Time for a merger of ST & oneworld alliances?
 

With *A has twice as many partners as either ST & oneworld (27 vs 13 vs 12), it's continuing to grow (Copa, Avianca–TACA, etc) and the only alliance with more than one legacy US airline. Does this lead to an environment where it make sense for SkyTeam & oneworld to merge?

• The Continental, KLM and Northwest alliance merged into Skyteam in 2004
• Oneworld lost mexico coverage with Mexicana going away, Skyeam has Aeroméxico
• With the loss of Avianca, DL has no South American partner and ST's current only hope is woeful Aerolineas Argentinas, while oneworld has LAN (and a larger ST & oneworld may help keep LATAM)
• Both currently have just one one legacy US airline
• AA, BA & DL partner with Alaska Air

Coverage wise it makes sense & I'm sure FT'ers can come up with more reasons.

Of course the con's are AA & DL are currently duking it out in NYC & not too long ago they were battling it out for JAL & ST said that they'd go after LATAM. I'm not sure how BA-IB & AF-KL would feel about a merger alliance.

Intriguing idea. Somehow I doubt that AF/KL would mesh with BA/IB, and it would be interesting in Russia too, KE/JL would be a mess. Those all ignore the AA/DL problem.

Too bad it could not happen.

Willie Walsh said that he likes mergers, this just may not be what he had in mind..

One area of strength for both ST & oneworld over *A

DL has a NRT hub yet still pursued JL joining ST. JL & CX are in the same alliance.

Your enemy's enemy can be your friend. Is DL vs AA a bigger issue than the the new UA+CO & *A?

At first blush it sounds good from FF redemption, but it would likely cause to reduced competition and if they go with the lowest common denominator (SkyPesos).. ..on second thought..

I do not think that anyone in ST could have an interest in such a merger. ST is set to grow and expects to have 20 members in a couple of years from now. While *A will still remain slightly ahead (but not as much as the number of 27 members suggests because there are many small airlines among these 27), ST is in a very safe and comfortable second position. Actually it is only OW that is falling behind.

From the customer perspective, a merger of ST and OW would be a catastrophe as this would significantly reduce competition. (And this is why governments would try to stop it anyway.)

*A plans to add 5 members, ST 4, OW 2, not sure ST will be gaining much/any ground on *A, while the combined ST & OW just passes *A

*A has 46% of the combined Passengers per year of all three alliances.
Said another way, a combined ST & OW would only have 15% more Passengers per year than *S

ST is in a very distant second. Second may not be a bad place to be, but it's no where close to *A.

So SkyTeam can bring their ridiculous award levels and fees to One World? No thank you!

Does anyone know the market share of *A in North America?

I doubt a merger between ST and OW would ever happen. While Star Alliance is surely bigger than ST & OW, bigger does not always mean better. I'm sure time will tell, but I foresee Star Alliance's large size eventually being somewhat disadvantageous.

Imagine UA or LH having 30+ other airlines trying to book award travel on their respective metals...

That's why UA and US Airways block many award seats on partners.

I believe a complete network is much more powerful than merely having a high number of carriers (or even passengers for that matter)...and I think ST and OW should work to fill their current holes.

Although an intruiging idea, while the US has DL, AA and UA, and Europe has AF/KL/AZ, BA/IB and LH/et al, there will be three alliances.

Really?

It depends very much on individual perspective. For me, ST comes a long way behind OW in terms of earning miles, retaining miles, redemptions and network coverage. I'm a member of FB and DL schemes.

As always on FT, YMMV. Noting your location, ST/FB may well be the dominant scheme at LCY. ;)

You could probably get close with this Department of Transportation’s Bureau of Transportation Statistics (BTS) report:
Table 3. Top 10 Airlines, ranked by January-December 2009 Scheduled Domestic and International Enplanements*


Wiki has a list of List of largest airlines in North America by Number of passengers
*The Delta numbers in Wiki don't seem to align with the BTS (maybe they're not apples-to-apples?)
*With Wiki, make sure you don't double count as it seems CO has its own line and additionally is also included in the UA total.
*Also with wiki I don't know if the regionals are also double-counted (are SkyWest Airlines flights also included in DL, UA, etc)

The effectiveness of an alliance does NOT depend on what YOU (the customers) get out at the end of the day, but it depends on what THEY (the airlines) get for themselves, like profits, bottom line, shareholders' values, stock price, etc.

