Introduction
In the current world where intensity of competition is high, large corporations cannot carry out their market operations effectively unless they are able to cut down their operating costs. In this context, firms tend to combine their synergies so as to take advantages of shared facilities and efforts, and hence to share business risks. As a result, today airline companies are willing to become members of global alliances and add value to their sustainability efforts. This paper will critically evaluate the formation, membership, and operational activities of three major global airline alliances including Star Alliance, Oneworld, and SkyTeam.
Formation
Headquartered in Frankfurt am Main, Germany, the Star Alliance is the largest airline alliance in the world. Star Alliance was founded on 14th May 1997. The founding members included Scandinavian Airlines, Thai Airways International, Air Canada, Lufthansa, and United Airlines. Oneworld was founded on 1st February 1999 with the stated objective of becoming the first-choice airline alliance for international travelers worldwide. Oneworld is headquartered in New York, United States. The founding members of this airline alliance include American Airlines, British Airways, Canadian Airlines, Cathay Pacific, and Qantas. Founded on 22nd June 2000, SkyTeam is an airline alliance managed by its centralized management team called SkyTeam Central. It is the third major global airline alliance formed after Star Alliance and Oneworld. SkyTeam is headquartered at Amsterdam Airport Schiphol Haarlemmermmer in Netherlands. The founding members of SkyTeam alliance are Aeromexico, Air France, Delta Air Lines, and Korean Air.
Membership
Currently, Star Alliance has the strength of 27 full members. The current members of the Star Alliance are Andria Airways, Aegean Airlines, Air Canada, Air China, Air India, Air New Zealand, All Nippon Airways, Asiana Airlines, Austrian Airlines, Avianca, Brussels Airlines, Copa Airlines, Croatia Airlines, EgyptAir, Ethiopian Airlines, EVA Air, LOT Polish Airlines, Lufthansa, Scandinavian Airlines, Shenzhen Airlines, Singapore Airlines, South African Airways, Swiss International Air Lines, TAP Portugal, Thai Airways, Turkish Airlines, and United Airlines.
Throughout its corporate history, 11 members left Star Alliance including Ansett Australia, Blue1, British Midland International, Continental Airlines, Mexicana, Shanghai Airlines, Spanair, TACA Airlines, TAM Airlines, US Airways, and VARIG. Ansett Australia left the Star Alliance on 12th September 2001 as a result of its business collapse. On 1st November 2012, Blue1 left the alliance because SAS acquired its mainline operations.
British Midland International exited from the alliance on 20th April 2012 as a result of its merger with International Airlines Group. In the same year, Continental Airlines also left the alliance when it merged with United Airlines on 3rd March. Mexicana exited from Star Alliance on 31st March 2004 so as to join Oneworld and to codeshare with American Airlines. Due to its merger with China Eastern Airlines, Shanghai Airlines exited from the alliance on 31st October 2010. A business collapse forced the Spanair to leave the Star Alliance on 27th January 2012. When it merged with Avianca on 27th May 2013, TACA Airlines left the Star Alliance. VARIG left the alliance on 31st January 2007 when the company ceased its operations. Finally, business mergers compelled both TAM Airlines and US Airways to leave the Star Alliance on 30th March 2014.
There are 15 current full members for Oneworld. They include Air Berlin, American Airlines, British Airways, Cathay Pacific, Finnair, Iberia, Japan Airlines, LAN Airlines, Malaysia Airlines, Qantas, Qatar Airways, Royal Jordanian, S7 Airlines, SriLankan Airlines, and TAM Airlines. The Canadian Airline left the Oneworld on 1st June 2000 when it was acquired by Air Canada, a member of the Star Alliance.
