Skift Take

Airline consolidation is getting disruptive these days -- and not just for stressed out passengers. New global joint ventures such as Virgin Atlantic-Delta and Emirates-Qantas are shaking up the status quo, and will be increasingly challenging to global airline alliances.

“It’s gonna be beautiful, it’s gonna be awesome, it’s gonna be the best airline ever.”

Thus said Derek DeCross, American Airlines’ vice president of global sales, as he jested yesterday about the prospects of the new American Airlines, resulting from its pending marriage with US Airways.

Sitting on a panel with his peers from United Airlines and Delta Air Lines at the GBTA conference in San Diego, DeCross noted that American’s reorganization plan will get bankruptcy court consideration next week, and then American and US Airways will await a green light from the Department of Justice. (And, slot concessions may be part of any approval.)

The two airlines hope to begin codeshares in the weeks following the final approvals, DeCross said, cautioning that mergers are “fraught with opportunities to take the wrong step.”

With Delta having merged with Northwest in 2008, and United and Continental getting together in 2010, DeCross of American hopes “being last” will enable the new American to absorbs some lessons from the previous two mergers.

In other words, a sort of last-mover advantage.

US Airways CEO Doug Parker, who will head the new American, has said for example, that it would be wiser for his smaller airline to transition to the reservations system of the larger airline, American. He learned that the hard way when US Airways and AmericaWest got together in 2005, and carried out the opposite strategy.

United Defends Progress 

After a disastrous melding of reservations systems and a very challenging Summer of 2012 filled with flight delays and cancellations, Dave Hilfman, United’s senior director of worldwide sales, said yesterday the airline is proud of the work it’s done to integrate the two airlines, although he acknowledged “we clearly have more work to do.”

“Certainly last Summer was extremely challenging,” Hilfman said, adding that United has been pouring an “enormous amount of money” into its fleet, facilities and training.

He argued that United has seven of the largest business travel hubs in its network and that this structurally knocks about 3 points off on-time arrival stats, which he said recently were around 74%.

Now, it’s United’s challenge, Hilfman said, to take advantage of “one of the greatest networks on the planet.”

Delta Loves to Merge

Delta has long been a proponent of airline consolidation, and Steve Sear, Delta’s senior vice president of global sales, continued that cheerleading, noting that supply is beginning to match demand in a more fruitful way.

Sear said the U.S. has gone from nine major airlines to four, and that four years ago the nine lost about $10 billion. A stable airline business helps everyone, he said.

There’s Something Happening Here

Speaking a few minutes before the trio, Virgin Atlantic CEO Craig Kreeger pointed to a different kind of consolidation, namely Delta’s taking a 49% stake in Virgin Atlantic, as an evolution where joint ventures will take some of the luster off global airline alliances. Virgin Atlantic doesn’t belong to an alliance.

Kreeger said joint ventures are “a natural byproduct” of breaking down boundaries where true mergers can’t occur because of foreign ownership rules. There is room “for all kinds of partnerships,” he said.

“The Delta partnership is a big deal for us,” Kreeger said, adding that both airlines will have more robust networks than they could have had if they had stayed independent.

But, Glenn Johnson, president of Horizon Air and executive vice president of Alaska Air Group, which has partnerships with Delta and American Airlines, injected a note of caution about the urge to merge.

At one point, discussion moderator Henry Harteveldt of Hudson Crossing asked Johnson if he were in a boat with Delta and American, and could only save one of them from drowning, which airline would he save?

Johnson quipped diplomatically that he’d jump out of the boat.

Turning serious and injecting a note of reality into the discussion, Johnson said all of these codeshares and mergers taking are complex, and the bottom line is that they have to actually work for the customer experience.

Kreeger of Virgin Atlantic responded that joint venture partners such as Virgin Atlantic and Delta have more incentive than with “looser” relationships or “temporary partnerships” to devote resources into ensuring that their codeshares work smoothly.

Pending final regulatory approvals later this year, their passengers will assuredly find out how “seamlessly” things go.

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Tags: alliances, codeshares, consolidation

Photo credit: European watchdog approves US Airways, AMR merger. Associated Press

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