Jetrader - Summer 2016 - 18

Alliances

Made
to be

H

By Mark Clarkson,
Business Development Director, ASPAC, OAG
History tells us that alliances are made to
be broken. Cast your minds back through
history and all sorts of alliances have broken down, be they strategic partnerships
between nations, commercial partnerships,
or even just alliances between work colleagues. Alliances are frequently nothing
more than a short-term form of creating a
defensive response to the competition; a
brief sharing of mutual interest and protection from others.
The airline industry is no different. OAG's
definitive schedules and flight status database reference former alliances such as
Atlantic Excellence, Qualiflyer Group, and
Global Excellence. The Atlantic Excellence
alliance lasted no longer than two years as
one partner rapidly moved on to what it saw
as a bigger and better opportunity. In the
last decade we have seen a pretty settled
airline alliance structure as outlined in the
table below, but is that settled structure
about to change?

Broken

There is some suggestion that the financial
returns of the last few years reflect the top
of the industry cycle and that things are
slowly turning down - not dramatically, but
certainly on a slight downward trajectory.
Reassuringly, perhaps from a consumer
and choice perspective, non-aligned airlines still have a significant share of the
global market (48.8 percent), but in some
parts of the world finding alternate carriers may be challenging. It also seems
that each alliance's share of that global
market has some correlation to the number of full members, which places Star in
first place and then Skyteam followed by
oneWorld. That reassurance would perhaps
be further strengthened by the knowledge
that the airline industry is enjoying some
of its most successful financial returns
in years; although, in the case of many

Table 1 - Airline Alliance Membership

18 The official publication of the International Society of Transport Aircraft Trading

carriers, it's still not enough to cover the
cost of capital.
All of which would be great, except major
airline CEOs appear to be getting itchy feet.
There is some suggestion that the financial returns of the last few years reflect the
top of the industry cycle and that things
are slowly turning down - not dramatically, but certainly on a slight downward
trajectory. Capacity increase in the U.S.
domestic market, likely to be in the region
of some 7 percent this summer against a
background of reduced consumer confidence
and a strengthening U.S. Dollar, has caused
some investors to be slightly cautious about
future performance. All of this has some
airlines taking an opportunity to review
their global market positions, seeking new
partnerships and indeed alliances that
could perhaps better serve their ambitions
in the next few years. Asia is central to
that thinking.
We all know that Asia is where the center of aviation gravity is shifting; it has
the fastest growth markets, the largest
opportunities in terms of future consumer
growth, but some of the lowest, current
propensity to fly on the planet. The fact
that Airbus and Boeing agree on the Asia
opportunity tells us all we need to know;
if they agree on something then it's got to
be right. Asia is the land of opportunity
Jetrader - Summer 2016

Table of Contents for the Digital Edition of Jetrader - Summer 2016
