Brian Higgs peeks into the future of global alliances, which until now still exclude the three Gulf giants

During an era where airlines are haemorrhaging millions of dollars due to volatile fuel prices, growing competition and the global economic slowdown, carriers are seeking ways to cut costs and increase scale in order to stem the bleeding.

Signing up with a global alliance may be a tried-and-tested solution, given that an expanded reach caters to the needs of high-value frequent travellers, but also delivers increased revenue generation and cost-saving opportunities through rationalisation of members’ networks, as well as joint purchasing and marketing initiatives.

Today, the three largest passenger airline alliances in the world, Star Alliance, SkyTeam and oneworld, jointly control 53.6 per cent of global air capacity, according to CAPA – Centre for Aviation.

None, however, has managed to capture the hearts of Middle East carriers, such as Etihad Airways, Qatar Airways and Emirates, all of which have thus far refrained from entering into alliances.

These three airlines, backed by their oil-rich government supporters, have expanded their respective networks so quickly and successfully, raising the question of whether alliances are becoming irrelevant, especially in the face of increasing competition from these ‘superconnectors’.

Independence prized
Earlier at this year’s IATA’s 68th AGM & World Air Transport Summit in Beijing, Emirates president, Tim Clark, insisted that the days of alliances were numbered, especially if they failed to keep pace with fast-evolving market dynamics. “Over the past few years, there has been evidence of a new force emerging in civil aviation,” he said.

Clark pointed out that the sixth-freedom Gulf carriers, which were trying to achieve a truly global scale, would independently reach into geographical regions where alliances had carved out separate spheres of influence among members.

Emirates, for instance, has thrived on carrying passengers from West to East and vice versa via Dubai, bypassing the traditional London, Paris and Frankfurt hubs.

“There will be an (increasing) acceptance of these kind of business models, which are likely to become more prolific in the next 10 to 15 years. There are a lot of airlines, even in alliances today, that want to chart their own destiny and will want to perhaps disengage from the old way of doing business in the alliance structures,” he added.

In an earlier speech to the European Aviation Club in 2009, Clark had even gone so far as to state that “Emirates has never belonged to and does not have any plans to join an alliance”. He explained: “We see alliances as having significant anti-competitive elements and believe that our membership in one would be an artificial brake on our own business plans.”

“There are a lot of airlines, even in alliances today, that want to chart their own destiny.”

Tim Clark
President, Emirates

Winds of change
It remains to be seen if Emirates’ counterparts are indeed of the same mind. Rumours have been swirling in recent months that oneworld is exploring bringing either Qatar Airways or Etihad Airways into its fold. Even though CAPA predicts that adding Etihad Airways will only boost oneworld’s share of the world’s available seats from 12.1 per cent to 12.5 per cent, while adding Qatar Airways will boost it to 12.7 per cent, the impact of one of the Middle East carriers finally breaking ranks to join a global alliance would be truly game-changing.

What’s certain for sure is that there will be an evolution in alliance structures in the near future, which will enable individual members to express creativity in the way they grow their businesses.

“I believe that alliance structures are going to change over time, to the extent that (member) airlines will have more opportunities to expand their reach in areas where the market makes sense,” said John Slosar, chief executive, Cathay Pacific, a founding member of the oneworld alliance.

“(Alliances) will (eventually) allow growth in certain areas when players within their grouping want to do their own thing at their own pace. I see this happening because more and more carriers are reacting to the way the world is moving, with regards to the aspirations of the travelling public and multi-segmentation,” added Emirates’ Clark.

“If you align yourselves in the way that alliance structures have done in the past, which is to follow the traditional segmentation of markets, then that’s not going to be the way to survive.

“You’ve got to align to this huge opportunity that we have, which is multiple segmentation – there are far more people coming to the market and they want to travel farther than they ever did before,” he added.

Unbeatable clout
Meanwhile, advocates of global alliances continue to hold fast to their beliefs that the model is a viable one. Christian Klick, vice president, corporate office, Star Alliance said such groupings remained relevant because they feature “advantages which no single airline can offer and which frequent travellers do appreciate”.

“Only the alliances offer truly global travel solutions, where passengers are able to travel within one system to any corner of the globe, have access to more flights and routing alternatives, priority services and lounges, and superior mileage programmes that allow them to earn and redeem miles on every flight within the alliance,” he said.

