Analysis of Strategic Alliance As A Source of Competitive Ad PDF

TIACA Juan Carlos Serna 1
Analysis of Strategic Alliances as a Source of Competitive

Advantage in the Airline Cargo Business -
Evaluation of SkyTeam Cargo and WOW Alliance.

Juan Carlos Serna Velez
TIACA Masters Scholarship Program Recipient 2006

Dissertation presented in partial fulfilment of the
requirements for the International MBA Programme

University of Greenwich
Business School

July 2007

Acknowledgements

To Soly, my love and unconditional support during this long year.
Thanks to you, a dream has come true.

To my family, for their permanent support and love.

To my friends at University of Greenwich, thanks for everything I
have learned from you.

To TIACA Education Committee for their support through the
Masters Scholarship Program.

Abstract

Utilization of strategic alliances in the airline industry is not a new
task. However, evolution in the air cargo side of the business came
after the consolidation of major alliances in the passenger side. This
document, intends to analyze the utilization of strategic alliances as
a source of competitive advantage in the air cargo industry.
Evaluation of specific cases, such as WOW Alliance and SkyTeam
Cargo are included as examples of such type of partnership
agreements in this sector.

As part of the evaluation, a disaggregated model of activities
conforming the Value Chain for a Cargo Airline is presented, being
an important tool when analyzing possible strategic cooperation
between airlines. Additionally, adapted implementation practices for
strategic alliances are included as a point of reference for future
partnership studies.

This document suggests that strategic alliances have been a source
of competitive advantage for the alliance members; however,
recommends additional research on the perception and effects on
customers of such type of cooperation.


Table of Contents

INTRODUCTION .............................................................................................7
1. COMPANY & INDUSTRY OVERVIEW..................................................10
1.1. WOW ALLIANCE............................................................................10
1.2. SKYTEAM CARGO ALLIANCE......................................................11
1.3. STRUCTURAL ANALYSIS OF THE AIR CARGO INDUSTRY..........14
1.4. AIR CARGO INDUSTRY OVERVIEW................................................17
1.5. THE TOPIC, AIMS AND OBJECTIVES..............................................21
2. LITERATURE REVIEW STRATEGIC ALLIANCES IN AIR CARGO..23
2.1. Previous Academic Studies on Strategic Alliances .....................................23
2.2. Strategic Alliances: Definitions and challenges...........................................23
2.3. Types of Strategic Alliances ..........................................................................26
2.4. Experiences of Strategic Alliances in Airlines.............................................27
2.5. Why Strategic Alliances? Reasons behind the decision ..........................31
2.6. Critical Success Factors in Alliance Formation..........................................36
2.7. Are the current SAs in the industry being a source of competitive
advantage?..................................................................................................................38
2.8. Are customers perceiving the benefits of the alliances?.............................40
2.9. Implementation Practices for Strategic Alliances.......................................41
3. METHODOLOGY AND LIMITATIONS OF THE PAPER .......................42
4. VALUE CHAIN ANALYSIS FOR A CARGO AIRLINE ..........................45
4.1.1. Inbound Logistics.......................................................................................46
4.1.2. Operations Activities .................................................................................49
4.1.3. Outbound Logistics....................................................................................51
4.1.4. Marketing and Sales ..................................................................................51
4.1.5. Service Activities ........................................................................................52
4.1.6. Other Primary Activities...........................................................................53
4.1.7. Support Activity Human Resource Management................................54
4.1.8. Support Activity Quality Control...........................................................55
4.1.9. Support Activity Corporate Support ....................................................55
5. FRAMEWORKS FOR IMPLEMENTATION OF STRATEGIC
ALLIANCES IN THE AIR CARGO................................................................57
6. CONCLUSIONS AND RECOMMENDATIONS......................................63
ANNEXES .....................................................................................................66
REFERENCE LIST........................................................................................78
List of Figures & Tables

Figures

Figure 1 The Five Competitive Forces (Porter, 1980)
Figure 2 Top 20 Freight markets in 2025 according to Airbus.
Figure 3 World Air Cargo Traffic 2006 2025
Figure 4 The Generic Value Chain (Porter, 1985)
Figure 5 Inbound Logistics Activities modified for a Cargo Airline.
Figure 6 Operations Activities Cargo Airline
Figure 7 Sales & Marketing Activities
Figure 8 Post - Service Experience Activities Cargo Airline
Figure 9 Primary Activities Cargo Airline
Figure 10 Value Chain Model for a cargo airline
Figure 11 Strategic Alliance Objectives

Tables

Table 1 Revenue & Tonnage SkyTeam Cargo Alliance Members
Table 2 Growth Rates 2005 by Major Market
Table 3 - Airline Alliances in the global airline industry 1994 1999


Introduction

The greatest change in corporate culture, and the way business
is being conducted, may be the accelerating growth of
relationships based not on ownership, but on partnership
(Drucker, 1996)

The concept of Strategic Alliance has become during the last
decade a usual term within the business language all over the
world. Its utilization is currently so wide, that when searching in
Google for the term Strategic Alliances, it took only 0.28
seconds to show 11.000.000 (Eleven million) possible links
related to that concept.

Despite the fact that academics and consultants see in strategic
alliances a source of competitive advantage and supports with
multiple benefits and reasons this type of partnership ventures,
high levels of failure showed by statistics presented by different
studies makes the development and implementation of strategic
alliances a challenging task.

In the airline industry the utilization of strategic alliances is not
new. During the 1990s, passenger airlines supported their
growth and expansion to international markets in the creation of
strategic alliances as a result of deregulation of the industry and
the applicability of code-share agreements. In the cargo side of
the business, this type of integration came late and only at the
beginning of year 2000, major alliance initiatives were presented
into the market with the launching of SkyTeam Cargo and
WOW Alliance. These partnership initiatives were the response
by alliances members to multiple challenges present in a highly-
regulated, restricted, highly competed, low margin air cargo
industry. The need for competitiveness as individual
organizations and as a group of companies involved in a strategic
alliance is a key element for their future success and survival.

