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The Global Airline

Published by Mike Morgan on 12/12/2010

While TWA was facing their third bankruptcy, I was taking my first flight to Hawaii. I remember eagerly awaiting flight 1 from St. Louis to Honolulu while sitting at Lambert field. At that time TWA had their exciting final livery, and the St. Louis airport was a bustling hub, and not the desserted place that is is today. American Airlines had their sites set on buying TWA and working towards becoming the first global airline.

Definition: Global Airline. I have thought long and hard about what it means to be a truly global airline, and I think we're just now beginning to see what it will look like. For the sake of today's blog I will define a global airline as one where you can travel from a small town in one country to another small town in a different country on a different continent on the same airline.

American has not yet made it the global airline that As I defined it, but I think it set the stage for U.S. Based airlines to see the opportunity.

But the thought of being the global leader wasn't kept to U.S. based airlines.  In 2004 Air France and KLM teamed up to create better purchasing power.  However, I don't believe these two airlines have the mindset to do what is needed to create this global airline.

Flash forward a few years later. Once again I'm in Hawaii. I pick up the USA Today to read the headline that Delta is purchasing Northwest Airlines.  At first I think nothing of it, other than the two worst airlines in America are teaming up to create one.  But then I realize that Delta is working towards greatness.  By completing the merger, Delta becomes the largest airline in the world.  And you can't forget that they're teamed up with the other forerunner in becoming a global airline.  Delta - Air France - KLM.

Now, let's all remember that I'm a huge United Airlines fan.  It's 2010 and UAL combines with COA to create the new largest airline in the world.  And then, British Airways and Iberia merger (even though their talks started in 2008), with a great agreement with American Airlines (oh, and Anti-Trust protection).

So, the stage is set.  I've painted a picture, but what is the point of this blog?  I want to discuss the reality that the airline industry is changing, and needs to change.  First of all, the age of the Low Cost Carrier is nearing an end.  Michael O'Leary and his antics will soon be a faded memory.

At the beginning of the recession, people began clamoring for lower prices as airlines began piling on the fees.  All of which created what looked like a fare war.  But was it really?  No, it was an appearance thing.  Which airline could look the cheapest, but then get most of their money back through fees?  So, from here on out, let's call them fee wars.

Sidebar: I would like to take a moment and say great work to Southwest for keeping it business as usual through the fee wars.  And, I must say, I love the Bag Cop commercials.

So how do we get from fee wars to a global airline?  There's not enough profit right now.  It's easy, and I'll play it out for four airlines.  United, Delta, American, and Southwest.

The Global Airline: United.  Once United and Continental complete their merger their route network will be powerful.  With United's strong presence in Asia, and Continentals strong presence in South America, it won't be much of a stretch to purchase Copa Airlines and seek out an Asian airline.  United will also be able to team up with Lufthansa for its European network and South African Airways for its African network. 

The end result is a Global Airline under the name United.  Allowing you to fly on one airline from Oklahoma City, Oklahoma, USA to Tamale, Ghana, West Africa.

The Global Airline: Delta.  Delta is the closest to it's final global status.  A simple merger with Air France KLM Group, and they're most of the way there.  The main problem that Delta will have is the lack of strong players in Sky Team.  The Star Alliance provides United with major airlines throughout the world, but Sky Team rests a lot on the shoulders of Delta/Air France/KLM. 

I believe that for Delta to reach its goal of becoming a global airline, they will have to search outside of their alliance to find suitable airlines to join their team. 

The Global Airline: American.  Thanks to British Airways and Iberia, American has been the forward motion needed to create a truly global airline.  However, once the three merge, a new name will be needed.  One of the aspects of a global airline is that it must appear to be country neutral. 

American has an easy entry into the global airline game.  Just look at what One World has to offer: Qantas, JAL, Cathay Pacific, Royal Jordanian, Mexicana (if they can ever get their act together), and LAN.  Plus, American has strong ties to both Alaska/Horizon and Hawaiian Airlines (which is working hard to grow its own network).  A merger of this sort would be hard to beat.

The Global Airline: Southwest.  I hope that you kept reading just to read this.  A friend of mine once told me that somewhere in the Southwest headquarters is a model of a Boeing 787 in Southwest Colors.  There is a plaque that suggests that maybe some day Southwest will have a 787.  I found this out around the same time that Southwest announced the purchase of Airtran.

Of course, I must say that Southwest is now tainted as it as ValuJet blood in their mix now.

None-the-less Southwest is now reaching far beyond their normal borders.  And may soon find business class seats in the middle of their free-for-all seat-finding brawls.   It's hard a leap to assume that Southwest may change a larger part of their structure to become more like a legacy airline.

The change at Southwest could be the most important change for the aviation industry right now.

That's a bold notion, but hear me out.  Southwest reaches out to the small business traveler, and those who don't want to spend a lot of money going on vacation.  Major businesses, especially those who work internationally, want to provide simple travel for their employees that also offers great rewards.  If Southwest expands beyond America, adds to its fleet (wait, that's happening), makes improvements for business travelers, and keeps their "no-fee" way of life, other airlines will be forced to change.

As Southwest grows their network, a true fare war will start, because other airlines will not be able to win over customers while they are still playing the fee war.  Airlines will be looking to add new routes, forgetting about traditional hub and spoke, and adding more and more point to point routes. 

Airplanes like the 787 will allow for more international point to point, and smaller jets with improved fuel efficiency will allow bigger airlines to compete against LCCs in regional markets. 

The last and most important part of this change will be brand identity.  I read a tweet somewhere that said "Southwest and Jet Blue are brands, all others are just airline names."  And I think they're right.  Southwest has a Brand that can destroy.  Other airlines will have to starting building a true brand.  And therefore stop relying on alliances.  The end result is merger after merger after merger. 

I predict it will take about 20 years to see this change happen, but I also believe there may be startups that show up before 2030 with this vision in mind.  And I believe those startups will change the game even faster.

But, let's see, I'm just a guy who likes to look at airplanes, so what do I know?