First Free Story (1 of 3)Join Skift Pro
The network of global airline alliances got a vote of confidence today, with Alaska Airlines becoming the 14th full member of Oneworld.
The membership is something of a feather in the bloc’s cap. Alaska long eschewed the three big alliances — Oneworld, SkyTeam and Star Alliance — in favor or what executives called a “Swiss strategy” to partnerships. In other words, the airline remained unaligned but partnered with carriers all over the globe no matter where their alliance allegiances lay.
That strategy appeared to reach its zenith by February 2020 when Alaska unveiled plans for a new partnership with American Airlines and to join Oneworld. Corporate customers in its Seattle home, as well as its growing stature in California following the 2016 acquisition of Virgin America, demanded a more global franchise. And without the big jets — or ambitions — to fly around the world, Alaska turned to the next best thing: an alliance.
“This was important pre-Covid — it’s even more important now,” Alaska Senior Vice President of Fleet, Finance & Alliances Nathaniel Pieper said in an interview.
Overnight, Alaska gained a network of more than 1,000 destinations in more than 170 territories around the world. The airline’s customers can earn and redeem loyalty points on any Oneworld member, and its frequent flyers will receive reciprocal benefits from priority boarding to lounge access across member carriers — no small thing when it comes to airline loyalty.
The expansion comes even as international travel remains at historic lows. According to the latest data from trade group Airlines for America (A4A), international passenger numbers on U.S. airlines were down 58 percent during the week ending March 30 compared to the same period in 2019. Domestic traveler numbers were down just 41 percent.
International flying is hard hit by travel restrictions. For example, the usually busy transatlantic market is hampered by restrictions on both sides of the ocean, including a U.S. ban on travelers from much of Europe and a mandatory 10-day quarantine for anyone arriving in the UK.
Travel restrictions will go away at some point, with many expected to lessen this year. However, the consensus is that global air travel will take until around 2024 to recover to pre-pandemic levels. And when it does, airlines are eager to capture as much travel demand as they can.
“When international comes back, our best team is on the field and we’re ready to roll,” said Pieper.
A Reshaped Industry
“Because of the pandemic, airlines eliminated fleet types and they don’t have the aircraft to fly [all their] routes anymore so they will again rely on their partners,” said Cowen & Co. airline analyst Helane Becker. “As a result, we think the importance of alliances will grow again.”
American is one example of this pandemic adjustment, according to Becker. When the airline retired its Boeing 757s, it was forced to drop plans for its first-ever flight to Africa, a nonstop between Philadelphia and Casablanca. Despite this, the carrier does “serve” the Moroccan city — just via connections with its Oneworld partners, including British Airways and Royal Air Maroc.
This story is repeated across airlines and regions. From Air France-KLM retiring “all the aircraft with four engines” as chief financial officer Frederick Gagey put it in February, to the Lufthansa Group streamlining its diverse wide-body jet fleet by removing eight different aircraft types. How these moves change their respective maps post-Covid remains to be seen but one can be confident both carriers will lean more on their alliance partners — and their partners’ hubs.
“The partnerships formed within our group are going to be even more critical coming out the other side of Covid than they were previously,” Oneworld CEO Rob Gurney said in an interview.
He reiterated Becker’s network example and pointed to other joint initiatives whose importance have risen during the pandemic. Many involve joint airport facilities, including co-locating at major connecting points — locating all alliance members in a single terminal at the same airport — or building shared Oneworld lounges. He declined to say where these developments could occur citing on-going negotiations, but said at least three airports are candidates for new joint Oneworld lounges. The opening of the first such lounge at Moscow’s Domodedovo was delayed due to Covid.
Not everyone is convinced that the crisis has reinvigorated alliances. Shakeel Adam, a managing director of aviation consultants Aviado Partners, said Alaska’s Oneworld membership is neither a positive or negative development for the partnership structure. The network benefits are often negated by the added cost and complexity of membership, he added.
“Alliance membership rarely adds a lot of value that cannot be achieved through robust bilateral deals,” said Adam. This is why many carriers have pursued closer partnerships, known as joint ventures, with one or two other airlines in recent years.
For example, LATAM Airlines left Oneworld in 2020 after inking an equity investment and joint venture deal with Delta Air Lines. The desire to finalize this pact only intensified during the pandemic, with LATAM hoping to use its Chapter 11 bankruptcy restructuring to accelerate approval of the tie up. LATAM’s move and other shifts before it had raised questions — including from Becker — over the relevancy of airline alliances before the crisis.
The World Awaits Alaska
If I were to ask “‘please come invest with us bilaterally,’ with capital tighter, resources tighter and time very tight — there’s no way my phone call gets answered,” said Pieper on bilateral relationships. “This was important pre-Covid, it’s even more important now.”
Now, Alaska can sell tickets to any Oneworld destination to its corporate customers. No small thing when considering the carrier’s main competition in Seattle and California are global carriers Delta and United Airlines, respectively.
In addition to Oneworld, Alaska renewed and expanded its partnership with American. The Fort Worth, Texas-based carrier plans to launch new nonstop service between Seattle and Bangalore, London Heathrow and Shanghai Pudong this year under the tie up.
Even Adam acknowledged that for Alaska, with its limited geographic reach in the U.S. and along the Pacific coast of North America, the Oneworld network will provide some gains for travelers.
And Alaska is not giving up all of its bilateral partnerships. While Pieper declined to name what airlines would stay, he said carriers like Icelandair and Singapore Airlines provided utility to Alaska that Oneworld did not.
“What we’ve been saying to our stakeholders in Oneworld is that ‘it’s not that you’re wrong, alliances provide this ecosystem that all these bilateral and trilateral partnerships can exist,’” said Gurney when asked of the criticisms of the alliance model.
As carriers emerge from the Covid-19 crisis weaker and with record levels of debt, there will be “a big incentive to do things on a more collaborative basis than have been done before,” he added.