Airline alliances in turmoil

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Key alliances between the world's airlines are facing collapse or massive restructuring, new research says.

Alliances between the great and good of the airline industry, such as Oneworld, which includes BA, American Airlines, Aer Lingus and Qantas, were set up to work together on marketing and branding. But the sector's crisis means the alliances face a treacherous future, particularly as some members may go bust.

"The collapse of Swissair and Sabena airlines, which is bound to be followed by other key airlines, has posed a serious problem to the future of the airline alliance," said John Laffan, who carried out the research and is head of aviation at Cap Gemini Ernst & Young, the consultancy. The researchwill be previewed tomorrow at the Future of Air Transport Conference in London.

The Qualiflyer alliance is in the most perilous state, as it has Swissair and Sabena as its two key members. Sabena is now bankrupt and desperately trying to save parts of its business. Swissair has sought protection from creditors.

Experts think the big three alliances, Star Alliance, Oneworld and Skyteam, will survive in some form but other priorities will lead to separate collaboration on broader issues.

But not all industry officials agree that alliances are doomed. "I think alliances will remain extremely important, maybe even more important," said Paul Gretch, director of the office of international aviation at the US Department of Transport.

"The question is, will you still have competition between alliances, which had resulted in an increase in services and a downturn in prices. If the number of global carriers were to decrease then you might have a competition problem."

The Star Alliance is already starting to expand the areas of collaboration into ground-handling and the procurement of aircraft and airport deals, said Austin Reid, chief executive of British Midland, which is a member.

Mr Reed will speak tomorrow on government regulationwhich he wants to relaxed to encourage mergers and consolidation.