Overview Of Global Airline Alliances: Benefits, Advantages, And Disadvantages

History of Airline Alliances

Question:

Discuss about the Global airline alliances.

This report presents briefly overview on global airline alliances. The airline alliance is an agreement between two or more aviations to provide cooperation and coordination. It explains the benefits, advantages and disadvantages of airline alliances. It tells that how global alliances are operating business in today’s world. The first airline alliance was formed in 1930 for providing benefits to aviation industries and the first largest airline alliance started in 1989. The main global alliances are star alliance, sky team, one world, wing alliance, and vanilla and U-fly alliance. On the other side, airline alliances are improving flyer programs and it provides high safety and services to passengers (Hanlon, 2007). The report analyzes that how airline alliances provide code sharing arrangements among the countries. The main object of this report is to provide an outline about the international airline alliances.

The air transport is an important industry in the world which provides around 1 percent of national GDP. The airline alliance is an aviation industry arrangement between two or more aviations for providing co operations and co-ordinations. In such way it can be said that it is an agreement between two or more airline industries to obtain the marketing benefits. There are two airline transport market in the world they are such as the European Union and United States. In 1930, when Panair do Brasil and its parent company Pan American world airways’ agreed to exchange routes to Latin America then first airline alliance was founded. The new competitors have been entered in the market as a result of competition, the services of air transport has liberalized (Dwyer, 2007). Now day’s global airline alliances are making strategy to develop airline networks and increase revenue of airline industries. On the other side aviation industries face many barriers and difficulties while rendering services to their customers. It provides help to economic growth of the U.S low cost carriers. The benefits of global airline alliances are discussed as below.

It provides wider network through codeshare agreement among the various aviation industries.

It reduces cost by sharing of sales offices, operational staff, maintenance and operational facilities.

It provides more destinations and airport lounges to travelers during travelling.

It provides coordination among different departments and provides well coordinated IT system.

The global alliances provide opportunities for operating more markets in different countries and it also eliminating the duplication of operations (Burghouwt, 2007).

Global Airline Alliances in Today’s World

(Source: Nikkei Asian, 2017)

Star Alliance

The star alliance is one of the largest airline alliances in the world and it was founded in 1997. It consists of 28 members and it focuses on the marketing strategy. Lufthansa, SAS, Thai international and united airlines are the members of the group. The star alliance includes 14 airlines and another three airlines added in 2007. It analyzes that currently almost 60 million people participates in these programs which include 729 airports in 124 countries in the world (Cento, 2008).

Advantages of star alliance are discussed as below:

It is the biggest airline alliance and it provides strong African network by South African airways and Egypt air.

It provides convenience to Asian travelers in America and Europe and it covers all the continents in the world.

Disadvantages of star alliance are discussed as below.

It is very complex and difficult to manage by all the members.

(Source: Milenomics, 2017)

One world alliance

It is the second largest alliance in the world. The oneworld alliance incudes eight airlines they are such as American airlines, Cathay pacific, finnair, Iberia, British airways, Air lingus, Lanchile and Qantas. There are almost 278,850 employees working in around 130 countries. The oneworld is managed by the New York City and it provides 340 lounges in the world. The oneworld was the first universal airline alliance which introduced inter-line ticketing between the members of airlines (Dicken, 2007). In such way travelers can enjoy the smooth transfers and it provides flexibility to the entire network. It provides strong network in Middle East by British airways and royal Jordanian airlines.  

Sky team alliance

Sky team is the universal and multilateral alliance among six airlines and it is one of the best alliances among three universal airline alliances.  It was created between Delta airlines and Air France in 1999. The other members of the sky team alliance are KLM, Aeroflot, Aeromexico and Korean air. It has only 11% of the world planned airline market. The sky team has declared the formation of a new centralized organization for the coalition. The governance framework of sky team is similar to as a one world and star alliance (Cento, 2008).

• It has the large number of airline members in North America among three global airlines alliances.
• The members of sky team alliance provide lot of miles services frequently.
• It earned the revenue passengers kilometers in Europe and North America.

In such way sky team alliance plays significant role in aviation industries and it provides benefits to these industries. But it also faces some challenges like it has only two members from Asia and there is no member from Middle East and Oceania, in such way it provides very weak route in these areas. 

(Source: Saudia, 2017)

It is the oldest integrated alliance which comprises of KLM, continental and northwest. The scope of wings alliance is very weak and it is not much wide in range. It is very flexible and less expensive. The wings alliance course provides effective preparation for online assessment and interviews (Smith, 2008). 

It is an airline alliance which was launched in September 2015 to improve air connectivity in Indian Ocean. The main object of this airline alliance is to increase airline services among countries and attract more tourists. The founding members of Vanilla alliance are Air Austral, Air Mauritius and Air Seychelles (Iatrou & Oretti, 2016).

Main Global Alliances

U fly alliance is the world largest alliance of low cost carriers and it was launched in January 2016. The founding members of U fly alliance are HK express, Seoul’s Easter jet, Yunnan’s lucky air, Urumqi air and Chongqing’s west air. The members of U-fly alliance provide good quality of services, safety and destinations to employees. The U fly alliance gives opportunities to guests for enhancing lower cost travel experience. The alliance provides support to smaller airlines for increasing growth in different provinces. This alliance serves 20 million passengers annually over 200 cities in North Asia (Hull, 2010).

