Alcazar (airline)

Last updated
KLM McDonnell Douglas DC-10 in a hybrid livery with Northwest Airlines Northwest Airlines-KLM DC-10 hybrid livery Spijkers.jpg
KLM McDonnell Douglas DC-10 in a hybrid livery with Northwest Airlines

Alcazar was a 1993 proposal to merge Austrian Airlines, KLM, Scandinavian Airlines System (SAS), and Swissair to create Symphony, which would have been Europe's largest airline.

Contents

Background

Since the 1944 signing of the Convention on International Civil Aviation, international aviation was based on bilateral air transport agreements, in which government would negotiate the rights of one or more flag carriers to operate routes between the countries. The negotiations focused on retaining each country's flag carrier's market share and also effectively hindered any airline from not being domestically owned—either by the government or by private investors. [1] In 1992, the United States started negotiating open skies agreements with the European Union (EU), which would allow any European airline to fly from any airport in their home country to any airport in the US, and similarly any US airline to fly from any US airport to any European airport. [2]

In the 1980s, SAS, Swissair, Austrian Airlines, and Finnair had attempted to establish European Quality Alliance (EQA). [3] In addition to codesharing and joint marketing, [4] the alliance was largely based around technical issues and using the EQA brand as a "seal of quality". [5] These had largely stranded because Finnair felt that SAS goal was to use Finnair as a feeder airline to SAS' hub at Copenhagen Airport. [4] There had also been previous discussions between SAS and Swissair, and SAS and KLM for mergers, without success. [6] In 1992, Swissair and Austrian Airlines had established the common frequent-flyer program Qualiflyer. [7]

In 1988, SAS had bought 18.4 percent of Texas Air Corporation, the holding company which owned Continental Airlines. The two airlines had started a strategic cooperation, such as SAS moving its New York services from John F. Kennedy International Airport to Newark Liberty International Airport. [3] KLM was cooperating with British Airways, Virgin Atlantic, and Sabena. In addition, they had a strong tie with Northwest Airlines. [4] In 1989, KLM bought 20 percent of the then ailing Northwest. In 1992, KLM had made a bailout purchase of Northwest, securing a 25 percent ownership of the airline, which is the maximum a foreign airline is allowed to own in a US airline. [8] Swissair cooperated with Delta Air Lines and Singapore Airlines in a triangular cooperation, which was highly valued by the company's management. Delta was significantly larger than the other two US partner airlines, and had a base in New York City, rather than Northwest's hubs in Detroit and Minneapolis. [5] Austrian Airlines lacked a US partner. [9]

In Europe, the European Commission was working on plans to deregulate the aviation market, similar to the US Airline Deregulation Act of 1978. The Commission received support from the Netherlands and United Kingdom, while most other countries and the International Air Transport Association (IATA) were opposed to deregulation. [3] In 1991, the Gulf War broke out. The price of oil escalated, while the demand for business travel diminished. [10] After a 1992 Swiss referendum rejected Swiss membership in the European Economic Area, Swissair was concerned they would not be able to have access to the European market. With its small home market, it was dependent on international partners to feed its hub. [11]

Proceedings and issues

Jan Carlzon, the then-CEO of SAS, took the initiative for the merger process. He believed that a deregulated European airline market would result in five large airline conglomerates, and launched the strategy "one of five in 95" whereby the SAS Group would be one of five large players in the European market by 1995. At the time, SAS was the fourth-largest airline in Europe, behind Lufthansa, British Airways, and Air France. Carlzon envisaged that the smaller flag carriers should merge to create a large company. The plan was to allow the smaller airlines increased economy of scale, particularly on intercontinental flights. [12] For instance, Lufthansa had 20 percent lower unit costs than SAS on international routes. [13]

SAS proposed that the new airline be organized as a consortium, in the same way SAS had been organized since 1946. This involved six national companies each owning a share of the new airline. However, SAS' then structure violated EU regulations, and would therefore have to gain permission from the supranational organization, which was largely controlled by the owners of SAS' main competitors. [14]

