07 February 2007 - With its official entry in the Oneworld alliance set for 1 April, Japan Airlines will solidify its partnership with American Airlines. As a result, JAL can become more involved in global corporate bids and American can grow its Pacific network. Though such developments occur against the backdrop of more travel program globalization by transnational companies, the full promise of airline alliance contracting has yet to be realized.
Oneworld, which on 1 April also will welcome Malev Hungarian and Royal Jordanian in what it termed "the biggest expansion since its launch eight years ago," still would lag its chief rivals (SkyTeam, led by Air France and Delta, and Star Alliance, anchored by United and Lufthansa) in allowable integration and therefore utility for the corporate market.
However, marketing and operational integration should immediately benefit travelers, especially now that most Oneworld airlines (excluding British Airways) have relocated their facilities at Tokyo Narita to JAL's terminal, and can offer itineraries with shorter connection times. JAL also is working to link IT systems with existing members and complete electronic ticket interline connections.
"Until we get antitrust immunity with British Airways, or for that matter Japan Airlines or the other [Oneworld members], there is going to be a limited amount of global dealing that we do," said David Cush, AA senior vice president of global sales. "We will just have to wait that out. Alliances are not about this year or next year. They are about 10 years from now, or 20 years from now."
While helpful, antitrust immunity is not always a pre-requisite for partnering with other airlines to serve corporate clients. "We probably will be participating with Oneworld on some global deals," said Steve Smith, Japan Airlines vice president of sales for the Americas. "We have already talked to a couple [of interested companies] to get in at the 1 April start, or if we have to, do a bridge [agreement] for a few months before we can actually become part of the process." He acknowledged that it would take time for JAL sales personnel "to get up to speed on Oneworld contracts."
Nevertheless, Smith said all indicators suggest that "once we become a member of Oneworld, we should see a boost of 15 to 20 percent in revenue because the connections will be so much better."
The partnership also is designed to help American compete in transpacific and Asian markets. "We are very bullish on where we are going in the Pacific," Cush said. "It allows us to go in and set interline pricing and pro-rates reserved for Oneworld carriers."
Such airline cooperation coincides with a growing awareness among corporate buyers of the merits of globalizing travel programs. "They do not care if the ticket was bought in India or Indiana. They want to control what carrier the employee is buying on and what the discount is, and to have a globalized travel procurement policy," Cush explained. "That causes some interesting dynamics. We have sales people in each of these areas trying to support their own routes, and their inclination would be to do local deals unless we tell them not to. So there are growing pains going on now in arranging discounts based on various points of sale."
Those challenges oftentimes are exacerbated within an alliance construct. "It's a conflict," said Mitch Cwanger, senior practice manager for air in American Express Business Travel Advisory Services. "[Alliance participants] want to drive higher-volume corporations to alliance deals, but they are still interested in getting that traffic themselves."
"If you compare the depth of discounts from an alliance deal that is offered, it generally is not as good as individual carriers," added Brett Zabel, regional project manager with Carlson Wagonlit Travel's Solutions Group. "However, the scope you gain by going with an alliance--more routes covered by more airlines--sometimes brings that back up in your overall net effective discount."
Meanwhile, nearly 20 million JAL Mileage Bank frequent flyer program members will become participants in Oneworld's integrated loyalty system, including elite level frequent flyer qualification, premium class upgrades and access to such airport lounges as American's newest facility at Narita.
On 1 April--the day JAL, Malev and Royal Jordanian join and
Aer Lingus officially withdraws--Oneworld will encompass 700 airport stations in 150 countries, handle 9,000 daily departures and 2,500 aircraft, serve 315 million annual customers and generate $85 billion in annual revenue.
More important than overall stats, the new members provide Oneworld with a stronger presence in three fast-growing markets: Asia (through JAL's extensive, Tokyo-based network), the Middle East (through Royal Jordanian's Amman base) and Eastern Europe (through Malev's Budapest base). In all, the three carriers will contribute 71 new destinations to the Oneworld network, including 40 in Japan.
Oneworld also includes Cathay Pacific, Finnair, Iberia, Lan and Qantas, and later in 2007 plans to add Hong Kong's Dragonair (which in September became a Cathay subsidiary), LAN Argentina and LAN Ecuador as "affiliate" members.
Canada's WestJet also is considering Oneworld participation, according to published reports. A travel management source familiar with the carrier's plans said WestJet is building frequency in an effort to gain share and earn an invite. Canada's dominant airline, Air Canada, is a Star Alliance member.
Meanwhile, Aer Lingus seemingly is wasting no time in striking a new transatlantic partnership as it transitions away from Oneworld. The Irish carrier and JetBlue Airways are in early talks on a "strategic alliance" for interline flight connections at New York JFK, according to a JetBlue spokesperson. The deal would enable customers to book JetBlue flights from the Aer Lingus Web site. JetBlue said other independent international carriers "continue to express interest in
partnering with JetBlue."
In other alliance news, SkyTeam signed "associate" member agreements with Air Europa, Copa Airlines and Kenya Airways. Once those airlines officially join, they will add 25 new destinations to the SkyTeam network.
