The Advantages and Disadvantages of Global Airline Alliances - Essay Example

Global Airline Alliances Global Airline Alliances Introduction The airline industry is viewed as one of the mostly highly competitive industries across the globe and this means that airline companies are frequently assessing and reviewing their strategies. An imperative aspect of the airline companies is coming up with a strategy to maintain advantage in the current market conditions that facilitates sharing of risks and pooling of resource (The Points Guy, 2014). This is what is commonly regarded as establishing an alliance. An alliance in the airline industry is termed as the process where airline companies work in cohesion while retaining their autonomy through the term of the relationship (Weber and Sparks, 2004). This cohesion between airline companies results to better perform in relation to customer service as well as the air transport. Although the extent of cohesion varies across alliances, it has been observed that they are more profitable to small airline entities. This essay will look at the three major airline airlines that are recognized on the international platform including Oneworld, Star Alliance and SkyTeam. Additionally, the essay looks into Alaska airline that is a key flyer in the US and other international destinations. Finally, the paper looks into the advantages and disadvantages of global airlines. Oneworld This is the first airline global alliance that is discussed in the paper. First, it is the smallest alliance that currently has thirteen members; however, this number is expected to rise in the coming years. The alliance was established in 1999 by the airline companies that were competing with Sky Team (Weber and Sparks, 2004). Examples of these members include: Qatar Airways, Malaysia Airlines, American Airlines and British Airways. The alliance has 981 destinations and it operates in 151 countries. The yearly capacity is 475 passengers; it has a fleet of 3,283 aircrafts and 14,244 departures on a daily. The top five members elect airlines that have the highest number of flights include TAM, British Airways, Iberaia, US Airways and American Airlines (The Points Guy, 2014). It can be argued the alliance is undeniably the best in redeeming domestic and global cabin topnotch awards. Six carriers have well-established global first rate cabins including Cathay Pacific, British Airways, American, Cathay Pacific, Malysian Airline, Qantas and JAL. Sky Team Alliance This is the second global alliance in the airline industry. Based on the recent statistics, the alliance has nineteen members. This alliance was formed in 2000. It operates in 178 nations across the globe and has 1024 destinations. The yearly passenger capacity is 569 million and has a fleet of 2853 planes with an additional 1475 that are allied to the company (The Points Guy, 2014). The frequently used airlines in the alliance include Alitalia, China Southern, China Eastern, Air France and Delta. At this point it is important to note that the alliance is the most hostile and has stringent conditions that hinder awards on partners. Star Alliance This is one of the leading global airline alliances and has undergone through some major changes. This is following the exit of TAM and US Airways as well as the potential of Air India in the alliance (The Points Guy, 2014). The alliance has twenty seven members and was started in 1997 by United, Air Canada, Lufthansa, Scandinavian Airlines and Thai Airways (Ito and Lee, 2007). Examples of members of the alliance include Scandinavian Airlines, Brussels Airlines, Copa Airlines, Ethiopian Airlines and Eva Airlines. The other airline that is hoped to join the alliance is Avianca Brazil. The annual passenger capacity is 610.4 passengers annually and has its operations in 195 nations across the world. Additionally, the alliance has its activities across 1348 destinations. It has a fleet of 3,927 planes and nearly 17,808. The best airlines in the alliance are Turkish Airlines, Air China, Lufthansa, United and Air Canada (Weber and Sparks, 2004). In spite of the fact that the alliance has a high number of members, there are various issues that are associated with blocking among the member. Alaska Airline This is the fourth alliance that does not qualify in the category of the three main alliances. The alliance has a number of reliable members. These include Air France, British Airways, Emirates, Qantas, Korean Air and Fiji Airways. Although there are no substantial findings on the alliance as compared to other major airlines, this is helped by the fact that the entity works closely with Delta and American airlines (The Points Guy, 2014). The airline serves 625 million travelers annually and 18,500 departures on daily basis. Alaska devalued its initiative; it paled in relation to other airlines such as United and Delta. Additionally, it did not influence partner