The airlines agreed to attempt as many point-to-point transit flights as possible, although they would still have to operate some flights via a hub-and-spoke network. Specifically, SAS would degrade Stockholm-Arlanda Airport and Oslo Airport, Fornebu from hub status, and instead focus its traffic in Copenhagen, which would become the main hub for flights to China and Japan. Swissair's hub at Zürich Airport would become the main hub for flights to Africa and South-East Asia and KLM's hub at Amsterdam Schiphol Airport would become the main hub for flights to South America, while Austrian's hub at Vienna International Airport would become the main hub for flights to Eastern Europe. [9]

The airlines operated three different long-haul aircraft: SAS used Boeing 767s, Swissair McDonnell Douglas MD-11s, while KLM operated Boeing 747 aircraft. Other non-conformities between the airlines included SAS using Amadeus and KLM using Galileo as their computer reservations system. To resolve issues with the labour unions, the airlines decided to organize the company with each of the airlines retaining their own aircraft and hiring their own flight crew and technical crew, with the merged company being a virtual airline. [9]

The last issues discussed during the merger talks was the location of the head office, the main hub, choice of US partner, the CEO and chair positions, and the ownership. [9] The negotiations took a pause in July and August, and resumed in September. [15] By then the project was meeting opposition from SAS' Danish labour unions, who were concerned about the new airline's position in Copenhagen, as KLM's main hub in Amsterdam was considered too close to Copenhagen. [16] Swissair had a 70 percent higher labour cost level than KLM. [5]

The airlines agreed to an ownership structure of 30 percent for SAS, KLM, and Swissair, and 10 percent for Austrian. Swissair had higher profits and more share capital than the other airlines, and was nearly debt-free and owned almost all their aircraft. Because of this, the airline was to receive compensation from the other airlines. [16] SAS agreed to sell its share in and terminate its cooperation with Continental Airlines. However, neither Swissair nor KLM were willing to abandon their American partners. [16] However, SAS demanded that the head office be located in Copenhagen. After negotiations, KLM agreed to terminate their cooperation with Northwest, and Jan Carlzon was proposed as CEO. With the business operations division being headquartered in Vienna, KLM demanded and got acceptance for the head office to be located in Amsterdam. The new company was to be named Symphony. [17]

On 21 November 1993, KLM announced that they would not participate in the merger, stranding the deal. [18] The airline had not succeeded at gaining support amongst key stakeholders, such as Dutch banks, aircraft manufacturers, and labour unions at Northwest. [17]

Aftermath

Immediately following the end of the negotiations, all four airlines stated that they would continue to look for new merger partners. [18] Carlzon was dismissed as CEO of SAS on 28 September. [15] Rainer Gut was forced to leave Swissair in April 1995. [11] Swissair chose to stay outside the large alliances, instead creating SAirGroup and purchasing minority stakes a number of smaller airlines in Europe, creating the Qualiflyer Group in 1999. [11] Swissair also lost its connections with Delta following the latter's alliance with Air France. [19] By 2001, Swissair was bankrupt. [11] [20] [21] [22] [23] [24] SAS joined forces with Lufthansa, who along with United Airlines, Air Canada, and Thai Airways International founded Star Alliance in 1997. [25] KLM continued to integrate its operations with Northwest. In 1998, KLM attempted a full-fledged merger with Alitalia, but the agreement was abandoned by KLM. [26] KLM was bought by Air France in 2004 to create Air France-KLM, in which both airlines are considered separate brands. [27]

Related Research Articles

Deutsche Lufthansa AG, or simply Lufthansa, is the flag carrier of Germany. When combined with its subsidiaries, it ranks second in Europe by passengers carried, as well as largest in Europe and fourth largest in the world by revenue. Lufthansa is also one of the five founding members of Star Alliance, which is the world's largest airline alliance, formed in 1997. Lufthansa was founded in 1953 and commenced operations in April 1955.

<span class="mw-page-title-main">Airline alliance</span> Cooperation agreement between two or more airlines

An airline alliance is an aviation industry arrangement between two or more airlines agreeing to cooperate on a substantial level. Alliances may provide marketing branding to facilitate travelers making inter-airline codeshare connections within countries. This branding may involve unified aircraft liveries of member aircraft.

