Liberalisation of the Airline Market now allows carriers to engage in alliances to form more powerful synergy’s and capture a larger share of the market. Since the introduction of The Airline Deregulation Act in 1978 in North America and similar acts worldwide the aviation industry has become one of the fastest growing industries. The main objective of this was to allow the market place to influence the development of airlines. The main development from this was that airlines find it more beneficial if they join alliances. In this report I will discuss why airlines engage in alliances, identify the strategic benefits of alliances and assess their effectiveness.
Why airlines engage in alliances:
The primary reason why airlines form strategic alliances is to expand their market and operations without going through the costly process of adding new aircraft or extra employees. This action allows an airline to impose itself amongst a new market quickly and expand its likelihood of new revenue streams under the guidance of a party already well established in that market (the strategic partner). Alliances also offer a greater network of flights to the consumer. The more airlines in an alliances means that there are likely to be more landing slots and facilities’ available globally to offer a more comprehensive network of flights to the customer. Finally alliances give the opportunity to the customer to build up loyalty through transferable air miles arrangements. Another reason why airlines engage in alliances is because this kind of agreement carries uncertainties that are not manageable through contractual agreements. It allows Airlines an opportunity to share knowledge, costs and risks.
Strategic Benefits of alliances:
The strategic benefits of Airline Alliances are plentiful and can be seen by the number of airlines currently involved in Airline Alliances. The main strategic benefit of Airline Alliances is that...