Geoff Dixon, CEO, Qantas Airways

A MAGAZINE FOR AIRLINE EXECUTIVES 2004 Issue No. 2

T a k i n g y o u r a i r l i n e t o n e w h e i g h t s

AN ALLIED FRON T A conversation with … Geoff Dixon, CEO, Qantas Airways

INSID E

Air France and KLM form 4 Europe’s Largest Airline

18 The Evolution of Alliances

A Conversation with oneworld, SkyTeam 26 and Star Alliance

Initial Three-Year Structure Final Structure

Current Air France Current KLM Current Air France Current KLM shareholders shareholders shareholders shareholders Uniform Service

Air France – KLM Foundations Dutch State Air France – KLM The experience of a traveler — even the most valuable — can differ signifi-

Listed company 36.3% of 14.7% Listed company cantly from one alliance member to another unless the member airlines 100% 100% of economic rights voting rights of voting 100% 100% and 49% of voting rights rights work together to ensure uniform standards of customer service are applied throughout the network. Air France KLM Dutch State Air France KLM Option Operating company Operating company Operating company Operating company

During the first three years as a cooperative airline, the Air France-KLM group will perform under a strategic operating structure outlined By Stan Boyer | Ascend Contributor by Air France general shareholders. After the initial three years, the operating structure will be further refined to meet the needs of the merged airline. oining an alliance certainly has an impact logo on ticket office locations and airport around the world on a business-class fare J on customer service — hopefully a positive lounges, a carrier should consider the following: using three alliance partners. one. Many airlines expect that by aligning them- Can it provide the same level and type of After two days of continual travel and harmonize other activities such as simulator “KLM has been pointing out the need Aeroméxico, Alitalia, CSA Czech Airlines, Delta selves with one of the major global alliances services as the other members of the customer visits, the frequent flyer checked utilization, joint purchasing of goods and for consolidation in light of the challenges fac- Air Lines and Korean Air. With its merger with that their customers will have a seamless, alliance? in for a 10-hour flight, where he was involun- jointly negotiating with vendors such as ing our industry, and we have not made it a Air France, KLM became a member of pleasant and comparable travel experience with What level of service are the alliance part- tarily downgraded from business to econo- caterers and ground handlers, delivering secret we were looking for a strong European SkyTeam, which also added KLM’s long-time all member airlines. ners providing their customers? my class. additional cost savings. partner,” van Wijk said. “Through this innova- partner Northwest, and Continental, which Just because several airlines carry the Do its policies and procedures at all cus- The situation began during the check-in The combined group also offers several tive partnership with Air France and our partic- had a relationship with Northwest. alliance brand, however, doesn’t automatically tomer contact points adhere to the stan- process. While standing in the business-class customer benefits, including an expanded net- ipation in the SkyTeam alliance, we are confi- The impact of the Air France-KLM merg- guarantee that improved customer service will dards of other alliance members? check-in line, he was approached by a cus- work, access to shared airport lounges, com- dent that we have secured a sustainable er has just begun, but the ripple effect could be the outcome when customers of one air- Will the alliance