Flying to Europe? Choose Your Airline Alliance

The oneworld global airline alliance is on a roll.

In the past week, the consortium of airlines—American, British Airways, Cathay Pacific, Finnair, Iberia, Japan Airlines, LAN, Malev, Mexicana, Qantas, and Royal Jordanian—has announced a new European partner, and received regulatory clearance to jointly operate transatlantic flights.

Alliances Dominate Europe Flights

Last week, the U.S. department of Transportation (DOT) followed the European Commission in granting antitrust immunity to American, British Airways, Iberia, Finnair, and Royal Jordanian on their transatlantic routes, including "plans for an integrated joint venture in which American, British Airways and Iberia would cooperate on all their transatlantic flights and services." That means those carriers are now free to jointly set schedules and fares across the Atlantic, effectively eliminating any pressure among the affected airlines to compete with lower prices or better service.

Some competition will remain, of course. But with most other transatlantic airlines already participating in one of the other two global alliances—SkyTeam and Star, both of which already enjoy anti-trust immunity—the competition has been reduced to the three mega-groups, plus a few independents like Virgin Atlantic.

American and British Airways have been trying to get approval for a transatlantic partnership for 14 years, and the just-approved anti-trust immunity was originally proposed to the DOT in 2008. So the ruling came as no great surprise.

Air Berlin Now (JetBlue Later?)

What was surprising was yesterday's announcement that oneworld will be adding another European airline to the partner roster: Air Berlin.

Air Berlin is, according to the oneworld press release, the sixth largest European airline. So it's a substantial airline, size-wise. But while it's not exactly a discount carrier, like Southwest or Ryanair, neither is it a full-service airline, like the other oneworld airlines.

It's been called a hybrid carrier, like, well JetBlue. Which recently began interline and frequent flyer partnership with oneworld founding partner, American. Which naturally gives rise to speculation that JetBlue might eventually be invited to join oneworld.

Stay tuned.

Winners and Losers

For all the airlines' promises of "seamless travel" and the like, the real beneficiaries of airline alliances are the participating airlines' own bottom lines.

Anti-trust immunity—like that now in effect for all three alliances across the Atlantic—means that companies may legally collude to set prices, exactly the sort of corporate coziness that anti-trust laws were designed to prevent.

Alliances themselves are a form of consolidation, which reduces competition and, inevitably, leads to higher prices. And that's exacerbated by affording anti-trust protection to alliance participants.

But the DOT disagrees, opining that oneworld "on balance, was pro-competitive."

There is one noteworthy consumer benefit that comes with the DOT ruling: Members of American's AAdvantage program will be able to earn and redeem miles for British Airways transatlantic flights; and British Airways Executive Club members will be able to do the same on American's transatlantic flights. In order to preserve competition between American and British Airways, such joint marketing had been expressly prohibited previously.

Alliances are now a fact of travel life, and are likely to become more entrenched, more dominant than ever in the future.

If you can't beat 'em, or avoid 'em, your best bet is to understand 'em, and use 'em to your advantage.

Comments

[FS]

This now means that the free 100,000 miles offered to BA executive club members should be used on AA as they have much lower fees (BA included a fuel charge of nearly $600 on my last flight)

[FG]

It's about time AA FFs can earn miles on BAs Trans Atlantic route.
Hopefully awards will be avalable also.