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Alliances Bring Continents Even Closer

On the eve of Continental Airlines joining the Star Alliance, United's Mark F. Schwab talks about the importance of the event and building relationships across the globe, one flight at a time

Author Rod O'Connor Photography United Airlines Creative Services

RIO DE JANEIRO. NEW YORK CITY. BUENOS AIRES. MIAMI. MEXICO CITY. LONDON. TOKYO. CHICAGO. Those are just a few of the destinations easily reachable via United’s comprehensive global network. They’re also a sampling of cities Mark F. Schwab, senior vice president of alliances, international and regulatory affairs for United, has called home during his 34 years in the aviation business.

Among his responsibilities is managing the airline’s role in the worldwide Star Alliance, a 25-plus-member group United helped launch in 1997 as the first truly global airline alliance. Last month, it welcomed its newest member: Houston-based Continental Airlines. Schwab says Continental’s partnership with United (which, along with US Airways, is the only other domestic member) makes the Star Alliance’s industryleading network even stronger.

“We really complement each other,” he notes, speaking on the phone from Tokyo during a break from a series of meetings with Japanese airline executives. “Not only do United customers gain easier access to Continental hubs in Houston, metropolitan New York (via Newark, New Jersey), and Cleveland, but Continental’s presence in Latin America adds significant reach into that region. They fly to more than thirty cities in Mexico alone-that’s comparable to some Mexican carriers.”

Customers of the two airlines will see multiple benefits even beyond the broader network reach, including a coordinated process for reservations and ticketing, check-in, flight connections and baggage transfer. They will also enjoy recognition in both carriers’ frequent flyer programs and access to their respective airport lounges. In addition, the two airlines will generate efficiencies to help both compete more effectively for international traffic in an increasingly global air travel market.

“Continental joining Star Alliance represents an important win for all the member airlines and certainly for United’s valued travelers,” Schwab emphasizes. “Continental is a strong and well-regarded airline and was evaluating membership in all three global alliances, including continuing its former role within SkyTeam as well as oneworld, led by American Airlines and British Airways. Continental joining Star makes the best even better,” he adds. “Collectively, the Star Alliance member airlines now offer the broadest scope and greatest choices of service in the entire world.”

To underscore the importance of this partnership between two of the nation’s top-performing airlines, Continental has also joined United-along with Lufthansa and Air Canada- in a separate, transatlantic joint venture, which officially launched on November 1.

This arrangement, known in industry terms as an antitrust immunized “Metal-Neutral” network, calls for members to pool revenues while integrating their scheduling, inventory management, pricing, frequent flyer and sales activities on itineraries that include transatlantic segments. The expected end result for the customer is better service to and from Europe, as well as more competitive pricing.

Previously, a flight across the Atlantic with multiple stops on either side of the ocean was a fairly complicated transaction. But now, thanks to this new joint venture, business and leisure travelers are going to experience everything from better-coordinated baggage handling procedures to seamless transfers among carriers.

“Metal neutrality- pertaining to whichever partners’ physical aircraft you fly on-means we’re going to offer you products that make your experience seamless,” explains Schwab. “The decision you make works equally well [for all of us], no matter which airline seat you actually sit in. As long as you fly on one of us, we’re happy. Customers are going to find it’s a much simpler way to conduct business.”

Schwab’s deep experience working with government officials and local businesspeople, combined with a lifelong passion for exploring other parts of the world, has made him ideally suited to his current job: overseeing United’s portfolio of international and domestic relationships, as well as its regulatory policies.

A citizen of the world in the fullest sense of the term, Schwab has spent his entire career representing American business interests overseas. In fact, the 57-yearold Twin Cities native has lived outside the U.S. longer than he’s lived inside its borders. “I have a very understanding family,” he says with a laugh. “When I relocated to Chicago earlier this year, it was the twentieth time I’d moved. But I’ve enjoyed every minute of it.”

