A joint venture (JV) can be called a business agreement in which two or more companies consent to merge their sources with the intention of achieving a particular task. The project may be a new business operation or some other activity. Along with this talking about airlines, a foremost move in airline contribution was the arrival of joint ventures (JVs). Further, in many nations it needed narrow vaccination from anti-trust laws. JV alliance in airlines involves flight arrangement and pricing synchronization along with other business-related deeds (Avenali, et al. 2018). The concord allows companies to enlarge their business because it is the airlines firm support each other in domestic market. Addition to it, further the entire report is focused on airline joint venture. Moreover, the current study also evaluates the causes and effect of the JV on airlines.
Causes of Airlines Joint Venture
It has been seen joint venture gives many benefit to the companies. Further, in the year 1997, the first joint venture (JV) was made between Northwest Airlines and KLM and since then organization is constructing JV till now. Moreover, airline involvement is more multifaceted and superior than ever, both for improved and for inferior. It has been seen that airlines desire to work with other companies of airlines that best complement them. Additionally, agreement formed in many different forms. Along with this, interline agreements are the most fundamental type of agreement that can be made between airlines (Baxter, 2019). When people are travelling on several airlines in the same journey an inter-settlement between airlines will make. It is simply a commercial agreement to handle travellers. Along with this, this agreement permits customers to ensure their luggage through their last destination.
Moreover, a code share accord is the advanced level of collaboration between the airlines. When two airlines understand the worth in working mutually, in order to this the airline organization made a decision to put “codes” in each other’s flights (Yan, and Luo, 2016). The main advantage is that it does business for airlines that are in code share contracts with each other. For instance, Air Canada is element of the Star Alliance and Cathay is component of Pacific One world. They have mutually decided to code share on both ends of their air travels between Canada and Hong Kong. In addition, Air Canada flies to Hong Kong, in this way there is no Star Alliance airline has a centre in Hong Kong. Air Canada cannot help the customers who wish to travel outside Hong Kong. For resolving this issue, Air Canada provides passengers with entrée to more destinations at various points in Asia from Hong Kong by Cathay Pacific. This was the main cause because of which two airlines get into Joint Venture. On the other side, Cathay Pacific flutter to both Toronto and Vancouver, in the contrast Cathay Pacific provides passengers to Air Canada routes at various points in Canada, allowing travellers admittance to more destinations (Ustaömer, Durmaz, and Lei, 2015). As a result, code share agreement makes beneficial for both the firms. Many airline companies get into Joint Venture in order to take mutual benefits; this is also one of the costs of companies for getting into JV (Bilotkach, and Hüschelrath, 2019).
It has been summarised from the above study that the overall research is focused on the airline joint venture. Globalization has steadily increasing; in this way individual shipper are most of the times not capable to attain the requirements due to price, resources, technology limitations. In order to fulfil the needs and demands, airlines have to make agreement that facilitate consumers to take a trip on numerous airlines with a single buy. Further, it has been observed in the above report that there are diverse forms of agreements in the airline industry nowadays. Code share, alliances and interline are the forms of JV explained in the research. The study also investigate the cause of the airline JV as such cost reduction, increasing economy, customer welfare and many more. Moreover, it gives the airline caters numerous benefits in the business. Economy, facility, technology, sources and all affect positively by JV.
Avenali, A., Bracaglia, V., D’Alfonso, T. and Reverberi, P., 2018. Strategic formation and welfare effects of airline-high speed rail agreements. Transportation Research Part B: Methodological, 117, pp.393-411.
Baxter, G., 2019. Capturing and Delivering Value in the Trans-Atlantic Air Travel Market: The Case of the Air France-KLM, Delta Air Lines, and Virgin Atlantic Airways Strategic Joint Venture. MAD-Magazine of Aviation Development, 7(1), pp.17-37.
Bilotkach, V. and Hüschelrath, K., 2019. Balancing competition and cooperation: Evidence from transatlantic airline markets. Transportation Research Part A: Policy and Practice, 120, pp.1-16.
Fageda, X., Flores-Fillol, R. and Theilen, B., 2019. Joint Ventures in the Transatlantic Airline Market. Airline Economics in Europe (Advances in Airline Economics, 8, pp.117-136.
Israel, M.A., Calzaretta, R. and Eilat, Y., 2017. Airline Cooperation and International Travel: Analyses of the Impact of Antitrust Immunity and Joint Ventures on Fares and Traffic. Available at SSRN 2921941.
Khan, Z., Shenkar, O. and Lew, Y.K., 2015. Knowledge transfer from international joint ventures to local suppliers in a developing economy. Journal of International Business Studies, 46(6), pp.656-675.
Kim, T.J., Kim, K.W., Park, S.S. and Lee, S.M., 2018. A Study of the Effect of Perceived Service Quality under the New Service Environment on Formulating Airline’s Global Brand (Joint Venture) Image. Journal of the Korean Society for Aviation and Aeronautics, 26(3), pp.66-76.
Kleymann, B. and Seristö, H., 2017. Managing strategic airline alliances. Routledge.
Miller, N.H. and Weinberg, M.C., 2017. Understanding the price effects of the MillerCoors joint venture. Econometrica, 85(6), pp.1763-1791.
Mohr, A., Wang, C. and Goerzen, A., 2016. The impact of partner diversity within multiparty international joint ventures. International business review, 25(4), pp.883-894.
Moss, D.L., 2019. Alliances and Antitrust Immunity: Why Domestic Airline Competition Matters. The Air and Space Lawyer, 32(1), pp.1-18.
Samano, M., Santugini, M. and Zaccour, G., 2017. Dynamics in research joint ventures and R&D collaborations. Journal of Economic Dynamics and Control, 77, pp.70-92.
Ustaömer, T.C., Durmaz, V. and Lei, Z., 2015. The effect of joint ventures on airline competition: The case of American airlines, British airways and Iberia joint business. Procedia-Social and behavioral sciences, 210, pp.430-439.
Yan, A. and Luo, Y., 2016. International Joint Ventures: Theory and Practice: Theory and Practice. Routledge.