Development of a synergy audit model for sustainability of horizontal airline alliances
Date
2003-12
Authors
Muller, Dirk D. (Dirk Dieter)
Journal Title
Journal ISSN
Volume Title
Publisher
Stellenbosch : Stellenbosch University
Abstract
ENGLISH ABSTRACT: For more than a decade there has been an economic need to mitigate the negative effects of
the air transport industry's innate sensitivity to cyclical developments as well as the effects of
its inherent lack of substantial profits. The past 20 years were additionally marked by a
change in policy that prompted various countries to liberalise and privatise their civil
passenger air transportation industry. At the same time, airlines' business ambitions became
more global, tapping into markets beyond countries' or continents' main gateways. All three
aspects started to change the pattern of airline competition and required new business models.
Key features of airlines' novel business models are geographic expansion and thus market
development. Global expansion strategies and market development activities in passenger air
transportation are, however, not easily and fluidly executable. The airline industry is, to some
extent, still nationally regulated, thus impeding passenger airlines from fully participating in
the global market-scene and from freely entering promising geographies. Concomitantly, the
competitive landscape in which scheduled passenger airlines operate changed drastically, with
travel value chains occasionally undergoing revolutionary transformations on both the supply
and the demand side. Finally, the air transport service reveals several peculiarities that impact
its production, distribution and consummation. These characteristics have inspired the
execution of novel forms of competitive strategies that are described and critically discussed
in this dissertation.
Within this context, a main root cause for passenger airline partnerships appears to be its
continued regulation and the circumvention thereof through the horizontal joining of forces,
thus emulating concentration tendencies that have long been a fixture in other globalising
industries. Consequently, horizontal interairline partnerships were induced and identified as a
key competitive device with which to weather the challenges of the new air transport rivalry
structures, the increasingly deregulated environment, and the impediments of sustained
market regulation.
All major airlines are now involved in some type of horizontal collaboration. The spectrum of
these linkages is wide and ranges from loose, unattached, operative agreements to long-term,
far-reaching, strategic ones, the most salient forms and instruments of which are thoroughly
scrutinised in this dissertation. This dissertation additionally presents the general core
inducing economic drivers of carrier interrelationship, which are cost reduction, revenue
generation and corporate power considerations. While these aspects offer a multitude of possible partnership forms and instruments, the bulk of airline linkages, however, is presently
constituted of joint revenue generation and, consequently, jointly pursued marketing and
market expansion goals. In view of these causes, the present dissertation engages in a
profound discussion of the rationales behind interairline partnerships, their likely evolution
and effects on management practice.
Essentially, the key importance of airline partnerships in meeting basic economic imperatives
on the one hand, while circumventing persistent regulation on the other, questions the
sustainability of incumbent carriers' current business models. There are clear indications that
a structured sequence of events in establishing interairline linkages is a key success factor for
horizontal airline partnerships. However, the empirical examination of contemporary
partnerships' governance structures and managerial practice strongly points to a lack of ample
tools with which to establish airline partnerships, select the appropriate match between
alliance goals and intensity, and govern alliances during their entire life-cycles. This
drawback seems particularly unacceptable in view of the urgent requirement for more
appropriate managerial practice in today's discontinuous air transport business environment,
and speaks loudly of the need for a framework with which to enhance airline partnership
output. Most ideally, a coherent, structured sequence of events should be followed in
partnership formation, organisational set-up and management in order to bring an alliance to
fruition.
On this basis, the establishment of a collaboration governance organisation, adequately
mirroring the specific partnership type and meeting the specific demands of all partners
involved, is equally identified and described as a fundamental success driver in this
dissertation. Further structural, organisational and functional issues thereafter need to be
considered in order to transform the joint business venture of two horizontally allied carriers
into a venture for mutual success. The most essential of these are introduced in this
dissertation.
Synergy plays a central role in this context. Synergy, as the overreaching intention and result
of working together towards a common goal, must be anchored as a prime objective of all
forms of partnership activities. Synergy through interfirm linkages can be derived from
various collaborative areas and is greatly influenced by both internal and external factors. One
gauge for synergy, in particular for the transformation of synergy potentials into synergy
effects, is partnership intensity. The measurement of partnership intensity can be used to
perpetually monitor the benefits of partnership activities. At the same time, inconsistent or uneven partnership intensity can indicate the existence of dissynergies or frailties in the
alliance. The underlying theories of collaborative synergy generation, its main drivers and
impediments, with particular reference to horizontal partnerships of scheduled passenger
airlines, are explored in this dissertation.
In recognition of the theoretical and practical background of airline partnerships and the
acknowledged problems associated with their establishment and operation, the present
dissertation proposes a novel model dynamically supporting the quest for synergy in airline
interrelationships. Incorporating the goals of synergy generation and its continual
measurement in interairline partnerships, the synergy audit is designed as a dynamic
managerial tool. The synergy audit functions as a recurring device for unleashing all the
positive partnership benefits of collaborative scope and width. It aids airline alliance
management in transforming the desired benefits of partnership activities - synergy
potentials - into real, tangible synergy effects during the entire partnership life cycle. The tool
A.PIE (Airline Partnership Intensity Evaluator) supports the synergy audit and, which
idiosyncratic to the airline industry, multidimensionally applies the deduced relationship of
partnership intensity and synergy to the most salient partnership areas and functions.
The present dissertation shapes understanding of the true drivers and complexities of today's
airline partnerships. It proposes a circular, multidimensional and dynamic model, thus
attempting to enhance the set-up, performance and output of horizontal airline collaboration.
From this point of view it endeavours to fill the gap identified in contemporary airline
partnership management and practice.
AFRIKAANSE OPSOMMING: Sien asb volteks vir opsomming
AFRIKAANSE OPSOMMING: Sien asb volteks vir opsomming
Description
Thesis (PhD)--Stellenbosch University, 2003.
Keywords
Airlines, Airlines -- International cooperation, Partnership, Airlines -- Management, Strategic alliances (Business), Interorganizational relations, Dissertations -- Business management, Theses -- Business management