Advantages And Disadvantages Of Alliances

Significant developments have occurred in the field of air transport. A large number of countries made remarkable progress in liberalizing international air transport regulations, and became involved in full market-access arrangements. At the same time, the airline industry underwent a major shift and saw the forging alliances and mergers between companies in order to consolidate their presence in a market environment characterized by strong competition. (Icao.int, 2013)

Alliances between airlines have become a dominant feature in air transport, and a new global phenomenon unfolding relatively quickly through multiple collaborative business arrangements. Alliance agreements took different forms and included various elements of code-sharing,

• Share fixed costs and resources.

• Enlarge your distribution channels.

• Broaden your business and political contact base.

• Gain greater knowledge of international customs and culture.

• Enhance your image in the world marketplace. (Laurel Delaney, 2017)

Disadvantages of Alliances are

In spite of their major advantages, airline alliances were criticized on a number of points including:

• Alliances may not respect antitrust rules. They can result in the exclusion of some companies from the market, and violation of fair competition standards.

• Due to their control of many key points and their competitive and marketing powers, alliances could lead to the collapse of some companies that have to compete as low cost companies.

• Alliances have grown dramatically, making their partnerships increasingly complex. (Icao.int, 2013)

Here are few more different disadvantages of the Alliances

• Weaker management involvement or less equity stake.

• Fear of market insulation due to local partner 's presence.

• Less efficient communication.

• Poor resource allocation.

• Difficult to keep objectives on target over time.

• Loss of control over such important issues as product quality, operating costs, employees, etc. (Laurel Delaney,

The synergies in operations or marketing enable alliance members to share some costs or reduce costs through route rationalization. Partner airlines can share sales offices, airport facilities such as dedicated passenger loungers and reservations or ticketing staff.

• Third, alliances can enable one airline, usually the major partner, to benefit from the smaller partners lower operating costs. A major factor affecting airline unit costs is the cost of labor, which can vary significantly between neighboring countries and also between airlines in the same country if some are highly unionized and other airlines are not. Some smaller airlines with lower wage rates reinforced this cost advantage by having low administrative and overhead costs and also in some cases by judicial outsourcing of key functions as maintenance or catering.

• Finally, alliances offer scope for cost reduction through joint purchasing in many areas. (Rigas Doganis,