ATN: Swiss has been with the Star Alliance for quite a while now. What has Swiss gained and what is Swiss expecting more out of the alliance?
HH: When we started the Star Alliance in 2006, the first thing we gained was support in sales and in terms of offering a worldwide network with more than a thousand destinations to our customers, thereby increasing consumer choice. Furthermore, we share a high degree of revenue integration through code share with our Star Alliance partners. This is of high value for both Star Alliance and Swiss. We are now entering in a new phase of coordination by creating joint ventures for routes to/from the North Atlantic, Japan and China. We are under permanent pressure to become more creative in the future to fulfil our customers’ wishes, especially in light of the fierce competition from the Middle East carriers...
ATN: What is the extra gain from joint venture against a traditional code share agreement?
HH: A joint venture is an even closer coordination than a code share. Authorities give joint ventures more scrutiny. You need to apply for or assess antitrust implications. Having done all this, you can finally offer more attractive prices to the customers, with seamless itinerary and travel, offering more destinations – all factors contributing to increase our customers’ travel experience.
ATN: What is the benefit for the airline? How much extra revenue is generated in percentages?
HH: This is very different for each Star Alliance partner. But since we are working in an industry with low margin, in average 2%, even a 1% contribution is already positive.
ATN: What are the negative aspects of the alliance?
HH: I don’t really experience a negative aspect. But you certainly need time for coordination, for example to bring new ideas with the customer in focus to the market. This might potentially slow down the implementation time if not managed well. But all in all, the advantages of being in the Star Alliance are much bigger than the disadvantages. Star Alliance gives its members ample room for its own growth.
ATN: Has the Star Alliance reached the roof or is there still more space?
HH: A joint venture is an even closer coordination than a code share. Authorities give joint ventures more scrutiny. You need to apply for or assess antitrust implications. Having done all this, you can finally offer more attractive prices to the customers, with seamless itinerary and travel, offering more destinations – all factors contributing to increase our customers’ travel experience.
ATN: What is the benefit for the airline? How much extra revenue is generated in percentages?
HH: This is very different for each Star Alliance partner. But since we are working in an industry with low margin, in average 2%, even a 1% contribution is already positive.
ATN: What are the negative aspects of the alliance?
HH: I don’t really experience a negative aspect. But you certainly need time for coordination, for example to bring new ideas with the customer in focus to the market. This might potentially slow down the implementation time if not managed well. But all in all, the advantages of being in the Star Alliance are much bigger than the disadvantages. Star Alliance gives its members ample room for its own growth.
ATN: Has the Star Alliance reached the roof or is there still more space?
HH: There are still a lot more things which can be done. Look for example to the South American market, which is not easy to cover for Star Alliance and Swiss. We have to actively work on the further development of the Star Alliance. In this industry, if you are not adapting swiftly you will eventually go bankrupt. Since the industry is so dynamic, Star Alliance has to be dynamic too.ATN: Swiss is under the umbrella of Lufthansa, and Austrian is very close as well. Is there competition among the Lufthansa Group carriers? Does the fact that there are too many HUBs in close geographical concentration creates competition?
HH: There is some kind of internal competition but we have a high degree of coordination in which Lufthansa Group carrier flies what and for which prices. 50% of our Lufthansa Group internal prices are coordinated. We have principles coordinating the destinations we fly to. The home carrier is responsible for the sales of the Lufthansa Group in its home market. We have principles that coordinate the market approach and we. have a common frequent flyer programme. There is a lot of integration work that has been done. When you look back five years ago, there was only a loose coordination, now we have a close coordination platform through the Lufthansa Group Executive Committee. By the end of the day, if you offer the same itinerary through three different hubs the customer has a great choice. Exactly this is the core idea: to push each other as far as possible and to learn from the best approaches within the Lufthansa Group.
ATN: In the business class of Swiss, Austrian and Brussels the seats are the same. In Lufthansa it is different. Why?
HH: There is quite a simple explanation for this. There are only a limited number of seat manufacturers for airlines. The seat manufacturer, who produces our business class seats, simply sold out his product. Lufthansa could not wait for that company to be able to manufacture its seat, so they found another producer. For our Boeing 777 which will enter service in 2016, we have closed a deal with our seat manufacturer in 2014. There are long lead times in our industry.
ATN: You seem to be facing competition from EasyJet at least in European level as they have two bases in Switzerland. Is this a direct competitor or does easyJet address a different market, is it a different product?
HH: Both! easyJet is developing a little bit in our direction and we are developing a little bit towards easyJet’s direction. The market is very dynamic, so maybe five years ago I would have said that easyJet is a different customer segment but now we have some customer segment overlap. They try to grab market shares in the business segment. There is some overlap and easyJet is getting more and more competitive.
ATN: We see more traditional LCC moving towards the legacy arena. Is there more fear for the legacy carriers or is it their problem that they enter in your area?
HH: I would never say fear but we have to monitor and watch the situation. We have to very carefully analyse the developments. Both LCC airlines, easyJet and Ryanair, have a very professional management, otherwise they wouldn’t be where they are. On the other hand, we have a very professional management, too, so it will not be easy for the LCC.
ATN: How do you see the air transport market in 10 years from now? Do you see more consolidation? Do you see airlines disappearing?
HH: Definitely. When you see that Europe has 125 airlines and that there are only 5 big airlines you ask yourself if this is a national approach regarding the global transport system. The ATC has to be organised at European level like SESAR which we don’t have so far Smaller airlines are under extreme pressure. Which out of these airlines make money? None out of them, so consolidation is imminent.
ATN: Does the brand play a role?
HH: If you have a good brand it plays an important role. We are proud of the Swiss brand which is playing a role, a global role. Maybe some brands have not this positioning and it does not play a role.