The concept of competitive advantage was presented by Porter
(1985) and it relates to the ability of an organization to discover
and implement ways of competing that are unique and distinctive
from those of their competitors and that can be sustained over
time. The competitive position of an organization can be
measured by their capacity of creating value, and therefore, the
Value Chain model proposed by Porter is a useful tool to analyze
such capability.

In this document, I intend to evaluate three main issues related
to the fact that strategic alliances are a source of competitive
advantage in the air cargo business. The first one is to evaluate
the extent in which strategic alliances are a source of competitive
advantage for the companies engaged in these partnerships,
understanding the reasons behind this decision and identifying
the potential benefits of these agreements. Secondly, to identify
how does a strategic alliance add value to customers, by
presenting a disaggregated value chain model for airlines in the
air cargo industry, and as a third point, to identify different
implementation practices that could be used by companies in the
air cargo business to develop strategic alliances.

In order to do what are the aims of my research and this
document, I have structured it as follows:

In section 1, Company and Industry overview is presented. A
brief profile of the WOW and SkyTeam Alliances is shown as well
as an industry analysis made based on Porters Five Forces
Model. Additionally, I include forecast of future trends for the air
cargo industry based on Boeing, Airbus and IATA sources.

Section 2 contains the results of my secondary data research on
strategic alliances. In here, I analyze different issues related to
the topic, including types of strategic alliances, the reasons
behind such decisions, key success factors, experiences of
strategic alliances in the airline industry, competitiveness of such
partnerships, how customers perceive these alliances and some
references to academic works on implementation practices.

Section 3 includes information on the methodologies used for
this research and the limitations of this paper.

Section 4 covers an analysis made to the different activities
performed by an air cargo carrier in order to deliver their
services and add value to their customers. Here, I base my
results on Porters Value Chain Model and after disaggregating
the different activities, at the end I present a Value Chain for an
Air Cargo Carrier.

Section 5 presents an adapted framework to be used by air cargo
carriers when evaluating the possibility of participating in
strategic alliances.

At the end, I conclude that it seems to be a general agreement
over the academics that strategic alliances are a source of
competitive advantage. The reality faced by carriers in the air
cargo industry characterized by a protective regulatory
framework in a global economy, low margins and the need to
adjust their organizational structure to be more flexible and
dynamic makes of strategic alliances an adequate and
competitive way to respond to this strategic challenge.


1. Company & Industry Overview

1.1. WOW Alliance

In April 2002, Lufthansa Cargo, Singapore Airlines Cargo - the
second and third biggest international cargo airline according to
IATA (International Air Transport Association)- and SAS, the
Scandinavian giant, joint forces to form an exclusive cargo
alliance named WOW Alliance. On July 5, 2002 Japan Airlines
Cargo decided to join the WOW Alliance, complementing the
network of destinations for the alliances customers and linking
the worlds major trading centers.
Through close cooperation, the alliance partners aim to offer
customers a greatly expanded network and have harmonized
their procedures in order to deliver in a seamless manner their
three WOW offerings: General Cargo, Premium Express and
Dangerous Goods. Although the three products have retained
their established brand names, they now shares key features. No
matter which of the partner airlines transports a shipment in the
alliance's worldwide express network, the customer can count on
the same product promises and service guarantees. Any of three
products can be booked to the destinations within the common
network.
The WOW Alliance vision, according to their website (2006), is
to have the world's leading airfreight and logistics system.
Together, we have the knowledge, experience and motivation to
make it happen. Its philosophy is based on three major
cornerstones that are: Seamless, Safety and Control. The
alliance ensures fully linked systems for Seamless delivery of
goods across five continents. Customers can always be assured
of the Safety of their cargo and with fixed delivery times and a
common tracking system, the alliance offer complete Control - so
customers will always know the status of their cargo. WOW
offers optimal transport solutions with their large network,
linking over 520 destinations in 103 countries.
In Annex # 1 to this document, a brief overview of the
characteristics of each of the three products offered by the WOW
Alliance members is presented. Additionally, in Annex # 2,
information on each of the alliance partners is included, where a
brief profile of each of the airlines is presented to offer better
understanding of the structure of the WOW Alliance.
1.2. SkyTeam Cargo Alliance

On September 2000, four carriers, already partners in the
SkyTeam passenger airline alliance, joined forces for the cargo
market as well. Aeromxico Cargo, Air France Cargo, Delta Air
Logistics and Korean Air Cargo announce the creation of
SkyTeam Cargo. Later in 2001, CSA Cargo and Alitalia Cargo
joined the Sky Team Cargo Alliance expanding the number of
members and the alliances network. Then, between 2004 and
2005, two new members KLM Cargo and Northwest Airlines
Cargo completed the current members participation.

According to the SkyTeam Cargo website (2006), SkyTeam
Cargo has the largest global footprint of any alliance providing
access to all major geographic regions, covering the globes key
trade routes. Since 2000, the alliance has grown from 411 to 728
unduplicated destinations, from 100 to 149 countries served, and
from 14 billion to 26.03 billion freight ton kilometers carried per
year.

SkyTeam Cargo mission statement is We, SkyTeam Cargo,
aim to be the most effective and customer-driven Air Cargo
group in the global logistics industry (SkyTeam Cargo website,
2006).

SkyTeam Cargo's focus is to provide their customers with a truly
global air network, a high quality portfolio of common products,
and ease of access to sale & operations through the single point
of contact & one roof concept. Together, these factors enable
seamless cargo handling and movement throughout SkyTeam
Cargos global network. (SkyTeam Cargo website, 2006).

