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SkyTeam, the global airline alliance partnering Aeroflot, Aeromexico, Air France, Alitalia, Continental Airlines, CSA Czech Airlines, Delta Air Lines, KLM, Korean Air and Northwest Airlines, sets itself apart by offering an exclusive experience for all passengers. Issued monthly, SkyTeam NewsFlash provides media with key updates and insights on alliance activities.
This month, NewsFlash features a Q&A with Mark Erwin, Senior Vice President, Asia/Pacific and Corporate Development, Continental Airlines. As alliance recruitment has been a topic of focus this year, Mark shares some insights on alliance growth in emerging markets and the benefit of this growth for passengers, alliances and new member carriers.
Q: Mark, SkyTeam recently welcomed Russian carrier Aeroflot into its alliance and we are all aware of the strong alliance focus on the China market. Can you tell us what the main drivers of alliance interest in markets like Eastern Europe and China are?
A: Well, these are really two different regions that are developing in materially different ways. To put it most simply, Eastern Europe is following the development of the European Union. These are markets that historically have been limited based on available infrastructure and access rights. All of this is beginning to change and we find ourselves on the cusp of substantial aviation growth due to the loosening of these long-standing limitations. And the growth prospects in Eastern Europe are not just for European carriers, either. Airlines from all regions, Asia, the Americas, are seeing a huge potential in the market over the next five to ten years. This potential is driven by the prospect of increased ability to fly to destinations in these regions as they open their markets and strengthen outside relationships. This is one of the biggest drivers of the great interest in the region, which is quite attractive for international business. According to a recent report by the Economist Intelligence Unit, in 2005 Eastern Europe and the former Soviet states received a record amount of foreign direct investment – more than $74 billion. As the government statistics show, the growth of GDP in Russia has exceeded seven percent in the last three years.
In SkyTeam, our European member airlines provide important access to primary points in key areas in Eastern Europe and the alliance continues to evaluate additional partners in the region, if there is a strong strategic fit. Our Associate Program is designed to supplement SkyTeam’s position and expand our service offering in regions like Eastern Europe. Through our member partners and soon with our Associate Airline partners, SkyTeam is able to provide cohesive service despite current limitations on access and infrastructure.
Now, China is a slightly different story. With momentum behind development in China and the focus of the rest of the world on China, we are in the middle of the act, so to speak. SkyTeam is in a comfortable position related to China; we enjoy the advantageous position of having a firm foothold in the China market because we have had a strong relationship with China Southern – one of the best carriers, and certainly the largest, in China – for a long time now.
We are working closely with China Southern, not only to bring them into the alliance, but also to determine what the SkyTeam alliance in China will look like over the next several years. We are really getting into the granular – how do we make the customer service experience in China better for customers in China and those traveling to or from China? How do we increase customer access to destinations?
The post-consolidation market in China presents many opportunities for development and growth. Right now SkyTeam’s focus is on bringing China Southern officially into the alliance as a full member. We are working with China Southern and other groups within China to help the airline develop IT and airport infrastructure that meets our stringent joining requirements. Once China Southern is officially a member, SkyTeam will have to evaluate any potential opportunities for further growth in the market, including new partnerships or the development of additional products or services, to suit customer demand.
Q: You mentioned that airlines must meet stringent joining requirements to become a member of an alliance like SkyTeam. While SkyTeam benefits through an expanded network offering for its passengers how can membership in an alliance help these airlines that are based in what are considered developing travel markets?
A: Joining an airline alliance like SkyTeam gives carriers – especially carriers in less-developed aviation markets – a clear roadmap to further elevate their standards on safety, service, operational performance, and so on.
As I mentioned earlier, SkyTeam is working with China Southern to put in place IT infrastructure that will allow SkyTeam members to align their networks with China Southern’s network.
Once the joining requirements are met and the carriers are members of the alliance, they also enjoy the incremental revenue benefits from being a partner in the SkyTeam alliance.
Q: As markets in these developing regions and countries become more open, how will future travel for passengers and airlines be impacted?
A: Well, simply put, these regions are the future of travel. But to flesh that out a little, these markets – Eastern Europe, China, India – are or recently were areas of limited air service. As these markets liberalize and technology development follows, business and leisure travelers will continue to take an interest. Established carriers will follow the growth, traffic demands and, ultimately, the revenue potential.
In China and India, the growth is there. Limited infrastructure and technology are restrictions on this growth. Once we figure out how these two components of development can keep pace with the growth, the demand will be almost limitless.
As carriers grow their networks and service, passengers will benefit from more options. Customers will see higher and higher levels of service, more products and capacity increases. They will travel through better airport facilities and enjoy more frequent flyer options. As these options become available, customer demand and expectation will naturally grow. That is why it is important to SkyTeam to have carriers in each of these regions of growth, so that we can provide the highest level of service to meet our customers’ needs.
Q: Tell us, what regions are next for alliance recruitment?
A: Beyond China, India and Eastern Europe, one should hope that Africa will benefit from growth and opportunity; the same can be said of Latin America. There is great potential in both regions for intraregional traffic growth. Unfortunately, both regions have some political obstacles that cloud the issue of when or if opportunity will present itself.
SkyTeam is already planning ahead to ensure its network can accommodate current and future customer demand in these regions. Our Associate Program is specifically designed to do this with Kenya Airways and Copa of Panama already identified as Associate Airline candidates in these regions.
Another prospect for alliance growth and development is our product offerings. As these and other markets grow, our customers’ needs will expand. SkyTeam will continue to develop products to provide travel solutions to our passengers in all regions.
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