partners meet or exceed its tomer service representative who asked if he petitive fares and enhanced onboard service. future for our company. Our valuable Schiphol hold the promise of creating waves of change line travel with an alliance partner. In fact, if air- customer service policies and procedures at was checking bags. After the passenger indi- The merged airline may also grow further. It hub will be an integral part of the dual-hub for the airline industry. a lines are not careful, the experience can actu- all customer contact points? cated that he was not, the representative has already held discussions about adding strategy of the new airline group, allowing us ally be less than expected. Consider the following true experience explained that the traveler could use the airline’s Italian flag carrier Alitalia. to build on what KLM and its staff have Before joining an alliance and placing its an elite-tier member had while traveling brand new “express” check-in kiosk. Thinking Leo van Wijk, president and chief execu- achieved over nearly 85 years.” Christian Gossel is a Europe-based tive officer of KLM and vice chairman of The merger also has implications for the account director for Sabre Airline AirFrance-KLM, said the merger was instrumen- SkyTeam alliance — which previously included Solutions. He can be contacted at tal for the future success of the Dutch airline. founding member Air France along with [email protected]. THE HIGH LEVEL vıew News Briefs from Around the Globe THE HIGH LEVEL Who domestic and international market. term and continued relationship News Briefs from Around the Globe Jet Airways Through the agreement, Jet Airways with Sabre Airline Solutions,” vıew will also deploy the Sabre ® AirMax ® said Wolfgang Prock-Schauer, Who scheduling functions. As part of the the recommendations made What Revenue Manager via Sabre ® eMergo ® chief executive officer for Jet China Eastern Airlines two-year agreement, an SOC expert by our valued Sabre Airline Entered a five-year agreement to Web access, an applications service Airways. “Beyond the value of the from Sabre Airline Solutions will be Solutions partners,” said utilize the SabreSonic ™ Passenger provider delivery method. In addition, SabreSonic solutions, which includes What assigned to China Eastern Airlines for Yu-Lin Wu, vice president for Solutions. The airline is the first the airline selected the Flight the e-ticketing capability with which Based on recommendations made by the duration of the agreement to China Eastern Airlines. “We in India, and one of the first in the Operating System from Sabre we will revolutionize the Indian Sabre Airline Solutions Consulting, ensure the new facility is optimally expect that the new efficiencies industry, to leverage the new Airline Solutions to manage its marketplace, Sabre Airline Solutions the airline will open a centralized implemented and functioning. we will achieve through the generation solution for reservations daily movement control and flight has an integrated suite of offerings system operations control center in operations control consolidation and passenger management, planning functions. that can help us automate our Shanghai, China, to consolidate its Why will heighten our performance including the introduction of both business more smartly and can movement control, flight dispatch, “We are confident we will see in this highly competitive e-ticketing and Internet booking Why help us increase our market share load planning, crew coordination and excellent results by implementing marketplace.” a services, revolutionizing the Indian “It is our intention to have a long- and profitability.” a industry industry