The expertise of the SkyTeam alliance offers customers the
following benefits:

Global Network: With 545 destinations, 127 countries, 1,200
aircraft and 8,900 daily flights, it provides access to almost
every corner of the globe through an extensive hub system.
Expert Solutions: SkyTeam Cargo partner airlines have
adopted four common product categories under standardized
branding - Equation, Variation, Cohesion, and Dimension - that
have been available across all partners beginning in October
2002.
Seamless Processing: SkyTeam Cargo offers universal
handling procedures, providing consistency among all partners
and a smoother transaction for customers. These services
enable SkyTeam Cargo to provide the simplest solutions for any
needs of customers.
One Roof Service: 59 percent of the freight that moves
through common SkyTeam cities is processed through
integrated warehouse operations or by ground handlers
common for three or more, enhancing the convenience,
reliability and benefits that SkyTeam Cargo customers already
experience.
Single Point of Contact: As a part of providing a centralized
service for booking and sales, SkyTeam Cargo members Air
France, Delta and Korean Air established the U.S. Export Sales
Joint Venture in November of year 2001.
Flexible Service: Flexible service that anticipates customers
need for speedy, personalized solutions.
Extensive Schedules: Extensive schedules ensure fast delivery
night and day, worldwide.
(Sky Team Cargo website, 2006)

In Table 1, information about capacity of cargo moved by the
alliance members and its revenue figures for 2005 is presented:

Carrier

Revenue by Airline
Carried
ton
kilometres

AeroMexico Cargo $136 million 271 million

Air France Cargo $1.714 billion
5.937
billion

Alitalia Cargo $595 million
1.361
billion

CSA Cargo $19.5 million 44.9 million

Delta Air Logistics $520 million
1.923
billion

KLM Cargo $1.178 billion
4.893
billion

Korean Air Cargo $2.1 billion 8.1 billion

Northwest Airlines
Cargo
$0.9 billion 3.5 billion

Table 1 Revenue & Tonnage SkyTeam Cargo Alliance Members
Source: SkyTeam Cargo Website 2006

In Annex # 3, information on each of the alliance partners is
included, where a brief profile of each of the airlines is presented
to offer better understanding of the structure of the SkyTeam
Alliance.

1.3. Structural Analysis of the Air Cargo Industry

The first fundamental determinant of a firms profitability is
industry attractiveness. (Porter, 1985, p. 4). The understanding
of the industry and the forces that drives such profitability is of
great importance when analyzing the competitive position of an
organization. Porter (1980) has presented a model where he
identifies five competitive forces that determines industry
profitability, which are: the entry of new competitors, the threat
of substitutes, the bargaining power of buyers, the bargaining
power of suppliers, and the rivalry among the existing
competitors (see Figure 1).

Figure 1 The Five Competitive Forces (Porter, 1980)

Based on the model presented above, the following is a brief
analysis of the Five Competitive Forces for the Air Cargo
Industry:

Potential
Entrants
Industry
Competitors

Rivalry among
Existing Firms
Substitutes

Buyers

Suppliers

Threats of
New Entrants
Bargaining Power
of Buyers
Bargaining Power
of Suppliers
Threat of
Substitute Products
or Services
Potential Entrants Threats of New Entrants

One of the main characteristics of the airline industry is the
regulatory framework in which it develops. During the past years
efforts of open skies policies have been made, in order to put
the industry in line with the evolution of markets and economies
all over the world, as discussed in the ICAO 5
th
Worldwide Air
Transport Conference in 2003 there is now broad acceptance of
the need for regulatory change, although there are wide
divergences between states and airlines as to how fast and how
far this should go. Advances have been made, with new bilateral
agreements between countries; however, the concept of national
airlines is still around and barriers for new entrants from the
regulatory perspective can be found.

Substitutes Threat of Substitute Products or Service

Main threat from substitute services for the air cargo business is
reflected in the efficiency and competition of other means of
transportation. For the international operation in which cargo
airlines participate, main substitute competition is the maritime
transportation.

However, there is no direct substitution of the service. Still,
differences exist between these two types of services, such as
time of delivery, cost and type of product to be transported. In
the case of the perishable transportation market, efforts have
been made by maritime companies to increase their capability of
maintaining freshness and reducing times, but still there is
significance utilization by companies to move their perishable
cargo via air services.

The existence of other model of transportation and their
efficiencies and increased capabilities to move diverse type of
cargo, presents a challenge to the air cargo business to identify
specific market segments or product niches where value can be
added.

Suppliers Power of bargain of suppliers

Within the numerous suppliers cargo airlines use to fulfill their
needs to run their operation, I would highlight the following
suppliers that I consider play a strategic role:

o Aircraft Providers
o Fuel Providers
o Insurance Companies
o Ground Handling Companies
o Cargo Handling Companies
o Heavy Maintenance Providers

From those above, Fuel Providers currently represent the
most critical supplier for the airline industry. Any gain
obtainable from a negotiation in this area will have a direct
impact on the financial results of their operations. While two
years ago, Fuel Costs comprised 20% of the total costs of an
airline, today, due to sky rocketing prices, we find that they
are responsible for almost 40% of the total cost. Hedging
strategies are needed to be in place in order to minimize
uncertainty and assure some level of control over the
operational costs.

On the other hand, negotiations with Aircraft Providers are of
strategic importance as well. The decisions on the type of
aircraft to operate, the financing of the fleet program
(purchasing aircrafts or leasing them), adequate timing of
negotiation and delivery of fleet are key issues that will
impact the competitive position of the airline in its market.

Buyers Power of bargain of buyers

On this area, the role of the Top Multinational Freight
Forwarding Companies is something to pay attention to. Major
acquisitions between the Freight Forwarding industry have
created very powerful organizations with global presence
strengthening their position in front of the airlines.

Being part of their distribution channel, the Freight
Forwarders have been able to assure control over the volumes
of cargo, by offering logistic solutions for the different
industries they serve. By working directly in the supply chain
of the importers or exporters of the different products, they
have been able in the majority of the cases and markets to
negotiate and make the final decision over carrier utilization
for their customers cargo. Therefore, high power of bargain
of such organizations is suffered by the airlines when
establishing corporate deals with the major freight forwarders.

