Global airline alliances: sparking profitability for a troubled industry

More than ever, as far as legislation permits, long‐haul airlines tend to group in alliances. This paper examines the historic developments of two alliances in terms of their potential for increasing profitability of individual airlines.

Fourteen in‐depth interviews were conducted with airline executives belonging to the two leading alliances, SkyTeam and Star Alliance, as well as with aviation experts. In addition to the recent literature on alliances theory, the Internet was used to obtain data from international organizations, consultancies, universities and airlines – members and non‐members of an alliance.

Star Alliance might be one step ahead of SkyTeam (in terms of scope, number of members, organization, age …). Star Alliance is not only bigger but its geographical scope is wider; the number of members in each region is more balanced. The Star Alliance Services GmbH as head organization provides members with a workforce dedicated solely to the goals of the alliance. But Star Alliance's advantage may be short‐lived, especially since the airline industry demonstrates one of the fastest dynamics of all industries, and government regulations change rapidly as well.

Inter‐firm agreements in the airline industry have undergone dramatic changes and the future will bring additional transformations. The dichotomy between endogamic and exogamic partnerships is used to explain these changes. Previous agreements were endogamies: alliances between companies with comparable profiles mostly centered on back‐office activities as in Global Distribution Systems. Current mega alliances, such as SkyTeam and Star Alliance, are exogamies. They are alliances between companies mostly originating from distinct geographic territories. As such, they built on differences between partners regarding their networks. Their current focus is on front‐office activities to better serve customers and the alliances have used publicity to attract more customers. The main thrust is to increase the number of passengers so as to increase revenues. It is forecast that these mega alliances will again change their emphasis to back‐office activities to benefit from economies of scale and decrease operating costs.Originality/valueIs of value in highlighting how the issues indifferent kinds of alliances are not managed the same way. In exogamic relationships, partners must learn about and adapt to each other. The qualitative differences that exist between organisations can be a threat to the success of the alliance and must therefore be managed. In addition, the two types of alliances do not produce the same results. Endogamies standardize processes to obtain benefits of scale in at least one stage of the value chain. Exogamic relationships, in contrast, develop qualitative benefits that result from a synergy of different resources.