No alliance revolves around you!

Let's see, BRIC countries are the future of the world, let's see who win:
- Star Alliance lost in Russia (besides Aeroflot and S7 Airlines, nothing much left, other airlines are so small)
- oneworld lost in China (besides Air China, China Southern, and China Eastern, nothing much left, other airlines are so small)
- SkyTeam not yet has a member in India and Brazil, but at least, there is something left (Jet Airways and Gol Airlines - and rumour is that negotiation is on the way for these two to join SkyTeam in the future, with Jet Airways more likely, while Gol still a bit unknown).

We must also note that SkyTeam is the "absolute winner" in China - the biggest market in the world (with China Southern Airlines, China Eastern Airlines, and Shanghai Airlines), in addition to China Airlines in Taiwan as well.

In Russia, Aeroflot is the clear leader for international routes.
In India, Air India and Jet Airways are on par with each other; while Gol Airlines is just behind TAM Airlines in Brazil.

After BRIC, there are also "Next Eleven" countries:
- Bangladesh: (none)
- Egypt: Star Alliance wins
- Indonesia: SkyTeam wins
- Iran: (none)
- Mexico: SkyTeam (with Aeromexico)
- Nigeria: (none)
- Pakistan: (none)
- Philippines: (none)
- South Korea: SkyTeam wins
- Turkey: Star Alliance wins
- Vietnam: SkyTeam wins

There are CIVETS countries:
- Colombia: Star Alliance wins
- Indonesia: SkyTeam wins (250-million population)
- Vietnam: SkyTeam wins
- Egypt: Star Alliance wins
- Turkey: Star Alliance wins
- South Africa: Star Alliance wins

There are MAVINS countries:
- Mexico: SkyTeam wins
- Australia: oneworld wins
- Vietnam: SkyTeam wins
- Indonesia: SkyTeam wins
- Nigeria: (none)
- South Africa: Star Alliance wins

There are VISTA countries:
- Vietnam: SkyTeam wins
- Indonesia: SkyTeam wins
- South Korea: SkyTeam wins
- Turkey: Star Alliance wins
- Argentina: SkyTeam wins

Now let's see the G20 countries:
- Canada: Star Alliance wins
- USA: (3 alliances)
- Mexico: SkyTeam wins
- Brazil: (situation unknown)
- Argentina: SkyTeam wins
- South Africa: Star Alliance wins
- China: SkyTeam wins
- South Korea: SkyTeam wins
- Japan: oneworld and Star Alliance win
- Indonesia: SkyTeam wins
- India: (likely 3 alliances)
- Saudi Arabia: SkyTeam wins (likely)
- Russia: SkyTeam and oneworld win
- Turkey: Star Alliance wins
- France: SkyTeam wins
- Germany: Star Alliance wins
- Italy: SkyTeam wins
- United Kingdom: oneworld wins
- Australia: oneworld wins

Now let's count the number of markets:
- Star Alliance: 7 markets
- SkyTeam: 11 markets
- oneworld: 6 markets

Does it show you that SkyTeam has the best strategy to get the most of the most important markets in the world?

Let's see the 13 countries with the highest population in the world:
- People's Republic of China: SkyTeam wins
- India: (likely 3 alliances)
- United States: (3 alliances)
- Indonesia: SkyTeam wins
- Brazil: (situation unknown)
- Pakistan: (none)
- Nigeria: (none)
- Bangladesh: (none)
- Russia: SkyTeam and oneworld win
- Japan: oneworld and Star Alliance win
- Mexico: SkyTeam wins
- Philippines: (none)
- Vietnam: SkyTeam wins

Let's count the number:
- Star Alliance: 3 markets
- SkyTeam: 7 markets
- oneworld: 4 markets

And did you see that SkyTeam is the clear winner in 4 of the above markets? (while this statistic is NONE for oneworld and Star Alliance)

So from the 2 above statistics, you tell me who is the number one in the world?