Industry Competitors Rivalry among current players

There is an active competition between the different carriers
that serve the different markets, however, due to regulatory
issues the level of competition can vary according to the
countries in which the airline is operating. Open Skies
policies, mainly with the United States, have opened the
market for different airlines to participate actively in the
business.

Competition within the air cargo industry can be segmented
as follows:

- Passenger Carriers with Cargo Capacity: Most passenger
airlines, in order to optimize the utilization of the capacity
of their aircraft commercialize cargo services, offering
transportation of goods in the bellies of their aircraft.
Being that passenger revenue their key driver and financial
source of their operation, these types of players are able to
offer low rates in the market and high frequency of flights
for the customer to choose. However, limitations in terms
of dimensions of cargo and type of cargo to be transported
apply to these types of airlines. Examples of airlines among
this group are: American Airlines, British Airways,
Continental Airlines, Delta Airlines, and others.

- Cargo Carriers: Under this group we identify those airlines
that operate dedicated cargo aircrafts. Revenue generated
by their cargo business is their key driver and, different to
the passenger airlines, they compensate the limitation in
number of frequencies with high capacity in each of their
flights. Passenger airlines that run their cargo department
operating cargo aircraft classify under this category.
Examples are: Air France Cargo, Lufthansa Cargo, KLM
Cargo, LAN Cargo, TAMPA Cargo, NCA, others.

- Integrators: Under this category we identify those airlines
dedicated to the courier services and that commercialize
available space in their aircraft for freight operation. Due to
the high revenue generated by their courier services,
freight can be a secondary priority in terms of utilization of
space by these airlines. Examples are FedEx, UPS, TNT,
others.

1.4. Air Cargo Industry Overview

In order to analyze the trends and perspectives for the future of
Air Cargo, I will base my evaluation on results presented by
reports published by Boeing Industries Boeing World Air Cargo
Forecast 2006 2007, Airbus Industries - Airbus Global Market
Forecast 2006 2025 and the International Air Travel
Association (IATA) IATA Passenger and Freight Forecast 2005
2009. These three studies are an important source of
information for the industry and are taken as a point of reference
by multiple industry publications.

Airbus forecasts that air freight expressed in terms of freight-
tonne kilometres (FTK) will grow at a 6% average annual rate
over the 2006-2025 period. The United States (US) domestic
market, still the largest with a 11.9% share of world FTKs in
2006, is also the most mature. Over the next 20 years, fast
growing Chinese exports, as well as its emerging express
market, will radically change the hierarchy of the top freight
markets. (Airbus, 2006)

The export of more time sensitive, high-value and high-tech
goods, has grown fastest among globally traded commodities,
largely contributing to the growth of air freight. As the value of
the goods being exported increases, so does their time
sensitivity and the likelihood they will be shipped by air. (Airbus,
2006)

In Figure 2, I present the Top 20 freight markets in 2025
according to Airbus Global Market Forecast 2006 2025.

Figure 2 Top 20 Freight markets in 2025 according to Airbus.

Boeing, in its World Air Cargo Forecast 2006 2007, makes an
analysis of the performance of the Air Cargo market during
2005, year in which the industry grew 2.0%, following 12.0%
growth in 2004. According to Boeing (2006), a major
contributor to the slowdown in 2005 was the high cost of jet
fuel. The spot jet fuel price increased 42% in 2005, ending at
an average of $1.69 per gallon. During the first six months of
2006, the spot jet fuel price averaged $1.96 per gallon
(Boeing, 2006, p.1). This fuel price increase diverted some
traffic that in other conditions would have moved by air cargo
channels to less expensive forms of transportation, such as
maritime trade lanes.

Economic activity, as measured by world GDP, remains the
primary driver for air cargo industry growth. World GDP grew
3.5% in 2005, following 4.0% growth in 2004. In the near
term, the world economic outlook remains upbeat despite
turmoil in the financial markets, rising oil prices, and increasing
tensions in the Middle East. (Boeing, 2006)

In Table 2, the growth rates for Air Freight in 2005 by major
market, based on Boeing calculations are presented:

2005 Air Freight Growth by
Major Market
Percentage
%
World 2.0
North America - 2.4
Europe North America 1.4
Asia North America 1.3
North America Latin America -2.6
Europe - Asia 9.0
Intra - Asia 6.3
Domestic China 12.2

Table 2 Growth Rates 2005 by Major Market
Source: Boeing World Air Cargo Forecast 2006 2007

With regards to expected growth for the next twenty years,
Boeing present similar results than the ones presented by
Airbus, stating that world air cargo traffic will expand at an
average annual rate of 6.1% for the next two decades, tripling
current traffic levels increasing from 178.1 billion RTKs in
2005 to more than 582.8 RTKs in 2025. (Boeing, 2006, p.1).
Additionally, Boeing evaluated the impact of the Asian market
concluding that Asias air cargo markets will continue to lead
the world air cargo industry in average annual growth rates,
with domestic China and intra-Asia markets expanding 10.8%
and 8.6% per year, respectively. (Boeing, 2006)

Figure 3, presents a chart included in the Boeing World Air
Cargo Forecast, which shows the growth trend for the World Air
Cargo Traffic over the next 20 years.

Figure 3 World Air Cargo Traffic 2006 2025
Source: Boeing World Air Cargo Forecast 2006 2007

Air cargo is only one part of the global goods distribution
network. Shippers demand that shipments arrive at their
destination on time, undamaged, and at a reasonable price,
regardless of transportation mode. Different transport modes
(road, rail, maritime and air) often can move the same
commodities, but for the intercontinental movement of freight,
shippers usually have only two choices: air and maritime.
(Boeing, 2006)

Maritime transport offers the primary benefit of lower cost; air
transport offers the benefit of speed. The maritime industry, as
measured in tonne-kilometers of goods transported, is much
larger than the air cargo industry. In 2005, the world maritime
industry generated a total of 53.4 trillion RTKs of traffic
compared to 178.1 billion RTKs of traffic for the air cargo
industry. (Boeing, 2006)

Air cargo is an essential element in the globalization of
sourcing, manufacturing, assembling, and distribution of goods,
and this trend accounts for much of the growth in air cargo
traffic. Other factors that affect the airborne freight growth rate
include available capacity, cargo yields, jet fuel prices, relative
currency strengths, regulations, and national industrial
initiatives. (Boeing, 2006)

IATA, in its Passenger and Freight Forecast 2005 2009,
forecast a similar growth than what Boeing and Airbus predicts,
stating that international air freight is expected to grow at an
average annual rate of 6.3% between 2005 and 2009 (IATA,
2005, p. 8). On the same line, when evaluating regional
growth, IATA highlights the potential of Asian markets as key
drivers for growth in the industry on the next five years, stating
that routes linked with Asia Pacific, and China and India in
particular, are forecast to show particular strength (IATA,
2005, p. 8).