<span class="mw-page-title-main">Northwest Airlines</span> Defunct airline of the United States (1926–2010)

Northwest Airlines was a major airline in the United States that operated from 1926 until it merged with Delta Air Lines in 2010. The merger made Delta the largest airline in the world until the American Airlines–US Airways merger in 2013.

Braathens ASA, until 1997 Braathens South American & Far East Airtransport A/S and trading as Braathens SAFE, was a Norwegian airline which operated from 1946 until it merged with Scandinavian Airlines (SAS) in 2004 to become SAS Braathens. For most of its history, Braathens was the largest domestic airline in Norway, but did not operate an international network for many years. Its main hubs were Oslo Airport, Fornebu and later Oslo Airport, Gardermoen, and briefly Stockholm-Arlanda Airport. The airline operated 118 aircraft of 15 models, mostly Boeing 737 variants. Braathens served 53 airports and 50 cities with scheduled services through its history.

<span class="mw-page-title-main">Scandinavian Airlines</span> Flag carrier of Denmark, Norway, and Sweden

Scandinavian Airlines, stylized as SAS, is a partially Danish state-owned airline and the flag carrier of Denmark, Norway, and Sweden. Part of the SAS Group and headquartered at the SAS Frösundavik Office Building in Solna, Sweden, the airline operates a fleet of 180 aircraft to 90 destinations as of December 2019. The main hub of the airline is at Copenhagen-Kastrup Airport, with connections to 109 destinations around the world. Stockholm Arlanda Airport is the second largest hub, with Oslo Airport, Gardermoen being the third major hub of SAS. Minor hubs also exist at Bergen Airport, Flesland, Göteborg Landvetter Airport, Stavanger Airport, and Trondheim Airport. SAS Cargo is an independent, wholly owned subsidiary of Scandinavian Airlines and its main office is at Copenhagen Airport.

Swiss International Air Lines AG, stylized as SWISS, is the flag carrier of Switzerland and a subsidiary of the Lufthansa Group, as well as a Star Alliance member. It operates scheduled services in Europe and to North America, South America, Africa and Asia. Zurich Airport serves as its main hub and Geneva Airport as its secondary hub.

Swissair was the national airline of Switzerland between its founding in 1931 and bankruptcy in 2002.

<span class="mw-page-title-main">Copenhagen Airport</span> International airport serving Copenhagen, Denmark

Copenhagen Airport, Kastrup is an international airport serving Copenhagen, the capital of Denmark, as well as Zealand, the Øresund Region, and southern Sweden including Scania. In 2023 it is the largest airport in the Nordic countries.

<span class="mw-page-title-main">Air Berlin</span> Defunct airline of the United States and Germany (1978–2017)

Air Berlin plc & Co. Luftverkehrs KG, branded as airberlin or airberlin.com, was a major German airline. At its peak, it was Germany's second-largest airline after Lufthansa, as well as Europe's tenth-largest airline in terms of passengers carried. It was headquartered in Berlin and had hubs at Berlin Tegel Airport and Düsseldorf Airport. At the time of its insolvency, it was a member of the Oneworld airline alliance, having joined in 2012.

CityJet is an Irish regional airline with headquarters at Dublin Airport. It was founded in 1992 and has gone through a series of corporate structures. The airline was sold to Air France in 2000 and then by Air France to Intro Aviation in May 2014; in March 2016 the airline was bought by founder Pat Byrne and other investors. CityJet ended its own-brand scheduled services in 2018 and is now a major provider of wet leasing to European airlines. As of Summer 2023, CityJet operates wet lease services on behalf of Brussels Airlines, Lufthansa and Scandinavian Airlines.

