Airline alliances: permanent advantages?

Abstract

The aim of this paper is to examine the effects of passenger airline alliances. The following tend to be included in the list of benefits of such alliances: the possibility of allocating the best aircraft for each flight segment with cost savings, network expansion, a greater offering of services, and a larger number of city pairs serviced with the same total pax. km flown. All else being equal, these benefits seem clear in analytical terms. However, the expected benefits did not materialize as anticipated. The reason for this is that even though all firms in the alliance flew longer stretches, carrying a larger number of passengers, these carriers were affected by the drop in fare prices, driven by industry-related issues, such as the sector's heavy competition, caused by deregulation, and the emergence of low cost airlines. All of this resulted in alliance member carriers achieving only modest earnings.