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Air alliances not perfect
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April 24, 1998: 5:48 p.m. ET
Frequent flier linkages may not put an end to all your flying frustrations
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NEW YORK (CNNfn) - While airlines are touting their recently-announced alliances as great news for travelers, you may find flying has gotten neither easier nor cheaper.
American Airlines (AMR) and U S Airways Group Inc. (U) were the latest to announce that members who belong to both American's AAdvantage and U S Airways' Dividend Miles frequent flier programs will be able to combine those miles for use on either airline.
The agreement follows a similar alliance announced in January between Northwest Airlines Corp. (NWAC) and Continental Airlines Inc. (CAIB).
Delta Air Lines Inc. and UAL Corp. (UAL), parent of United Air Lines, are also considering such a deal but said Friday they have not reached any agreement yet.
Frequent flier programs have been criticized in the past for restrictions which made it difficult to redeem miles for free flights and, while the reciprocal agreements offer the promise of cashing in your miles more quickly, they do little to ensure you'll be able to board a flight.
"It certainly will not ease the frustration of not being able to get on a flight. In fact, it might make it worse," said Candace Browning, airline analyst at Merrill Lynch.
Tom Parson, publisher of Best Fares Discount Travel magazine, said that the new rules will serve only to dump more frequent fliers into a program which cannot accommodate their demand.
"The airlines can hype this up all they want, but all it becomes is one big gimmick," said Parson.
However, the alliances will give you a wider choice of destinations when you do decide to head for the skies.
Assume, for example, you have U S Airways frequent flier miles and want to cash them in to fly between Charlotte, NC and Portland, OR. U S Airways doesn't fly that route. With the proposed alliance, though, you would be able to fly through Chicago on an American Airlines flight.
Additionally, U S Airways and American have revved up other parts of the program. "Some flights will get you miles on both programs," said Lynda Young, an editor at Inside Flyer magazine. Those "double miles" can be earned on certain U S Airways flights between Washington, New York and Boston.
You may not want to start planning your July flight to San Francisco just yet, however. U S Airways and American said they would not implement the changes until at least late summer. Northwest and Continental have yet to get their frequent flier combination off the ground.
Code-sharing brings fare fears
While the alliances should bring some immediate advantages to frequent fliers, they could face higher fares at some point in the future, said Samuel Buttrick, airline analyst at PaineWebber.
"Alliances do not increase real capacity. They do not increase competition. Therefore, they do not lower fares," said Buttrick.
At the center of uncertainty about airfares is an arrangement known as "code-sharing."
"When you do code-sharing, it means one airline can book passengers on the other airline as if it were their own flight," said Raymond Neidl, airline analyst at Furman Selz.
Essentially, this allows travelers to shift between different airlines while on a single trip. It's an easy way for airlines to expand their route networks and fill up seats which would otherwise be empty.
However, these code-sharing alliances could reduce incentive for airlines like U S Airways to move in on competitors' air routes because they can reach these destinations without having to fly there themselves. And while that's good for the airlines' bottom line, it does little to open up competition which could lower fares.
The arrangement between Continental and Northwest provided for code-sharing and U S Airways and American said they were pursuing it as well. But code-sharing involves getting approval from pilot unions, whose labor contracts limit their ability to fly under code-share conditions.
Unions officials on Friday expressed reluctance about allowing any kind of code-sharing.
In the short-term, say analysts, travelers will probably not see any increase in fares until code-sharing agreements are hammered out.
-- by staff writer Randall J. Schultz
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