines and evolve into these mega-carriers themselves.
conclusion, since only El Al requires a onetime membership fee to join their
frequent flier program, it costs no capital to join an airlines frequent flier
club; one should strive to do so and assiduously ensure they have a frequent
flier number on all of their tickets. While there may be no such thing as a free
lunch or free airline ticket, some benefit can be received.
is the CEO of Ziontours, Jerusalem. For questions and comments email him at
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