Is there a place at the alliance table for low-cost-carriers? With no-frills, budget carriers burgeoning, that is a question legacy alliances must grapple with.
Star Alliance CEO Jeffrey Goh was interviewed by Bloomberg at the Singapore Airshow this week. The full interview is below and touches on many interesting points, but of interest to me was discussion on the growing prevalence of low-cost carriers.
When asked if Star Alliance was open to more members, Goh demurred, though he did not foreclose the possibility. Instead, he suggested a partnership.
Many of our members and many airlines around the world are moving a lot to lower-cost platforms. We want to find a way of recapturing these markets offering the benefits and privileges that they used to have and enjoy. We want to use this connecting partner model.
Let’s examine the current state of affairs. Lufthansa has Eurowings, a low-cost division outside of Star Alliance. Thai Airways has Thai Smiles, also outside the alliance. Singapore Airlines has Scoot, which operates outside the alliance. ANA has Vanilla Air, Asiana has Air Seoul, and South African has Mango.
All of these carriers are in the “low-cost” model and serve markets or destinations that were neither practical nor profitable for their parent legacy carriers.
But with limited exceptions, these subsidiaries of Star Alliance carriers offer very little to Star Alliance itself or to customers who are loyal to Star Alliance. Star Alliance Gold benefits like lounge access or complimentary checked bags do not apply to these subsidiaries. These flights also do not show up in award searches…they are separate, non-Alliance carriers.
This, however, creates holes in the network and undermines the concept of worldwide connectivity across the Star Alliance network. Yet making these low-cost carriers full-fledged Star Alliance members seems like a remarkable way to cheapen the brand and introduce unnecessary complications to a low-cost model.
A Middle Road = Connecting Partners
Is there a way to have the best of both worlds? To integrate these carriers into the alliance so that passengers who fly on these low-cost subsidiaries will still enjoy certain benefits?
Take lounge access for instance. In many cases this would not be applicable because budget carriers operate out of low-cost terminals…without lounges. But in cases where lounges are available, would it destroy the low-cost model to grant access? Would this encourage more business?
What about inter-line baggage issues? Budget carriers pride themselves in refusing to check bags through, but let’s say you’re at a resort in Phuket and need to fly Thai Smiles to Bangkok and then connect on Singapore Airlines to Singapore. Would checking bags though engender loyalty to the Alliance and therefore loyalty to the Member Carriers?
Finally, what about earning miles? Does a budget carrier cease to be a budget carrier when you can earn frequent flyer miles on another Star Alliance carrier? Wouldn’t that strengthen the route map and ultimately help the Member Carrier?
I’m asking questions because the answers are not clear. I am not entirely clear what Goh is after: do budget carriers balkanize legacy carriers or can they work in concert to create a larger global network in which some markets simply will offer scaled back service? I tend to think the latter is true. Let’s face it: people are willing to give up a lot of comfort to save money. But integrating these budget carriers into the Alliance on a partnership basis may at least encourage customers to stick to Alliance-owned airlines and provide a more elevated flight experience for loyal Star Alliance travelers.
Star Alliance is attempting this through its “Connecting Partners” program. Only one airline, Juneyao Airlines, currently participates. If you fly on Juneyo as a Star Alliance Gold Member, you will receive:
- Priority Check-in
- Additional Baggage
- Priority Boarding
- Fast Track Security
- Priority Standby
- Lounge Access
- Priority Baggage Delivery
This represents a great start to addressing the growing waive of low-cost carriers.
I think low-cost-carriers are here to stay and the alliance that figures out how to work them into the business model is going to be the alliance that remains relevant the longest. The key is not to offer consistent service across airlines, but to manage expectations while still offering a baseline of perks like through-check-in, interline baggage, and mileage earning that would keep customers loyal to the full-service members of the alliance.
Do you think LCCs should play a great role in the Alliance?