What do airline alliances and consolidation lead to?

Having earned almost 80,000 miles on a SkyTeam member airline, the addition of Romanian national carrier TAROM and especially fast-growing Vietnam Airlines to the alliance in June is welcome news. At the same time, SkyTeam renewed its membership program, eliminating the 'associate member' status and thus upgrading Air Europa (Spain) and Kenya Airways to full members. Smaller airlines wishing to join no longer need to adopt a current member's frequent flyer program (FFP) if they already have their own. So June saw the number of member airlines grow to 13, serving 898 destinations in 169 countries and carrying 384 million passengers annually. Further, China Eastern is joining in 2011, and Air Algérie (Algeria), China Airlines (Taiwan), Garuda Indonesia, MEA Middle East Airlines (Lebanon), and Uzbekistan Airways have also shown official interest in joining, and are in various stages to apply for membership.

However, by size, the undisputed leader of the three major airline alliances is Star Alliance, which is also the oldest, having been founded in 1997 by Air Canada, Lufthansa, SAS Scandinavian Airlines, Thai Airways International, and United Airlines. Now boasting 28 members encompassing 1,077 destinations in 181 countries, they transport almost 624 million passengers annually. They recently added TAM Airlines of Brasil giving its presence a boost in South America, a continent without a partner ever since VARIG Brasil went bankrupt. On the other hand, the alliance with what some say is the most balanced network is Oneworld, with a member airline in every continent of the globe except for Africa (and Antarctica, of course). LAN of Chile (with subsidiaries in Argentina, Ecuador, Peru), Qantas of Australia, and Royal Jordanian in the Middle East help the group stand out. By size, they are third, with 11 members serving 819 destinations in 142 countries carrying 308 million passengers annually.

The battle to lure the leading carriers into their alliances is only getting fierce, especially in India, Latin America, and Africa. In China, the 'big three' have already decided on their future partners, with Air China in Star Alliance, China Southern in SkyTeam, and China Eastern also joining SkyTeam in 2011, which left Oneworld without a partner in the world's fastest growing market, though they do have Hong Kong-based Cathay Pacific. For the 'big three' in India, Kingfisher has already announced their intention to join Oneworld and Air India is preparing to enter Star Alliance, leaving SkyTeam to do whatever they can to persuade Jet Airways to join. The airline is reportedly most interested in Star. In Latin America, the recently-merged Avianca-TACA group is being fiercely fought for by Star and SkyTeam, though the airline says they are so far leaning towards the former.

The aviation industry is one that is fragile and constantly changing, yet often requiring airlines to make company-risking decisions. Consolidation is happening everywhere in the industry, where the strong are merging to get an even stronger hold of the market, the weaker are being gobbled up or wiped out, whether a legacy flag carrier or not, while a constant threat of low-fare low-cost carriers force the incumbents to make radical changes to keep up in the competition. Alliances are also a tool for consolidation, with airlines in the same alliances merging or taking over one another or forming joint ventures and making joint purchases of aircraft. Air France/Alitalia/Delta/KLM, Air Canada/Continental/Lufthansa/United, and the recent American/British Airways/Iberia are the most notable examples.

Recently, in the U.S., Northwest just completed merging with Delta, and now Continental is proceeding with a merger with United (retaining the latter's name), pending government antitrust approval. United belongs to Star Alliance, Delta belongs to SkyTeam, and American belongs to Oneworld. Then there are the now well-established low-fare airlines such as Southwest (the mother of them all), AirTran, and JetBlue, while not doing bad are Frontier, Spirit, and Virgin America. While across the pond in Europe, airlines are starting to get consolidated around three major airlines: Air France (SkyTeam), British Airways (Oneworld), and Lufthansa (Star). Then there are the well-known (or rather notorious) low-cost carriers such as Ryanair and EasyJet, among others like Air Berlin, Norwegian, and Wizz Air.

In Asia, consolidation has been rather slow, however, with the recent surge of successful low-cost carriers such as Air Asia (Malaysia, Thailand, Indonesia), JetStar (Australia, Singapore, Vietnam), Tiger Airways (Singapore, Thailand), and a handful of Indian start-ups, the legacy airlines are being forced to change. An airline like Air Asia X, which is the first low-cost low-fare model for long-haul operations, could change the entire picture, especially if they team up with the local low-cost low-fare carriers and connect their respective networks. It would have the potential to effectively create a low-cost low-fare network that spans worldwide. Plagued by mismanagement, political instability, economic turmoil, or other factors, once great airlines such as Japan Airlines, Philippine Airlines, and Garuda Indonesia (finally improving) need to act much faster. Malaysia Airlines, which is one of only five five-star rated airlines by Skytrax (others being Asiana, Cathay Pacific, Qatar Airways, Singapore Airlines), has been changing their 'long-term' plans too often and seem to have settled down on going solo, for the time being, after having had talks with SkyTeam for years.