<span class="mw-page-title-main">SAS Group</span> Airline holding company based in Sweden

SAS AB, trading as SAS Group, is an airline holding company headquartered in the SAS Frösundavik Office Building in Solna Municipality, Sweden. It is the owner of the airlines Scandinavian Airlines and SAS Connect. SAS once owned 19.9% of the now defunct Spanish airline Spanair as well as shares in Estonian Air and Skyways Express. SAS Group is owned by the American investment fund Castlelake with a 32% stake, the Government of Denmark through the Ministry of Finance with a 25.8% stake, the airline holding company Air France-KLM with a 19.9% stake and the Danish family office Lind Invest with a 8.6% stake.

Wings Alliance was the working name of a proposed airline alliance to be anchored by the American carriers Northwest Airlines and Continental Airlines of USA with the European flag carriers KLM of the Netherlands and Italy's Alitalia. Although these airlines cooperated with one another through code-sharing and frequent flyer program coordination, no formal association was ever announced. It was rendered superfluous in September 2004 when most of its participants joined the SkyTeam alliance.

Austrian Airlines AG, often shortened to Austrian or AUA, is the flag carrier of Austria and a subsidiary of Lufthansa, the flag carrier of the Federal Republic of Germany. The airline is headquartered on the grounds of Vienna International Airport in Schwechat where it also maintains its hub. As of July 2016, the airline flew to six domestic and more than 120 international year-round and seasonal destinations in 55 countries and is a member of the Star Alliance.

<span class="mw-page-title-main">Oslo Airport, Fornebu</span> Former airport that served Oslo, Norway (1939–1998)

Oslo Airport, Fornebu(IATA: FBU, ICAO: ENFB) was the primary international airport serving Oslo and Eastern Norway from 1 June 1939 to 7 October 1998. It was then replaced by Oslo Airport, Gardermoen, and the area has since been redeveloped. The airport was located at Fornebu in Bærum, 8 km (5.0 mi) from the city center. Fornebu had two runways, one 2,370 m (7,780 ft) 06/24 and one 1,800 m (5,900 ft) 01/19, and a capacity of 20 aircraft. In 1996, the airport had 170,823 aircraft movements and 10,072,054 passengers. The airport served as a hub for Scandinavian Airlines System (SAS), Braathens SAFE and Widerøe. In 1996, they and 21 other airlines served 28 international destinations. Due to limited terminal and runway capacity, intercontinental and charter airlines used Gardermoen. The Royal Norwegian Air Force retained offices at Fornebu.

Transwede Airways AB, was a Swedish charter and later also scheduled airline operating between 1985 and 1998. Based at Stockholm Arlanda Airport, Transwede initially flew Sud Aviation Caravelles, and from 1987 also McDonnell Douglas MD-80s. Most charter services were operated for package tour companies to the Mediterranean.

Det Norske Luftfartselskap A/S or DNL, trading internationally as Norwegian Air Lines, was an airline and flag carrier of Norway. Founded in 1927, it operated domestic and international routes from 1935 to 1941 and from 1946 to 1951. It became one of the three founders of Scandinavian Airlines System (SAS) and became one of its three holding companies from 1951, with a 28% stake and listed on the Oslo Stock Exchange. DNL was renamed SAS Norge ASA in 1996 and was merged in 2001 to create the SAS Group.

<span class="mw-page-title-main">History of Braathens (1994–2004)</span> History of Braathens from domestic market deregulation to dissolution

Braathens SAFE's domestic market was deregulated on 1 April 1994. Since then, any airline within the European Economic Area is free to operate any domestic or international route. Braathens rejected a proposal from the main competitor Scandinavian Airlines System (SAS) for a merger; instead the helicopter division was sold and the company listed on the Oslo Stock Exchange. New routes were opened from Oslo Airport, Fornebu to Bodø, Harstad/Narvik and Tromsø, but the routes from Bergen to these cities were terminated. International routes to Rome, Nice and Jersey were introduced. In 1996, Braathens SAFE bought Sweden's second-largest airline, Transwede, and started flying on the Oslo–Stockholm route. The following year, Transwede, with its five domestic routes, was merged into Braathens SAFE. The same year, KLM bought 30% of Braathens SAFE and the airlines started a partnership.