Cathay Pacific’s Slosar was also adamant about the enduring value of alliances. “Alliances generate (clear) benefits (for their member airlines). They certainly generate benefits for us, and there are good ways of tracking these benefits. No airline is yet global enough to cover all the segments that customers in the various markets would like to cover.

“The point where an individual airline has enough global presence everywhere, including domestic areas, to really offer a truly global brand…that still seems to be a long way off, and till we get to that point, there’s still going to be value in alliances,” he said.

National carriers such as Malaysia Airlines, SriLankan Airlines and Garuda Indonesia seem to agree, given that the first two have signed up to join oneworld in 2012 and 2013 respectively, while the third will enter SkyTeam’s ranks next year.

SriLankan Airlines CEO, Kapila Chandrasena, said: “Joining the (oneworld) alliance will put SriLankan firmly on the global aviation map and improve Sri Lanka’s connections with the rest of the world.”

This article was first published in TTG Asia, August 24, 2012, on page 12. To read more, please view our digital edition or click here to subscribe.

Sim Kok Chwee takes readers into the world of premium air travel, which has never seen better days, innovation wise, even despite the shaky economy

Clockwise from top left: Singapore Airlines’ Business Class; a Boeing Business Jet, which is increasingly seen as a time-saving business tool; Emirates’ First Class
(Photos by Singapore Airlines; Boeing and Emirates)

There was a time when almost every international airline or flag carrier had to absolutely have First Class service. It was a prestige and a sign of being able to rub shoulders with the world’s best.

Today, luxury air travellers often end up in Business Class as many airlines have given First Class the boot. Only about 35 airlines belong to the exclusive group that still does, according to a Forbes report. But to be fair, many airlines – including those that still offer First Class and others that do not – have upgraded their levels of service in Business Class to the point where the divide is blurred.

Premium travel appears to be holding up well against a landscape dominated by softening growth in many of the world’s major economies. New York-based Harrell Associates, which does airfare benchmarking, reported that the average one-way First Class ticket for a European and Asian carrier is US$6,922 and US$7,377 respectively.

Even as many airlines are seeing their profits dive in recent quarters, premium travel grew at 8.6 per cent in March 2012, the latest data given by IATA on the segment. Even if the effects of the previous year’s tsunami in Japan and the Arab Spring were taken into account, this sector still grew a respectable four per cent.

It appears that at the apex of the travel pyramid, premium air travel is still resilient and represents a lifeline for airlines that continue to improve and stay a step ahead of their well-heeled customers.

Door-to-door pampering
For many airlines, the perks begin on the ground. Complimentary limousine transfers at both ends of a flight are offered by airlines such as Etihad Airways and its partner, Virgin Australia. Others offering this service include Emirates and Virgin Atlantic Airways. While premium travellers themselves are no strangers to being chauffeur driven, such complimentary transfers are often in the latest models of some of the world’s most recognisable car labels. Lufthansa, for example, offers its First Class passengers at Frankfurt Airport that extra German touch with this transfer being conducted in a Porsche. Meanwhile, many that do not offer this service provide butlers and meet-and-greet services from kerbside to lounge.

Once in the airport, airlines treat premium class passengers to lavish lounges. Thai Airways International’s lounge at Suvarnabhumi Airport, Cathay Pacific’s at Hong Kong International Airport and Qantas’ lounge at Sydney Airport have garnered more trophies than they have shelves to display them. Carriers from the Middle East and Asia-Pacific are also notable for their opulent and at times even over-the-top lounges.

At Changi Airport’s Terminal 3, Singapore Airlines operates dedicated lounges for Suites, First Class and Business Class travellers. Those travelling in the airline’s Airbus A380 Suites – branded as a class beyond First – get a private room. From the soothing brown/beige colour palette and carpeting to soften footsteps to its children’s playroom (with minders if needed), the entire facility is geared towards creating a quiet oasis. Dining in this lounge comes close to that in a bespoke restaurant with an à la carte food and drinks menu to match. Staff track boarding times for each passenger and gently cue them in a timely fashion.

Lufthansa’s First Class lounge at Frankfurt Airport offers valet parking and personal assistants, à la carte dining and self-service buffet, a cigar lounge, showers and bath tubs that come complete with rubber ducks!

Shower spas and double beds
The advent of planes such as the Airbus A380 and Boeing 747-8 Intercontinental has given airlines greater flexibility in customising the aircraft cabin. The upper-most tier of luxury travel is dominated by the suites onboard the A380s of Singapore Airlines and Emirates.

