TIME MONEY: NOVEMBER 1999

Illustration for TIME Money by Liliane Tsui Up in the Air Airlines love alliances, but are they of any use to you? Yes, if you fly in the front of the plane By DAFFYD RODERICK Cooperative competition. Competitive cooperation. Confused? Airline alliances have travelers scratching their heads over what's going on in the skies. Some folks view alliances as a boon to travelers, offering seamless travel, reduced fares and enhanced frequent-flyer benefits. Others see a conspiracy of big business, causing decreased competition, increased fares and fewer choices. Whatever your opinion, there's no escaping airline alliances: the marketing hype is unrelenting, with each of the two mega-groupings, Oneworld and Star Alliance, promoting itself as the best choice for all earthlings. And, even if you turn away from their ads, chances are they will figure in any (or all) of your travel plans. By the end of the year, Oneworld and Star Alliance will between them control more than 40% of the traffic in the sky, according to Orient Aviation magazine. Some pundits predict that figure will be more like 75% in 10 years. But why, after years of often ferocious competition, have airlines decided to band together? Let's just say the timing is mutually convenient. North American airlines, having exhausted all means of earning customer loyalty at home (domestic frequent-flyer programs can only fill so many seats), have been looking for ways to reach out to foreign flyers. Asian carriers are still hurting from the region-wide economic downturn that began two years ago--just when some of the airlines were taking delivery of new aircraft. Alliances also allow carriers to cut costs and increase profits by pooling manpower resources on the ground (rather than each airline maintaining its own ground crew) and code-sharing--the practice of two partners selling tickets and operating only one aircraft. So alliances are terrific for airlines--but are they good for the passenger? Absolutely, say the airlines: think of the lounges, the joint FFP (frequent flyer program) benefits, the round-the-world fares, and the global service networks. Then there's the promise of "seamless" travel: the ability to, say, travel from Singapore to Rome to New York to Rio de Janiero, all on one ticket, without having to wait hours for connections or worry about your bags. Sounds utopian? Peter Buecking, Cathay Pacific's director of sales and marketing, grants that seamless travel is still evolving. 'It's fair to say that these links are only in their infancy. The key to seamlessness rests in infrastructure and information sharing. We're working on this." Henry Ma, spokesperson for Star Alliance in Hong Kong, lists some of the other benefits for consumers: "Global travelers have an easier time making connections, redeeming reward travel and planning their itineraries." Ma claims alliances also assure passengers consistent service standards. "You know what you are going to get when you fly with us or one of our partners," he says. Hmmm. Does anybody really believe that Varig and Lufthansa, both members of the Star Alliance, provide the same level of service? Critics of alliances say the much-touted benefits to the consumer are mostly pie in the sky, that alliances are all about reducing costs for the airlines, rationalizing services and running joint marketing programs. Jeff Blyskal, associate editor of Consumer Reports magazine, says the promotional ballyhoo over alliances is much ado about nothing. "I don't see much of a gain for consumers: alliances are just a marketing gimmick. And as far as seamless travel goes, I'll believe it when I see it. Most airlines can't even get their own connections under control, let alone coordinate with another airline." Blyskal believes alliances will ultimately result in decreased flight choices and increased costs for consumers. Instead of two airlines competing and each operating a flight on the same route at 70% capacity, the allied pair will share the route and run one full flight. Since fewer seats will be available, passengers will be obliged to pay more for tickets. The truth about alliances and their merits probably lies somewhere between the travel utopia presented by the players and the evil empires portrayed by their critics. And how much they effect you depends on what kind of traveler you are. • Those who've already made the élite grade in the FFP of a major airline stand to benefit the most when it joins an alliance: then they enjoy the FFP perks and advantages on any and all of the member carriers. For example, if you're a Marco Polo Club "Gold" member of Cathay Pacific's Asia Miles FFP, you will automatically be treated as a valuable customer by all members of Oneworld--even if you've never flown with them before. For instance, if you find yourself in an airport where Cathay doesn't have an upper-class lounge, you can walk into any lounge operated by a Oneworld carrier. • For those who haven't made the top grade in any FFP, alliances might be a way of simplifying the earning and burning of frequent flyer miles. For example, I belong to United Airline's Mileage Plus and generally fly less than 25,000 miles a year. But I earn miles with every flight I take on Star Alliance members All Nippon Airways and Thai Airways. I can use my frequent-flyer points for a trip to a destination United doesn't serve out of my home in Hong Kong. • If you fly less than I do, you might be smarter to stay out of the FFP game altogether. Hunt for bargains when booking flights and you might be able to save enough to take that extra trip anyway. The only real benefit infrequent flyers can draw from an alliance is an inexpensive round-the-world fare (see table). The bottom line: for all the marketing hype, alliances aren't all things to all people--but everybody can get some benefit out of them. Don't expect the sky, and you won't be disappointed. Mine's Bigger Than Yours: How the two biggest airline alliances match up Members Destinations Countries Lounges STAR ALLIANCE: United Airlines, Lufthansa, SAS, Air Canada, Varig, Thai Airways, All Nippon Airways, Ansett Australia, Air New Zealand, Singapore Airlines (April 2000), Mexicana Airlines (July 2000), Austrian Airlines (TBA) 760 112 250 ONE WORLD: American Airlines, British Airways, Canadian Airlines, Cathay Pacific, Finnair, Iberia, Qantas, Japan Airlines (TBA) 655 135 230 Members Round-the-World Deals High Flyer Perks STAR ALLIANCE Star Alliance offers several round-the-world fares across all classes. The Starlite fare lets you fly up to 26,000 miles. Economy fare for Hong Kong-Sydney-New York-London-Hong Kong: $2,239 Priority check-in, boarding and baggage handling on all Star Alliance flights. Priority reservation, waitlisting and standby on fully booked flights. Additional 20 kg of luggage (or extra piece on transpacific flights). Access to lounges around the world on same day as flight. ONE WORLD The Explorer fare allows for four continents, unlimited miles and three stopovers. Economy fare for Hong Kong-Sydney-New York-London-Hong Kong: $2,804 Preferred check-in, boarding and baggage handling on all Oneworld flights. Priority seat reservation, waitlisting and standby on fully booked flights. Extra 20 kg of baggage (or extra piece on transpacific flights). Guaranteed seat within 24 hours of booking. Lounge access around the world.

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