I would tell you SkyTeam (not even Star Alliance). The ones that should "merge" together are Star Alliance and oneworld. Just do the math: 3 + 4 = 7.

Interesting way to look at it, although your assumptions are inconsistent (assuming only losses for OW & *A and assuming only gains for ST).

If we remove assumptions and focusing on current and announced members:
- Brazil: *A
- Russia: ST & OW
- India: *A & OW
- China: *A & ST(3)

"Next Eleven"
- Bangladesh: (none)
- Egypt: *A
- Indonesia: ST
- Iran: (none)
- Mexico: ST
- Nigeria: (none)
- Pakistan: (none)
- Philippines: (none)
- South Korea: *A & ST
- Turkey: *A
- Vietnam: *A

- Colombia: *A(squared)
- Indonesia: ST
- Vietnam: ST
- Egypt: *A
- Turkey: *A
- South Africa: *A

G20 countries:
- Canada: *A
- USA: *A(squared) & ST & OW
- Mexico: ST
- Brazil: *A
- Argentina: ST & OW
- South Africa: *A
- China: *A & ST
- South Korea: *A & ST
- Japan: *A & OW
- Indonesia: ST
- India: *A & OW
- Saudi Arabia: N/A yet
- Russia: ST & OW
- Turkey: *A
- France: ST
- Germany: *A & OW
- Italy: ST
- United Kingdom: OW
- Australia: OW
*A: 10 (ignoring the squared)
ST: 9
OW: 8

100 million+ population:
(rather than arbitrarily picking 13 which includes Vietnam but excludes Germany)
- China: *A & ST(3)
- India: *A & OW
- United States: *A(squared) & ST & OW
- Indonesia: ST
- Brazil: *A
- Pakistan: (none)
- Nigeria: (none)
- Bangladesh: (none)
- Russia: ST & OW
- Japan: *A & OW
- Mexico: ST

*A: 5 (ignoring the squared)
ST: 5 (ignoring the 3)
OW: 4

Looking at the country analysis above:
- ST & OW overlap in Russia, Argentina & USA
- *A & ST overlap in China, South Korea & USA
- *A & OW overlap in Japan, India, Germany & USA

What exactly does "squared" signify in your list?

To signify two or more carriers in that country that are part of the alliance:
China with ST = China Southern, China Airlines, China Eastern
Colombia with *A = Avianca–TACA, Copa Airlines [through Copa Airlines Colombia, formerly Aero Republica]
USA with *A = United-Continental, US Airways

ADDITION: I was sent a PM that *A in Brazil should also be squared with TAM & Avianca Brazil (although TAM may be moving to OW with LAN, the current status is with both in/going to *A)

oneworld has a much different aim than SkyTeam (which is called the 'leftover alliance'). oneworld wants a smaller alliance (less intra-alliance competition) with quality carriers, and competition laws would surely prevent such a merger.

I'm sorry to say, but I think Star Alliance is the "leftover alliance" instead, who seems to willing to take any airlines on the planet with a valid flying license.

For example, in Southeast Asia, I think airlines like Philippine Airlines, Lao Airlines, Bangkok Airways, Royal Brunei Airlines, may all join Star Alliance if these airlines ever "apply" to join. Star Alliance would even "accept" Malaysia Airlines as well (just that Malaysia Airlines will not want to).

Did you my analysis above about the "great strategy" by SkyTeam to focus on "the most important countries" of the future? (e.g. BRIC, Next 11, G20, the most populated ones)

For example, Indonesia is the 4th most populated country in the world. No one is looking to Indonesia now. No one is looking to Garuda Indonesia now. But that is a 250-million population (just after China, India, and USA). The potential market is huge. And SkyTeam "conquers" that market.

