The impact of market liberalization on formation of airline alliances

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.