As we all know, the global business community can use all the help it can get right now. Taking some of the hassle out of air travel just might be the right tonic to help spur muchneeded growth. According to Schwab, the only way the worldwide economy is going to fight its way out of the current downturn is by creating new business opportunities. That means expanding access for U.S. corporations overseas to growing markets in Asia, Latin America and beyond, as well as making it easier for tourists from abroad to visit our shores.

From a business perspective, while many companies have cut their travel budgets to help control costs in the face of the recession, a recent study by Oxford Economics shows that companies that invest in travel actually see $3.80 in new profits for every dollar spent on activities such as customer meetings and trade shows. But Schwab didn’t need to see the data to know that business travel and face-to-face meetings drive growth-he’s learned that firsthand during the economic ups and downs of the past three decades.

Schwab’s own professional career-and extensive travels-began shortly after his graduation from the University of Virginia in 1974, when he secured a job with Pan American World Airlines while living as an expat in Brazil.

“I genuinely believe that travel contributes to a better understanding of other people,” says Schwab. “And it creates more business opportunities. That’s what United’s alliances are doing: building on our strengths so we can all get our web deeper into the rest of the world.

“But you have to get on a plane and create the relationships,” he says. “We all have to get moving if we want to get the economy back in shape.”

East Meets West

United and its fellow Star Alliance members make Asia a priority

IN THE GLOBAL ECONOMY, air travel has increasingly become a worldwide business. Relationships with other carriers, most notably through United’s leadership role in the Star Alliance, help expand the airline’s ability to provide service around the world.

No market is more important than Asia. While it suffered during the financial crisis, the market is starting to bounce back, with healthy annual growth rates expected to return. That’s why United CEO Glenn F. Tilton and Mark F. Schwab have been traveling extensively to meet with their counterparts and regulatory officials to further strengthen United’s alliances with carriers in the region.

Their meetings have been happening in the midst of much commercial and regulatory activity. Perhaps most significant is the push for an Open Skies Air Services Agreement between the U.S. and Japanese governments. After decades of restrictive regulatory policies, the two countries are set to conclude talks by the end of the year. An expanded agreement would allow United to work closer with current partner All Nippon Airways (ANA). During Tilton’s recent Asia trip, he met with the company’s president and CEO Shinichiro Ito to map out potential opportunities.

“ANA has been a Star Alliance member for ten years, but our business relationship has plateaued because of the regulatory environment,” Schwab explains. “They have a huge network throughout Asia, so an [Open Skies] agreement would greatly improve access for our customers.”

While United’s hubs in Los Angeles and San Francisco, as well as Chicago and Washington, D.C., provide excellent jumping off points to major cities like Beijing, Tokyo and Seoul, it’s also a priority for the airline to connect travelers with Bangkok, Taipei and Singapore, among others “Many of these places are just joining the global economy,” notes Graham Atkinson, president of Mileage Plus. “As a result, American businesspeople are seeing tremendous opportunity to expand their horizons. But you have to create those connections to enable people to make those seamless journeys.”

Much of United’s strategy since cofounding the Star Alliance in 1997 has involved working with world-class airlines such as ANA, Singapore Airlines, Air China, Thai Airways and others to open up these new markets. And by loosening regulatory restrictions, Atkinson says, many of the hassles associated with inter-Asia travel can be eliminated, allowing for benefits like onestop ticketing, easier upgrades, and a better recognition of elite customers across all members.

But much hinges on developments in China. To this end, Tilton met with a number of policymakers and executives of carriers there as well. Included were Air China, also a Star Alliance member, and China Eastern, which recently acquired current member Shanghai Airlines, to encourage the combined carrier to join the alliance. United’s relationships with Chinese airlines will take on added importance next year as the U.S. and China are scheduled to begin their own round of Open Skies discussions.

“No one carrier can serve all customers, and no one carrier can serve all points on a map,” says Tilton, pointing to the regulatory constraints that prevent U.S. airlines from attracting foreign capital or investing in non-U.S. airlines-opportunities available to other industries such as pharmaceuticals, energy, telecommunications and the auto industry.

“United has always been a proponent of open markets, of taking the shackles off of industry,” he emphasizes. “Letting businesses compete on a global basis is important to us, and it is important to our customers.”

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