Latest round of mergers may impact air alliances

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The fledgling airline alliance led by Delta Air Lines and Air France is expected to announce its name this week. But a more intriguing question than what the name is -- it's likely to be SkyTeam -- concerns how global alliances can continue to exist in their current form.

With several proposed mergers of airlines bubbling, many wonder how deals, if done, may complicate existing alliances. The alliances continue to gain strength as brands and play a more important role in individual airlines' marketing.

The consolidation could have a significant impact on the four major global groupings: the Star Alliance led by United Airlines and Lufthansa German Airlines; the OneWorld Alliance led by American Airlines and British Airways; the still-unofficial Wings Alliance with Northwest Airlines, KLM Royal Dutch Airlines and Continental Airlines; and the Delta/ Air France-led linkup. A fifth network, Qualiflyer Group, is led by Swissair and Sabena Belgian World Airlines.


Delta and Air France are expected to be joined by Aeromexico and Korean Air, and may take the SkyTeam name, which was trademarked in the U.S. but reportedly ran into trouble in Germany. Delta and Air France spokeswomen declined comment.

The proposed United/US Airways merger, which ushered in the latest round of airline merger talks, would have little impact on the Star Alliance since alliance-less US Airways would meld into United.

But the possible British Airways/KLM marriage -- the carriers acknowledged they're in talks -- could break up the Wings Alliance before it gets off the ground. That is unless American and Northwest also merge, which could bring one massive alliance led by those four carriers.

The talked-about American/ Delta merger -- unlikely to receive clearance from regulators -- would also upset the current alignment, as would a Delta/Continental marriage.

What's clear is the larger airlines such as American and Delta will determine how things shake out if and when mergers occur.

"Whoever the dominant player is, that's who wins in the alliance game," said Barbara Beyer, president of consultancy AvMark. "You suck up the small guy and whoever the bigger player is [that's] where the alliance goes."

The possibility of redrawing alliances, which allow airlines to jointly offer frequent-flier benefits and seamless access, comes as the global groups become prominent planks of individual airline marketing and more prominent brands themselves.

"When you see United ads now they almost always include the Star Alliance logo," said a United spokesman. "In certain markets it's even a more powerful name than our own brand name."


Mergers always bring shivers among ad agencies as they worry about the fate of their accounts.

In April, the 3-year-old Star Alliance launched its biggest global campaign, from Y&R Advertising, New York. The OneWorld Alliance started a $35 million effort in April from Temerlin McClain, Irving, Texas, and M&C Saatchi, London, its most extensive push to date. Y&R is United's shop outside the U.S.; Temerlin serves American, and M&C Saatchi serves BA.

The Wings Alliance last year assigned its estimated $50 million account to Ogilvy & Mather, New York, which won't introduce any work until the alliance is official.

The Delta/Air France group's business went this year to the Euro RSCG network, which represents Air France. Details of ad plans and creative could be released this week along with the name.

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