The Effects Of Airline Strategic Alliances And Competitive Dynamics On Performance Of Airlines

With the increased globalization of competition，the Chinese enterprises usually needs tojoin the internal and external dynamic competitions among alliances through the decisions ofstrategic alliances to enhance their competitiveness and profitability during the internationaloperation. Due to the global aviation industry is more in line with the typical characteristics ofthis paper, the author used the specific data of the aviation industry to study the strategicalliances and dynamic competition of airlines combining the methods of empirical research,theoretical and case study.Whether to join airline alliances is a strategic choice for the airline’s future survival anddevelopment, because the airline network is the most critical factor among the completion ofairlines. Joining airline alliances and participating in the alliance network competition are twopaths to improve airline international competitiveness and profitability, which is of greatstrategic significance for promoting the internationalization and development of Chineseairlines. How to make airline alliance decisions based on the actual situation of airlines; howto improve the performance in the competition of the airline alliance network structure; howto share the benefits effectively among the internal cooperation and competition of airlinealliances are the primary problems to be solved urgently. This essay mainly focus on the studyon how airline alliances and network influence the performance of airlines by using themethods of empirical study, combining theoretical research and case study, at the basis ofgame theory, decision analysis, network structure analysis, theory of consumer behavior andthe firm, multivariate statistics, supply chain coordination system etc.First it makes quantitative analysis on the influential factors of airlines joining alliances.Most of other researches are focusing on the qualitative analysis about which factors are thedetermining ones for airlines joining alliances, which is not so convincible. The author hasmade quantitative analysis on the influential factors using a discrete choice model and anested logic model with the12years’ data from75airlines of the world, and found thatpassenger traffic, the number of fleet, alliance market share and alliance pressure are thedeterminants of airlines to join airline alliances. By the relative risk ratio analysis, the authorhas also found that the strategic decision of an airline is not to select a particular airlinealliance, but whether or not to join the alliance, which is different from traditional research.This conclusion can not only enrich the decision theory of airline alliances, but also help toguide the decision whether to join the airline alliance. This essay also discusses how the network structure dynamic competition of alliancesaffects the performance of airline since it joined airline alliances. A balanced decision modelof different combinations of alliance network structures has been set up through combiningthe airline network structures and the difference of products, external choice and marginalcosts. It investigates the effects of different combinations of airline network structures on theairline performance by numerical analysis, and the results show that the airline profit is aconcave function of product differentiation; airline profits may increase, decrease or notchange with marginal costs increasing, which are different from traditional research; Secondly,different combinations of balancing network structure correspond to different levels of profit.This conclusion can direct airlines to select a different network structure in order to improvethe airline performance in the competition of the airline network structures according to thedifference of the product and the cost of the external choice,This essay discusses the effects of benefits sharing system on the airline performance inthe cooperation and competition among the airline alliances members. By building twodecision-making model of airline alliance network consisted by risk-averse airlines and usingthe mean-standard deviation risk measurement criteria to analyze the optimaldecision-making behavior under the centralized decision-making of airline alliances, theauthor found the risk aversion characteristics of the airline will reduce fares, thereby reducingthe overall performance of the airline alliance. Under the decentralized decision-making ofairline alliances, it proposes an optimal benefits sharing system, which can not only maximizethe individual benefits of airline alliances members, but also maximize the overall interests ofthe airline alliance, achieving perfect coordination of airline alliances; it also finds that thebenefits sharing system can improve the performance level, thus the greater of the riskaversion, the greater of the airline’s performance level will be. This conclusion can not onlyenrich the benefits sharing system theory of airline alliances, but also direct airline alliances touse an optimal benefits sharing system to improve the level of airlines performance inpractice.Although this paper is based on research of the aviation industry, the solution is for thegeneral theoretical issues, which meansthe conclusions can not only solve the problem of theaviation industry, but also solve the problem of the other Chinese enterprises enhancing theirinternational competition and performance by strategic alliances planning and attendinginternal and external competition during the international operation. So this paper couldprovide practical and theoretical implications for Chinese enterprises on how to improveinternational competitiveness and profitability in the dynamic competition of the global strategic alliances.