How the SkyTeam Alliance Became a Rehab Center for Global Airlines

Last Updated Oct 4, 2010 7:13 PM EDT

When I spoke with leadership at the SkyTeam airline alliance back in June, its focus was on recruiting airlines that could expand the alliance's coverage around the globe. Now that we've seen some of the airline choices, it's clear that SkyTeam is willing to sacrifice brand image for coverage. The alliance is becoming a halfway house for airlines with a history of problems, and that's a bet that could pay off mightily or blow up in the alliance's face. My money's on the former.

The question around SkyTeam's airline decisions first reared its head at the founding of the alliance back in 2000. One of the founding members, Korean Air, had just come off a three year period with 7 accidents. This was famously discussed by Malcolm Gladwell in Outliers, and it was only compounded when the FAA downgraded South Korea's safety rating in 2001. Even though the regulatory move was unrelated to the airline itself, it still reflected poorly in the public eye.

Flash forward 10 years, however, and Korean Air is riding high. It hasn't had an accident since then after making some significant crew training changes, and the onboard product is significantly improved as well. So the inclusion of Korean Air in the alliance was a success, but can SkyTeam repeat this with some of its latest recruits?

Just look at this list of airlines with checkered pasts:
I never thought that Alitalia would look like one of the most desirable airlines in an alliance, but sure enough, that's the case in this motley group. Though Alitalia has been miserable for ages, the new ownership that took over appears to be making some real progress in righting the ship. Aerolineas Argentinas, however, is where Alitalia used to be. It's a political tool used by the government for national pride, or something like that. But it means the airline is an absolute mess.

Then there are airlines like China Airlines and Garuda Indonesia. Around the same time as Korean Air ran into trouble, China Airlines found itself with a crashing problem as well. While its onboard product is still old and needs serious refreshing, the safety issue has been fixed. Garuda has a similar reputation, made even more difficult by flying in Indonesia, a rugged country where a great number of accidents have occurred over the years (including a Garuda flight in 2007). But today, under new management, Garuda is actually poised to become a success story in the region.

And then there's Aeroflot. Aeroflot is one of those airlines that could become the best in the world but will still have the stigma of being that former Soviet airline with dreadful service and old Russian airplanes. The reality is that it isn't the case anymore. Most of Aeroflot's fleet is made up of newer Western aircraft, and the product has improved as well, but it's a tough brand to sell from the name alone.

So why is SkyTeam going after these airlines? Opportunity. While they have had checkered pasts, most (not all) of them have righted the ship and are on their way to being solid airlines. So these airlines today can fit in the SkyTeam alliance and bring new route coverage. Aerolineas Argentinas, for example, can finally bring South America into the fold. And Aeroflot's vast coverage of Russia and former Soviet republics brings a great deal to the table. Each of these airlines brings something good in that sense.

But can SkyTeam overcome the brand perception here? That's going to be the hardest part, but they have to feel confident about it or they wouldn't be making these moves. There are only so many airlines in the world that can provide value to an alliance in each region, and in that sense, these airlines all add something valuable. But will frequent fliers at other, stronger alliance partners be happy about this? That's where the risk lies for SkyTeam. They don't want to alienate their best customers, but it's a risk. I think it's a risk worth taking.

Related: Original Photo via Flickr user U-g-g-B-o-y-(-Photograph-World-Sense-)/CC 2.0
  • Brett Snyder

Comments

CBSN Live

pop-out
Live Video

Market Data

Watch CBSN Live

Watch CBS News anytime, anywhere with the new 24/7 digital news network. Stream CBSN live or on demand for FREE on your TV, computer, tablet, or smartphone.

Market News

Stock Watchlist