And China as well, the biggest country in the world. SkyTeam is a clear winner in China (Star Alliance is far left behind, while oneworld is almost non-existent there).

While I'm Sapphire with QF and love my AA miles and have a preference for OW, a lot of OW is marketing spin. Cathay seems to loathe that it is in the same alliance as QF or AA and has actively prevented expansion of OW in Asia (hence Hainan is still non-aligned). And the "quality" claim always amuses me (perhaps "arrogant" is more apt), when QF long haul economy has less seat pitch that SQ regional, QF converts its flights to it's "quality" LCC Jetstar, the torture of CX economy seats on any flight over an hour, Air Berlin is accepted, Iberia loses your bags, and, well, AA.

What SkyTeam seems to do better than other airlines is raise their members. When Korean joined it was a laughing stock for a variety of reasons including safety, now I would pick them over CX long-haul in economy in a heartbeat (although I'd even pick AA or UA over those awful CX seats). The cooperation they offer almost had JAL move until a catastrophic bankruptcy and initial change costs put paid to that.

It would be interesting to have a discussion about the strategy of the three alliances here.

However, this will not work if people start claiming that a certain alliance is better than others, that a certain alliance is a "leftover alliance", etc.
Whether alliance A, B, or C, is the best one, is in the eye of the beholder and very much depends on individual travel plans and on how people perceive the quality of different flight products. As much as there is no such thing as "the best Business class", there is no such thing as a "best alliance". All 3 alliances have carriers with more sophisticated products and carriers that are boarderline LCCs. The same applies to FFPs within the 3 alliances: there are generous ones, not so generous ones, some that match the needs of a particular individual, some that do not.

So let's try to keep all these subjective assessments out of this thread here and see them as what they actually are - a mater of taste.

Instead, we could focus on business facts, such as the number of passengers, the number of destinations, exposure to different markets, mid-term strategy, etc. In doing so, we could have a fruitful discussion.

Number of carriers is an exceedingly poor metric for alliance reach or market share. Number of destinations served, number of city pairs served, Revenue Passenger Miles, number of flights per day, passenger boardings... all these are better indicators.

That said, there's no way any proper competition authority would allow this. Look at the time spent, and concessions made, just to get the simple 3-way AA/BA/IB TATL JV approved. I don't see how the ongoing cartelization of the global airline industry is good for consumers, and a SkyTeam + oneworld combination would be a huge step.

Do not call me rasist, but historically:

Star: Central European and Northern European centric plus Portugal (Turkey, Egpty have strong tie with Germany; Part of Siwss and Austria have strong tie with Germany)
Sky Team: Franco and Dutch centric plus Eastern European(Indonesia and Taiwan used to be Dutch colony; Frenhc once occupy Vietnam...Russia and France used to be friend...Malev once was believed to join Sky Team with heavy code share and cooperation with both KLM and Air France)
OneWorld: Anglo-saxon and Spanish centric (Hong Kong used to be GB colony, JAL loved the beatles....Lan and Iberia...the founding members including five airlines from five former British pride: GB, US, AU, Canada and Hong Kong)

But not all the airlines in the alliance have such historical ties. There is more to be studies in this area. E.g. why United chose Star Alliance whereas why Delta chose SkyTeam? It may be just economic interest or strategic choice. But for many airlines in the alliance, there is background ties within the alliance. It is interesting to notice.

Their objective is really to be big with maximum coverage, but at the expense of each individual member airlines' revenue (intra-alliance competition). Of the three, *A actually has the best products and services - such as a standardized priority tag, combined *A check-in at major hubs, dedicated baggage / passenger tracking centres (as per their Reference Guide at www.starallianceemployees.com).

SkyTeam does not have a clear objective of what they want to achieve.

The term leftover alliance(Which I take credit for starting back in 03) refers to Skyteam only being able to grab a few of the major global carriers.

By the time ST was formed in 2000, OW(est. 1999) and *A(est. 1997) had already collected the major carriers who were looking to join an alliance.

I wouldn't count OW out of the china game just yet. Hainan is still up for grabs and they already codeshare with MA, S7, and AB. CX and DragonAir cover the ex-HKG to china routes in the meantime.