this was fantastic, the traveler proceeded to the kiosk. After the airline representative spent several minutes attempting — and failing — to The VIP Treatment help check the traveler in using the kiosk, the representative made a few phone calls and By Nico Stoman | Ascend Contributor gave him an economy-class boarding pass.

“I’m sorry, sir,” she said, “but I’ll need By coordinating processes, procedures and systems, alliance Photo courtesy of Star Alliance to provide you with this economy-class board- members can ensure that their frequent flyers receive the ing pass to get you through security. Business class appears full; however, there are seven highest level of service from each of their partners. seats open in first class. Just speak to the lounge representative, and I believe you will be pleasantly surprised.” Combining frequent flyer programs is one of the main benefits of joining He thanked the representative and pro- an alliance. After all, by linking their programs, airlines can significantly expand ceeded through security to the airline’s lounge. the benefits they offer customers — providing access to hundreds of additional Upon entering, he approached the destinations, opportunities for upgrades on partner airlines and personalized counter and introduced himself, saying, “The attention to the most valuable customers. check-in counter agent should have called to If only integrated loyalty programs always worked like they’re tell you of my dilemma and told me that I supposed to. would be pleasantly surprised.” Frequent flyer programs are designed to increase loyalty toward the air- The lounge representative replied, line and retain valuable customers. Joining an alliance makes it even more “Oh yes, someone did call. Would you like important to ensure that all other members recognize high-value passengers cash or a voucher?” The traveler was taken and track their activity accurately. by surprise. “Cash or a voucher?” he Despite all the technology that has radically reshaped the industry, airlines inquired. “Yes,” replied the representative, still have difficulty adequately tracking flight activity and recognizing elite status “our business class is full, and we are offer- members consistently across the alliance network. Part of the difficulty is that ing $300 cash or a $400 voucher for you to such tracking is not as simple as it sounds. Just because a passenger has flown downgrade.” hundreds of thousands of miles with a single airline in an alliance does not “I was told that I would be pleasantly mean that person will automatically be recognized as a valuable customer by surprised and that there were seven seats the other alliance members. Establishing common customer service policies and procedures among alliance partners will likely result in consistent, high levels of available in first class,” he said. “Could I have What members of an alliance need, therefore, are integrated processes service, increasing customer loyalty and retaining valuable passengers. one of those?” and procedures — as well as the technology that supports them — because “We have no first class on this flight maintaining a thriving loyalty program requires that all alliance members provide today,” the lounge agent said. “Would you like the highest levels of service to the most valued customers of any individual partner. cash or a voucher?” The issue is magnified because as alliances increasingly synchronize their The traveler asked to speak with a schedules in order to expand the number of routes and destinations available, THE HIGH LEVEL supervisor, and related his story. The super- individual passengers are more likely to use several alliance partners to com- visor, however, said, “I can do nothing at this plete their journey. News Briefs from Around the Globe point.” The frequent flyer then asked Providing the highest levels of service throughout the alliance must begin vıew who had the authority to help his situation, at the start, with the booking process. Since travel agents, both online and and the supervisor indicated that the manag- offline, still account for a significant amount of reservations, an airline’s reserva- Who product available on the market to “We found limitations quickly arose er on duty at the gate could help solve tions procedures and processes should be geared to evaluate these incoming meet our needs,” said Valuair with the reservations system we imple- Valuair the problem. bookings to assess the accuracy of frequent flyer data. The same procedures Chairman Lim Chin Beng. “These are mented initially and decided to turn to By this time, the passenger was clearly should be in place for bookings that come from partner airlines. Determining the the only solutions available today that the market to identify the best solution irritated, and he knew his preferred airline quality of frequent flyer data includes validating the name of the passenger What offer an open-systems architecture to meet all our needs, both current and would have handled the situation at the ticket against the membership number and updating the customer information with that will enable us to quickly adapt to future,” he said. “The SabreSonic solu- counter prior to letting him pass through secu- the traveler’s correct status information. Selected the SabreSonic ™ passenger changing market demands and busi- tions will allow us to expand our reach rity. It would not have pushed the responsibili- Because travel agents typically do not include status-level information in solutions to manage its reservations, ty to the gate agent. At the gate, he was the passenger name record within a global distribution system, an airline must ness requirements. The modular via a number of different distribution informed that several first-class-assigned flight have systems in place to recognize the traveler and update the PNR with the pricing, ticketing, reporting and architecture and performance-focused channels; facilitate partnerships with attendants had not shown up for work, so the appropriate frequent flyer information in the proper fields. This will ensure that customer service operations. pricing of the SabreSonic solutions our industry members; maintain a low airline decided to fly without first-class service. the frequent flyer information is transferred from the airline’s computerized are exactly what we need as a low- cost of business; and provide a fast, First-class passengers were downgraded to reservations system to its own departure control system, or to other Why fare carrier, allowing us to use a vari- reliable, modern solution that meets business and several business-class passengers were downgraded to economy. The pas- “After conducting an extensive mar- ety of distribution channels to offer Valuair’s needs including capabilities senger begrudgingly accepted his fate and The VIP Treatment | Continued on page 12 ket evaluation, the SabreSonic solu- the most advanced travel experience for e-ticketing, Internet booking and boarded the aircraft. tions clearly stood out as the best at value-based pricing. codeshare agreements.” a

