Airline Alliances

Which Will Benefit You, And Which Ones Won't

September 5, 1998 - The announcements that the six largest U.S. airlines would be dividing up into three marketing twosomes have given rise to highly speculative reports in the media, and highly extravagant hopes among frequent flyers. To recap the situation thus far:

• American will partner with US Airways
• Northwest will partner with Continental
• United will partner with Delta

The focus of the media speculation has been the timing and, most important, the details of these marketing alliances. And the frequent flyers' fervent hope has been, very specifically, that members of the allied airlines' frequent flyer programs would be able to combine miles from both programs, thereby effectively increasing their award opportunities.

What follows is a summary of the latest available information, with an emphasis on how these relationships will benefit members of the participating airlines' frequent flyer programs. We'll keep the speculation and wishful thinking to a minimum.

American &
US Airways

Of the three pairings, American and US Airways have been the quickest to bring the partnership benefits to market. Beginning August 1, members of American's AAdvantage and US Airways' Dividend Miles programs were able to claim awards for travel on both airlines.

In addition, American's Admirals Club members and US Airways' Club members now have reciprocal access to each other's clubs, also beginning August 1. (American has 47 Admirals Clubs throughout its system, including Latin America, Europe and Japan, and US Airways operates 26 clubs throughout the United States.)

This, it was promised, was but the initial stage of their newly formed marketing relationship, which would soon be expanded to include bigger, better benefits.

And expanded it was. On August 24, American and US Airways launched the second stage of their marketing relationship, enabling Dividend Miles members and AAdvantage members who belong to both programs to combine miles when claiming travel awards on either airline.

Before you map out that elaborate award itinerary, notice that the pooled miles can only be used toward an award on American or US Airways. You could not, for example, combine AAdvantage miles with Dividend Miles to redeem a free award ticket on All Nippon Airways (a partner in the Dividend Miles program). While a disappointment, this constraint on combining is understandable from an economic standpoint: American and US Airways must purchase award tickets from their program partners, whereas an award trip on their own services essentially costs them only the price of an extra inflight meal.

What else could a frequent flyer ask for? To begin with, ask for reciprocal earning opportunities. In other words, a member of US Airways' program would be able to earn Dividend Miles for a flight on American. And conversely, a member of American's program would be able to earn AAdvantage miles for flights on US Airways. Why does this matter? Precisely because, as alluded to above, you cannot combine miles for partner awards. Reciprocal earning would allow you the flexibility to "top off" whichever of your two accounts needed the extra miles to qualify for a partner award. And while you're at it, ask that those reciprocally earned miles count toward elite status in the other airline's program. So that the AAdvantage miles you earn for flights on US Airways would count toward elite status in AAdvantage. And the converse.

While there are still a few wanna-haves that this union won't provide, the benefits overall to frequent flyers are real and represent real value. Members of American and US Airways' programs in particular have reason to cheer. After which, they should press the two carriers to further develop the relationship, as outlined above.

Delta & United

Delta and United plan to partner as follows: each will participate in the other's frequent flier program, "giving customers more opportunities to earn and redeem miles than ever before." Specifically, beginning September 1, members of either airline's program could earn mileage for domestic flights on the other airline. And, beginning October 15, they can redeem their miles, in either program, for domestic award flights on the other airline.

What "partnership" here amounts to is simply this: Delta will join United's program, and United will join Delta's program. And that overstates the consumer benefits of the arrangement, since both carriers have limited their participation in the other's program to their flights within the U.S., Puerto Rico and the U.S., Virgin Islands.

So far, there has been no discussion of allowing mileage pooling, nor is any expected.

While there is added value here for members of the two programs, this feels more like a marriage of convenience than of passion. The result is no less uninspired.

Continental & Northwest

Continental and Northwest were the first to promise the benefits of partnership, but they're going to be the last to deliver.

Officially, when the announcement was made back in January, the promise was to provide "reciprocity" between their two frequent flyer programs. Translation: Continental will become an earning and redemption partner in Northwest's program, and Northwest will do the same in Continental's program. The expectation is that the reciprocity will extend to all flights on both carriers, with no domestic-only constraint such as that imposed by the Delta-United offering.

The good news, potentially, is that Continental and Northwest reportedly have been discussing ways to expand the roster of benefits associated with their partnership beyond simple reciprocity. If the rumors are borne out, we could see mileage pooling or even something approaching a true merger of the two carriers' programs.

This is more than just corporate munificence. From a competitive standpoint, Continental and Northwest know they must offer more than their larger industry counterparts. Because even in combination, they have less market share than America, Delta or United each have. They must, therefore, try harder. Here's a case where competition could, and should, result in increased consumer benefits.

But before the good news can play out, the larger alliance between Continental and Northwest must be endorsed by the DOT. And, further delaying progress, Northwest has temporarily ceased operations, pending resolution of the remaining points at issue with its pilots' union. Hopefully, though, when the final plan is revealed, it will turn out to have been worth the wait.

The Summary

The following table summarizes the situation as it stands today:

Stay Tuned

For the latest on these alliances, keep an eye on the websites of the players:

• American Airlines AAdvantage
• Continental OnePass
• Delta Air Lines SkyMiles
• Northwest Airlines WorldPerks
• United Airlines Mileage Plus
• US Airways Dividend Miles