From the outset, Singapore Airlines harvested feedback and ideas from premium passengers and engaged luxury yacht designer Jean-Jacques Coste to create its critically acclaimed suites in a three-year process. Only 12 of these are found on each A380 and when transformed into a bed, an added touch of luxury comes from the beddings that promise the same nocturnal comforts of home and upscale hotels. The centre pair of suites can also be converted into a double bed for couples if so desired.

Just this month, the airline announced it had appointed two world-renowned design firms, DesignworksUSA and James Park Associates, to help develop the next generation of in-flight cabin products. Work is currently underway to “further distinguish the airline’s First Class from the competition and provide customers with a unique premium feel and experience”, it said in a press release. Enhancements will be made to its First Class seat, in order to offer more privacy and personal stowage space and improved seating comfort, as well as its cabin environment, starting from its new B777-300ERs that will be entering service in the second half of next year. This will be followed by A350s and B787s, in addition to possible retrofits to aircraft already in service.

Emirates, too, has installed enclosed suites that come with a host of features including a personal mini-bar, ambient lighting, vanity table and wardrobe. It is the only airline to offer two Shower Spas onboard each A380, offering First Class passengers the opportunity to take a shower at 35,000 feet. A tonne of water is carried to ensure this facility never runs dry, although with each of the 14 high net-worth travellers being transfered from their palatial homes and luxury hotels in limousines, one wonders if they truly need a shower. It is nevertheless a novelty that only a select few can tick off as bragging rights.

Not to be outdone by its peers, Lufthansa’s First Class passengers onboard its fleet of B747-400s are pampered with both an armchair and a bed – instead of a chair that converts into a bed. Its First Class cabin onboard the A380 comes with a cabin air humidifier and sound-absorbing curtains and carpet. A urinal – the only one in the air – has also led to cleaner toilet seats, something which has gained the approval of the airline’s female premium travellers.

Even though restaurant-quality dining options are already offered at airlines’ premium lounges, well-heeled customers are offered further customisation onboard ranging from choosing when to have their meals to pre-selecting specially designed ethnic and signature dishes from top chefs. Lobster, truffle and abalone are often featured as are comprehensive wine lists that will make even the most discerning wine connoisseur envious.

Upward trajectory of private jets
Despite such luxurious cabin offerings, many premium corporate travellers – and increasingly even leisure ones – have turned to private jets to bypass crowded airports and the hassle of heightened security processes. Cash rich and time poor, these busy executives are conveyed right into the secondary towns where their companies’ investments are located.

Over the years, the average size of business jets has grown, and today Boeing’s Business Jets (BBJs) range from the equivalent of a B737 (more than 150 of these have been sold since 1996) to a B747, while its keenest competitor offers jets as small as the A318CJ right up to an A380.

A high degree of customisation is offered, said BBJ president, Steve Taylor. “If you can imagine it, it’s either being done or is probably being engineered,” he added. Think interiors that replicate an old English library or planes equipped with a full kitchen, bedrooms and even a putting green.

Service that doesn’t stifle
However, there is still one luxury that only a select group of airlines can deliver, namely service and the human touch.

Singapore Airlines’ crew serving in premium class cabins are trained to instinctively identify and note a passenger’s likes and dislikes. Such observations are then conveyed to other colleagues on the flight as well as those serving on an onward sector beyond a transit stop where a crew change takes place.

The airline’s assistant manager (human factors and grooming), Foo Juat Fang, likened the cabin attendant’s role to that of a personal butler. She said: “Passengers communicate cues pertaining to how they like the service to be delivered and crew members must pick up on these cues. It is not about constantly asking passengers for their preferences but relying on non-verbal cues.”

Foo added: “Our service philosophy means that in the premium cabin, the passenger never needs to activate the crew call button. A crew member will always be around, be there to anticipate the passenger’s service needs and meeting it before it is even articulated.”

This means that when a passenger unbuckles his safety belt, a crew member immediately does a quick survey to ensure the washroom is clean. While the passenger is away, the cabin attendant tidies up the seat, folding the blanket and even getting a glass of warm water or a towel ready when the passenger returns.

This is a tall order to deliver with any degree of consistency, but also perhaps the ultimate luxury that premium travellers value. It is clearly the reason why certain airlines continue to be firmly placed at the top ranks of international passenger surveys.

Given its resilience, luxury travel may just be what can help airlines lift their bottom lines and ride out the storm in today’s turbulent economic landscape.

This article was first published in TTG Asia, August 24, 2012, on page 10. To read more, please view our digital edition or click here to subscribe.