Globalized world stuck with parochial airline rules

Imagine you’re one of a still small, but growing, number of global road warriors. You’re based out of Vancouver, but have business to do in London and Tokyo, and wish to make things as simple as possible by doing it all in three hops, taking nonstop flights.

On the surface, this should be easy enough to arrange. London is British Airways’ global hub, and Tokyo serves the same purpose for Japan Airlines. Both belong to the Oneworld airline alliance, one of three that purpote to offer seamless worldwide connections, and both fly from their respective hubs to Vancouver, so booking a Vancouver-London-Tokyo-Vancouver trip should be a piece of cake, right?

Not necessarily. Oneworld, like the other two alliances, offers suggested itineraries and even a few package deals; but you cannot book directly through the Oneworld site; you must deal directly with a member airline.

An amusingly bad Tokyo-Vancouver routing suggested by the Oneworld web site: Fly from Tokyo's Haneda Airport to Osaka,  then fly back to Tokyo, landing at the less-central Narita airport this time, then fly to Vancouver. (Click to enlarge.)

An amusingly bad Tokyo-Vancouver routing suggested by the Oneworld web site: Fly from Tokyo’s Haneda Airport to Osaka, then fly back to Tokyo, landing at the less-central Narita airport this time, then fly to Vancouver. (Click to enlarge.)

Fair enough. So you try booking online with British Airways, but come to a dead end because their web site won’t let you book a nonstop Tokyo-Vancouver flight on Japan Airlines, despite being alliance partners. BA’s web site demands that the Tokyo-Vancouver leg be via London Heathrow, a journey of more than 24 hours.

Then you try making the booking with Japan Airlines, but get no further because their web site requires that your first leg be from Canada to Japan.

Frustrated, you check out your options on Google Flights, and find out that, ironically, the only way to reserve all three flights on a single booking is to book through the American Airlines web site — rather counterintuitive, given that your itinerary neither involves ever stepping aboard an American Airlines flight, nor setting foot in the United States.

Even once booked, your hassles aren’t necessarily over. Prefer an aisle seat for those long flights? Even within an alliance, airlines might have drastically different seat-selection policies, and almost all require that seats be arranged through their own web sites or call centres. Hate waiting in line to check in? Sorry, but many of those computerized airport kiosks still tell you to go find an agent to personally get you checked in, as the software can’t handle bookings made through other carriers’ reservation systems.

The airlines know this is a clunky and exasperating way of doing business, and some within the European Union have merged while retaining nominal national brands. British Airways and Spain’s Iberia, for example, might look like two different airlines; but both are really divisions of the London-based International Airlines Group (IAG). The same applies to Paris-based Air France-KLM, which owns the French and Dutch airlines which go by those names.

But among the airlines that have their hubs in other global business capitals, not only has little consolidation taken place — it’s not even allowed to happen.

Although the International Civil Aviation Organization (ICAO) has acknowledged that laws restricting foreign ownership of domestic airlines are of questionable relevance today, Canada remains one of many countries whose laws are based on the assumption that foreign ownership of an airline, no matter how sterling the foreigners’ reputation, is somehow a bad thing. As the Canadian Transportation Agency notes on its web site:

The CTA requires that air carriers operating or proposing to operate a domestic air service be Canadian unless they obtain an exemption from the Minister of Transportation, Infrastructure and Communities . . . With respect to a corporation, partnership, proprietorship or other legal form of business enterprise: It must be incorporated or formed under the laws of Canada or a province; At least 75% of its voting interests must be owned and controlled by Canadians; and it must be controlled in fact by Canadians.

But Peter Davies, a former Air Malta CEO notorious for referring to his own troubled airline as “crap”, is pitching a solution. In an interview published Jan. 8 on Skift.com, a travel industry news site, he suggests that smaller airlines in different countries keep their national identities on the surface, but merge their back-office operations:

[Davies] proposes a “hotel management style, where airlines have maintained their brand but the whole back office is managed by the management company.” The hotel management company would be invisible to passengers. The airline’s customers would experience the local airline brand, not a chain identity. But the national carriers would benefit from the same cost advantages of their larger competitors.

“Your back office costs, your revenue counting, maintenance, aircraft purchasing, insurance—all these expensive ticket items would be transferred [to the management company] which yields economies of scale,” Davies says. “That company takes on a percentage of the fixed-costs basis of these smaller flagship airlines, which would make a significant difference in terms of profitability. The key is to make sure you maintain the brand. I do believe fervently in the brand, particularly for a destination airline.”

Though Davies promotes his idea as a means by which to save small national brands — the same week as one such carrier, Cyprus Airways, bit the dust — it raises another possibility: adapting this model to finally allow the Star, Oneworld and Skyteam alliances to become to global air transport what Crowne Plaza, Holiday Inn and Sheraton have become to lodging; namely, a global network of regionally owned franchises.

Under such a model, it would be possible for airlines to respect the foreign ownership laws of their respective countries. Unlike in the hotel industry, it would even be possible to keep the planes painted in national colours and the flight attendants in the same uniforms that they wear today.

But the pricing and marketing functions, the policies on such things as baggage allowance and seat selection, the fee structure, the product offerings and innovations, and the reservation systems would all become merged and run out of Star’s Frankfurt headquarters, Oneworld’s New York City headquarters and Skyteam’s Amsterdam headquarters.

Thus, if you were to fly Oneworld’s British Airways from Vancouver to London, and then on to Tokyo, and then fellow alliance member Japan Airlines from Tokyo to Vancouver, it would be the truly seamless experience that the airlines had in mind when they began forming alliances in the ’90s.

It’s a move that would make sense in a world that’s more internationally mobile than ever, though some carriers with excellent reputations in their own right, such as Star Alliance member Singapore Airlines, might rightly resist any tarnishing of their brand.

Yet the airline industry is also closely tied to nationalist sentiments, and can end up taking a bashing by politicians for not being reverential enough to these sentiments, as British Airways painfully learned when it tried removing the Union Jack from the tails of its aircraft years ago. That alone might be enough to slow any progress down.

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About theviewfromseven
A lone wolf and a bit of a contrarian who sometimes has something to share.

2 Responses to Globalized world stuck with parochial airline rules

  1. dirk says:

    Always enjoy your insights, and sometimes frustrations in the airline business. As an international airline ticketing agent I have learned some interesting facts from your posts and see some of your views reflecting my own. My wish(ful thinking) is AC Rouge 3x per week YWG-FRA or LHR in the summer months. One can only dream.

  2. theviewfromseven says:

    Thanks!

    It will be interesting to see what comes of Rouge, especially as the eventual retirement of the Boeing 767s and Airbus A319s will offer an opportunity for Air Canada to decide whether to continue the Rouge project or make a fresh start. A Jetstar-like product (same lower costs, but newer planes and less brand confusion) might please the Finance people just as much, while taking some of the pressure off of Customer Relations.

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