Airline Alliances: The Next Generation

The evolving Airline Alliances and Partnerships:

Airline Alliances have been a critical element in the evolution of collaboration between airlines to provide travel and elite benefits to their passengers. When United, Air Canada, Lufthansa, SAS and Thai got together back in 1997 to form Star Alliance, it changed the whole industry. From a passengers perspective, you can now travel to multiple destinations, traveling a route not serviced by a single airline, but by connecting flights from two or more airlines in the alliance. From a mileage earning perspective you can earn miles and more importantly status mile when flying any of the alliances member airlines. You can also enjoy Elite status benefits on all alliance members. Furthermore, you can redeem your miles for an award ticket that can include multiple alliance members on the same ticket. I have redeemed United airlines miles on a trip that included United, Swiss and Lufthansa. Thanks to Star Alliance, this was booked painlessly and resulted in an excellent award trip.

From the airlines perspective, alliances allow airlines to sell you tickets to destinations they do not fly to, thru alliance partners. And they also do not have to sign multiple bilateral agreements with individual airlines, but agree to one single master agreement governing all alliance members.

Now to the focus of this article. Over the last few years, some airlines who are already in an alliance have started forming bilateral partnerships with certain other alliance members that go beyond the basic partnership tenets of the alliance. I see this as a natural evolution. Airlines are doing this to further their reach in the market and to increase benefits to loyal customers, hence keeping them away from common competitors.

These ‘extra-alliance’ partnership agreements have included benefits such as bonus miles to each others Elites, complementary upgrades to each others Elites and the ability to upgrade using the other partners upgrade instruments or miles.

Here are some examples:

United – US Airways:

United and US Airways have had an agreement to give bonus miles to each others Elites on all routes. As a United 1K (or 1P) I get 100% bonus award miles on any trip on US Airways flights. This is in addition to full EQM for every flight that is available on any Star Alliance carrier.

United – Lufthansa:

United and Lufthansa have had an agreement, till now focussed on trans-Atlantic routes only, to give bonus miles to their Elites. They just extended this agreement to give bonus miles to United Elites on all Lufthansa routes. This is a great enhancement to the agreement, given Lufthansa’s global network. Another feature of this agreement, that makes it much more lucrative than the United-US Airways agreement, is the ability for United Elites to upgrade on Lufthansa flights using a United upgrade instrument (System Wide Upgrade).

United – Continental:

United and Continental, in an agreement signed in the wake of Continental’s move to Star Alliance, took this to the next level. United and Continental now give full recognition and benefits to each others Elites (or to be more specific, will start doing this from mid-March 2010). This includes unlimited complimentary domestic upgrades to each other’s Elites. Continental has also introduced seats with extra legroom to match United’s EconomyPlus. Now if only United will start free food in domestic Economy.

Miles and More:

In 2000 Lufthansa expanded its Frequent Flyer program called Miles and More to include other airlines owned by the Lufthansa group. These included Austrian and Swiss, who joined Miles and More in 2000 and 2006 respectively. Since then other EU based airlines have joined Miles and More, including LOT Polish airlines, Brussels Airlines, Adria Airways and Croatia Airlines. This makes Miles and More a unique single airline miles program for multiple airline. This allows full airline miles and Elite benefits to all passengers across all member airline. This is an Alliance beyond Star Alliance as it also includes airlines who are not in Star Alliance. While other airlines that are co-owned do share a frequent flyer program – such as Flying Blue for KLM and Air France – none extends to as many airlines as Miles and More.

Other partnerships:

There are two other tri-partite partnerships: United – Continental – ANA and British Airways – American Airlines – Iberia that are developing. These companies have applied for anti-trust immunity to share revenues on trans-Pacific and trans-Atlantic routes respectively. While these partnerships do not seem to include any Frequent Flyer or Elite benefits beyond what they already offer as being alliance members, one can only imagine and hope that they will add some once the partnerships get approved and formed.

To Boldly go where no Airlines have gone before… (with due apologies to all Federation Star Ships)

As you can probably see for yourself, the common element across several of these partnerships is United Airlines. Are they the dark horse of the airline industry? While they get maligned for always following American Airlines for all promotions, are they really the most innovative airline when it comes to working with partners? Is this really the ‘Next Generation’ of airlines partnerships? I think so. It is these airlines attempt to get closer without actually merging. And United seems to be leading the way. As a Frequent Flier, I am all for this and hope more airlines form such partnerships that mutually recognize Elite status and give benefits to each others Elites.

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