10 ascend industry industry

“I’m sorry, sir,” she said, “but I’ll need By coordinating processes, procedures and systems, alliance of Star Alliance courtesy Photo to provide you with this economy-class board- members can ensure that their frequent flyers receive the ing pass to get you through security. Business class appears full; however, there are seven highest level of service from each of their partners. seats open in first class. Just speak to the lounge representative, and I believe you will be pleasantly surprised.” Combining frequent flyer programs is one of the main benefits of joining He thanked the representative and pro- an alliance. After all, by linking their programs, airlines can significantly expand ceeded through security to the airline’s lounge. the benefits they offer customers — providing access to hundreds of additional Upon entering, he approached the destinations, opportunities for upgrades on partner airlines and personalized counter and introduced himself, saying, “The attention to the most valuable customers. check-in counter agent should have called to If only integrated loyalty programs always worked like they’re tell you of my dilemma and told me that I supposed to. would be pleasantly surprised.” Frequent flyer programs are designed to increase loyalty toward the air- The lounge representative replied, line and retain valuable customers. Joining an alliance makes it even more “Oh yes, someone did call. Would you like important to ensure that all other members recognize high-value passengers cash or a voucher?” The traveler was taken and track their activity accurately. by surprise. “Cash or a voucher?” he Despite all the technology that has radically reshaped the industry, airlines inquired. “Yes,” replied the representative, still have difficulty adequately tracking flight activity and recognizing elite status “our business class is full, and we are offer- members consistently across the alliance network. Part of the difficulty is that ing $300 cash or a $400 voucher for you to such tracking is not as simple as it sounds. Just because a passenger has flown downgrade.” hundreds of thousands of miles with a single airline in an alliance does not “I was told that I would be pleasantly mean that person will automatically be recognized as a valuable customer by surprised and that there were seven seats the other alliance members. Establishing common customer service policies and procedures among alliance partners will likely result in consistent, high levels of available in first class,” he said. “Could I have What members of an alliance need, therefore, are integrated processes service, increasing customer loyalty and retaining valuable passengers. one of those?” and procedures — as well as the technology that supports them — because “We have no first class on this flight maintaining a thriving loyalty program requires that all alliance members provide today,” the lounge agent said. “Would you like the highest levels of service to the most valued customers of any individual partner. cash or a voucher?” The issue is magnified because as alliances increasingly synchronize their The traveler asked to speak with a schedules in order to expand the number of routes and destinations available, THE HIGH LEVEL supervisor, and related his story. The super- individual passengers are more likely to use several alliance partners to com- visor, however, said, “I can do nothing at this plete their journey. News Briefs from Around the Globe point.” The frequent flyer then asked Providing the highest levels of service throughout the alliance must begin vıew who had the authority to help his situation, at the start, with the booking process. Since travel agents, both online and and the supervisor indicated that the manag- offline, still account for a significant amount of reservations, an airline’s reserva- Who product available on the market to “We found limitations quickly arose er on duty at the gate could help solve tions procedures and processes should be geared to evaluate these incoming meet our needs,” said Valuair with the reservations system we imple- Valuair the problem. bookings to assess the accuracy of frequent flyer data. The same procedures Chairman Lim Chin Beng. “These are mented initially and decided to turn to By this time, the passenger was clearly should be in place for bookings that come from partner airlines. Determining the the only solutions available today that the market to identify the best solution irritated, and he knew his preferred airline quality of frequent flyer data includes validating the name of the passenger What offer an open-systems architecture to meet all our needs, both current and would have handled the situation at the ticket against the membership number and updating the customer information with that will enable us to quickly adapt to future,” he said. “The SabreSonic solu- counter prior to letting him pass through secu- the traveler’s correct status information. Selected the SabreSonic ™ passenger changing market demands and busi- tions will allow us to expand our reach rity. It would not have pushed the responsibili- Because travel agents typically do not include status-level information in solutions to manage its reservations, ty to the gate agent. At the gate, he was the passenger name record within a global distribution system, an airline must ness requirements. The modular via a number of different distribution informed that several first-class-assigned flight have systems in place to recognize the traveler and update the PNR with the pricing, ticketing, reporting and architecture and performance-focused channels; facilitate partnerships with attendants had not shown up for work, so the appropriate frequent flyer information in the proper fields. This will ensure that customer service operations. pricing of the SabreSonic solutions our industry members; maintain a low airline decided to fly without first-class service. the frequent flyer information is transferred from the airline’s computerized are exactly what we need as a low- cost of business; and provide a fast, First-class passengers were downgraded to reservations system to its own departure control system, or to other Why fare carrier, allowing us to use a vari- reliable, modern solution that meets business and several business-class passengers were downgraded to economy. The pas- “After conducting an extensive mar- ety of distribution channels to offer Valuair’s needs including capabilities senger begrudgingly accepted his fate and The VIP Treatment | Continued on page 12 ket evaluation, the SabreSonic solu- the most advanced travel experience for e-ticketing, Internet booking and boarded the aircraft. tions clearly stood out as the best at value-based pricing. codeshare agreements.” a

