Have airline alliances reached their expiry date?

For over two decades, airline alliances have dominated global travel standards. Having clear rules over earning points, securing rewards and getting into airport lounges makes things simple… in theory. But many well-known airlines have shunned the traditional alliances in favour of bespoke partnerships. Among them, Etihad Airways, Emirates, and Virgin Australia.

Let’s talk about the latter. Virgin Australia has a number of partner airlines in Star Alliance. It’s to the degree that many people regularly ask, when will Virgin Australia join Star Alliance? But its sister airline, Virgin Atlantic, recently joined the rival SkyTeam Alliance. Meanwhile, Virgin Australia is now part-owned by a oneworld Alliance carrier, Qatar Airways. Qatar is also arguably Virgin’s most significant airline partner, particularly with the new Doha wet lease flights taking off.

Meanwhile, on the alliance front, the grass isn’t all green. Oneworld has just gained Oman Air among its ranks – an integration announced more than three years ago. But even after finally joining the fold, Qantas still hasn’t figured out its earning rates for travellers taking Oman Air flights. Right now, if you on a oneworld airline (Oman Air), with a oneworld frequent flyer number (Qantas), you’ll earn nothing. Isn’t that meant to be a standard alliance-wide benefit? Even eligible Qatar Airways flights earn something with Qantas, and the two airlines don’t exactly get along…

SkyTeam is arguably no better. It’s also allowed airlines to join in recent years without all of the proper IT systems in place. Many travellers with ITA Airways status struggled to access benefits on partner airlines in its early SkyTeam days. Ditto, Virgin Atlantic, which hadn’t set up Flying Club redemptions with all SkyTeam airlines by launch date.

When airlines can simply ‘get around to it’… or forgo the alliance concept altogether and pick and choose their partners, does the concept of a global alliance still have any real appeal? I catch up with Star Alliance CEO Theo Panagiotoulias on the sidelines of the invitation-only IATA AGM to find out.

What Star brings to the table

I ask, point blank, what a group like Star Alliance could offer to an airline like Virgin Australia. That is, a carrier that already has a lot of its own direct airline partnerships covering its key markets.

“Well, the way I would characterise that is, being part of an alliance is not simply just about a bilateral commercial relationship. It goes a lot deeper than that,” begins Panagiotoulias. “We have, for example, 53 standards that all the member carriers need to adhere to. And that’s all about having consistency and making sure the customer commitment is delivered upon.”

For example, Star Alliance has very clear rules about airport lounge access. As opposed to the international lounge agreements of Virgin Australia, which vary significantly from one partner airline to the next. And in many cases, leave Velocity members with no lounge to visit at all.

“So yes, carriers that are not part of the Alliance can have bilateral relationships,” Panagiotoulias continues. “But the commercial value of being part of a group of airlines with consistency and a specific set of standards (is quite strong).”

“Think about Star Alliance Gold, for example. They can’t take advantage of that. They can have bilateral partnerships, but Star Alliance Gold only exists to the frequent flyers specific to airlines that belong to Star. So there are lots of different aspects of the Alliance that you’re never going to be able to capture, unless you’re part of it.”

With Virgin Australia more keenly eyeing international flying, the ball remains in its court. But it’s also fair to observe, numerous Virgin Australia CEOs have had the opportunity to join an alliance over the years. But none, yet, have taken it.

A broader rollout of Star Alliance Rewards..?

Star Alliance is the first major alliance with a loyalty program of its own. Named Star Alliance Rewards and currently exclusively for Australians, members can earn flexible points up-front, while deciding which participating Star Alliance member they’d like to transfer those points to later. It’s the points program attached to the HSBC Star Alliance Credit Card, also issued in Australia.

HSBC Star Alliance Credit Card

Find Out More & Apply

Read the guide

Sign-up Bonus:

Fast Track to Star Alliance Gold Status

Rewards Earn Rate:

Earn 1 Star Alliance Point per $1 on eligible purchases, up to $3,000 per statement period and 0.5 Star Alliance Points per $1 spent on eligible purchases thereafter, uncapped

Annual Fee:

$0 in the first year, $499 p.a. thereafter

Fast track your way to Star Alliance Gold Status when you apply for the HSBC Star Alliance Credit Card and spend $4,000 or more on eligible purchases in the first 90 days from account opening. Includes $0 annual fee in the first year ($499 p.a. thereafter) and uncapped Star Alliance points earn on spend. Fee, charges and T&C's apply. Offer may end anytime.

Currently, Star Alliance Rewards is limited to credit card spend. But could that same flexibility apply to flights as well? Could members list a Star Alliance Rewards number when they travel, rather than a direct airline frequent flyer number? “I don’t see that in the foreseeable future,” Panagiotoulias shares.

“I think when you look at Star, what do we represent? We’re an alliance where we empower the member carriers to do stuff that they otherwise can’t do on their own. So these things can be done by the airlines… we don’t really see the value in us doing something that the airline could already do.”

Instead, Star’s focus is more, “what can we do to make the customer experience more seamless? And we think customers will appreciate that. Think about the various stages on a journey. I see this for myself when I travel, and I know you guys travel a lot. But we look at it from, when I’m making a booking, when I’m at the airport, when I’m connecting, my loyalty experience… you look at all that along the way, and you say, right, where are the pain points? Of which we know in this industry, there are a lot.”

“With these things here now, customers are demanding that you find solutions. (They want to) control their own destiny. So actually, for us, that’s where we see the sweet spot, and our primary priority.”

Also read: ITA Airways makes tracks towards Star Alliance

Featured image courtesy of Pexels/Jose Cruz.