Philippe Bruggisser is a Swiss manager in the airline industry. In 1996 and 2000/01 he was Chief Operating Officer (COO) of Swissair and President of the SAir Group Executive Committee in the period from 1997 to 2001. The growth strategy pursued by him, which had aimed at establishing an own aviation alliance was largely responsible for the bankruptcy of Swissair in October 2001.

Maersk Air was a Danish airline that operated between 1969 and 2005. Owned by the eponymous A. P. Møller–Mærsk Group, it operated a mix of scheduled and chartered passenger and cargo services. Headquartered at Dragør, its main operating bases were Copenhagen Airport, Billund Airport and Esbjerg Airport. The airline had offshore helicopter operations from 1975 to 1999 and had three airline subsidiaries: Maersk Air UK, Maersk Commuter and Star Air.

<span class="mw-page-title-main">ITA Airways</span> Flag carrier of Italy

Italia Trasporto Aereo S.p.A., doing business as ITA Airways, is the flag carrier of Italy. It is owned by the Government of Italy via the Ministry of Economy and Finance and was founded in 2020 as bankrupt Alitalia's successor. The airline flies to over 70 scheduled domestic, European, and intercontinental destinations. ITA is a member of the SkyTeam airline alliance. Its main hub is Rome Fiumicino Airport near Rome and focus city is Linate Airport near Milan. ITA Airways will leave SkyTeam and join the Star Alliance as part of the process of its acquisition by Lufthansa.

References

Bibliography
Notes
  1. Havel (2009): 9
  2. Havel (2009): 13
  3. 1 2 3 Björnelid (2011): 34
  4. 1 2 3 Björnelid (2011): 52
  5. 1 2 3 Kleymann and Seristö: 26
  6. Björnelid (2011): 49
  7. Collins, Roger (24 July 1992). "New European Frequent Flier Programs". The New York Times .
  8. Tully, Shawn; Eiben, Therese (24 June 1996). "The alliance from hell: Northwest and KLM". Fortune .
  9. 1 2 3 4 Björnelid (2011): 55
  10. Björnelid (2011): 37
  11. 1 2 3 4 Ruigrok, Winfried (2004). "A tale of strategic and governance errors: the failings which caused the demise of Swissair were aggravated by the convergence of several industry developments". European Business Forum (Spring).
  12. Björnelid (2011): 35
  13. Björnelid (2011): 50
  14. Björnelid (2011): 54
  15. 1 2 Björnelid (2011): 56
  16. 1 2 3 Björnelid (2011): 57
  17. 1 2 Björnelid (2011): 58
  18. 1 2 "4 European Air Carriers Scrap Plan for Merger : Transportation: The airlines had hoped to form a 'fortress' to compete with lower-cost flights". Los Angeles Times . Times Wire Services. 22 November 1993.
  19. Morrish, S. C.; Hamilton, R. T. (November 2002). "Airline alliances—who benefits?". Journal of Air Transport Management. 8 (6): 401–407. doi:10.1016/S0969-6997(02)00041-8.
  20. Cappelli, Peter (2001-10-24). "How Swissair Landed in Trouble". Knowledge at Wharton. Retrieved 2024-06-30.
  21. Milner, Mark; Harper, Keith; Clark, Andrew (2001-10-03). "Financial crisis grounds Swissair fleet". The Guardian. ISSN   0261-3077 . Retrieved 2024-06-30.
  22. Olson, Elizabeth (2001-10-02). "Much of Swissair Seeks Bankruptcy". The New York Times. ISSN   0362-4331 . Retrieved 2024-06-30.
  23. Kamen, Matt (2001-10-02). "Swissair Gets Grounded". Wired. Associated Press. ISSN   1059-1028 . Retrieved 2024-06-30.
  24. Maidment, Paul (2001-10-03). "Swissair Under An Avalanche Of Problems". Forbes . ISSN   0015-6914 . Retrieved 2024-06-30.
  25. Bryant, Adam (14 May 1997). "United and 4 Others to Detail Air Alliance Today". The New York Times .
  26. Kleymann and Seristö: 27
  27. "Air France claims KLM takeover". Cable News Network . 4 May 2004.