In the case of those two airlines they were both founding members as opposed to joining the alliance after it was formed. I think it would have been highly unlikely for DL to join *A or vice versa.

On a lighter note, what would the new alliance be called... OneTeam, SkyWorld?

"Leftover", "major global carriers" and "number of airlines" are all very subjective terms that have little to do with reality (as does the ridiculousness that ST "only" has one US carrier, all the alliances originally had only one US carrier, it was ST which changed the trend when it absorbed "Wings" , and considering that Delta ate NW, which was in fact bigger than about 35 of the worlds top 50 airlines at the time of the merger, ST has enough US coverage). I am top tir on TWO * carriers as well as top tier on 2 ST carriers, as well as 1 1world carrier, they all have their pluses and minuses, however carrier count is not a real metric, as airlines like Air Adria, Tyrolean, Aegean, and a few others really do not generate too many passengers. All the talk about "better" carriers is a bit of a joke as I count several of the 1world and * cariers which hae dsappeared over the years due to insolvency, but cannot remember any ST carriers doing the same. Furthermore with the exception of Continental and its minions leaving ST, I cannot recall many defections from ST, but do recall several from the other alliances. I would say overall that 1world has been and continues to be in the weakest position for a variety of reasons, and that these may accelerate in the medium term future.

Other than Canadian Airlines going broke and being bought by AC, there have been no defections from OW. I can't speak about *A other than MX.

People have been saying this for years, and yet OW still survives and continues to grow with new members and ATI/JV agreements. Predictions of OW's demise are highly exaggerated.

true, as it is true that ST has in the past years lost many of the most interesting prospective members to * (mostly) and OW.
I would not be so quickly to discount OW as the weakest alliance, one of the main stumbling blocks for its development, a proper alliance between two of the core partners, has been just removed. The presence of one or more core partners with deep links between them (AF/KL/DL for ST, LH/UA for *) has been a deciding factor for many prospective entrants in their respective alliances.

EI left OW also

1 World has lost Aer Lingus, and Canadian ( Canadian went bust and Air Canada picked up a few pieces, this was not some sort of merger), Swiss (which was a huge stillborn mess). And of course MExicana which has disappeared (again)

It should also be noted that 1w has lowered its standards substantially, one of the reasons Aer Lingus was forced to leave was because they would no longer operate a business cabin on s/h services, now 1w has gone out of its way to bring AB in, which is even more down market.

* lost Varig, Ansett, Mexicana, Shanghai Airlines. At least 6 * carriers are so small that it is a joke that they are listed as full members.

I agree on the loss of EI, however EI never left OW for another alliance. They left to become a Ryanair-esque LCC which they realized was a big mistake. Now they're considering rejoining an alliance.

Swiss was never a member of OW and as you said CP ran out of cash and was bought. None of these examples fit the term of "defection".

And where exactly dd I use the word "DEFECTION", I believe my words were (with original typos, "hae dsappeared over the years due to insolvency". EI left, because they became a LCC, it is not that EI is changing, but rather that 1w through its welcome of AB has extremely lowered its standards. Swiss had in fact agreed to be a 1w member and for a bunch of reasons never enetered, much of this had to do with BA trying to "roll" them, considering the fact that they later did join *, that is a big diference(and I do recall 1w materials with Swiss on them at many airports for a short time). Canadian and Mexicana are two more examples of lost carriers. Again other than CO (and its controlled carrier Copa) leaving due to the purchase of NW by DL and CO's later purchase by UA, ST has never lost a carrier, and has only grown.

