Alliances in the Airline Industry Essay

4347 Words18 Pages
Executive Summary
Throughout the years there has been an increase in strategic alliance formation in order to combat a number of factors creating uncertainty in the market and to share knowledge and know-how. The formation of alliances has also occurred in the Airline industry; this report discussed how these alliances gain economies of scales and synergies. The deregulation of the airline industry has open doors to more competition sand to further agreements such as the “open skies”, these agreements allows airlines to serve consumers more efficiently by offering extensive domestic, continental and intercontinental service networks.
Through the formation of alliances, airlines have created economies of scale through extensive use of a
…show more content…
‘Open skies’ opened possibilities for airlines to serve consumers more efficiently by offering extensive domestic, continental and intercontinental service networks. Deregulation has made positive changes in the airline industry by expanding a network of services where a consumer can choose a variety of desired destinations with just one airline. Increased traffic feed between partners has helped to effectively utilize seat capacity and increase flight frequency. Alliance partners reduced operational and ticket costs by taking advantages from economies of scale and scope. Improved service quality was achieved through more coordinated time schedules and increased itinerary choices for passengers (Bennett, 1997).

Deregulation Effects
On Safety
Safety is the most important aspect of product quality for the consumer and unlike with other simply distinguishable products a flight safety is very difficult to observe or evaluate. In order to rectify the issue Federal Aviation Administration (FAA) substantially tightened safety requirements from a very beginning of deregulation. FAA has tightened requirements for pilot qualifications, crew training and increased maintenance requirements for large commuter aircrafts. All the safety precautions had a positive impact reducing more then half of accidents. Aircraft manufacturers purchased a complete accident indemnity before the actual
Get Access