1.5. The topic, aims and objectives

More than 5.000 joint ventures and many more contractual
alliances, have been launched worldwide in the past five years.
(Bamford et al., 2004, p. 91)

The utilization of strategic alliances as a source of competitive
advantage in todays world is a reality. No matter the size of the
organization or the industry in which it participates, most
organizations see in a strategic alliance an interesting
opportunity of growth, knowledge, efficiency and profitability.

The airline industry has not been aside of this reality, and initially
during the 1990s a wave of alliances came in place in the
passenger airlines industry, boosting their competitive position,
expanding their networks and increasing levels of market share
for members of the alliances. However, is not until the year 2000
when major initiatives of strategic alliances in the air cargo
business took place, as it was presented in the introduction of
this document, with the creation and launching of SkyTeam
Cargo and WOW Alliance.

The discussion over the benefits and value created by such
alliances in the Airline Cargo Industry has been presented by
different specialized publications. However, even though studies
have been made on the passenger alliances (see Glisson et al,
1996; Flores Jr., 1998; Park & Zhang, 2000; Wang & Evans,
2002 among others), few academic studies have been made
focused into the air cargo business alliances and the evaluation
of such partnerships as a source of competitive advantage.

In this document, I intend to cover the following three
objectives, focusing my analysis on the assessment of different
issues involving the case study on SkyTeam Cargo and WOW
Alliance:

- Evaluate the extent in which strategic alliances are a source of
competitive advantage for the companies engaged in these
partnerships, understanding the reasons behind this decision
and identifying the potential benefits of these agreements.

- Identify how does a strategic alliance add value to customers,
by disaggregating the different activities involved in the value
chain of companies participating in these alliances.

- Identify different implementation practices that could be used
by companies in the air cargo business to develop strategic
alliances.


2. Literature Review Strategic Alliances in Air Cargo

2.1. Previous Academic Studies on Strategic Alliances

Strategic alliances have been studied from numerous
perspectives. These perspectives include those of alliance
rationale (Ohmae, 1989; Burgers et al., 1993; Contractor and
Lorange, 1988), the process of alliances (Ring and Van de Ven,
1994; Doz et al., 2000), the transaction costs involved (Parkhe,
1993a), their characteristics (Borys and Jemison, 1989) and
complexity (Killing, 1988) partner selection and development
(Hamel et al., 1989; Osborn and Baughn, 1990; Sheth and
Parvatiyar, 1992; Ring and Van de Ven, 1994; Brouthers et al.,
1995; Doz, 1996; Singh and Mitchell, 1996; Contractor and
Kundu, 1998) or performance measurement and value creation
of alliances (Harrigan, 1986; Kogut, 1988; Parkhe, 1993 a, b;
Dussauge and Garrette, 1995; Chan et al., 1997; Glaister and
Buckley, 1998; Das et al., 1998; Doz and Hamel, 1998; Baum et
al., 2000). (Kleymann, and Seristo, 2001, p. 304)

The effects of airline alliance have been extensively investigated
elsewhere, including emprirical studies by Gellman Research
Associates (USDOT, 1994), Youssef and Hansen (1994), the US
General Accounting Office (USGAO, 1995), Oum et al., (1996),
Brueckner and Whalen (2000), and Park and Zhang (2000). All
of these alliance studies have focused on international alliances
on passenger services. (Zhang et al., 2004, p. 85)

In their article, Airline Alliances Who Benefits?, Morrish &
Hamilton (2002) present a consolidation of major studies in
alliances in the airline industry, which we attach in Annex 4 of
this document.

2.2. Strategic Alliances: Definitions and challenges

The concept of Strategic Alliances has become widely used in the
business language to refer to the different type of partnership
agreements between two or more companies that pursue clear
strategic collaboration objectives, with different levels of possible
integration among the members. The definition presented by
Elmuti & Kathawala (2001, p.205), in my opinion, presents a
very clear idea of what a Strategic Alliance should be about;

Strategic Alliances are partnerships of two or more corporations or business units
that work together to achieve strategically significant objectives that are mutually
beneficial.

From such definition, it is important to highlight the following
three ideas. The first one is the concept of partnerships of two
or more corporations; which opens the definition to the
construction of network alliances, with more than two members
seeking for the benefits of such alliance. In this sense, Elmuti &
Kathawala state that much of the discussion regarding strategic
alliances has typically focused on alliances between two
companies; however, there is an increasing trend towards multi-
company alliances (2001, p.205). Following with this idea,
Gomes-Casseres introduces the concept of constellations, as a
set of firms linked together through such alliances and that
competes in a particular competitive domain; the constellation
may compete against other constellations, or against single
firms (2003, p. 328).

The second idea to evaluate from Elmuti & Kathawalas definition
is the concept of achieving strategically significant objectives.
Is in here, where I consider the main differentiation of Strategic
Alliances over any other type of partnership can be identified.
Companies throughout its business-life establish relationships
with hundreds of companies, from suppliers to competitors, to
customers; ones more deeply integrated or stronger than the
others, however, it is important to clearly identify which of those
partnerships evolve to real strategic partnerships and which
ones are just simple business relationships for the organization.