SkyTeam is operating with 20 full members including Aeroflot, Aerolineas Argentinas, Aeromexico, Air Europa, Air France, Alitalia, China Airlines, China Eastern Airlines, China Southern Airlines, Czech Airlines, Delta Air Lines, Garuda Indonesia, Kenya Airways, KLM, Korean Air, Middle East Airlines, Saudia, TAROM, Vietnam Airlines, and Xiamen Airlines. Alitalia-Linee Aeree Italiane left the SkyTeam on 12th January 2009 when it was rebranded to Alitalia. Continental Airlines exited from SkyTeam on 24th October 2009 following its decision to merge with the United Airlines and subsequently move to Star Alliance. In addition, Northwest Airlines left the alliance on 31st January 2010.
Size and Scope of the Alliance
‘The Way The Earth Connects” is the alliance slogan of Star Alliance. Star alliance is the largest airline alliance in the world. In terms of passengers, Star Alliance is the world’s largest airline alliance as of March 2014 (637.6 million) beating SkyTeam and Oneworld. At the same point of time, the alliance had the strength of 27 full members who operated nearly 4,000 aircrafts and served over 1,000 airports spread across 194 countries (Star Alliance: History, n.d.). In March 2014, Star Alliance had over 18,000 daily departures. Star Alliance offers a two-tier rewards program featuring Silver and Gold for passengers. Currently, the alliance has 1,321 destination airports and a fleet size of 4,456. In addition to 27 full members, the Star Alliance has 40 non-voting member affiliates. The large size and fleet network assists the organization to take advantages of the economies of scale and to spread risks effectively.
‘An alliance of the world's leading airlines working as one’ is the alliance slogan of Oneworld. In addition to its 15 full members, the Oneworld has an additional strength of 30 affiliated airlines. Oneworld alliance became the third largest global alliance by means of passengers carried (512.8 million passengers) in March 2014 after Star Alliance and SkyTeam. As of April 2014, the Oneworld alliance operated a fleet of 3,428 aircrafts, serving 1,010 airports in 155 countries; and, it has 14,000 daily departures that can make more than US$140 billion annually (Oneworld at a glance, n.d.). It has one inactive member too with 21 affiliates (Oneworld). As part of its second big expansion project, the Oneworld has included 30 affiliate members that are either owned by or have strong connections with its full members. The three premium status levels such as Ruby, Sapphire, and Emerald assist the organization to deliver customized services to its passengers.
‘Caring more about you’ is the alliance slogan of SkyTeam. Although SkyTeam is the last alliance formed among the three, it is currently the second largest global alliance after Star Alliance in terms of passengers carried (588 million passengers). As of March 2014, this alliance has the strength of 20 airline carriers spread across five continents. The SkyTeam also operates a cargo alliance known as SkyTeam Cargo. The SkyTeam witnessed the biggest expansion in its history when Continental Airlines, Northwest Airlines, and KLM joined the alliance in 2004 (Jangkrajarng, 2011). As of March 2014, the SkyTeam members collectively operated a fleet of more than 4,400 aircrafts, serving 1,052 airports in 177 countries. It has over 15,700 daily departures supported by a workforce size of 459,781 people. In addition, the SkyTeam maintains 564 lounges worldwide to serve the needs of its 588 million passengers annually.
Estimated Revenues
Justifying its status as the world’s largest airline alliance, Star Alliance generates the highest amount of revenues compared to other major airline alliances. In the 2014-15 financial year, Star alliance generated an estimated revenue of USD$179.05 billion whereas the organization’s Revenue Passenger Km was USD$1,364 billion during the same period (Star Alliance: Facts and figures, n.d.). In a 2009 report, it is reported that the Oneworld alliance generated roughly $5 billion for its members over the first ten years of its operations (Dunn, 2009). Oneworld’s management says that it was a significant achievement in the corporate history of the Oneworld because the company had to compete with the giant player Star Alliance. As of October 2013, the organization earned annual revenue of more than US$140 billion. Being the second largest global alliance, the SkyTeam improves its revenues each year. Industry analysts opine that the SkyTeam has grown unimaginably over the last decade and it has the potential to become the world’s largest airline alliance over the coming years, surpassing the Star Alliance. The significant revenue growth of the company over the recent years justifies such claims.
