The effects of the airline strategic alliance group on member airlines' productivity during pre-mature stage

Abstract

Airline strategic alliance groups have become an important part of the airline industry and tend to have dominance in many markets. Airlines want to join a strategic alliance group in order to expand their business and reduce their costs. However, the true benefits of a strategic alliance group still remain unclear. This study adopted panel regression model to analyse and reveal the effects of joining a strategic alliance group on airline performance. Our results suggest that alliance group effects are limited in terms of improving airline productivity during the global airline alliance group's pre-mature stage. Airlines joining the alliance group may not necessarily achieve significant productivity gains. Additionally, the study also did not find any significant effect of the size of alliance groups and membership duration on airline productivity change. However, the results suggest that as the number of members in the airline alliance group increases, member airlines' productivity will increase accordingly until a certain point but will then fall thereafter. Furthermore, the study indicates that an airline's productivity level may drop as its alliance membership duration increases initially until it reaches a certain point; after which, performance will start to increase over time.