Environmental Engineering Reference
In-Depth Information
these barriers, and during the late 1990s several global airline alliances have emerged,
the main ones being Star Alliance (13 airlines, including Lufthansa, United, SAS,
Varig, Thai and Singapore airlines), Oneworld (eight airlines, including British Air-
ways, American, Qantas and Cathay Pacific airlines) and SkyTeam (Air France, Aero-
mexico, Delta and Korean), plus two smaller alliances, Qualifier (11 European airlines
led by Swissair and Sabena) and Wings (KLM and Northwest) (see Table 2.1). Today
the top three alliances account for 48.5 per cent of world revenue passenger kilometres
(RPKs). If all five alliances are considered, then 61 per cent of all revenue passenger
kilometres are carried by an alliance (Jasper, 2000b; Lewis, 2000) and that is before
the traffic of over 100 regional carriers affiliated to these airlines is considered.
Ta b l e 2 . 1
Trans-national global airline alliances
Alliance
Star
Oneworld
SkyTeam
Wings
Qualifier
Operating revenues
US$63.1
billion
US$47.6
billion
US$30.4
billion
US$16.8
billion
US$16.2
billion
Annual passengers
296.4
million
209
million
174.3
million
71.6
million
52.3
million
Countries/destinations
served
130/815
134/559
98/451
80/350
N/A/332
World share of RPKs
21.3%
16.4%
10.8%
9.9%
3.6%
Source:
data from Jasper, 2000b; Lewis, 2000; KLM, 2000; Swissair 2000
Partners have been selected to try to gain coverage of global markets. Forms of co-
operation range from equity stakes being held in partner airlines, through to code
sharing, marketing and scheduling agreements between partner airlines. Airlines have
entered into alliances for several reasons: to cut costs through the rationalization of
air services; to increase network traffic by being able to offer more destinations through
alliance partners; to increase marketing scope per unit cost; to maximize economies
of scope; to increase purchasing power with suppliers; and to restrict the threat of
effective competition.
This recent trend is likely to continue for the simple reason that the benefits of
alliances reported so far appear to have had a positive impact upon the financial bot-
tom line. Alliance carrier profits have increased faster than market share (Button et
al, 1998). For example, evidence from Northwest Airlines presented to the General
Accounting Office estimated in 1995 that their alliance with KLM has resulted in
200,000 extra passengers per annum and revenues of circa US$175 million (Doga-
nis, 2001).
Alliance instability
Airline alliances are far from stable. Alliance partners can be promiscuous and are sus-
ceptible to altering their allegiance in order to maximize the financial bottom line for
their airline as circumstances change over time. Over 80 per cent of alliances have
failed within five years since 1990. For example, during the summer of 2000 KLM
and Alitalia split up, weakening the Wings alliance considerably. British Airways
