Introduction
An airline alliance is coming together of two or more airlines and cooperates in their business at a substantial level. In the airline industry, there are three large and known passenger alliances that include, the sky team, Star Alliance and the Oneworld. On the other hand, there are also three cargo airlines alliances including, SkyTeam Cargo, WOW Alliance and ANA/UPS Alliance. The main reason for airline alliancing is to provide a netwowrk that is convenient and easily connected for international passengers and cargo. Alliances start as a code sharing of different airlines and also in order to improve their network and also have some benefits from each other. There are several advantages that are associated with alliances compared to mergers and acquisitions.
Reasons for alliances
There are different reasons why different companies’ alliance and others merge and acquire. Most international airlines alliance to increase their net including benefiting from each member, example, an airline might be flying from New York City to London, with an alliance which flies for example to Tel Aviv, it would be easy and less costly for both passengers and the airline to get their passengers in to their destination as they will proceed with their flight without a need to another airline to get them there. Most passengers prefer one time booking that will take them direct to their destination.
The other reason most companies’ alliance is to reduce competition. When a member airline is flying to a given route, it would be hard for another member airline to introduce their flights to the same area and also it would get passengers from other airlines that do not fly to the route.
Advantages of Alliances
There are various advantages that are associated with alliances. When an airline joins an alliance, it’s guaranteed an extension of its network which is realized through the code sharing agreements.
- The allianced airlines reduce the costs of operations through sharing sales offices.
- The other benefits these airlines gets is through the sharing of the maintenance facilities that enable them maintain their aircrafts in any member hanger without paying.
- Allianced airlines also share operation staff especially the check-in and ground handling personnels.
- For small airlines, they could benefit because large airlines will be doing all the bookings and will only be giving the small airlines to ferry the passengers thus reducing the cost of operation in bookings, large number of employees and can use the large airline facilities without any problem.
Disadvantages of alliances
Though there are advantages associated with alliances, there are also disadvantages that are caused by alliance to the passengers and include:
- When the competition is fully erased in any given route, there is probability that airlines might take advantage and hike their fares. This will be caused by rising demand and reduction of the supply.
- There are always probability of reduced number of flights per day or per any given flight schedule. This could be true especially on shared routes because each airline has to give its affiliate a room thus causing more delays.