Easy enough to see Former Members in the Wiki link on the original post

Summarizing the wiki post:

*A Former Members
(AN) Ansett Airlines 1999-2001, defunct
(MX) Mexicana 2000-2004, later joined Oneworld
(FM) Shanghai Airlines 2007-2010, left voluntarily
(RG) Varig 1997-2007, ejected

ST Former Members
(CO) Continental Airlines 2004-2009, changed to Star Alliance
(CM) Copa Airlines 2007-2009, left with Continental
(NW) Northwest 2004-2009, merged with Delta

OW Former Members
(EI) Aer Lingus 2000-2007, left voluntarily
(CP) Canadian Airlines 1999-2001, acquired by Air Canada
(MX) Mexicana 2009-2010, defunct

I vote for OneSky

Glad to see someone add some levity ;-)

EI left because they didn't want to pay to link up their systems with JL. Their changing business model was just a convenient excuse.

I'd disagree that OW is in the weakest position. Contrary to some of the posts above, it's strength is that it works out of some of the world's most important hub cities. In fact, LHR, JFK, HKG, NRT & SYD alone is a pretty impressive set of global hubs to call your home.

ST has definitely improved, although the introduction of carriers such as GA is a little worrying. Indonesia might be a major future market, but the country still has a long way to go in respect to aviation safety (or even safety in general). Interesting country, but it's a long way from top of the pack neighbour Singapore, or even the up and coming giant of Malaysia.

AB arguably provides a significantly better product in Y than either BA or AF, so your conclusions don't really hold water in respect to it's introduction into OW. In fact I think it suffers from many of the same successes such as DJ, which I am sure both ST and *A would love to have, and a far cry from the likes of Sleazyjet or Liarair.

LX also never joined OW, so I don't think you can chalk that one up. MX also was not in bad shape necessarily when it left *A. It just decided that it was not in it's interest to keep going down the *A path and cosying up to UA.

Finally in respect to CP, don't forget that AC also nearly went bust. Neither carrier was in particularly good shape, and it has only been in recent years that AC has started to look good again.

Again, I think you are forgetting a little recent history. CO left ST and switched to *A before the UA merger. CO's leaving may have been related to the 'golden share', but it had nothing to do with a merger which at the time had not been inked.

Also CO no longer controls Copa. In fact I don't believe it owns any shares anymore, and has not done for getting towards 3 years. In the latter years it actually had a pretty small shareholding. The only thing tying the two together is really OnePass.

EI is a very poor cousin to AB. Comparing the two is pretty unfair.

I've flown AB four times in the last 2 months. It is an LCC plain and simple, A pig in lipstick is still a pig, its not ust the seats you know.............its the entire attitude. Regarding CO, you have just reiterated pretty much exactly what I said. As for Copa, while CO may not have a shareholding anymore, as you point out its Onepass integration pretty much ensures that it follows CO.

yes 1W does have some good hubs............perhaps in the year 2040 when a new runway is built at LHR that will lead to some growth there, unfortunately as it stands this mans that BA is about 20% smaller than it was a decade ago and may shrink more. JFK is a nice hub to have..........everyone has it if they want it and DL is the 900 pound gorilla there. HKG is somewhat static, and several mainland airports have been growing at 300% the rate of HKG in recent and coming years, NRT was everyone's dream in the 80's and early 90's, not a bad place to have but DL is the thrid biggest carier there and KAL the fourth. SYD? That's a reach. Its a nice monopoly to have, but ultimately not very important.

I did not realize knows CP is already acquiring by AC in early 2001. I don't really remember which former airlines who already joined the alliance. I remember EI is former DL codeshare for a short-time and EI is switched to AA. Then EI is already joined codeshare with UA.

NOTE: The OP was tactfully PM'ed the above info 4 days ago. As hfly has not corrected and hfly & Traveloguy continue to discuss defection it may be relevant to post in the forum.

As you generally fly BA in J, you are probably not aware of what happens behind the curtain. Otherwise you would probably have to acknowledge AB is probably better than BA in Y.

I would also disagree that OnePass is a big tie between Copa and Continental. Considering Copa did not even elect to join *A until recently, I suggest that speaks volumes.

Hard to say what will actually happen at LHR, and I doubt it will be as long as 2040 until a new runway is built. I would also disagree with your view on SYD considering the how many carriers actively compete on the Roo Route.

BA had considered buying KLM while AA was toying with NW. Anything can happen.
I don't like BA's mileage accrual.