Airline alliance infighting

As the airline alliance questions move toward settlement, the discord within the airlines and the government entities is hitting new volume levels. What some folk figured was a done deal, doesn’t appear so settled after all.

Though, airline alliances are only about frequent flier miles and codeshare flights for most passengers, the business implications are profound and in the long run will have severe implications for business airfares, international schedules, supplier relationships and jobs.

Here’s a quick overview of the disagreements.

The Department of Transportation (DOT) vs. Senate Judiciary Committee
The DOT has had a clear field with the airline antitrust exemptions, however, last year the Senate Judiciary Committee and its antitrust subcommittee got into the act. The committee and subcommittee bigwigs wrote a letter to DOT asking them to go slow, include the Department of Justice and take a harder look at the antitrust implications.

Airline pilots vs. transportation workers vs. flight attendants
Airline pilots have always been against these antitrust arrangements since they may be a threat to their jobs as flights are shifted between alliance carriers. The Transportation Workers Union has just figured that U.S. costs might be lower than European costs, so they are have now come out in favor of the alliances. Ex-TWA flight attendants have asked DOT to delay any AA/BA/Iberia agreement unless American guarantees their jobs or at least their right to be recalled from furlough when jobs open up.

U.S.A. vs E.U.
Up until now, the U.S. has been moving forward aggressively with approval of these alliances. The E.U. recently has put on the brakes and urged a slower pace. This E.U. request together with the Judiciary Committee letter seems to have slowed down the alliance steamroller that seemed inevitable. DOT has a study on the antitrust implications of airline alliances that is scheduled to be completed soon.

Business travelers vs. airlines
Business travel managers are concerned that with the advent of only three major alliances for international routes, their bargaining power will be diluted and that they may be forced to consolidate their business either losing flexibility or being forced to pay higher prices.

Between now and September, this political drama will be playing out in Washington DC and in Europe. Not only are the political sands shifting, the economic sands are changing as well.

Airlines such as British Airways, that once seemed invincible are suffering from the business slowdown, while others such as Iberia are weathering the storm far better. American is seeking to partner with this group.

Lufthansa is continuing their expansion with the purchase of Brussels Airlines and BMI, and probably Austrian Air. Their strength will put United and US Airways in a more difficult position unless they manage to strengthen their balance sheets.

And Air France-KLM is combining with Delta to create a new joint venture that will change the airline rules again.

For airline watchers, this will be an interesting summer.