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BENEFITS AND COSTS


Benefits can consist of:

  • An extended and optimised network: This is often realised through Code Sharing agreements. Many alliances started as only a code sharing network.

  • Cost reduction: This can include sharing of

  • ---Sales offices

  • ---Maintenance facilities

  • ---Operational facilities, e.g. catering or computer systems.

  • ---Operational staff, e.g. ground handling personnel, at check-in and boarding desks.

  • ---Investments and purchases, e.g. in order to negotiate extra volume discounts.

  • Traveler benefits: Benefits for the traveler can be:

  • ---Lower prices due to lowered operational costs for a given route.

  • ---More departure times to choose from on a given route.

  • ---More destinations within easy reach.

  • ---Shorter travel times as a result of optimised transfers.

  • ---Faster mileage rewards by earning miles for a single account on several different carriers.

  • --- Round-the-world Ticket s, enabling travelers to fly over the world for a relatively low price.

    • Airline alliances may also create disadvantages for the traveler, such as:

  • Higher prices when all competition is erased on a certain route.

  • Less frequent flights, for instance when two airlines fly each three times a day on a given route, the alliance might fly only four times on the same route.



HURDLES TO OVERCOME


The abilities for airlines to form an alliance are often restricted by laws and regulations or subject to approval by authorities. Antitrust laws play a large role. Sometimes political quid pro quo between governments is at hand.

Also landing rights may not be owned by the airlines themselves but by the nation in which their head office resides. If an airline loses its national identity by merging to a large extent with a foreign company, existing agreements may be declared void by a country which objects to the merger.

The first known airline alliance started in the 1930s, when Pan American Grace Airways and parent company Pan American World Airways agreed to exchange routes to Latin America . The first large alliance which is still functioning started in 1989 , when Northwest and KLM Royal Dutch Airlines agreed to code sharing on a large scale. A huge step was taken in 1992 when The Netherlands signed the first Open Skies agreement with the United States, in spite of objections uttered by the European Union authorities. This gave both countries unrestricted landing rights on each others' soil. Normally landing rights are granted for a fixed number of flights per week to a fixed destination. Each adjustment takes a lot of negotiating, often between governments rather than between the companies involved. The United States was so pleased with the independent position that the Dutch took versus the E.U. that it granted anti-trust immunity to the alliance between Northwest and KLM. Other alliances would struggle for years to overcome transnational barriers or still do so.


GLOBAL PLAYERS


The three largest alliances are:


Notes

# As of February 2007
# As of end of year 2005
# In 2005, SkyTeam launched its Associate Program, whereby existing codeshare alliances (such as Continental and Copa) can be integrated into SkyTeam's marketing (shared loyalty programs, etc.) .

Network strengths are continents or regions where listed airlines have one or more hubs or a major presence in several destinations.

Network weaknesses are continents or regions with no hubs and few (if any) flights for any airline in the alliance.

As the table shows, the three alliances combined fly 60.8% of all passengers travelling each year.