Airline economics: An essay on international airline alliances

Abstract

This article describes the factors supporting inter-firm cooperation in the form of international airline alliances. It presents the benefits of such cooperative agreements by drawing conclusions from related empirical literature examination under a structure-conduct-performance paradigm. The review shows some factors, that is, legislation and government policies, can result in changes in the demand for air travel and that the characteristics of the airline business can lead to collaborations to form international airline alliances. The review demonstrates that members of airline alliances gain five beneficial consequences from making such mutual pacts-passenger traffic boosting, improved cost efficiency, enhanced exercise of market power, global network expansion and service quality improvements. These all represent competitive advantages compared to non-Aligned airlines. This study, consequently, offers compact guidelines for firms seeking strategies to improve performance which are open to considering international airline alliances as a solution. Additionally, policy recommendations are provided. © 2020 Thammasat University. All rights reserved.