If the first three months of 1996 are any indication, this year may be remembered for the broad expansion of alliance-building between the world's airlines. US carriers are leading the way, typically ruffling a few feathers, especially in Latin America.

So far, few players have been left out of recent codesharing announcements: Delta Air Lines is planning new blocked-space arrangements with Aer Lingus and Malev; American Airlines is planning a codeshare alliance with Singapore Airlines out of Chicago; and Continental has announced tie-ups with China Airlines, CSA and the five-carrier Central American consortium Taca.

Among the non-US contingent of new partnerships, Lufthansa and Air Canada are preparing to gear up a major new alliance that will tie in to the existing relationships the two carriers already have with United Airlines. This codesharing accord replaces the six-year alliance Lufthansa and Canadian Airlines International canceled in December due to the former's links to United and the latter's to American.

This dizzying dance may indicate a new stage in the ongoing alliance-building trend: with most of the world's largest carriers allied, such as BA-USAir-Qantas and United-Lufthansa-Thai, it is now time to grow into smaller regions of the world via codesharing. For some, like Delta-Malev, this simply means expanding where the larger carrier is not well represented. For others, like American in Latin America, it means consolidating where its strengths already lie.

After close to a year of rumination on the topic of building alliances in the region, AMR Corp CEO Robert Crandall in late February set off a stormy debate in South America when he publicly stated American may be interested in investing in financially troubled Aerolineas Argentinas and establishing close ties with LanChile.

Declaring along the way that American has no competition in the region besides United, Crandall has incited much speculation in the region as to who would benefit most from an alliance between American and, say, domestic Brazilian carriers, which, sources say American is also pursuing. 'The problem is that they only want to guarantee their hegemony in the region,' says a Santiago-based airline industry official. 'Though an alliance may be good, there is a risk for the long term that Latin carriers will simply become feeders.'

American, however, counters that any alliance would be less intrusive than many people expect. Sources suggest that the airline is considering establishing a relationship with Aerolineas similar to the one it has with Canadian; AMR took a 25 per cent stake in the troubled Calgary-based carrier as a means to sell its management services.

However, the difference between Canada and Latin America for American is extreme: the latter already generates 15 per cent of its total revenues and has become the carrier's most profitable region. Though carriers like Aerolineas could clearly benefit from American's sophisticated management technologies, many Latin American industry executives believe Crandall is only interested in gaining market share and deterring other alliances in the region.

Meanwhile, United says it is actively seeking codesharing partners in the region besides Transbrasil, and Continental is known to be considering a tie-up with Vasp of Brazil.

M Jennings/J Levere

Source: Airline Business