{"id":4996,"date":"2020-05-04T13:33:08","date_gmt":"2020-05-04T12:33:08","guid":{"rendered":"http:\/\/www.globalflight.net\/german\/?p=4996"},"modified":"2020-05-04T13:34:26","modified_gmt":"2020-05-04T12:34:26","slug":"jvs-will-they-survive-covid","status":"publish","type":"post","link":"https:\/\/www.globalflight.net\/german\/jvs-will-they-survive-covid\/","title":{"rendered":"JVs – will they survive Covid?"},"content":{"rendered":"\n
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04 May 2020<\/span><\/em><\/p>\n\n\n\n

United’s recent move to increase award levels on Lufthansa transatlantic flights throws the light on a question not yet really examined: Where are joint ventures (JVs) heading to? Will there be even a second life for alliances?<\/p>\n\n\n\n\n\n\n\n

Joint\nVentures are generally considered the closest form of cooperation between\nairlines, except for mergers. And there has been a clear trend over the last\nfew years towards such business models, putting also a question mark behind the\ncontinued relevance of alliances.<\/p>\n\n\n\n

But the\nmain objective of joint ventures remains the access to additional markets. This\ncan be driven by considerations of restricted market access or by a willingness\nto share risks. Even in open skies markets such as the Transatlantic, it makes\nmore business sense for Lufthansa and United to team up to benefit of each\nother’s strength in their home markets rather than United trying to fly on its\nown from Chicago to places such as Zagreb or for Lufthansa from Frankfurt to\nIndianapolis.<\/p>\n\n\n\n

Developing\nsuch joint ventures happened over the last few years in front of growing\nmarkets and where the main concern for United was indeed how to capture the\nmarket to Zagreb. But the current crisis will result in a reduction of traffic\nvolumes, which might take two years or more to recover to previous levels.<\/p>\n\n\n\n

The first\nobjective of each business is therefore rapidly shifting to look first and\nforemost after oneself – rather than chasing that incremental business together\nwith partners. The not so pleasant increase of award levels on Lufthansa\ntransatlantic flights by United – only one day after United stopped publishing\naward levels on partners – is therefore more than a symbol. With such a smaller\ncake and a massive overcapacity, any demand, including for award flights, is to\nbe channelled to its own metal in order to guarantee the related revenue.\nRevenue in joint ventures is usually shared between partners in function of the\nproduced flight capacity. The more own flights you are able to maintain, the\nmore you earn. At the same time, using partners to reduce its own mileage\nliabilities is not a priority anymore, given the low load factors on flights.<\/p>\n\n\n\n

While such\ncloser forms of cooperation are certainly beneficial in good times – including\nfor customers to a certain degree -, things risk looking differently now. And\nairlines might be more comfortable with the light and less engaging cooperation\nmodels as proposed within the alliance networks, basically proposing the same\nbenefits to customers, but less for the airlines\/shareholders.<\/p>\n\n\n\n

At the\nlevel of loyalty programs, this may result in many programs reconsidering how\nthey treat their partners. Lower accrual levels, limited elite benefits, higher\naward levels, but also more subtle means at the communication level are the\nclassical tools at the disposal of airlines to make travel on partners less\nrewarding – without a need to dissolve the JV and create visible fraction, but\nto do it in a much less visible manner by influencing those, who decide about\nthe degree of success of any form of cooperation, the traveller.<\/p>\n\n\n\n

Will Japan\nAirlines continue to reduplicate promotions of their partners American Airlines\nor Finnair for flights to\/from Japan to give them more visibility and power? Will\nEmirates continue to play low card in Australia in order not to offend Qantas? There\ncan be some doubt about it. United’s downvaluing of Lufthansa might indeed have\nonly been a small first step.<\/p>\n\n\n\n

And the\nsmartest moves in the market will probably be those not reducing the value of a\npartner, but rather increasing its own value. Such measures would have less potential\nof conflict and might be strategically wiser moves. Long before Covid, British\nAirways introduced some of the elements of the loyalty toolbox in an open manner\nto make it much more rewarding to fly on British Airways and Iberia than on American\nAirlines.<\/p>\n\n\n\n

We will see\nmore developments in such a sense and when looking at them more closely, you\nmay understand that JV considerations are actually the driving force. There are\ninteresting times ahead – but also tricky ones since loyalty programs definitely\nneed to get their contribution to higher corporate objectives right.<\/p>\n\n\n\n

For the\ntime being, very much is still in the „what if“ state regarding the\nfuture of JVs, but certain questions are asked openly such as what were to happen\nto the BA\/AA joint venture if Virgin Atlantic were not to survive. But until such\n(unlikely) end decision, it will be interesting to watch how loyalty programs\nwill use their power of leverage to help their own airline a bit more than in\nthe past – what might ultimately help to save JVs by putting them „on\nhold“ until better times return rather than waiting until things explode irrevocably.\n<\/p>\n\n\n

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04 May 2020 United’s recent move to increase award levels on Lufthansa transatlantic flights throws the light on a question not yet really examined: Where are joint ventures (JVs) heading to? Will there be even a second life for alliances?<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_links_to":"","_links_to_target":""},"categories":[37],"tags":[],"_links":{"self":[{"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/posts\/4996"}],"collection":[{"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/comments?post=4996"}],"version-history":[{"count":1,"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/posts\/4996\/revisions"}],"predecessor-version":[{"id":4997,"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/posts\/4996\/revisions\/4997"}],"wp:attachment":[{"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/media?parent=4996"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/categories?post=4996"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/tags?post=4996"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}