Alliances are the best means to operate under the current international regulatory regime. In the last decade, there has been a tremendous increase in the number of alliances and partnerships amongst airlines. According to Airline business, the number of partnerships amongst airlines has increased by 57% in 2004 as compared to 1994; an increase from 280 partnerships to 486.
Alliances are generally strategies that companies use when acquiring or internal development as a means of growing is not an option. Sometimes, even if internal development is possible, alliances are preferable as it provides quicker access to new markets. Alliances vary in degrees of commitment from simple marketing cooperation to complete mergers or acquisitions.
A majority of the airlines are interested to extend their network beyond the markets they currently serve. However, due to regulatory restrictions on market access, ownership and control they have been pushed towards the formation of strategic alliance groupings. Legislation aimed at protecting national interests has meant that it is virtually impossible to acquire a controlling interest in airlines in countries or trading blocks outside those in which an airline is owned and operated. For example, a non-US airline can only have up to a maximum of 25% of controlling share in any US carrier. A non-EU carrier can purchase up to a maximum of 49% of an EU carrier. To grow naturally is also subject to restrictions such as the limitations of growing in home markets, or lack of regulatory approval to access foreign markets, or lack of slots at airports to which the airline wants to operate. As a result, over the past few years, several alliance groupings have emerged.
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