Singapore Airlines, Lufthansa team up

By I. Christianto

SINGAPORE (JP): The German airline Lufthansa and Singapore Airlines (SIA) signed an agreement here yesterday to enhance their global competitiveness.

The agreement, signed by SIA's deputy chairman and chief executive, Cheong Choong Kong, and Lufthansa's chairman and chief executive officer, Juergen Weber, covers a range of cooperative measures including code-sharing, network and schedule development, frequent flyer programs, product development, ground handling, customer service, information and cargo operations.

Cheong said the agreement would take effect gradually beginning in April next year.

"Our alliance with Air New Zealand and Ansett (of Australia), which was announced five months ago, was said to be the worst- kept secret. Our alliance with Lufthansa is no different. I'm not sure why it is such a badly-kept secret, especially since we have not departed from our policy of never commenting on alliances and the like until we are good and ready," Cheong said, adding that discussions began a year ago.

Rumors on the SIA-Lufthansa alliance first broke out a couple of months ago and climaxed last weekend. The agreement focuses only on the two airlines and there was no plan at the current stage for SIA to join the Star Alliance which was set up last May joining Lufthansa, the Scandinavian airline SAS, United Airlines of the United States, Thai Airways, Air Canada and Varig of Brazil, he said.

"Today's agreement is a bilateral agreement. I'm not saying that we are not considering the Star Alliance," he said. "We do not comment on anything concerning alliances or equity investments until we're ready to do so," he added.

He said that the latest deal was an expansion of a long- standing commercial relationship between the SIA and Lufthansa set in September 1989 on a joint cargo service linking Singapore and Frankfurt.

Weber said that alliances had become a common feature in air transportation.

"Our customers have become much more global in their thinking and choices. And this is where airline alliances come in. They are cross-border cooperations. We unite in order to take advantage of each other's networks, seek synergies and offer what the customer is looking for: seamless travel and smooth connections," he said. He added that Lufthansa was still eying other chances to ally with other airlines.

Both executives refused to give estimated figures on their companies' growth rates.

"It's too premature to predict," Weber said.

SIA's deputy managing director, Michael J.N. Tan, said that weekly services of the two airlines between Singapore and Frankfurt would increase to 22 by next April from the current 14 flights.

According to Cheong, SIA's alliance with Ansett and Air New Zealand in the Southeast and with Lufthansa in the Northwest, would make his company a more competitive player along the Europe-Southeast Asia, Asia-Australia axis.

"Frankfurt will be our European hub, just as Singapore is Lufthansa's for Southeast Asia and Australia. The knowledgeable observer and analyst will understand why we in SIA are so pleased with these agreements," he said.

SIA also announced yesterday that it had broken off its alliance with Swissair and U.S.-based Delta Air Lines.

He said that the Global Excellence Alliance among SIA, Delta and Swissair, in the meantime, would have to be redefined as the result of the new partnership signed yesterday.

"Those joint activities that are not in conflict with our Lufthansa alliance can continue if the parties concerned are agreeable. Where there's a conflict, the activities will have to be phased out at a mutually acceptable pace. Our code-sharing with Delta between Singapore and New York is one such example, since we will be code-sharing with Lufthansa on this route," Cheong said.

Lufthansa, formed in 1926, carried 41 million passengers last year. The Frankfurt-based airline operates 314 aircraft serving 458 cargo and passenger destinations around the world. The company, which accomplished almost 18 percent of its turnover in Asia last year, booked a Dm 327 million (some US$192 million) operating profit in the first half of this year.

SIA was established in 1971 after splitting from Malaysia- Singapore Airlines which first flew in 1947. The air carrier currently has 80 jets, serving 77 destinations in 42 countries. The company, which booked an operating profit of S$441 million (some $293 million) in the April 1996 to Sept. 1997 period, carried over 12 million passengers in 1996.