In 2000, former TWA chief Bill Compton said that in 10 to 20 years, there would only be about 10 legacy carriers in the world plus a couple of successful low-cost low-fare carriers for each continent. Now, that doesn't seem to be an exaggeration. However, this brings us to another question. Deregulation of the airline industry was aimed at bringing the best value for the fare-paying customers, however, now it seems like they could have less choice in the not-too-distant future, if the industry does actually get dominated by just a couple of huge airline groups, thus raising the potential for higher fares. Hmm... but then maybe there will be the next surge of new airlines challenging the big ones. However, that is not as easy as said, and more so if the challenged are much bigger than they are today; countless start-ups have fallen to predatory pricing tactics of the incumbents.

Flying into the sunset.

On October 29, 2008, Northwest Airlines became a wholly-owned subsidiary of Delta Air Lines, after the U.S. Department of Justice (DOJ) approved their merger on that date. The name of the Atlanta, Georgia-based mega carrier, which takes its name from the Mississippi River delta, will be the surviving brand. Although it will still take some time for them to merge completely, including combining operations, frequent flyer programs, seniority lists, Northwest's aircraft have already started to be repainted into Delta's livery, signaling the beginning of the end of a long history that has continued since its founding on September 1, 1926.

The year 2008, along with many other recent years, saw a number of carriers going into the history books, with some going out of business while others being bought out by others. From record high fuel prices to extreme competition and now a global recession, the aviation environment is becoming more harsh and unforeseeable than ever before. For the mighty incumbent flag carriers too, there is no safe haven. In Europe, former major airlines, some of which are now but a shadow of its glorious past, are being amalgamated into the big three: Air France, British Airways, and Lufthansa (Germany). KLM is now part of Air France; Austrian Airlines, bmi (British Midland), Swiss International Air Lines are now owned by Lufthansa; Iberia (Spain) is discussing a merger with British Airways; others that are so far 'left out' such as SAS (Scandinavian Airlines) face an uncertain future and Alitalia (Italy) ran out of cash. Established low-fare carriers easyJet and Ryanair continue to thrive with their rigorous cost-saving measures, but have felt pinches with strong competitors and other low-cost newcomers.

The same is happening in the U.S., despite at a slower pace. Once a trademark for air travel, Trans World Airlines (TWA) is now part of American Airlines, Phoenix-based America West Airlines acquired troubled U.S. Airways (retaining the latter carrier's name) in 2005, and after the announcement of the Delta/Northwest merger, Continental Airlines decided to switch loyalty from Air France/Delta-led Skyteam Alliance to Star Alliance, agreeing to cooperate comprehensively with United Airlines. The low-fare market is dominated by AirTran Airways, jetBlue Airways, and the mother of all low-cost carriers Southwest Airlines, and many new entrants who have dared to challenge have failed, though tiny Allegiant Air seems to have found its own niche, for the time being. And Alaska Airlines? Where are they heading for?

From March 30, 2009, Northwest's crew will start wearing Delta's uniforms, and rumors have it that they will start standardizing the interiors of the aircraft then, including replacing Northwest's WorldTraveler in-flight magazine with Delta's Sky. Frequent flyer programs WorldPerks and SkyMiles are planned to be combined by the end of next year. On the last day of TWA's operations at San Diego on December 1, 2001, a Northwest crew joined them on the radio frequency saying "we sure are going to miss hearing your call-sign"... probably little or never had they imagined that the same day would come for them just a couple of years later. I find Northwest's product on international routes superior among U.S. airlines that I have flown on before, including their acceptable meal service, warm and charming flight attendants, enjoyable in-flight entertainment (IFE), affordable fares, and a good mileage program. I will surely miss those red tails lined up at Narita Airport.

So long, NWA. :-)

Goodbye to a flying sports car.

Fleet rationalization is happening everywhere in the commercial aviation industry. With fuel prices sky-rocketing, airlines are doing whatever they can to cut costs, and fleet simplification is one of them.

