Strategic Alliance in the Airline Industry

Management
Case Study
Strategic Alliance in the Airline Industry

Table of Content
Introduction........................................................................................................................................... 3
Macro Context........................................................................................................................................ 4
Information Revolution................................................................................................................................... 4
Economic Restructuring.................................................................................................................................. 4
Global Competition............................................................................................................................................ 5
The Micro Context................................................................................................................................ 5
Risk Sharing.......................................................................................................................................................... 5
Economies of Scale, Scope & Learning....................................................................................................... 5
Access to Assets, resources & Competitors............................................................................................. 6
Shape Competition............................................................................................................................................. 6
SWOT of Strategic Alliance................................................................................................................ 6
Strengths................................................................................................................................................................ 6
Weakness............................................................................................................................................................... 7
Opportunity.......................................................................................................................................................... 7
Threats.................................................................................................................................................................... 7
Conclusion.............................................................................................................................................. 7
References.............................................................................................................................................. 9

Introduction
Airline sector ever since its inception has underwent evolution at its every stage. Forming
strategic alliance between the Airlines on the fear of being left around is one such
development which has been in the buzz in the last couple of years. Airlines in the last few
years have reached a point where most of the International Airlines sector has merged into
three large alliance groups, namely: Sky Team, One World & Star Alliance. The noteworthy
point here is that it’s is not only the alliances, but the strong and deep relations between
the partners in the alliance which creates an Impact. However, there are certain Airlines,
like the Emirates & Etihad which have so far stayed away from joining an
alliance(Kleymann & Seristo, 2017) . The report here will throw light across the strategic
alliance in the form of Micro and Macro context. Besides this, SWOT analysis of the strategic
alliance will be also be conducted to give more clarity to the understanding of the strategic
alliance in the Airline industry.

Macro Context
In order to understand the Motivation for the alliance formation in the Airline sector, the
four forces have to be understood in the detail. These are the forces which gives an impetus
and strength to the alliance in Airline sector.
Information Revolution
It was the US Airline Deregulation Act of 1978 which for the first time opened the doors of
opportunities and threats to the Airlines operating out of the Country. Due to this act, Price
regulating powers in the industry were removed from the CAB, which enabled the Airlines
not only to charge exceeded fares but they could also fly at increased frequency, which lead
to the development of Computer Reservation Systems (CRS). It was the growth in the CRS,
which not only created a marketing tool, but also gave power in the hands of the agents
who now could create preference for booking flights. It was the growth in the coverage of
CRS which lead to the creation of Global Distribution System. Due to increased amount of
information available online, it became easier for the customers to compare the prices
online, removing the intermediaries. Thus, it is the ease of information in the hands of
customers, which pushed the Airlines to form an alliance(Garg, 2016).
Economic Restructuring
It’s a strong argument to say that it was the economic disengagement by governments in
many parts of the world that lead to economic restructuring had a major impact on the
industry structure. The Chicago convention of 1944, deregulation of domestic services In
the US in 1978 and completion of deregulation in 1994 within the EU impacted the Airline
industry. It can thus be said that Liberalization, Privatization, trans- national mergers and