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Aviation History
1993
1993 - 0028.PDF
AIRLINE ALLIANCES giving it access to the developing Brussels hub. Lufthansa, preoccupied with its inter nal problems, has begun to put out feelers into the surrounding states, taking a stake in Austria's Lauda Air and, more recently, a share in Luxembourg's Luxair. In southern Europe, Iberia has set up stall as a South American gateway carrier with its stakes in Aerolineas Argentinas, Viasa (Ven ezuela) and Ladeco (Chile), while also making its interest clear in taking a share in the TAP Air Portugal when it comes up for privatisa tion later in 1993. Fi nally, Alitalia has plans to develop Rome into a Mediterranean hub, link ing regional traffic with its international services. As Bisignani stresses, Italy has one of the fastest- growing domestic mar kets in Europe. Another dimension has been added by the emergence of Eastern Europe. Czechoslovakia's flag-carrier CSA was the first airline to be priva tised, selling a minority share to Air France. Talks with BA appear to have foundered when it became apparent that CSA had little control over the development of Prague as a hub. BA is close, anyway, to launch ing its Air Russia joint venture from Moscow. Alitalia then stepped into Eastern Europe by taking a share in Hungary's Malev, against stiff competition from Lufthansa. The aim appears to be to develop Budapest as a hub feed into Rome. The largest of the remaining eastern carriers, Poland's LOT, says that it will not be ready to privatise for another year, while Bulgaria's Balkan is in the process of attract ing bids. In Western Europe, the smaller carriers also agree that they need to find partners. Following the failure of the lengthy talks with BA (over the issue of control of the merged company) the Netherlands' KLM has been reviewing its options. The airline has been able to pull feeder traffic into Schiphol Airport from outside the Nether lands, including that from UK regional airports, using its stake in Air UK. It also has a large, if financially troubled, US partner in the form of Northwest Airlines, although that does not necessarily solve the European issue. SAS, which is already an inter-Scandi navian alliance, faces a similar dilemma. It may be possible to cement further ties with Swissair and Austrian Airlines through the European Quality Alliance (a marketing agreement), which has been gaining in importance as the carriers carry out joint operations into Eastern Europe. While admitting that consolidation has some time still to run, Bisignani believes that there will be a resolution within the next couple of years. He adds that "...every body in Europe is in the process of talking to everybody else". As chair of the Associa- Swapping equities: Singapore Airlines, Delta Airlines and Swissair tion of European Airlines over the last year, he has been privy to some of the agonising. INTERNATIONAL ALLIANCES The creation of "global carriers" with world markets could take even longer. To date, British Airways has been making most of the running, with its clearly stated strategy of buying into the world's three main markets. Europe is largely in place. The airline's successful bid for 20% of Australia's Qantas will satisfy ambitions in the Asia Pacific region for the foreseeable future, says BA chief executive Sir Colin Marshall. The USA, however, has proved to be more problematical. BA's fight to take a major share of USAir provoked hostility from the big three US carriers, with screams that the deal would effectively give BA "control" of its merger partner. As the SAS-Continental and KLM- Northwest alliances have shown, lack of adequate control is likely to lead to losses. The USA has shown that it will trade on the control issue only in return for greater access in Europe. KLM and Northwest have plans to integrate operations, but only under the sanction of a US-Dutch "open skies" agreement. The same was demanded of the UK before a BA-USAir deal could go through, stalling the deal. MARKETING ALLIANCES A less politically fraught alternative to taking major equity stakes and seeking full code-sharing is to develop softer marketing/ operational alliances. Virtually all of the world's largest airlines now have co operative agreements in some form. These agreements range from shared frequent-flyer programmes through to joint sales and co-ordi nated scheduling. Air France has an nounced a string of co operative agreements over the past 18 months, stretching from Aer- omexico to Vietnam Air lines. Lufthansa has also suggested that, in the wake of its failure to find a transatlantic partner, it could look for strategic alliances. The German carrier already has good relations with Japan Air- Lines (JAL), with which it now owns jointly the DHL international par cels business. The link between Delta, Swissair and Sin gapore International Air lines (S1A), which is backed by small cross- shareholdings, is also being marketed heavily. Besides S1A, other Pacific Rim airlines also hold some potentially interesting stra tegic stakes — JAL has 5% of Air New Zealand, and All Nippon Airlines 9% of Austrian Airlines. It is worth remembering that the region has four of the world's top five most profitable airlines, with free access to capital and equity markets now closed to some of their Western competitors. Bisignani says that the West should not dismiss what he believes will be a "real future threat" from the region's carriers. He argues that, while the traffic-growth rates in Asia remain the highest in the world, the region can develop internally. When those growth rates fall back, as they did in the USA, the evidence is that the carriers go hunting for a bigger share of world markets. "We have to be prepared for the game that will start when the Far-East carriers arrive in Europe," he says. The danger is that, by then, national protectionism will simply have been re placed by regional protectionism, with the three major blocs keeping outsiders at bay. Whether that happens may depend on a settlement of the much wider issues of free trade, dependent on the success of the General Agreement on Tariffs and Trade, tl 26 FLIGHT INTERNATIONAL 6 - 12 January, 1993
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