Airline Alliances. Basics & Bypassing Barriers

Seminar paper from the year 2013 in the subject Business economics - Investment and Finance, grade: 1,0, University of Applied Sciences Wildau (Wildau Institute of Technology), course: Corporate Finance, language: English, abstract: The formation of modern airline alliances has been a key process and prominent tradition in the airline industry since the last three decades. The characteristics of these alliances vary in scopes and extend from branding or franchising of low density feeder or regional routes to the creation of global airline networks conducted by the world¿s most powerful carriers. Due to various reasons airliners prefer the amenities of acting co-operative rather than competitive relationships. Overall, it is undeniable that the formation and the rapid growth of alliances has been a central topic of the airline industry. Meanwhile it is scientifically proven that the economical benefits and opportunities for airlines prevail possible threats and disadvantages. This project paper intends to give a detailed description of present alliance landscape and competition connected with chosen statistical data in the beginning. Furthermore the key competitive effects and motivations leading the formation of alliances are described and act as basis for this project paper. This is followed by a concise overview about the mentioned regulations relating to bilateral air service agreements and M&A in aviation industry. Based on that we will describe how the participation in an airline alliance can help to circumvent several constraints imposed by the current regulatory system. Finally the paper is closing with a critical look at the question whether airlines are airline alliances are the really the second best solutions or even sometimes intentionally chosen by the operators.