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oneworld Alliance Surging, Adding Airlines -- and Finally Offering Customers Some Perks

For quite some time, oneworld has been known as the also-ran of the alliances. It started out strong when American (AMR) and British Airways decided to get together, but years of regulatory denial and poor management decisions have taken their toll. Some members have left, others are failing, and it's been a tough go. But now, there is light for the alliance. Things are getting better on the regulatory side, and new, non-traditional airlines are joining up. Air Berlin is the latest example, and it's a strong move.

Star Alliance is the clear leader in the alliance space. Anchored by United/Continental and US Airways in the US along with the Lufthansa group of airlines in Europe, the alliance has grown rapidly and now has 28 members (27 after Shanghai Airlines leaves in October due to acquisition). Star covers the globe quite effectively (except for Australia), and has the tightest cooperation between airlines from a customer perspective.

SkyTeam has surged lately on the backs of Delta in the US and Air France/KLM in Europe. The alliance has really excelled in China with China Eastern recently deciding to join China Southern in the alliance. Shanghai Airlines, which has been acquired by China Eastern, is likely to join as well once its Star Alliance membership is done. The group has lately turned its focus to a seamless customer experience and has done relatively well in that regard.

Then there's oneworld. The alliance has limped along for years, partially thanks to a regulatory stranglehold, and partially thanks to poor integration efforts and carrier instability. American is the anchor in the US with British Airways (with merger partner Iberia) leading in Europe. But while Star Alliance and SkyTeam European carriers have been cozying up to their joint venture partners in the U.S., BA and American have long been shut out. That finally changed recently with final approval by the U.S. Department of Transportation and the European Union.

But there is a lot of work to be done. American frequent fliers still cannot earn miles when flying BA over the ocean and vice versa (thanks to management decisions). The airlines will finally end this silly rule now that closer cooperation has been approved, but it shows just how far behind this alliance is right now.

In Asia, it's been a rocky road as well. The well-publicized Japan Air Lines (JAL) financial disaster saw SkyTeam trying to woo JAL away from oneworld. In the end, JAL decided to stay but in a weakened and shrunken state. Those ties need to be rebuilt and improved.

As if that's not enough turmoil, just this week, news of oneworld-member Mexicana's financial crumbling has hit the wires as well. The airline appears to be circling the drain. To make matters worse, Mexico as a country had its safety ranking downgraded by the Federal Aviation Administration in the U.S. That means no growth and no codesharing in the country until it's fixed.

The bright spot in the alliance may very well be star performer LAN in South America. LAN continues to grow and make money and is by far the most solid part of the group at this point.

But things are changing. Now that British Airways and Iberia are merging and the joint venture with American has been approved, the airlines will become much tighter. Schedules will be better-coordinated and pricing will be conducted jointly over the ocean. JAL continues to try to recover from its financial crisis and a joint venture with American will bolster transpacific operations. The pieces are slowly coming together.

Now comes word that new members are starting to join the alliance to help it grow beyond its small core. Other than Mexicana's joining last year, nobody has joined the alliance since 2007. Within the next year, S7 Airlines in Russia is expected to make good on its commitment to join and Kingfisher in the important India market has announced its intentions as well.

The most recent addition caught my attention last week -- Air Berlin will join oneworld in 2012. I'll talk more about that soon, but it's just one more example of the trends in the alliance finally becoming positive.

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