10 ascend industry industry

Such actions can leave a passenger wondering about the quality of service on air- The VIP Treatment | Continued from page 10 lines in the alliance and questioning whether to use the alliance in the future for global travel. alliance partners or handling agents, prior to departure to ensure accurate Linking Latin America Although an extreme example, it illus- status recognition and mileage accrual. This will also assist the check-in trates the potential cultural differences agent in matching the passenger’s airline status level with the corresponding between alliance members with respect to level of the alliance as a whole. customer service. Alliances should be If the appropriate information is gathered initially during the booking As with most parts of the world, alliances are becoming more prominent aligned so that alliance partners support cus- process, all airlines can proactively act upon a traveler’s elite status. If airlines and more important in Latin America. However, the region’s alliances are tomers of all member airlines with the same wait until an elite passenger has displayed a membership card, they have level of service. missed an opportunity to provide high-quality customer service. taking some unique forms to adapt to the local landscape. Keys to solving these issues require Some GDSs, such as the Sabre ® global distribution system, store pro- appropriate access to information and clear files of an airline’s frequent flyer members, which can help airlines that communication within the individual airline, depend on sales from agents who use a particular GDS. Regularly providing By Marcela Lizárraga and Nadja Killisly | Ascend Contributors among partners and, most importantly, with the member’s travel agency of record or the GDS with updated member the customer. information can help ensure that frequent flyers automatically receive the ew would argue that forming an alliance hold four of the top five market share posi- When it comes to regulation, the In order to reap the benefits of the appropriate mileage credits. This also helps ensure that the name and F among airlines is the future of the indus- tions in Latin America, where trans-Atlantic development of open skies agreements has alliance, all airlines must focus on providing a account number of a frequent flyer will match the airline’s records when a try — alliances enable airlines to protect them- non-stop capacity has almost doubled during resulted in Latin America experiencing glob- high level of customer service. When joining reservation is made by an agent utilizing a GDS that stores frequent flyer selves in a highly volatile climate, where the the last 10 years. alization. This has allowed some existing an alliance, airlines should consider: information. The status level, however, must still be added to the PNR by the economy is unstable and competition is high. carriers to expand. In addition, the multiplica- The partners’ customer relationship man- airline’s system. They are also a way to increase revenue. tion of alliances between a North and agement capabilities, Coordination of processes and systems will also eliminate issues such In Latin America, the trends toward Codeshare Market Reach South American carrier is continuing to cre- The customer service philosophies among as passengers trying to “double dip” by accruing miles in more than one pro- consolidation and alliances are consistent for July 2004 ate even more pressure on governments in

