MIAMI — Mark Schwab is CEO of Star Alliance Services GmbH, founded in 1997, where he and his team coordinate the development and strategies of the world’s first global airline alliance out of Frankfurt, Germany.
Before coming to Star Alliance in January 2012, Schwab was senior vice president, alliances for United Airlines. In that job, he also served on the Star Alliance’s management board. He has also held management positions at US Airways and American Airlines.
Schwab began his aviation career in 1975 with Pan American World Airways, based in Rio de Janeiro, and went on to head operations in Latin America, Europe and Asia. He spoke with Airways about changes in the Star Alliance since 1997, filling gaps in the route map, the future of alliances and missed accomplishments.
Airways: You took on your role as CEO of Star Alliance in 2012. At the time, what was so appealing to you about this job?
Mark Schwab: I had been in the airline business at that time for 37 years, and had been following the progress of the Star Alliance. What really appealed to me was seeing a global aviation network that connected the entire world. I was representing United Airlines and they didn’t have much of an operation outside of the United States. There were a lot of flights and many different markets within the US, but they struggled to be relevant in global aviation.
When the Star Alliance was formed with five carriers, it allowed United to reach these global customers and truly offer them the world. So right after the start of the Star Alliance, I moved to Asia and we became even more relevant, because Asia was booming at the time. Traveling was becoming more popular in the region during the 2000s and airports were growing. So once I retired from United, it was perfect for me to step into the Star Alliance role.
How do you think working for United prepared you to take over as CEO of the Star Alliance?
Not only did working for United set me up for this new role, but all the jobs I had before helped me. At United, in particular during my three final years, I was the head of alliances and international affairs. In this role, I was in charge of partnerships with other airlines and I was one of the representatives working with the Star Alliance. I had a deep understanding of how things worked and I had a deep opinion of things that I thought we could do better.
And so it was just a logical transition from doing the alliances job at a major carrier in Star into Star Alliance. Prior to that, almost all of my other work up to that was with US carriers in the role as an overseas representative. I worked in America, Europe and Asia. So I came to the Star Alliance with experience of working with different aviation partners around the world. That experience served me well here.
Talk about how the Star Alliance has changed from 1997 until now.
From our humble beginnings in 1997 to being about to celebrate our 20th anniversary in spring 2017, we have been really working on building the network. During my tenure, we added six new airlines, so we are now at 28 in our family.
One of the other things that I have concentrated on during my tenure was integrating new IT technology to help the airlines integrate and operate together. One of the challenges is that the airlines have different operating systems that they work under. And different airports around the world have their own systems. You need to figure out how to offer services like printing a boarding pass and checking in bags when the customer has multiple stops and is flying on multiple airlines. You have to incorporate that into their itinerary and have the IT in the background to make sure that it all works.
We have worked hard in the last few years to build this technology in-house to integrate this diverse system that we operate under around the world. We are trying to continue that path and we have two new services that we are planning to launch later in the week and others that will launch early next year. So that has been some of the major work building the network and designing the IT.
Asia and Latin America are hot airline markets. Why is it so important to get representatives into those networks for these particular parts of the world?
We have focused on key developing aviation markets in the world in the last five years. China is one of the leaders and it has been experiencing double-digit growth for years and it looks like that path is going to continue.
Latin America has also shown significant growth, driven by newly shifting demand. Our focus has been going to those key developing markets and trying to pick the right members to join us and fill the gap in our worldwide map. In Latin America, Avianca has done a great job in northern Latin America and some parts in southern Latin America. Copa has done a fantastic job of North-South flying within the region. After bringing on Avianca Brazil, we were able to fill a gap in the Brazilian market, and that has grown substantially since joining the alliance.
IAG head Willie Walsh has said that alliances have may have outlived their usefulness. What are your thoughts on this?
We will be celebrating 20 years in May, and we are going to be celebrating that milestone in one of the key aviation markets in the world — the booming market of China. But we have spent quite a bit of time talking about the future of the alliance, which we believe have many years to come.
We are trying to have a five-year and a 10-year plan. If I hand over my plan to my successor, will we have the same idea of what a 10-year outlook of Star Alliance will look like?
These networks can reach people on a global level. In most other industries, that wouldn’t be possible. You have to deal with different international agencies and regulations and other factors that are of interest to the airline business. I believe that over time, those restrictions will contract, but it is not going to happen overnight and it is going to happen unevenly around the world.
There could be a loosening up ownership rules, but that is not going to happen for awhile, so alliances are here to stay, for a while at least.
We need to have some large entities in order to be able to compete in some areas of the world. The solution has been the alliance. It has offered significant value to our membership. The way we calculate the value of being a member of Star is to determine the revenue that a carrier of each member of the alliance brings in, and that number is well above $1 billion a year. Nobody is going to walk away from that kind of benefit.
And the customers get it. It is optimal for customers because they can travel the world and we can get them there. It is going to feel like pretty much flying on the same airline when you do that.
The alliance has 28 different airlines that have their own customers and their own way of doing things. How do you balance Star Alliance members with those who codeshare with others outside the alliance or form of joint ventures?
That is one of the beauties of this job, trying to find the balance between different members of the alliance. You need to look at it strategically. Our smallest airline has a dozen or so aircraft and then you have others that operate at more than 1,000 airports.
There is a huge diversity within the network. No one has ever joined the alliance expecting homogenous balance. Carriers and their customers have their own expectations of services and their respective preferences.
Putting it all together in a comprehensive way is fun and challenging at the same time. The overall proposition is what makes it work for everybody. We encourage the development of cooperation between our carriers to make sure that we have the most innovative of all the different alliances.
Part of my job is to spot where commercial opportunities are and point members in the right direction to enhance their operations. There is a reality that not every commercial carrier’s issues can be solved within the alliance.
There may be times where the members are going to have to go out and find partnerships that are not necessarily part of the alliance. That’s logical, and it depends on where you are and what the market is.
What is one thing that you want to accomplish during your term that you weren’t able to do?
I started working with airlines in Brazil, having grown up in Brazil and then going back to Brazil after university. I have a deep understanding of that marketplace and a keen desire to make it as strongly represented as we possibly can. The merger [between TAM and LAN] that occurred has made it competitive over here.
We still need to frame a solution in the Brazilian market. Unfortunately, I am going to retire at the end of the year, and we still haven’t framed what that second Brazilian membership is going to look like. But I am sure that it is not too far away. I remain optimistic that our second carrier in Brazil is not far around the corner. Unfortunately, I won’t see that before I leave.
Why do you think now was the right time to step down?
I’ve had 42 years in the airline business. I started my first job right out of college and it is a good time to step away and go do something at a different pace. I think five years was the right amount of time to be here and I was given enough to carry out the business plan that was given to me. And at the Star Alliance’s 20th anniversary, I think it is a perfect time to draft a new 10-year plan.
Some of my friends were a bit upset about that since I have been at Star for such a long time but I was deeply involved in where the Star Alliance is going to.