Global Airline: Current Status of Airline Partnerships (Case Study Sample)

Introduction
As consumers ae becoming more and more sophisticated; airlines have to find ways to interact and keep the consumers engaged. In order to do this, they have to come up with structured strategies in sales and distribution. What is seen in the market-place is more airlines being interested in e-commerce strategies and design thinking because that is what going on in e-commerce market-place and in airline industry? Airlines industry have much observation these days about the competition going on in the market place and they are really willing to replicate what is being out there. Two types of airlines are majorly observed: ones that are profoundly robust in their e-commerce and strategical operations and ones that are less robust. Thereby, it is further observed that there are different strategies for both of them: the one for the very sophisticated, they apply the hard-core e-commerce strategies (tactical marketing, comprehensive structuring and so forth strategies) and; for less sophisticated airlines, the simple and tactical issue are the niche as far as the strategies are concerned. The airline industry is a predominant industry as far as the world economy is considered. The airline industry works on the air travel revenues that are equal to about one-percent of the overall national GDP. Since early 1980s the GDP related to airline is continuously increasing due to the development in tourism.
Overview
As the world is turning as a global village; the global airline is tending to attract the sophisticated customers. The European airline market has changed dramatically due to the induction of partnerships. The European airline market has now become a fairly competitive to three major groupings:
1 Lufthansa Group
1 Swiss Lufthansa
2 Australian airlines
3 SN Brussels airlines.
2 IAG Group
4 British airways
5 Iberia
3 France KLM
6 Air France.
7 KLM
These airlines are the major airlines considered in Europe and are dominating the European market. However, the difficulty is also ubiquitous because of the induction of Easy jet and Ryanair. The Easy Jet is attracting the business passengers because it is being nicer with them in terms of strategies and quality of services. Easy jet offers huge network around Europe, due to which now the business tours are much easier. The reason behind this ease is that one can reserve the seat with valuable priority and boarding. Thereby, the Air Jet in Europe is more like a business carrier. On the other hand, France KLM offers cheaper tickets than Easy Jet. If we analyse the whole situation of airline market in Europe, we find that now is less competition than it was before in the early 1980s up till 1990s. However, the real competition in these days is a long-haul. The term long-haul in this context means that the outside competitions robust impacts on the regional market. For instance, the middle-east airlines such as Emirates is competing majorly with the profound airline brands in Europe. The completion is roaming around the quality of service.
The strategic alliances are not a new innovation in the airline management system because of the profound and evident results in different manufacturing departments and industrial culture. Concerning this, around two-thousand new strategic alliance comes subsequently and around fifteen-percent of the partnerships in the form of alliances is increasing ever year (Cools and Roos, 2005). Besides airlines, these alliances are also found in other manufacturing industries such as the partnership alliance of Sony and Erricsson which has jointly robust the completion in mobile industry. Similarly, different airlines have followed the same strategic policies in the formation of partnership alliances to create a new era in competition and to provide a step ahead in advance competitions; the examples of as such are Lufthansa group and IAG group which is ruling the European airline market.
Current status of Airline partnerships
The airline forms an alliance partnership to increase their revenues and minimize the unit cost. According to the survey of the US-based Association of Strategic Alliance Professionals (ASAP), the insiders have proclaimed fifty-percent success rate due to the induction of alliance formation. Furthermore, the companies who reported the success rate more than eighty-percent were only nine. This sophisticates the question that whether alliance formation is beneficial for an airline industry or not. Furthermore, what would be the future of the airline if the alliance formation is persistent?
In an airline industry different carriers altogether forms a cooperative arrangement to produce greater revenue and to strengthening their position out of the local or regional market to the global reputation. In the first-phase, the formation of cooperation is characterized as: ethical tactical and strategic alliances, which are discussed below:
Tactical Alliances (Commercial Alliances)
The tactical alliances also termed as commercial alliances are those which focuses on the bilateral agreements between the adjoining or partner airlines. By doing so, the partner airlines try to gain limited number of route access to the other network of airline. This agreement starts with interline, code sharing, and Coordinated Joint Ventures (JVs). These are discussed below:
Interline
The Interline is similar to what junction is in railways. The interline concerns the transfer of passengers – in their route – from one airline to another. Furthermore, it also provides a service to transfer the cargo in similar manner. The experience from one airline to another can be different in terms of quality of service and other aspects; this is because each airline retains its brand image and identity. This type of alliance is formed due to the cooperation of both the partner airlines cooperating at the marketing level. Although, the coordination is very limited and the passengers are only charged by one airline but the airlines share the revenues with each other. This sharing of revenues is done by pro-rating.
Code Sharing
Code sharing is another way of transferring passengers from one airline to another. Both the airlines should correspond in agreement. In code sharing, either the airline reserves the seat to sell or the other flight already purchase the seats. For instance, if flight A is landing on the airport and the flight B – the partner alliance of the flight A – has to transfer its passengers to flight A; either the flight A before take-off has to book the seats in flight A as per the agreement or flight B will reserve the seats for flight A on purchase as per the suitable price. Unlike Interline that shares the earned revenue, the code sharing works on sale and purchase.
Joint Ventures
The joint ventures (JVs) strategy is sophisticated as compared to the Interline and code sharing and it is often adopted when the carriers have to take the international routes. In Joint Ventures, the partner alliances share equal amount of revenues and profit earned by the passenger, regardless of which airline was operated as a main aircraft in a route-to-route international travel. This is the reason this strategy is termed as ‘mental-neutral’; for instance, if an airline A and airline B are partners as per Joint Venture, no matter if A is the main aircraft and B is the subsidiary, each will have to share equal amount of revenue and profit earned. The revenues are monitored by regulatory bodies in a sense to allow partner alliances to set or pre-set their schedules and fair in a coordinative manner.
Strategic Alliances
Strategic alliances refer to the agreements with respect to bilateral or multilateral arrangements. These arrangements are set in order to let the airlines coordinate their services in terms of similar business objective to achieve their interconnected aims. The alliances abiding this strategic alliance have common goals and focuses on to the presentation of alike brand or common brand; thereby, setting uniform standards of service. Furthermore, the asset is also shared commingling such as: staff, terminal services, traffic rights, capital resources, and the identity. The definitive characteristics of strategic alliances are exclusive membership and joint marketing entity. On the other hand, the key elements of the current strategic alliances are coordinated reservations, reciprocity in rush flyer, management in terms of inventory system, sale management, and special emphasis in promoting seamless coordination and connection between the partner alliances.
Reason to form Strategic Alliance
The key motivation behind the airlines for entering into alliance is the market competition and to expand the market fee. This is highly observed that some airlines are dominant in their home markets (for example, British Airways) and join the alliance with another airline in order to provide sustainable feed to their brand airline. For instance, the Jet Airways and KLM alliance which had signed a limited strategic agreement operating in the Indian domestic market. Moreover, there are other reasons concerning the demand and need of alliance that is the government policies and economic returns etc.
The partners entering into the alliance have three categories:
1 Convergence: common brand image to show cast the similar reflection of carriers in terms of service quality and technical productivity.
2 Competitiveness: each airline of the alliance has to be competitive in the market on their own in order to provoke joint schemes.
3 Complementarity: meaning serving the routes in order to provide necessary economic boost and tranquillity.
The main purpose to enter alliances is to overcome the government restrictive policies often found in deve...