Wednesday, May 12, 2010

LCC or hybrid

Well, it appears as if JetBlue is at it again. This time the LCC has inked a codeshare deal with South African Airways which will allow passengers to check in all the way to their final destination, including their luggage. This is an interesting development for the traditionally low cost carrier as it has similar arrangements in place with Aer Lingus, Lufthansa (minority owner of JetBlue), and American Airlines.

JetBlue appears to have created an open source IT system, if you will allow me to call it that, which allows easier integration with potential partners. This contrasts with the recent decision by Southwest and WestJet to part ways after a much-hyped partnership across the border. Part of the reasoning was the necessary costs to integrate the IT systems of the two North American airlines.

Is this the future development of the airline industry? My research has shown that a form of alliances are a viable option for LCCs, and possibly also for LCCs that are emulating their full-service brethren. Today we have 3 major alliances, however this does not mean that new entities can appear. The 3 major alliances do strive to offer global, seamless travel, however these come at a cost. Airlines have to integrate IT systems, coordinate back-office functions and operational aspects, and ensure commonality with the alliance. This may be a new area for LCCs to attack. It may not be necessary to establish formal alliances that are resource-heavy, but more flexible, open architecture based alliances that are more virtual in nature. One day it may be possible for passengers to travel across the globe on a handful of LCCs and one ticket, but not in a formal alliance structure that is resource and cost heavy.

It will be interesting to see how JetBlue will continue to advance these partnerships, and what impact it will have on JetBlue and other carriers. Hopefully, the tie-up with SAA will be a success, and JetBlue will hopefully experience a boost in traffic that want to go to the Southern hemisphere to see some soccer/football this summer.

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