Premium #138 – WILL ALLIANCES TAKE THE NEXT STEP – OR WILL THE ETIHAD MODEL PROVE MORE PRODUCTIVE?

Airline alliances, including the Star Alliance, oneworld, and SkyTeam, have generated substantial benefits for their members. Those benefits, however, have primarily been on the marketing side of the business, as code-shares and connecting traffic increase revenues for alliance members, particularly when flying into partner hubs for traffic feed. Alliances have also taken the first steps at joint purchasing. To date, however, those purchases have focused primarily on disposable items — such as napkins or blankets for use inside the cabin, but not focused on larger items, such as aircraft, engines, and maintenance.

Equity alliances, such as Etihad’s investments in a number of airlines, have already seen aircraft transition between one member and another (Jet to Etihad) and appears ready to move more aggressively into joint purchasing and leveraging of purchasing power. IAG, which owns British Airways and Iberia, has already negotiated orders for the A350 on behalf of both airlines, and is likely achieving significant volume-based discounts.