The enforcement of the Airline Deregulation Act in the United States in 1978 initiated the liberalization of the airline industry, while the Open Skies1 concept that became broadly accepted in 1995 provided the opportunity to construct today’s global networks. This agreement liberalized regulations governing traffic volume, fares and location entry and permitted code-sharing and other new forms of operation.

Code-sharing allows alliance partners to use their own flight codes and numbers on their partners’ flights as the marketing carrier.

It therefore strengthens marketing capabilities by expanding the respective networks of alliance partners and by adding value to frequent flyer programs through mileage accrual.

Code-sharing and other commercial relationships among airlines have currently developed into three global alliances. ANA is a member of Star Alliance, which five airlines inaugurated in 1997 around a core alliance between United Airlines and Lufthansa. British Airways and American Airlines are the nucleus of oneworld, which was formed in 1998. SkyTeam was launched in 2000 with members KLM Royal Dutch Airlines, Air France, Delta Air Lines and others; in 2002, it merged with the Wings Alliance that was formed in 1993.

Over the past several years, advanced partnerships called “Joint Ventures” have formed within these global alliances.

Several of these global Joint Ventures are operating today.
1. The United States and the Netherlands signed the first Open Skies agreement between the two countries in 1992.

In addition to expanded networks, including the use of code-share flights, the fundamental merits of global alliances are 1) seamless travel through the use of shared airport terminals; 2) improved competitiveness through frequent flyer programs; 3) shared facilities such as airport lounges; and 4) minimization of costs from joint purchasing of goods such as in-flight service items and jet fuel. Moreover, alliances conduct periodic reciprocal safety audits and assist members in dealing with unexpected incidents. Alliances regularly conduct drills and prepare themselves so that they can initiate immediate action to handle emergencies. Such action includes setting up customer support, information gathering and linguistic support. Each global alliance has concentrated on improving competitiveness through these types of initiatives, but the emergence of LCCs and other factors are reshaping the airline industry’s landscape. In addition to competition among alliances, airlines must now compete with LCCs that do not belong to any alliance as well as Middle Eastern carriers. Continental Airlines changed its alliance from SkyTeam to Star Alliance in October 2009, which exemplifies the complexity of the landscape. We are also witnessing an increase in the number of airlines that are partnering with airlines from other alliances. These types of partnerships are the result of aggressive competition and complicated route networks. We may even see more dynamic changes in the future.

A Joint Venture is a strategic partnership that can be commenced with antitrust immunity (ATI) approval. ATI is granted on the condition that the approved Joint Venture would bring various benefits to travelers such as improved flight schedules and discounted airfares.(Please refer to page 34 for a detailed explanation of the term.)

Before Joint Ventures existed, network coordination, marketing and pricing discussions among carriers were prohibited by antitrust laws in each country. However, after Joint Ventures began, airlines were able to coordinate networks, flight frequencies and schedules as well as provide discounted and harmonized fares to the market.

These initiatives have been designed to maximize the revenues of the Joint Venture as a whole, and the revenues are pooled and shared among the Joint Venture partner carriers in accordance with a certain methodology. A Joint Venture is in fact a joint business that extends beyond existing partnerships encompassing simply code-sharing or being a member of a global alliance.

The first Joint Venture started in 1992 between KLM Royal Dutch Airlines and Northwest Airlines (its name at the time) with ATI approval. The first Joint Venture among Star Alliance carriers was formed by United Airlines, Air Canada and Lufthansa in their trans-Atlantic routes. After 20 years, the Joint Ventures themselves are now more sophisticated and able to bring more benefits to travelers, and at the same time they create value and increase competitiveness for participating carriers.