Bennet, cited by Evans (2001), distinguishes between tactical
alliances which are loose forms of collaboration which exist to
gain marketing benefits and strategic alliances which are a
longer term, and wider in their scope and level of commitment.
Airline tactical alliances frequently focus on code-sharing
agreement and feed arrangements at airport hubs. Strategic
Alliances, whilst incorporating these arrangements, would also
include such aspects as shared airport facilities, synchronised
scheduling, reciprocity on frequent flyer programs, freight
coordination and joint marketing activities. (Evans, 2001, p. 238)

T. Fan et al (2001, p. 350), identify three possible levels of
cooperation: ordinary, tactical and strategic. Ordinary
cooperation activities, in the airline industry, is present when
carriers serving an airport infrequently may choose to ordinarily
outsource the handling of general sales or airport functions to
another carrier or handling agency. These agreements may be
indicative of mutual trust, however, they are not necessarily
indicative of deeper forms of cooperation. At the next level,
tactical cooperation usually takes the form of two carriers cross-
selling each others capacity on selected routes, or one carrier
marketing its code on anothers flight, limiting its cooperation to
specific routes or regions and most of the times the carriers
involved are still marketed as independent organizations.
Strategic alliances, as a difference of the other two, are
characterized by joint, dedicated marketing entities for network-
wide cooperation, characterized by extensive code-sharing,
coordinated schedule and fare planning, reciprocal loyalty
programs with the ultimate goal of delivering seamless
transportation experience across the entire alliance network.

And the last idea that is important to highlight from the definition
of Elmuti & Kathawala is the concept of mutually beneficial. As
in every business relationship, the idea of a win-lose situation is
far from being accepted. Seeking for win-win opportunities for all
the members of the alliance is a critical element for the success
of such partnership in the future.

Other definitions of strategic alliances can be introduced to have
a wider idea of how academics perceive this concept. Wheelen
and Hungar (2000, p. 125) state that a strategic alliance is an
agreement between firms to do business together in ways that
go beyond normal company-to-company dealings, but fall short
or a merger or a full partnership. Ernst & Bamford define an
alliance as an agreement between two or more separate
companies in which there is shared risk, returns, and control, as
well as some operational integration and mutual dependence
(2005, p. 134). Gomes-Casseres (2003, p.328) presents his
definition of alliance as any governance structure to manage an
incomplete contract between separate firms and in which each
partner has limited control, and the same author complements
his definition by stating that an alliance is a way of sharing
control over future decisions and governing future negotiations
between the firms it is a recognition that the initial agreement
is in some sense incomplete (Gomes-Casseres, 1998(a)). Evans
(2001, p. 230) states that the concept of strategic alliances is
defined as a particular horizontal form of inter-organisational
relationship in which two or more organizations collaborate,
without the formation of a separate independent organization, in
order to achieve one or more common strategic objectives.
Porter and Fuller (1986) cited in the work of Evans (2001,
p.236), define strategic alliances as an attractive mechanism for
hedging risk because neither partner bears the full risk and cost
of the alliance activity.

More specifically into the airline industry and the alliances within
that sector, Morrish & Hamilton (2002, p.401) present the idea
that an airline alliance is any collaborative arrangement
between two or more carriers involving joint operations with the
declared intention of improving competitiveness and thereby
enhancing overall performance.

Other new creative concepts have been introduced as well into
the market, such as the concept of Co-opetition, presented by
Rijamampianina et al. and that is defined as The concept of co-
operation and competition with a competitor is known as co-
opetition. (2005, p. 92)

Differentiating between alliances from mergers, Doz and Hamel
(1998, p. xi) have presented for a set of features that are:
In alliances there is much uncertainty and ambiguity;
The manner in which value is created in alliances is not
preordained.
In alliances, the relationships between partners evolve in
ways that are hard to predict.
The playing field in alliances is very unstable or turbulent
todays partner may be tomorrows rival
Alliance relationship management in the long term is usually
more important than the initial formal design
Success in alliances is very much determined by adaptability
to change.

2.3. Types of Strategic Alliances

When analyzing the types of strategic alliances that have been
created and implemented by different companies, academics
tend to classify them based on different criteria. On one hand,
we find those academics that classify the type of strategic
alliances based on the areas of collaboration. In this group, we
find for example the work of a study of Coopers and Lybrand
(1997) presented by Elmuti & Kathawala (2001, p. 207):

In a study by Coopers and Lybrand (1997), they identified the following types of
alliances, and found their clients were engaged in them as follows:
o Joint marketing/promotion, 54%
o Joing selling/distribution, 42%
o Production, 26%
o Design collaboration, 23%
o Technology licensing, 22%
o Research and development contracts, 19%
o Other outsourcing purposes, 19%

Under the same idea, Technology Associates and Alliances (TAA)
(1999), a strategic alliances consulting company, lists the
following type of alliances: Marketing and sales alliances,
Product and manufacturing alliances, Technology and know-how
alliances (Elmuti & Kathawala, 2001, p. 207)

On the other hand, we have a group of academics that classify
the type of strategic alliances depending on the level of
integration in the collaboration process. In this group, we can
find the work of Gomes-Casseres, who states that Alliances may
be structured as complex equity joint ventures or they may be
looser arrangements for cooperating (2003, p. 328). Johnson et
al. presents that there are a variety of types of strategic alliance;
some may be formalized inter-organizational relationships; at
the other extreme, there can be loose arrangements of
cooperation and informal networking between organizations with
no shareholder or ownership involved. (2005, p.354)

Analyzing the airline industry, we find classifications on alliances
such as the one presented by Park (1997, cited by Morrish &
Hamilton, 2002, p. 401) who distinguished two major type of
alliances as being either complementary or parallel. The main
difference is that members of complementary alliances have
non-overlapping routes on their network, whereas in parallel
alliances members face problems of routes being overlapped.