That is no exception with the airlines of Japan too. When Japan Airlines (more commonly referred to by its ICAO three-letter code JAL) and Japan Air System (JAS) merged in 2002 to take on All Nippon Airways (ANA), which had and still has the biggest share of the domestic market in terms of passenger numbers, it not only created an initial series of coordination problems but also a diverse fleet as well, as the two only had one aircraft type in common. Operating more aircraft means more maintenance work, a larger spare parts inventory, more training of its employees, etc, which adds to costs.

For example, the competitors in the short-haul market are the Airbus A320 family, Boeing's 737 family, and the McDonnell Douglas (merged into Boeing in 1997) MD-80/90 series. Production of the latter was terminated not long after its takeover by its former arch-rival, so essentially the A320 and 737 have the market all to themselves now.

JAL had been operating a substantial fleet of 737s, while JAS had been loyal to the Long Beach-based manufacturer, operating the MD-80 and also acquiring the advanced MD-90s in the mid-1990s. So the merged airline operating two (or three) major types for the short-haul sector was naturally deemed uneconomical, and the decision was made to acquire newer 737s to eventually replace the Douglas twin-jets. JAS operated the MD-81, MD-87, and MD-90, and the first to say farewell became the MD-87.

First delivered to JAS on June 3, 1988, the fleet eventually built up to eight aircraft. The MD-87 is basically a MD-82 (a MD-81 with more powerful engines) with a shortened fuselage, compromising capacity for longer range and better take-off and landing performance. JAS acquired these 117-seat jets, sometimes nicknamed the "flying sports car" for its superior climbing performance, to bring jet age to the local regional airports in Japan with limited runway length. These markets had long been served by the Japanese-built NAMC YS-11 turboprop airliner.

After the merger, all eight were repainted in JAL's new "Arc of the Sun" corporate livery which was developed by Landor Associates, however, as the merged airline took delivery of more newer 737s, it was only a matter of time before retirement. So the first of eight was withdrawn from service in October 2007, and the ultimate aircraft is now planned to operate its last revenue flight on March 31, 2008, flight JL1386 from Nanki-Shirahama to Tokyo's Haneda airport. All were already withdrawn from scheduled service by the end of February, and have since been operating mainly as back-up equipment.

The MD-87 was never the most popular jetliner like Boeing's venerable 747, but it did have its own niche, and brought jet age to the regional airports in Japan, boosting tourism. It surely will be missed by its crews, employees, and those local airplane spotters. Fortunately, many are now finding a new lease of life in Thailand with low-fare airline One-Two-Go (a subsidiary of Orient Thai Airlines), instead of being reduced to piles of metal somewhere in the southwestern USA where many older jetliners end their life.

Farewell, sports car in the sky. :-)

Farewell to an old local friend.

January 22nd marked the last day of regular revenue operations by Tokyu's 8000 series train.

I've lived most of my life in Japan near the Toyoko, Denentoshi, Oimachi Lines, and grew up watching the train's stainless side look and hearing the unique thundering sounds. Whether it's a train you use every day or a local shop or restaurant you visit regularly, these are things that are usually taken for granted, things that you don't really stop to think about. But once you know they're going to be gone soon, you suddenly realize that times are changing. You miss these things you've never missed or even cared to think much about before.

The 8000 series started service in 1969 and for almost four decades served the people of Tokyo and Yokohama on the Toyoko Line, which connects the two big cities, hence its name. These series of trains were the most technologically-advanced of its time, being the first to be controlled digitally, enabling trains to run on tighter schedules, and has claims to being the first in the world to incorporate a field system chopper circuit which made regenerative brakes possible. With its length being 20 meters, it was also much longer than the commuter trains of its time, helping to make way for Japan's economic growth of the 1970s.

On January 13th, the gradual replacement of the series by newer, more advanced types was completed for the Toyoko Line with much fanfare, where amazingly over a thousand people from local residents of all ages to train afficionados gathered to bid farewell to the grand old workhorse. Truly a sign that it was loved by everyone. The last remaining example (ironically the first to roll off the production line), which served the Oimachi Line, a 10.4-km local route in southwestern Tokyo, was retired on February 22nd.

Tokyu Corporation has transferred many of these trains to Izukyu, a wholly-owned (but financially-troubled) subsidiary in Shizuoka Prefecture carrying holiday-makers to resorts on the Izu Peninsula. A handful have also been donated to Indonesia as part of Japan's official development assistance (ODA) to help set up Jakarta's railway infrastructure.

Adios. :-)