Case Details

This case examines joint ventures between major airlines, highlighting the necessity of cooperation while also acknowledging the challenges of fully eliminating competition between partners. The airline industry is unique in that the services offered by competing companies can be complementary: a passenger traveling primarily with one airline may need to connect via another airline for certain segments of their journey. This is why such collaborations are generally permitted by governments, although authorities typically scrutinize and restrict collusion in order to promote healthy competition. The case describes how airline partners coordinate on scheduling, pricing, routes, networks, capacity, and marketing and sales efforts. They must also develop a specific revenue-sharing model to align incentives and enforce the coordination.

Despite the partnership, the parties still have strong incentives to compete. The case discusses three major challenges faced in airline joint ventures. For long-haul route collaborations, each airline is often hesitant to share its key customers with its partner. In short-haul route collaborations, an airline may benefit from price competition at the expense of its partner, and it might also expand capacity to divert passengers to its own long-haul routes, which can undermine the efficiency of collaborative short-haul operations.