Apart from routes, the most common forms of collaboration
involve code sharing; block spacing; shareholdings; and
franchising. Code sharing allows an airline to sell seats or cargo
on a partners flight under its own designator code, while
blocking spacing is an agreement under which one airline
allocates a block of seats or cargo space on its flight to a partner.
Shareholding (cross-equity holding) is usually subject to
regulation if it involves an airline from another country, and does
not require any type of strategic collaboration. Franchising, on
the other hand, has the franchisee paying a royalty to the
franchiser in exchange for the privilege of using the latters
marketing package (Morrish and Hamilton, 2002, p.401). Also,
Glison et al (1996, p. 27) define three types of alliances available
in the airline business, which are marketing, equity and frequent
flyer programs.

2.4. Experiences of Strategic Alliances in Airlines

The development and implementation of strategic alliances in the
airline industry is not new. During the 1990s, passenger airlines
embraced a set of strategic alliances as a consequence of
deregulation initiatives and the benefits of code-sharing
agreements. As a result, multiple bilateral agreements of
complementation of routes and services were signed between
airlines of all over the world, increasing volumes, network
coverage and market share opportunities. Strategic alliances
have occurred in a broad spectrum of industries, among which
the airline industry has the largest number of alliances (Oum et
al., 2004).

In Table 3, I present the results of a survey conducted by the
specialized publication Airline Business on the number of
existing airline alliances on the period 1994 1999. From there,
we can see an increase of 18.3% during the 5 year period and
the increase on Non-Equity Alliances.

Table 3 - Airline Alliances in the global airline industry 1994
1999
1994 1995 1996 1997 1998 1999 % Change
1999/1994
Number of Alliances 280 324 389 363 502 513 + 18.3
With equity stakes 58 58 62 54 56 53 -8.6
Non-equity alliances 222 266 327 309 446 460 +207.2
New Alliances - 50 71 72 121 26
Number of Airlines 136 153 159 177 196 204 +150.0
Source: Airline Business (1999)
Reproduced with permission from the Editor.

Some reason behind the growth on the number of alliances
within the airline industry can be: the level of instability of the
industry, the low levels of margin and profitability and the
regulatory framework in which the industry works. In the airline
industry, , it is only recently that there has been an increase in
alliance stability, and it seems that the degree of integration is
one of the main factors accounting for stability. (Lindquist and
Deimler, 1999, cited by Kleymman and Seristo, 2001, p. 303)

On the other hand, the effect of profitability on the proliferation
of strategic alliances is presented by Morrish and Hamilton
(2002, p. 403), stating that one explanation for the prevalence
of alliances in the airline industry is that although the industry
has achieved high growth rates, it suffers from intrinsically low-
profit margins. Additionally, same authors analyze the factor of a
restrictive environment, proposing that with global expansion
constrained by restrictive air services agreements, strategic
alliances are seen as a strategy for growth.


In the air cargo industry, the fever of strategic alliances have
come a little bit behind the passenger industry, even though, the
utilization of bilateral interline agreement among airlines is
common commercial and operational practice over the last years.
The cargo alliances have come in behind the more extensive
passenger alliances that grew out of the rapid expansion of code-
sharing and other cooperative arrangements the scheduled
airlines undertook during the 1990s to add international markets
with limited new investment (Wiebner, 2003, p. 39). Notice that
one difference between a cargo alliance and a passenger alliance
is that for the passenger alliance, the burden of moving
passengers at the connecting airport is strictly the responsibility
of those persons. With cargo alliances, freight must be moved by
a finite number of crews working for both airlines and at the
terminal. (Zhang et al., 2004, p. 88)

The initiatives to create clear airline alliances, such as the ones
created in the passenger industry
1
, have been embraced only
since year 2000 with the creation of SkyTeam Cargo and then
creation of New Global Cargo Alliance, that later would be
branded WOW.

SkyTeam Cargo was created in year 2000 by four carriers that
were already members of the SkyTeam Alliance in the
Passenger side of the business. These carriers were Aeromexico
Cargo, Air France Cargo, Delta Air Logistics and Korean Air
Cargo. Since then, four other carriers have joined the alliance
(Alitalia Cargo, CSA Cargo, KLM Cargo and Northwest Airlines
Cargo) complementing the network and the type of products
offered to their customers. The dynamic that this alliance has
had over the past years, has been reported by Conway (2004, p.
58) stating:

Sky Team Cargo members are all adopting a single product portfolio based
originally in that of Air France and the alliance is committed to joint handling as far
as possible. It also has a joint venture, which handles all outbound sales for Air
France, Delta and Korean, with Alitalia and KLM expected to join too by the end of
the year.

In 2004, it was reported by Air Cargo World that SkyTeam
Cargos Network (before Northwest Cargo joining in) served
more than 500 destinations in 110 countries.

1
In the passenger industry, three major group-alliances can be identified: One World, Star
Alliance and Sky Team.
Being members of SkyTeam Cargo, Air France and KLM are
also set as an example of the evolution of strategic alliances in
the Air Cargo, as it is stated by Peter Conway (2004):

Air France and KLM also show what true integration of cargo operation can be like
when uncomplicated by company egos. As part of their merger plan, they have
moved to create one cargo organization, with a single management, harmonized
sales force and common IT platform, and to align freighter networks.

On the other side we have WOW, the cargo alliance created in
April 2000 by Lufthansa Cargo, the worlds biggest international
airfreight carrier, Singapore Airlines Cargo, the world second
biggest, and SAS Cargo, the Scandinavian giant (WOW website,
2006). It was initially known as New Global Cargo; however, in
April 2002 it was re-branded as WOW and launched
harmonized services for the customers of the airline members. In
July 2002, Japan Airlines Cargo joined WOW as a new partner,
extending the presence of the alliance in the Asian Market.

According to WOW website (2006), through close cooperation,
the alliance partners aim to offer customers a greatly expanded
network. They have also harmonized their air cargo services so
that their individual products, such as express services, can be
transported seamlessly throughout the alliance network. On the
same line, Taverna (2002) reports: WOW executives are
continuing efforts to harmonize their operations considered the
key to ensuring a genuine joint product offering. One are of
focus is sales and handling, where the aim is to move under a
single roof whenever possible (2002, p. 52).