It is an airline alliance which was formed in May 2016 and it is the second largest alliance consists of low cost carriers (LCCs). It encompasses seven Asia pacific airlines such as Jeju air, scoot, Nok air, Cebu pacific, Nokscoot, vanilla air and Tigerair Australia who merged with scoot. It is the fourth biggest alliance in terms of destinations, flight, passengers, combined fleet and members. The value alliance was established by eight airlines in the Asia pacific and it allows passengers to book flights with all the eight carriers. It serves more than 160 destinations in the Asia pacific region (Oum & Yu, 2012).

The advantages of airline alliances for airlines are discussed as below.

• It increases in revenues and reduces in cost through the various innovation and standardization of products.
• It provides entire networks to airline industries and it also increases the presence of markets.
• When airline alliances are work together then they can easily achieve the objectives and they can take advantages in competitive market (Burghouwt, 2007).

The advantages of airline alliances for customers are followings:

• It provides different kinds of services to customers in such way it helps to provide satisfaction to customers.
• It provides broad network to passengers, in this way they have good choice of services in any destination.
• The code sharing arrangements between airlines provides excellent connections to passengers.

Some other advantages of airline alliances are discussed as below.

• Increase connectivity for flyers: The airline alliances increase connectivity of flyers from many ways. Now it increases flights for many routes and it connects all the cities and towns.
• Safety and regulations: The airline alliances ensure to flyers and regulatory authorities for providing safety and security. In such way it can be said that airline alliances follow the safety rules and regulations (Zamir, Sahar & Zafar, 2014).

The disadvantages of airline alliances are discussed as below.

1) Unfulfilled promises on airfares: The airline alliances promise to have favorable impact on airfares but in really it does not happen. So it is the biggest disadvantages of airline alliances in aviation industries.

2) Compromise in services: It is one of the biggest cons of airline alliances is compromise in services. The airline alliances do not focus on the luxury elements of flying and they do not provide proper services to passengers.

3) Unhealthy competition: It increases competition in the market so passengers face many problems and difficulties during travelling.

4) Sharing of knowledge, skills and capabilities: The airline alliances refer to the agreement between two or more aviation for providing support to aviation industries. But it affects the business of aviation industries by negative way. The airline alliances share their knowledge, resources, skills and capabilities with other aviation. In such way sometimes it becomes very challenging when the other alliances come to know the business secrets and they start to misuse these secrets (Belobaba, Odoni & Barnhart, 2015).

Code Sharing Arrangements and Impact on Aviation Industry

The other challenges are such as lack of commitment, poor communication, lack of trust and lack of goals and objectives which can also affect the business of airline alliances negatively.

Conclusion  

The entire report is based on the global airline alliances and it provides briefly overview on the importance of these airline alliances. It analyzes the global airline alliances which are operating in now days. It explains that how aviation industries are affected by the international airline alliances. The alliances provide support to airline industries to create a strong position in the market (Tribe, 2015). The report explains the different kinds of airline alliances and their advantages and disadvantages.

Now it is concluded that airline alliances play significant role in the development of aviation industries. So it is assumed that airline industries should encourage and promote the airline alliance for providing excellent services to passengers. The alliances provide code sharing facility and broad network to passengers. The star alliance is the biggest alliance in the world and it provides strong African network. The aviation industries should conducts programs and conferences to increase the scope of airline alliances.

References

Belobaba, P., Odoni, A., & Barnhart, C. (Eds.). (2015). The global airline industry. John Wiley & Sons.

Burghouwt, G. (2007). Airline network development in Europe and its implications for airport planning. Ashgate Publishing, Ltd.

Burghouwt, G. (2007). Airline network development in Europe and its implications for airport planning. Ashgate Publishing, Ltd.

Cento, A. (2008). The airline industry: challenges in the 21st century. Springer Science & Business Media.

Cento, A. (2008). The airline industry: challenges in the 21st century. Springer Science & Business Media.

Dicken, P. (2007). Global shift: Mapping the changing contours of the world economy. SAGE Publications Ltd.

Dwyer, L. (2007). International handbook on the economics of tourism. Edward Elgar Publishing.

Hanlon, J.P. (2007). Global airlines: competition in a transnational industry. Routledge.

Hull, D. L. (2010). Science as a process: an evolutionary account of the social and conceptual development of science. University of Chicago Press.

Iatrou, K., & Oretti, M. (2016). Airline choices for the future: from alliances to mergers. Routledge.

Oum, T. H., & Yu, C. (2012). Winning airlines: Productivity and cost competitiveness of the world’s major airlines. Springer Science & Business Media.

Smith, A. (2008). Native Americans and the Christian right: the gendered politics of unlikely alliances. Duke University Press.

Tribe, J. (2015). The economics of recreation, leisure and tourism. Routledge.

Zamir, Z., Sahar, A., & Zafar, F. (2014). Strategic alliances; A comparative analysis of successful alliances in large and medium scale enterprises around the world. Educational Research International, 3(1), 25-39.