Strategic Activities
Being the first global airline alliance, Star Alliance network strives to deliver a better passenger experience and thereby contribute to the growth efforts of its member airlines. The synergies of combined operation have assisted the member airlines to limit their operating costs and to improve the profitability notably. The codeshare agreements between Star Alliance members add value to flight experience of passengers. Unsurprisingly, Star Alliance follows joint-purchase and joint-marketing activities so as to take advantages of economies of scale and to achieve a superior position in the global marketplace. These joint operations greatly aid the organization to cut down its operating costs notably and to make a greater impact on the target audience. It is interesting to note that the Star Alliance has joint-facilities like ‘Co-location’ and ‘Connection Centers’ to enhance the efficiency of its overall operations. Under the ‘Co-location’ facility, Star Alliance’s members share facilities like ticketing, check-in counters, lounges, baggage, and other services. In addition, the alliance’s ‘Connection Centers’ operate to ensure that the passengers and their baggage make their flight connection (Star Alliance, n.d.).
The codeshare agreements between Oneworld members assist this airline alliance to provide its customers with a greater choice of destinations and departure times. The joint ground facilities really benefit the Oneworld to deliver enhanced services to passengers at better unit costs. Interestingly, the members of the Oneworld have strength of “combined ticket offices, check-in facilities and/or lounges at some 50 airports worldwide”; and, Oneworld’s members “co-located their international operations at Tokyo Haneda” so as to create an extensive global network for the alliance (An introduction to oneworld, n.d.).
Oneworld has also taken a number of cost-saving initiatives such as airport co-location and joint procurement. The alliance gives particular focus to constant maintenance and upgradation programs with to obtain a competitive edge in the global marketplace. In addition, the organization follows joint-purchase and joint-marketing activities in an attempt to trim down operating costs and to sustain its operations in the long term. Compared to Star Alliance and SkyTeam, it seems that the Oneworld does not combine their synergies or share their facilities effectively.
Similarly, the joint operations between the SkyTeam members have assisted this organization to become the world’s second largest airline alliance in terms of passengers carried. One of the major objectives of the organization is to deliver fast and efficient transfers for passengers and their luggage between flights. The SkyTeam hubs are able to facilitate this coordination and the extensive SkyTeam network contributes significantly to the passenger experience. In addition to offering more convenient transfers, the joint operations aid the corporation to provide consistent check-in process to its clients. In addition, this airline alliance has invested in joint initiatives like recycling and carbon offset programs with intent to minimize the environmental impacts of its operations. The company adopts a joint-purchase strategy for acquiring ‘electric and alternative fuel ground service equipments’ (SkyTeam NewsFlash – July 2009). The organization’s collaboration on various energy conservation projects has benefited the business to improve its status as a socially responsible corporate citizen.
Conclusion
References
Dunn, G. (2009). Oneworld touts $5b revenues from alliance over first 10 years . Flightglobal. Retrieved from https://www.flightglobal.com/news/articles/oneworld-touts-5b-revenues-from-alliance-over-first-10-322031/
Oneworld at a glance. (n.d.). Official site. Retrieved from https://www.oneworld.com/news-information/oneworld-fact-sheets/oneworld-at-a-glance/
Star Alliance. (n.d.). Official site. Retrieved from http://www.staralliance.com/en/about
Jangkrajarng, V. (2011). Emprical studies on strategic alliances in the airline industry. Hitotsubashi University Repository. (n.d.). Retrieved from https://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/19405/2/0201102101.pdf
SkyTeam NewsFlash – July 2009. (2009). SkyTeam. Retrieved from http://www.skyteam.com/en/About-us/Press/News/News-overview-2009/SkyTeam-Newsflash-July-2009/
Star Alliance: Facts and figures. (n.d.). The Star Alliance Network. Retrieved from http://www.staralliance.com/documents/20184/22080/SCP_Facts+and+Figures/c8797e1f-12d0-46ea-b5ad-28edfa31803c
Star Alliance: History. (n.d.). America Pink. Retrieved from http://america.pink/star-alliance_4157124.html
