With Continental the Star Alliance Fills Some Gaps

Posted by: Justin Bachman on October 27

Continental (CAL) formally joined the 25-carrier Star Alliance on Tuesday after a 16-month transition. It becomes the first major airline to switch from one such partnership to another, and the company expects some $100 million in new annual revenue from the shift. At Continental’s Newark hub each airline CEO gathered for a welcoming ceremony, seated before a Continental 757 freshly painted with the white/back Star Alliance livery, a flight attendant from each Star carrier standing by the plane.

For business travelers who need a truly global network, Continental helps Star cover Latin America and Mexico, the two most glaring destination gaps for the 13-year-old alliance. Continental’s road warriors will now also get a huge new roster of destinations in Asia, thanks to the six Asian carriers in Star. “If there’s a destination in the world that the Star Alliance doesn’t fly to, I’d suggest you may want to rethink your decision to go there,” joked Continental President and COO Jeff Smisek, who will become chief executive on Jan. 1.

Continental’s divorce from SkyTeam after five years was precipitated by Delta’s (DAL) acquisition of Northwest, which changed the balance of power for Continental and many others, Smisek said. Delta’s ability to buy its way into the largest airline spot last year was a jolt to the industry and demanded a competitive response. Continental’s shift to Star is one. The closer AA-BA relationship across the Atlantic is another, as is Lufthansa’s acquisitiveness.

As with every bit of news that arises in any of the three major airline alliances, Continental’s participation in Star Alliance was heralded first and foremost as a triumph for consumer choice and flexibility. Consumers always win when it comes to airline alliances — always. Or so we are told by airlines. Of course, some regulators, particularly those on the eastern side of the Atlantic, have not completely accepted this proposition. The Financial Times reported on Oct. 26 that European regulators may be prepared to demand steep concessions for the proposed American-BA-Iberia link-up across the Atlantic. Other media reports say the Justice and Transportation departments are at odds in the American-BA case over how much the airlines should be told to relinquish. Similar “immunity” arrangements with SkyTeam and Star Alliance carriers have previously received clearance from U.S. authorities.

However, this is not to discount the customer convenience factor in alliances. In the past week, I flew on two Star Alliance airlines, Asiana and Singapore, and needed to switch bags in Hong Kong from Asiana to Singapore. Even with completely separate bookings/tickets between these flights, it was a simple process for Singapore to collect the baggage from Asiana. I have no idea whether this problem-free experience was the result of good customer service or just the IT infrastructure that is the required to be alliance partners, but it was nice not to have to corral luggage after 17 hours of flying, with three more to go.