Opportunities Further integration of services (i.e. Facilities in airports, services in regions) Development of tools to measure effectiveness of alliance (metrics). i.e. Measure which passengers were brought in as a result of alliance. Pursue activities that could support economies of scale. Consolidation of alliance members, where applicable, as current large number increases the complexity of operations. Threats Airline industry is fragile which poses many uncertainties.
Too many alliance members can lead to conflicts of interest Poor integration can lead to lose of consumer confidence in the alliance. (i.e. Ansett Australia went bankrupt in 2001 causes a huge disruption in baggage transportation resulting in negative publicity for the entire alliance.) An abrupt departure of a large alliance member that is weighed upon heavily may cause massive disruptions in the flow and effectiveness of the alliance. Such an event could bring about the quick collapse of such an alliance.
Rise in popularity of low cost travel carriers. Taking account the development that have taken place during the last 5 years offer recommendations concerning Star Alliance’s future strategic direction The most important area the Star Alliance must focus on moving forward is to further integrate their services. Their business model works as it clearly offers customers a much larger travel coverage area, frequent flyer miles. It just needs to be refined a bit more. The most critical issue is the lack of consistent integration across the alliance. There are two main recommendations.
First, they should create a stronger centralized IT infrastructure that integrates all systems. This would ensure that knowledge would be shared to all alliance members in an efficient way. The case contained far too many instances of a customer who felt defrauded by loosing their luggage or not having the lounge access. These were just a few examples of services the alliance claimed offer and did not follow through on consistently. It’s those types of deficiencies that can make or break customer retention rates. It would behoove the Star Alliance to further streamline their operations and create that seamless travel environment they claim to have.
The second recommendation would be to develop the tools to quantify the alliances absolute value. This would be done with the development of the IT infrastructure. By being able to quantify, the value added to each airline then there can be no question of the alliances net worth. The alliance adds value but not in a definitive way. By having metrics in place, airlines could measures just how much they are getting out of the alliance and determine whether or not they’d be a better fit elsewhere. There’s no sense in keeping an airline on board just to have a larger network. There would be a much clearer focus of what is and is not working to benefit the alliance as a whole if all the data is on the table.