partners, gram for a single trip. To prevent such abuse, airlines should have a copy or with those in Europe and North America. 1,600 ------the region to sign open skies bilateral agree- The volume and type of customer com- receipt of the ticket sold to the customer and a copy of the boarding pass However, they have been developing at a ments with the United States. The results 1,400 ------plaints for each partner, at least at a high prior to retroactively awarding credit. It is important to verify flight activity, slower rate and with a different emphasis, are rewarding: Costa Rica, Chile and El level, especially if supporting documentation is not available. focusing on building traffic from other 1,200 ------Salvador are examples of how open skies Whether there is a plan to provide solutions Equally important is ensuring that passengers do not inadvertently regions as well as leveraging the strength of agreements have benefited airlines and pas- 1,000 ------to common customer service issues and receive credit for flights that were booked but not flown. Preventing unearned the region’s flag carriers, which have strong sengers by allowing carriers such as TACA to the resulting customer complaints. credits being granted becomes complicated in networks that depend on other ties with local governments. Also, some 800 ------build a regional network and, in the case of Markets served With the right customer service policies airlines’ handling agents. In such instances, receiving an accurate flight close- alliances have had better chances to succeed 600 ------LAN, earn record profits. and practices in place, customers flying out report will facilitate the updating of PNRs prior to the start of the mileage than others — those with common/shared However, there are still some chal------alliance carriers should receive a consistent accrual process. goals in which the partners complement each 400 lenges to overcome:

level of service and experience seamless Joining an alliance opens up a new world of frequent flyer other and are willing to work productively 200 ------Latin America remains very nationalistic and travel as they move from one partner to mileage/point redemption opportunities, but only if the member airlines have with each other. is characterized by a patchwork of aviation 0 ------a the next. tightly coordinated processes, procedures and systems that allow them to AM CM LA MX RG TA agreements that considerably limit the busi- properly identify and care for their most valuable customers. The Latin American Airline Market Airline ness development of its airlines. In fact, the Nico Stoman is a senior management consultant with Sabre Airline Latin America is a growing marketplace. The Additional markets served with outdated regulatory systems do more to Stan Boyer is a line of business Solutions Consulting. He can be reached at [email protected]. region’s gross national product is increasing, regional codeshares generate income for the government than director for Sabre Airline Solutions resulting in air travel growing at a constant Additional markets served with developing airlines. north/south codeshares Consulting. He can be contacted at rate, particularly in markets such as Central Latin American carriers, which are small and Additional markets served with [email protected]. America, Argentina, Chile and Colombia. alliance partner codeshares medium sized, are plagued by high costs Today, Latin American countries are consid- Additional markets served and low efficiencies. Therefore, despite the ered to be among the fastest growing mar- alone growing traffic, Latin America is still experi- kets. Tourism between the United States and Sources: market information data tapes, encing economical crises and financial diffi- +count it up Latin America and within the region is increas- Sabre ® Planet ® profitability forecasting system culties. This is evidenced by the economic ing at a rapid rate. fleet-size reduction among Latin American 2006 — Year the world's 250,437 — Number of 10,335 — Distance in miles At the same time, leadership has Alliances have provided benefits to carriers and the fact that economic turmoil largest passenger jet, the Airbus U.S. dollars, mostly in loose change, of the world's longest commercial shifted while the market is increasing: North a number of Latin American carriers. and high jet fuel costs have caused airlines American and European carriers such as Air COPA and TACA have highly benefited to struggle to survive. A380, will begin operations from that was left by passengers at airport flight, which is served by Singapore Canada, Iberia Líneas Aéreas de España, from their respective alliances with At the same time, pressure is building for Australia's Melbourne Airport, security checkpoints during the last Airlines. The 18-and-a-half-hour American Airlines, Lufthansa German Continental and American Airlines. airlines to improve safety systems and the which will begin a multi-million- year. The money is collected by inaugural flight between Singapore Airlines, Continental Airlines and Air France LAN and Aeroméxico have increased quality of service that is expected by global dollar infrastructure development the U.S. Transportation Security and New York City, New York, are taking advantage of the increase in the number of markets they serve travelers. in preparation for the double- Administration and deposited into carried 181 passengers earlier demand to open new routes to Central and through the development of numerous As these issues are considerable, decker, 550-seat aircraft. the federal government's general fund. this year. Latin America, where fares and correspond- regional codeshare partnerships. alliance and consolidation strategies are topics ing yields are significantly higher, and grow of critical importance. They are viewed as a their market share. Today, European carriers way to gain strength and survive globalization.

12 ascend ascend 13