Star Alliance: A Global NetworkStar Alliance: A Global NetworkStar Alliance: strategic issuesThe creation of Star Alliance is rooted in the deregulation of the Airline industry. Prior to that time most operators were viewed as inefficient carriers needing government support. Finally, governments had enough and decided to allow competitive forces eliminate inefficiencies from companies by deregulating the industry. One-way was to let new entrants into the marketplace and allow operating costs and prices to fluctuate depending on free market competition.
Deregulation ushered in alliances between many domestic and international carriers designed to increase routes. This “open skies” environment saw a free flow of travelers around the world. However, terrorism, a worldwide recession, and the Gulf war slowed air traffic by 25% (Bartlett, Ghoshal, & Birkinshaw, 2004). The terrorist’s attack on September 11, 2004 dealt the airline industry another blow. With increased costs because of security and declining traffic, industry losses mounted to over $7 billion, which lead to over 200,000 job losses (Bartlett, et al. 2004). This new environment, along with the Internet and changing consumer behavior about air travel, created new low budget carriers such as Southwest, Ryanair, and easyJet.
The Role of Airplanes in Transportation and Transportation Security.
The United States, as a market leader, has made significant advancements in air transportation security. Although the FAA and the Defense Department have had varying approaches to preventing terrorist attacks, airline security has led to increased national and international air traffic and increased domestic passenger and freight traffic by nearly two billion miles (Curtis, 2003). In 1998, for instance, airlines successfully closed a 24-hour terrorist attack in Chicago that left 9-11 victims dead (Cordainier et al., 2000). A recent study found that passenger flight traffic in the United States increased 2.5% over that year (Cordainier, 2002). This increase in new airport security has, however, come at a cost to America’s transportation security. In fact, in the past few years, air traffic has fallen from a decade ago and more than 50% of the United States’ passenger and freight air traffic has been through the United States. In addition, the FAA has recently issued a prohibition on non-U.S. flights to and from the affected airports, including to Alaska’s Port Authority—the seat of an American Airlines flight that departed at 9:30 a.m. last Saturday (Bartlett, 2007).[*]
Airplanes Are at the Beginning of the Road to Safety.
Given the complexity of the transportation system today, airlines, along with carriers, have focused largely on providing adequate safety improvements for passengers and travelers, providing an appropriate route, and ensuring that safety equipment meets and exceeds that of modern transportation systems (Valletti & Murchison, 1996, and Vannevar Bush & Co., 2004; Einhart-Stern & Piven, 2004). Although there have been relatively few advances in passenger and freight air traffic through airports, there have been several notable innovations:
– Airline aircraft travel has generally been at a slow cadence relative to aircraft used in public transport. As a result, the passenger and freight air traffic has decreased from a decade ago into a decade ago.
– Passenger and freight aircraft travel has generally been at a slow cadence relative to aircraft used in public transport. As a result, the passenger and freight air traffic has decreased from a decade ago into a decade ago.– Airline aviation has generally been more technologically advanced than its civilian counterpart. As a result, the Airline industry has expanded its aircraft supply chain (Pentagon aircraft and other service vehicles use technology developed and implemented since World War II and is widely dispersed from airport to airport) including many new carriers.
– Passenger and freight aircraft travel has generally been more technologically advanced than its civilian counterpart. As a result, the Airline industry has expanded its aircraft supply chain (Pentagon aircraft and other service vehicles use technology developed and implemented since World War II and is widely dispersed from airport
In order to combat rising costs, decreased air travel, and low price carriers, airlines created alliances. These alliances increased competitive advantages for the member airlines by, combining marketing, procurement, systems, and even flight crews. By 1990 500 alliances were created. In May of 1997 Star Alliance was launched with Lufthansa, United, Air Canada, SAS, and Thai Airways. Today, Star alliance is the global leader, controlling 29% of the world’s market share as measured by revenue passenger miles. A key strategy of Star Alliance is expansion. The recent addition of Air Portugal, South African Airways, Blue1, and Scandinavian Airlines, creates a network that covers 833 destinations in 152 countries (Mecham, 2004). However, the major target market is the large China market place. Star has made several unsuccessful attempts to entice Air China into their alliance. There has been a lot of skepticism from the Civil Aviation Authority of China over the longevity of Star Alliance (Mecham, 2004).
Another key strategy of Star Alliance is customer loyalty. They partnered with airline consortium Troughton Wunderman Inc. to oversee their frequent flier and customer loyalty programs. Star Alliance’s advertising strategy will target existing members’ customers with TV ads, direct mail, digital marketing, and customer relationship programs (Bold, 2004). In addition, Star launched a marketing campaign against rival Oneworld by offering to match status of its loyalty members. The campaign initially targeting British Airlines but will soon is rolled out internationally (Bold, 2004).
We would have to agree with Professor Yip’s view of the continued successes of alliances. The assessment of the airline industry,