Airline Consolidation and Alliances

During the current period of economic uncertainty, short term flexibility in being able to adjust aircraft use and capacity according to demand is an important consideration. 

While European airline mergers, such as Air France-KLM and Lufthansa-Austrian, have been a dominating feature of past consolidation in the airline industry, the current crisis may stimulate more widespread mergers and alliances as airlines attempt to cut costs and improve competitiveness.  The merger of Delta Air Lines and Northwest Airlines, which commenced in October 2008, is almost complete with Northwest to be fully integrated under the Delta name.  British Airways has recently signed a merger agreement with Spanish carrier Iberia.  China Eastern Airlines has merged with Shanghai Airlines.  United Airlines, following various merger discussions with US Airways and with Continental Airlines, has announced a definitive merger agreement with Continental (both are members of the Star Alliance).

At the same time global airline alliance membership has been growing, with the alliances recruiting new members to extend their geographic coverage and boost passenger benefits.  In 2003 the three main alliances combined had 29 member airlines; full membership now numbers 49 airlines (plus 25 affiliates/associates). 

 (1) As at December 2009, incl member elect S7.
(2) As at June 2010. * Mainline Fleet.as at October 2009
(3) As at June 2010.

The global airline alliances continue to look towards Asia to boost network coverage, particularly the emerging markets of China and India.

The Star Alliance dominates in terms of Asian carriers;  All Nippon Airways, Korea’s Asiana, Singapore Airlines, Thai Airways International, Air China and Shanghai Airlines are all members, and Air India is joining.

SkyTeam has Korean Airlines, China Southern Airlines and Vietnam Airlines, with China Eastern Airlines signed up as a future member.

oneworld has JAL and Cathay Pacific Airways as full members, Dragonair as an affiliate and India's Kingfisher Airlines joining.

China's three largest carriers have now all joined one of the global alliances:  Air China is a member of the Star Alliance, while SkyTeam has China Southern as a member and China Eastern signed up.  oneworld's connection in China is via Hong Kong based Cathay Pacific.  Shanghai Airlines, currently a member of the Star Alliance, may be facing a move following its merger with China Eastern which is joining SkyTeam.

The three alliances all support hub operations at Tokyo - the Star Alliance through All Nippon Airways, Skyteam through Delta/Northwest and oneworld through JAL.  JAL was recently at the centre of a major alliance tussle between oneworld and Skyteam following its slide into bankruptcy in January 2010, but has since reaffirmed its membership of the oneworld alliance.

Other developments include the first “alliance switch” as Continental moved from SkyTeam to the Star Alliance, and the departure from the main alliances of the restructured airlines, Aer Lingus and Varig.  Aer Lingus subsequently announced an industry-first strategic partnership linking low-fare networks with JetBlue Airways.

Most recently SkyTeam's new membership program fully integrates all members.  Air Europa, Kenya Airways and new member TAROM are now Member airlines rather than Associates. 

The alliances are an important factor in airline development with members generating marketing and operational benefits.  Frequent flyer programs and integrated route networks are amongst the benefits evident to alliance customers.  Airlines not flying particular routes can offer their customers extended network benefits through alliances.  Events such as September 11, and the Global Financial Crisis, accelerate rather than create trends towards consolidation. 

The following table lists the latest alliances and their memberships. 
 

World Airline Alliances

Back to Overview