Alliances improve customer services in a move to keep the model relevant
The three global airline groups—Oneworld, and —have been touting “seamless travel” between members' networks, but this has often been little more than a marketing gimmick. After establishing a global footprint, alliances now are focusing on improving the customer's flying experience.
To be fair, alliances offer some of what they claim. The customer receives—if permitted—coordinated schedules, intra-partner accrual and redemption of frequent-flier program miles, proximity for connecting flights (co-location at airports), shared lounges, recognition by the partner carriers at check-in and onboard, and coordinated baggage tracing. “By the same token, this doesn't always work perfectly. The fact of the matter is that the customer is still flying on multiple airlines with varying degrees of product quality and consistency, communication practices, and so forth. So true seamlessness probably remains more of a target than a fact—but the customer's experience is probably less fraught with the alliances than it otherwise might be,” says Mark Diamond, principal at ICF SH&E.
Alliances certainly can provide improvements to the customer flying experience, and somewhat reduce the hassle, he asserts. However, he warns, “as alliances grow, the challenge of offering a consistent and quality product grows as well. As with cost savings, optimizing product quality and consistency may not be easy to accomplish without some sort of equity stake in addition to the pure marketing alliance, as it involves asset commonality and capital expenditure.”
For John McCulloch, who was CEO of Oneworld from 2003-11 and now works as a senior principal at Seabury Group, improving the offering to the customer is the only way the traditional alliance model will stay relevant. But only time will tell if the alliances wake up and recognize this fact, he says.
SkyTeam is redirecting its strategic priority to intensifying efforts and investments that generate benefits for travelers when connecting from one airline to another, CEO Michael Wisbrun confirms. “When alliances were being formed 15 years ago, the first target was building up, piece by piece, a global footprint. Networks were connected gradually. But this phase is more or less completed (see page 45) and now we have to focus on the usage of the scope of the network. We're moving from building scale to the usage of this scale,” he says. It is about being relevant to the top segment of the customers base, Wisbrun adds, and “this means covering 90% of the travel wishes of the high-value customer—the customer that generates the most revenue and the highest margins.”
Last year SkyTeam introduced SkyPriority, an alliance-wide red carpet treatment for premium customers offering dedicated check-in desks, priority boarding and baggage collection and, at transfer points, priority of ticket desks. “We're proving that the alliance is not just the extension of network and selling capabilities beyond home-carrier networks, enhancement of frequent-flier program and lounge access. It is also [a means of] ease of travel and delivering consistent airport services across the globe,” avers Wisbrun, who reiterates that improving “the travel experience is our focus today, tomorrow and after tomorrow.” SkyPriority will be rolled-out to all of SkyTeam's 1,000 destinations worldwide by the end of this year, and priority security and passport clearance will be added where allowed.
In the second half of 2013, SkyTeam will open a common lounge at Beijing Capital International Airport and launch a new baggage drop-off functionality atthat will be able to handle the nine SkyTeam airlines operating at the airport. “Our value is working together in the operating processes to make connectivity easier for the passengers and to increase the efficiency of the members, and thus lower their costs. It is also a win-win for airports, because we are making substantial less use of constrained space. [Airports] are big supporters,” Wisburn says.
To support the new focus and enhanced cooperation, SkyTeam is stepping-up its investment in IT and is upgrading its technology hub SkyLink to SkyLink Sprint. The alliance allows flexibility in the timing of the implementation as some members are restricted in their capital expenditure or restrained by airport capacity. “It is up to each airline to calculate the value of their transfer traffic, but with 25 million passengers interlining within SkyTeam members each year, and this number is growing rapidly to 30 million, it seems like an excellent investment.”
Other alliances have similar projects. Over the past year or so, Oneworld has rolled out what it calls Global Support centers at key alliance hubs—backroom units manned by staff from all the online carriers with the brief to iron out any snags for passengers making connections between member airline flights, often before the customer is even aware of them. Passengers with tight transfers are met at the aircraft doors to be fast-tracked to their departure gates. If an inbound flight is late, any passengers who would otherwise miss their next flight are booked onto the next available connection and met on arrival with their new boarding cards. So far, the centers have been opened at Chicago O'Hare International, Dallas/Fort Worth International, London Heathrow, Los Angeles International, Madrid-Barajas, Miami International, New York John F. Kennedy International, Sydney, Tokyo Narita International, and, most recently, at Hong Kong International. Oneworld says that besides rave reviews from customers, the centers are also saving member airlines substantial sums of money from disrupted journeys.
Star Alliance's single most important co-location project is the move into London Heathrow's Terminal 2. So far, Star Alliance carriers are spread out across much of the airport, making connections inconvenient to impossible. But the giant project will change its product offering fundamentally. Star will be able to cut the minimum connecting time in Heathrow from the current 90 min. to a much more competitive 45 min. That will lead to connecting flights via Heathrow being listed much higher in the computer reservation systems (CRS), making them more visible. “This will create huge value for us, every minute is worth a lot of money,” says Star CEO Mark Schwab. “We have very little connectivity now, because we are in three different terminals.”
With construction work to be completed in November, Schwab hopes that the first Star carriers will move to their new home in the second quarter of 2014 and all 23 will shift operations over a few months. Star is not using the terminal exclusively; unalignedwill also be operating out of the facility.
also wanted to move into the rebuilt Terminal 2, but the airline is now staying in Terminal 3 and it possibly will move to Terminal 2 to join its new shareholder . Star Alliance airlines have a combined 21% share of Heathrow capacity in terms of available seat kilometers (ASK). The co-location creates 10,600 possible weakly connections and that is before schedules are optimized. If interlining with Aer Lingus is included, that number rises to 12,500.
While the Heathrow move is the biggest common infrastructure project, it is not the only one. Star is opening a new lounge at Los Angeles' Tom Bradley Terminal, which houses international departures.