The European alliance merry-go-round is turning at full tilt during the northern hemisphere's summer, with loose ends tidied up and new combinations entering the arena.

With the holidays more or less shutting the regulators in Brussels down for the month of August, the frustrated officials at British Airways and American Airlines have time to prepare for the next round of bargaining and just get more frustrated with a situation that has dragged on for more than a year now. On top of that, confirmation that American will take a stake in Aerolineas Argentinas means that a BA-Iberia linkup, and an American-Iberia alliance, are now real possibilities (see story, p13).

But while the UK carrier continues to struggle to define its global alliance strategy, its European rivals are having more success. Following the long-expected agreement by KLM to sell its 19 per cent stake in Northwest back to its US partner, the two carriers have agreed to expand their alliance at the commercial and operating level. The sale of the holding will take place in four tranches over three years, starting with the first deal on 1 October, netting the Dutch carrier US$40 per share with a 7 per cent accretion rate linked to the remaining three tranches. At the base price KLM will earn almost US$1.2 billion from the sell-back.

Under the new agreement the carriers have committed themselves to a minimum 10 year partnership and each intends to appoint one member to the other's board. The current, highly successful cooperation on the trans-Atlantic will be extended to destinations in Canada, Mexico and India. The two carriers also plan to expand the alliance through new partners.

The first major addition to the family could be Alitalia. Prompted by talks between BA and Iberia, Gian Maria Gros-Pietro, the chairman of the Italian flag carrier's holding company IRI, revealed he was hopeful of Alitalia finding a major strategic alliance partner by year end. Gros-Pietro identified both KLM and Air France as possible candidates. The latter already codeshares with Alitalia between six French and Italian points, but Gros-Pietro appears to favour KLM because there is less overlap between the hubs.

Elsewhere in Europe, the lines between two of the main alliances became less blurred after Finnair and Lufthansa decided to end their six-year codesharing partnership from 25 October 'to avoid conflicting interests in the Nordic market,' explains the German carrier. The carriers' frequent flyer programme link will continue until the end of 1997.

Lufthansa will focus on building up its presence in the Scandinavian market through SAS, one of its four Star Alliance partners. Moreover, the German carrier will also start an important regional codesharing alliance with Air Littoral. From September France's largest regional carrier will put Lufthansa's code on services to 26 destinations. The carriers will also link their FFPs.

Finnair will instead concentrate on its links with the Swissair, Sabena, Delta grouping, which also includes Austrian Airlines and Danish carrier Maersk Air. The Finnish flag carrier also has a link with Braathens Safe of Norway.

Concurrently with the Finnair move, Swissair stepped up its codesharing relationship with Maersk. The Danish carrier will launch daily Copenhagen-Geneva services from 26 October as an extension of its codesharing alliance with Swissair. The two carriers started codesharing in May this year on Billund-Zürich.

Mark Odell

Source: Airline Business