Greg Lindsay's Blog

December 13, 2009  |  permalink

Open Skies vs. Oneworld

The battle for the future of the airline industry is being fought in the skies over Tokyo.

For months, American Airlines and Delta have waged a public bidding war for Japan’s flag carrier JAL—not to buy it, but to bail it out. Each has offered more than a billion dollars in cash for JAL’s loyalty. In American’s case, this means sticking with the Oneworld alliance; to Delta, it entails defecting to Skyteam. At stake is access to one of the world’s largest and most lucrative markets. (Despite the shinkasen barreling their way to Osaka and back every day, Japan still has one of the world’s largest domestic markets—fully loaded JAL 747s take off every hour for Sapporo.) American wants to cover its flank, while Delta is keen to protect the hub at Tokyo Nartia it acquired along with the rest of Northwest Airlines. It appeared this highly entertaining tussle would go on for quite a while, complicated by Japanese politics.

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Surprise: the U.S. and Japan agreed last week on Open Skies.

In a nutshell, Open Skies means airlines can fly wherever and whenever they like without political restrictions. The U.S. and E.U. signed such an agreement last year; negotiations had been dragging on with Japan for nearly a decade. The advent of Open Skies should mean more flights, more destinations, and lower fares thanks to increased competition, especially considering United and Delta/Northwest would lose some of their special privileges. But that’s probably not going to happen.

As the Financial Times points out tonight, United and JAL’s more nimble rival ANA are racing to apply for an anti-trust exemption on closer cooperation on schedules, pricing, and strategy—a precondition of which is Open Skies. Both happen to be members of Star Alliance, and those ties will take precedence over competition between the two. The same thing is likely to happen with whomever successfully woos JAL—either American will keep it in the fold and strive for an even closer partnership, or Delta will steal it away, secure its dominance in Tokyo, and add another much-needed Asian partner to Skyteam.

Either way, the future of the airline industry is taking shape as you read this—airlines’ individual identities will begin to matter less than their alliance membership and partners. This might be old news to road warriors who don’t let any frequent flyer miles go to waste, but I’m curious to see if and when casual passengers start to notice.

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Greg Lindsay is a journalist, urbanist, futurist, and speaker. He is a senior fellow of the New Cities Foundation — where he leads the Connected Mobility Initiative  — and the director of strategy for LACoMotion, a new mobility festival coming to the Arts District of Los Angeles in November 2017.

He is also a non-resident senior fellow of The Atlantic Council’s Strategic Foresight Initiative, a visiting scholar at New York University’s Rudin Center for Transportation Policy & Management, a contributing writer for Fast Company and co-author of Aerotropolis: The Way We’ll Live Next.

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