Alliances & The Consumer

When two different organizations agree to cooperate there should be some benefit for their customers. Ideally, there's also some rationale to do it from their own business drivers too - lowered costs, higher margins, extended services and so on. But really, any thing proposed has to to pass the litmus test of customer benefit to be a real value - otherwise it's just a scam.

I've been thinking of the airline alliances a little these past few days, and am shifting back to the fence on them, as I'm not sure I see the value anymore - at least tangibly for the consumer.

In the spirit of full disclosure, I spent almost 20 years in the travel industry on the technology side, and while I was never directly engaged in an alliance creation or maintenance effort, I did deal with most of the world's airlines. So my opinion here is hopefully educated, and (also hopefully) not biased.

Airline alliance exist for a few reasons - it increases destination coverage as no single carrier flies everywhere; it helps maintain service on what are considered long thin routes (Cities far far apart) as it taps into the hub & spoke system of the participating airlines on both ends; and it helps expand the footprint of those companies, such that they can offer their loyal clientelle a similar service level that has been earned - when on a partner airline. Importantly, it also allows lays a foundation for pricing discussions on a given route between airlines, something out of bounds due to anti-trust laws in normal circumstances.

Here's a summary from the involved perspectives:

Airline

• Ability to control price and supply with the other airline on a given route
• Ability to imply wider destinations served, without actually having to fly to them
• Ability to keep loyal high paying customers happy by extending the benefits offered beyond their own network

Consumer

• Ability to have more direct services through code-shares (perhaps not on pref. airline)
• Ability to get extended coverage of benefits beyond everyday pref. airline

The first one - ability to control price and supply is fantastic for their business - as it removes market forces largely. Overall though, I think you see when I put it this way that the benefits to the airlines outweigh the consumer benefits - especially when a few situations arise. Let me explain.

If my airline is small, and offers perhaps below average service; then to partner with a first class airline - a Singapore Airlines or Emirates is a tremendous win, as whenever my clients use the partners, they'll be thrilled. It's a little like being given a Rolls Royce loaner car when you take the Toyota in for service.

If however your 'home' carrier offers above average service, then most visits to the alliance will be disappointing - especially if the flights bought were under the guise of being your preferred carrier's flights. (called codeshare in the industry) If the actual interactivity between the airlines is also sub-standard - "regrettably you can't select seats as this flight is operated by another carrier, even though you're in first class"- then the whole alliance seems a sham to the consumer as the pre-travel and actual travel experience don't meet expectations.

I've seen the ugly underside of this lately a few times - being told that unfortunately the service levels entitled can't be offered due to the way something was bought, or will be operated - or my very favorite - "check at the airport because they break all the rules there, that we create here".

I don't mean for this to be a whinge about a decidedly first world issue that in importance ranks up there with adult braces. But I do want to highlight that when we lose sight of the customer benefit in whatever we're doing, we lose the plot. I fear airline alliances have jumped the shark as they say, as there is precious little that's positive for the consumer going on there lately.