Airlines Take to the Skies in Global Strategic Alliances

TITLE: AIRLINES TAKE TO THE SKIES IN GLOBAL STRATEGIC ALLIANCES

Introduction:

This case focuses on alliances between airline companies from different countries who have gone forward to make agreements of partnership in business with an intention of improving customer service and operational efficiencies of their individual companies. This has been as a result of massive privatization of airline companies in Europe and also because of the increased in globalization. The alliances have allowed one airline company to book seats on flights operated by the other airline company if the two are partners with primary target market being business travellers who need to change planes en route to a particular destination. Some of the notable alliances have been between KLM and North West Airlines and also British airways and American Airlines. We shall answer questions that focus on the benefits and issues that have arisen as a result of these alliances.

Questions:

1. Identify some of the immediate benefits for an American airline company forming alliance with a European one.

a. An extended network often realised through code sharing agreements. Reservation system prioritizes flights bearing the codes of two airlines, which means higher degree for business for both member airlines.

b. Cost reduction from sharing of:

i. Sales offices

ii. Maintenance facilities

iii. Operational facilities, e.g. catering or computer systems which has in turn resulted to lower prices.

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

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

c. The American airline can tap into the benefits of the exclusivity of the European Union, being affiliated with a member (the European Airline) e.g. KLM provides Northwest passengers service in Rome, where American airlines are not allowed to land.

d. Routes available to the European airline become available as well to the American airline.

e. More departure time for customers to choose.

f. Short travel times for customers as a result of optimized transfers.

2. How is the global strategic alliance between KLM and Northwest different from a traditional joint venture?

A traditional joint-venture entails contribution by the parties of equity or assets over another entity or project as well as combined efforts in managing it. Alliances