How Do Pre-Alliance Motives and Strategies Affect Post-Alliance Performance in the Airline Industry?: A Future Research Agenda

Introduction

The global airline industry has currently experienced uppermost changes such as an intensive rivalry, a rapid growth of technological explosion, environmental and terrorist events, regulations, new entrants etc. These forces have shaken the airline industry. Hence, airline corporations have to sustain their competitive advantages and performance that can be built through alliance memberships. The pressure of forming appropriate alliance strategy is increasing due to the above forces. In fact, there are three major global airline alliances. The largest one is Star alliance, which in 2011 hold 26% of the market measured by available seat kilometers; the second is Skyteam with 15%; the third one is Oneworld with 14% (Centreforaviation.com). In summary, each alliance demonstrates that pre-alliance motives, strategies and performance are inter-related.

In the last two decades, the growing body in the literature has explored relationships in the inter-firm alliances and their impact on the firms’ performance (Baum, Calabrese, & Silverman, 2000; McEvily & Zaheer, 1999; Rowley, Behrens, & Krackhardt, 2000). For example, several scholars also apply theoretical arguments to the airline alliances to understanding how to improve performance as indicated by consumers’ welfare and perceptions (Brueckner, 2001; J. Park, 1997), fares, passenger volume and traffic output (Brueckner & Whalen, 2000; Oum, Park, & Zhang, 1996; J. Park, Park, & Zhang, 2003). Despite positive pre-alliance motivations as recognized in most cases, after certain alliances strategies are formed and implemented, the post-alliance performance is not always satisfactory. Therefore, the question of: how do pre-alliance motives and strategies affect post-alliance performance in the airline industry seems under-researched. This study thus explores the triple relationships among: motives, strategies and performance.

The first element of triple relationships is the motives of alliance. Firms may have variety of incentives to engage in an international alliance such as building a global network, seeking entry opportunities of foreign markets, and reducing cost (Gudmundsson & Rhoades, 2001). These motives provide only part of the story. Additional reasons can be institutional conditions such as regulations and norms that shape the growth of this particular industry (Luo, 2007). Strategic partnerships provide airlines a platform to share risks and collectively respond to institutional restrictions (Amankwah-Amoah & Debrah, 2011). When two or more airlines join the membership of strategic alliances, they can better access to scarce resources (Oum, Park, Kim, & Yu, 2004), transfer knowledge (Inkpen, 1995), and operational cost reductions (J. Park, Zhang, & Zhang, 2001). Therefore, alliances may arguably enhance firm’s competitive advantage which influences firms’ performance. This debate has not been well established in the airline industry.