Last month Delta Air Lines CEO Ed Bastian declared that the global alliances failed to bring “a lot of great value to customers..[or] to member airlines” and vowed to create his “own international network of carriers” with Delta “as the centerpiece.”
He repeated this view when walking through Delta’s investment in South American powerhouse airline LATAM. Under Delta’s influence LATAM will leave the oneworld alliance but will not be joining SkyTeam.
Bastian is certainly right that alliances haven’t created seamless travel experiences for customers, and that alliances don’t allow airlines to do as much jointly as when they receive anti-trust immunity from governments to work together, as with a joint venture.
However he overgeneralizes the importance of this to alliances as a whole, rather than recognizing alliances simply haven’t helped Delta. There are two main reasons that Delta hasn’t benefited substantially from SkyTeam, while other airlines have benefited from their alliances.
- SkyTeam is the weakest alliance. The Star Alliance gives United non-joint venture partners like Singapore Airlines and Turkish. American is able to partner with Cathay Pacific and Qatar. SkyTeam is for also-rans like Aerolineas Argentinas, Aeroflot, TAROM Romanian and Vietnam Airlines.
- Frequent flyer program quality matters less to Delta than competitors. People choose Delta because of operational reliability and friendlier staff, not because of SkyMiles. It’s certainly more possible to get outsized value from MileagePlus and AAdvantage. But that’s largely the case because of alliance partnerships. Award availability on American is quite poor in my view, but redeeming for travel on American is a poor use of miles. It’s precisely because you can use miles for Qatar and Cathay redemptions that AAvantage mileage collection is worthwhile, and of course American’s own accounting shows they frequently lose money flying, earning all of the profit from selling miles to banks.
Alliances mean it’s possible for members to cash in miles for awards even when the program’s host airline has no availability. That satisfies members and keeps them on the earning treadmill. Alliances also give greater reach, delivering an ability for members to travel places they couldn’t otherwise with their miles. And alliance award redemption is largely seamless, even if travel across airlines within alliances involves inconsistent products and policies.
The concern here is that Bastian is influential, airlines copy Delta for all the wrong things. They don’t think independently, merely assume that if Delta does something it must be smart, without factoring the differences in Delta’s business from their own. So Bastian’s claim that alliances have lost relevance puts alliances at risk, even if alliances are valuable for airlines not named Delta.
That of course is to Delta’s benefit, since other airlines create own goals (American in particular has a habit of playing Delta’s ‘Greater Fool’) that makes them less fierce of a competitor to Delta.
It’s also easy to overstate the uniqueness in inconsistency of product across alliance members. American Airlines itself flies five different international business class seats in its current fleet. The introduction of the Airbus A321XLR is likely to mean another seat still, and the return of the 737 MAX to service will likely accompany more international routes with a domestic product offered. Is the inconsistency of a customer flying Cathay Pacific really such a problem?