As input to the book I’m writing at the moment, I have been thinking about examples of collaboration in business, and it struck me that the Star Alliance is a great example of the value of collaboration in the travel industry. Essentially, the Star Alliance is a group of airlines (at December 2010, almost 30 airlines) from around the world that agree to work together for various reasons. Those reasons include:
- Seamlessness and Consistency for Passengers … Passengers gain from the Star Alliance. While an individual who travels frequently can gain status within one or two frequent flyer programs, only diehard travelers could pull off more than that. The benefits that come from being in a frequent flyer program are shared across airlines in the Star Alliance – priority check-in, priority baggage, access to lounges, priority boarding, extra baggage allowances, and more. What you earn on one airline can be shared across all airlines in the alliance. Passengers can even take the hassle of working out international trips by booking travel plans through the Star Alliance web site, rather than with individual airlines.
- Cost Reduction for Airlines … If you think parking is expensive at airports, think how much real estate must cost inside the buildings, especially at the major hub airports. By working together, individual airlines don’t have to build and operate separate lounges for frequent flyers. One lounge is built and maintained, and any passenger with Star Alliance status is able to access it. I don’t know how the airlines share the costs for the lounges, but perhaps costs are on a pro-rata basis on the number of passengers checking in with each airline per month.
- Changing the Competitive Dynamics … Once you have status within an airline that’s part of the Star Alliance, when facing a decision about traveling to a particular destination, where one airline is part of the Alliance and one is not, which airline would you choose? My guess is the balance of decision will fall in favor of the Alliance airline. Thus by working together, the airlines that are part of the Alliance have reformed the competitive airscape away from choices about individual airlines to choices about airlines within the Alliance or not. That’s powerful.
As a passenger, I appreciate the benefits that come from having Air New Zealand Gold status, and given Air New Zealand’s involvement in the Star Alliance, I appreciate the extension of those benefits outside of the country.
The Star Alliance is a great example of collaboration – where there is potential to do something together, with clear benefits to everyone involved, and clear detriments to those not involved.