The impact of market liberalization on formation of airline alliances

Wang, Zhi H. and Evans, M. (2002) The impact of market liberalization on formation of airline alliances. Journal of air transportation, 7 (2). pp. 26-52. ISSN 1093-8826

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Abstract

There has been concern raised about how airlines in the Asia Pacific (AP) region are slow in response to the liberalization of world airlines, compared with North America (NA) and the European Union (EU). There is little rigorous analysis that has examined the impact of market liberalization on formation of airline alliances. This research explores how strategic alliance activities are evolving and the critical factors that impact on the formation and development of airline alliances. Findings show the initiation of regional and more liberalized bilateral, or open skies, agreements have removed some of the impediments to structural changes in international aviation. Airlines in more liberal markets enter into greater numbers and more integrative forms of alliances. Also, the general examination of airline performance within the liberalisation process shows there is a significant difference in airline performance between the markets, and that airlines, on average, achieve better results of operation if the market is more liberal. Since currently access to new markets is still restricted, strategic alliances continue to be an important tool for airlines as they seek to expand their own networks to provide new service in a market. This suggests that regulatory coordination (or strategic airline alliances) and liberalization of international aviation reinforce each other and should therefore be pursued simultaneously.