Amid the bleak market outlook facing airlines, global alliances believe they can be even more relevant to their members during tougher times. Star Alliance chief executive Jaan Albrecht says that in the initial years after the grouping was established in 1997, it was viewed as being a "good weather alliance".

But he adds that this changed with the fallout that followed the terror attacks of September 2001. "After 9/11 probably the alliance has shown more value to its members during the hard times rather than in the good weather times," says Albrecht.

Glenn Tilton, chief executive of one of Star's founding members United Airlines, similarly points to the value of the alliance during hard times. "The challenge of a slowing market really accentuates the importance of the alliance structure, and alliances within alliances," he says, highlighting the move by United and fellow Star carriers Air Canada and Lufthansa to widen their transatlantic joint venture to incorporate future Star member Continental Airlines.

Star Alliance Jaan Albrecht - David Barioni
Star's Jaan Albrecht (left) and TAM's David Barioni join forces

Rival alliance grouping SkyTeam echoes the importance of partnerships within the alliance to provide cost efficiencies during leaner times - such as its own transatlantic joint venture between Air France, KLM, Delta and Northwest: "Joint venture agreements between SkyTeam members are sources for rationalisation and consequently cost savings. In similar fashion, the consolidation of premises such as ticket offices, check-in desks and freight infrastructures, enables us to carry out further savings."

Oneworld Alliance managing partner John McCullouch adds: "When times are tough the value added by the alliance is even more important than usual, if anything. The additional revenue generated for our member airlines through alliance sales activities is still by far the biggest contribution we make, and that will remain the case for the foreseeable future. Since the bulk of this business is sold in the premium classes of service, our contribution is particularly strong in tougher economic times."

Oneworld had already shown signs of tackling costs, and this was highlighted by its recruitment of Moshe Levertov as the alliance's vice-president for IT and cost reduction over the summer. "In the early days of oneworld, most of these savings came from joint purchasing, but more recently our focus has been on the big budget area of engineering and maintenance and we have achieved some significant breakthroughs there," says McCulloch.

Star, meanwhile, in October unveiled its latest recruit when Brazilian carrier TAM accepted its invitation to join the alliance, filling a void in the region for Star since Varig's exit in early 2007.

"We are talking about a country and a region in the world which cannot be ignored," says Albrecht. Even with the addition of TAM, which should formally join the alliance within the next 18 months, Albrecht says there remain other areas of interest in the region. "When we talk about TAM, we are looking at South America, that still leaves some opportunities in Central America and the Caribbean. Central America has been an important driver in that part of the world's [growth]. We are talking to airlines [in the region] and don't be surprised if we make an announcement in 2009."

The addition of TAM leaves Russia as the last of Star's previously identified "white spots". "With Russia we have a wait and see approach. They have gone from having one airline to 300, and some consolidation is taking place," says Albrecht. Aeroflot is a member of SkyTeam and one of the options Star had been looking at was airline grouping AirUnion. But the latter has found itself engulfed in a financial crisis and is in the process of restructuring as a new carrier in combination with Atlant-Soyuz and other smaller carriers.

To read about the profound changes taking place in the structure of global alliances:

Source: Airline Business