The air transport industry is among the most challenging business fields worldwide, driven by volatile fuel prices, ever-changing operating costs and unstable traffic demand. To address these leveraging factors, carriers developed partnerships to coordinate their route network and reinforce their synergies.

Major airline alliances

The aviation market currently features three major alliances, whose members are based in several countries worldwide, to cover the widest possible range of destinations.

Star Alliance is the oldest and the most extensive alliance (counting 26 members), SkyTeam is the most recent one with 19 members and lastly, One World features just 15 members (S7 Airline’s membership was suspended following the 2022 Ukrainian war breakout).

An airline that joins any of the three alliances can benefit from increased connectivity and it can provide its customers with plenty of destinations through its partners. For instance, a passenger who would like to travel from Zurich to Denver could fly with Swiss to Newark and then proceed with United Airlines to Denver, purchasing one single ticket with either one of the two carriers. This option is feasible since the two carriers are both Star Alliance members and share a mutual strategy on the North Atlantic routes. Furthermore, both Swiss and United are part of the North Atlantic joint venture comprising the Lufthansa group, Air Canada and United Airlines.

Advantages of Joint Ventures

A joint venture consists of an agreement between airlines to share revenues on some routes and coordinate their operations in terms of planning and scheduling. Some of the most significant joint ventures can be found in the North Atlantic air transport market. The three largest joint ventures feature the Lufthansa-United-Air Canada partnership (Star Alliance), the American-British-Iberia block (One World group) and Air France KLM-Delta (Sky Team alliance).

JVs are beneficial for both airlines and passengers, as on one side, they allow carriers to develop robust networks and operations reducing the risk of economic losses and on the other side they provide passengers with far more flexibility and offerings in terms of destinations available from the airlines’ hubs.

Disadvantages of Joint Ventures

Limitations of Joint Ventures can be identified both from the airlines’ point of view and from the customers’ perspective. Specifically, carriers that are part of any joint venture have to comply with the group strategy in terms of network and destinations served, which may lead to expansion constraints to favour the leading airline on certain routes. For instance, in 2019 Alitalia (the former Italian flag carrier), was under the Chapter 11 restructuring procedure and decided to leave by mid-2020 the Air France-KLM and Delta joint venture since it was not considered beneficial anymore for the Italian carrier. Some of the reasons behind this decision included the limitations to Alitalia’s expansion to North American destinations since they were already well-connected by its partners. Furthermore, airlines that are part of a joint venture share revenues but they do not share the operating costs which are likely to be higher for smaller carriers and may lead to losses.

In contrast, passengers travelling on routes where joint ventures are in place could find distorted competition between operating airlines, as many of them share price and network agreements which limit the competitiveness index. In addition, a structured joint venture field could jeopardise the entry of additional operators, since they would be over-challenged to acquire their market share and eventually generate profits.