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Airline alliance

From Academic Kids

An airline alliance is an agreement between two or more airlines to cooperate for the foreseeable future on a substantial level.

The degree of cooperation differs between alliances.

Benefits/Costs

Benefits might consist of:

  • An extended and optimised network
    This is often realised through code sharing agreements. Many alliances started as only a code sharing network.
  • Cost reduction
    This might include sharing of
    • Sales offices
    • Maintenance facilities
    • Operational facilities, e.g. catering or computer systems.
    • Operational staff, e.g. ground handling personnel, at check-in and boarding desks.
    • Investments and purchases, e.g. in order to negotiate extra volume discounts.

Benefits for the traveller might be:

  • Lower prices due to lowered operational costs for a given route.
  • More departure times to choose from on a given route.
  • More destinations within easy reach.
  • Shorter travel times as a result of optimised transfers.

Disadvantages for the traveller might be:

  • Higher prices when all competition is erased on a certain route.
  • Less frequent flights, for instance when two airlines fly each three times a day on a given route, the alliance might fly only four times on the same route.

Hurdles to take

The abilities for airlines to form an alliance are often restricted by laws and regulations or subject to approval by authorities. Anti-trust laws play a large role. Sometimes political quid pro quo between governments is at hand.

Also landing rights may not be owned by the airlines themselves but by the nation in which their head office resides. If an airline loses its national identity by merging to a large extent with a foreign company, existing agreements may be declared void by a country which objects to the merger.

The first large alliance which is still functioning started in 1989, when Northwest and KLM Royal Dutch Airlines agreed to code sharing on a large scale. A huge step was taken in 1992 when The Netherlands signed the first open skies agreement with the United States, in spite of objections uttered by the European Union authorities. This gave both countries unrestricted landing rights on each others' soil. Normally landing rights are granted for a fixed number of flights per week to a fixed destination. Each adjustment takes a lot of negotiating, often between governments rather than between the companies involved. The United States was so pleased with the independent position that the Dutch took versus the E.U. that it granted anti-trust immunity to the alliance between Northwest and KLM. Other alliances would struggle for years to overcome transnational barriers or still do so.

Global players

The three largest alliances are:

Star Alliance oneworld Skyteam Alliance
Passengers per year *112 million85 million124 million
Market share *23%17%24%
Participants** Adria Airways
Air Canada
Air New Zealand
ANA
Asiana Airlines
Austrian Airlines
Blue1
British Midland
Croatia Airlines
LOT Polish Airlines
Lufthansa
Scandinavian Airlines System
Singapore Airlines
Spanair
Thai Airways International
United Airlines
US Airways
Varig Brazilian
Aer Lingus
American Airlines
British Airways
Cathay Pacific
Finnair
Iberia
LanChile
Mexicana
Qantas
Aeroméxico
Air France
Alitalia
CSA Czech Airlines
Delta
Korean Air
Continental
KLM Royal Dutch Airlines
Northwest
External linkstar-alliance.com (http://www.star-alliance.com/)oneworld.com (http://www.oneworld.com/)skyteam.com (http://www.skyteam.com/)
* = source IATA / September 2002
** = as of February 2005

As the table shows, the three alliances combined fly 64% of all passengers travelling each year.

pl:Sojusze linii lotniczych de:Allianz (Luftfahrt)fr:Alliance de compagnies aériennes

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