travel in any way. Possibly the major disadvantage of the Alaska alliance is the fact that members cannot combine customers based on award tickets. However, an airline can include the alliance and partner on a specific award (Buhalis, 2004). The airline has relatively efficient award availability as well as when brought together with their diverse partners. Advantages of Global Airline Alliances Presently, the most common airline alliances are based on non-equity and marketing interests. These interests touch on the global airline alliances discussed in the above section. These alliances are mainly a major system of joint resource and code sharing. This allows a key point of contact for the passenger to guarantee a smooth, convenient and global travel experience (Kleymann and Seristö, 2004). Though individual airline companies are allied under the network of a single company, individual characteristics as well cultures are maintained (Franke, 2004). These alliances facilitate a smooth air travel for global passengers between various points. From a business perspective membership in these alliances has a strategic advantage that is instantaneous as well. All members in a given alliance will have increased their operations without a considerably increased spending in assets and capital investment. This allows airline companies to operate in routes that have been inaccessible and non-profitable for years (Kleymann and Seristö, 2004). Alliances have the flow influence of generating unexploited markets in the context of the domestic business environment. This generates more income for the airlines and as a result the overhead costs are minimized. While this leads to higher profit margins and increased diversification, consumers can be certain that travelling costs will remain low. This is based on the assumption that competition in a given rote remains practical. This is a profitable result for the airline companies and consumers. Airline companies are not the only beneficiaries behind this alliance that is widely viewed as a strategic marketing onslaught (Warden, 2003). Customer retention, satisfaction and relationship are the main aims behind a marketing strategy and more so a major benefit of the global airline alliances (Button, 2009). Furthermore, these alliances are viewed as a mark of quality and the members are required to deliver a given standard of quality. At the end of the day, these global alliances add value to the services offered by the airlines (Kleymann and Seristö, 2004). The benefits of these alliances are profitable to the businesses as well as the consumers. Disadvantages of Global Airline Alliances There are various disadvantages that are associated with global airline alliances for the airline companies and the customers (Tiernan et al., 2008). First, the small airline companies that do not belong to these alliances are faced by a high level of competition. Secondly, there are some stringent rules and regulations that govern the entry into these alliances and this means that some airlines fail to qualify for membership (Kleymann and Seristö, 2004). Thirdly, the price of air tickets increases where the competition is eliminated in a given route. Finally, there less frequent flights and this is an inconvenience for the customers. Conclusion Airline alliances enable cost-sharing through the use of uniform sales offices, maintenance aspects, and even operational employees. Alliances could also allow for lower traveling prices for travelers, due to the incidence of lowered operating costs. Another advantage has to do with flexibility. Alliances make it possible for passengers to have more leeway in regards to departure and arrival times in varied lounges. Moreover, alliances can result in retrenchment and increased price fares. References Buhalis, D. (2004). eAirlines: strategic and tactical use of ICTs in the airline industry. Information & Management, 41(7), 805-825. Button, K. (2009). The impact of US–EU “Open Skies” agreement on airline market structures and airline networks. Journal of Air Transport Management, 15(2), 59-71. Franke, M. (2004). Competition between network carriers and low-cost carriers—retreat battle or breakthrough to a new level of efficiency? Journal of Air Transport Management, 10(1), 15-21. Ito, H., & Lee, D. (2007). Domestic code sharing, alliances, and airfares in the US airline industry. Journal of Law and Economics, 50(2), 355-380. Kleymann, B., & Seristö, H. (2004). Managing strategic airline alliances. The Points Guy. (2014). Shifting airline alliances: Which is best – Oneworld, SkyTeam or Star Alliance? Retrieved from http://thepointsguy.com/2014/02/shifting-airline-alliances- which-is-best-oneworld-skyteam-or-star-alliance/ Tiernan, S., Rhoades, D., & Waguespack, B. (2008). Airline alliance service quality performance—An analysis of US and EU member airlines. 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