As it is presented in the description of both current alliances in
the Air Cargo Industry, they characterize by the fact that in both
of them exist a group of companies coming together to establish
an alliance. As it was presented above, the idea of two-member
alliances has evolved to have alliance groups. An alliance group,
then, is a collection of separate companies linked through
collaborative agreements (Gomes-Casseres, 1994, p. 65). The
same author presents the idea that collaboration in business is
no longer confined to conventional two-company alliances, such
as joint ventures or marketing accords. Today, we see groups of
companies linking themselves together for a common purpose
(Gomes-Casseres, 1994, p. 62).

The fact that multiple organizations come together into an
alliance to work towards a common strategic objective, with
different management styles, resource capabilities and culture
presents a great challenge for the executives of such alliances to
create a successful one. The challenges of integrating the
operations of a series of companies with disparate corporate
cultures include everything from integrating information
technology systems to coordinating sales forces and product
lines (Wiebner, 2003, p. 38). The need to coordinate and
integrate all the efforts within the alliancing members are
evident when multiple organizations establish a strategic
alliance, as it is in the airline alliances, and as it is stated by
Kleyman and Seristo (2001, p. 305) in a fully multilateral
alliance network, where each member cooperates with every
other member, a single members decision will affect a large part
of the network.

Armbruster (2002) presents an interesting fact, related to the
perception of the alliances and its future by the industry
members:

In an electronic survey conducted by Cargo Network Services
2
at its annual
conference in Las Vegas, 80% of the forwarders, carriers, vendors and other
participants said they expect consolidation and alliances to continue. A similar
percentage said they perceived alliances primarily as an opportunity, with only 20%
viewing them as a threat.

2.5. Why Strategic Alliances? Reasons behind the
decision

The importance of strategic alliances in todays business
environment has been a common point of discussion from
several academics. Different set of reasons can be found as to
why a company should seek for strategic alliances in order to
compete in todays open, aggressive markets. For some of them,
strategic alliances are a must in todays business strategy and
are a matter of survival; Alliances between companies, whether
they are from different parts of the world or different ends of the
supply chain, are a fact of life in business today (Moss, 1994, p.
96). Gomes-Casseres state, the reality of alliances is complex,
but their impact on every facet of economic competition is
profound. No firm can afford to ignore the use of alliances in
competitive strategy. (Gomes-Casseres, 1998)

Rijamampianina et al., citing different authors, present the idea
that alliances are growing as a response of rapid advances in the
business environment. The basis for the growing number of
competitive business alliances lies in the rapid advancement of
technology, the management of knowledge, more aggressive

2
Cargo Network Services Corporation is a subsidiary of the International Air Transport Association,
operating and offering services in the United States.
competition and the uncertainties and complexities of todays
business environment (Escriba Esteve & Urra Urbieta, 2002;
Zineldin, 2002; Tse et al, 2004) (2005, p. 93). The same
authors, present as reasons to get involved in strategic alliances
the different type of benefits that organizations can achieve from
them, stating that by forming alliances with strategically chosen
competitors, companies find that they can shorten development
cycles, share financial risks, improve their organizational learning
and increase their access to markets (Rijamampianina et al,
2005, p. 93).

According to Elmuti & Khatawala (2001, pp. 206 - 207) the
reasons for creating strategic alliances can be classified into:
Growth Strategies and entering new markets, Obtain new
technology and/or best quality or cheapest cost and Achieve or
ensure competitive advantage. They based their classification in
a study of Coopers & Lybrand (1997) that shows that growth
strategies and entering new markets are among the main
reasons cited by organizations to form strategic alliances. At the
same time, the same authors citing Quinn (1995), state that
many companies are forming alliances looking for best quality
or technology, or the cheapest labor or production costs (Elmuti
& Khatawala, 2001, p. 206). In a similar line of thought we find
Segil, who states: once seen primarily as a way to cut costs,
alliances now play a strategic role in increasing revenue, fueling
growth and improving efficiency (2004, p.31).

To some degree alliance formation can be viewed as an
inevitable result of the regulatory framework within which the
international airline industry operates. Regulatory and legal
restrictions often prevents the full ownership of airlines by
foreign companies and consequently alliances have been
perceived as the only viable market entry mechanism at least in
the short to medium term. (Evans, 2001, p. 239)

In a study presented by the Roland Berger consulting firm it was
stated, The main aim in forming an alliance is to create a global
logistics offering and hence increase market share
disproportionately. When they form alliances, therefore, airlines
focus mainly on optimizing their route networks and
schedules(Wiebner, 2003, p. 39); Airlines have embraced
alliances as a way to cut costs and expand sales by offering
service to markets where the carriers themselves do not fly
(Armbruster, 2002, p. 22).

Kleymann and Seristo (2001, p. 305) present three categories in
which benefits from alliances can be classified, being Market-
presence related, Resource utilization related and Learning of
practices. Learning of better practices is, in a way, an indirect
source of benefits as it eventually leads to financial benefits
either through better utilization of resources or through
maximization of revenues. As to market-presence related
benefits, alliances have an impact over its members revenues
allowing them to be present in markets where they wouldnt
participate as a single organization. Concerning resource
utilisation benefits, we can differentiate, for instance, labour
productivity, aircraft productivity, and benefits of accruing from
lower costs of procured goods and services. Most of the cost
reduction potential is in labour costs, whether that labour is in
marketing, maintenance, ground handling or flight operations.
Other sources of cost reduction are in equipment and property
costs, capital costs mainly for aircraft, and expenses paid for
third party services such as ground handling. Within marketing,
the payment to the distribution channel offers a potential for cost
reduction. (Kleymann and Seristo, 2001, p. 305)

Button et al. (1998), suggest a number of possible reasons for
alliance formation cost savings, market penetration and
retention, financial injection, infrastructure constraints,
circumventing institutional constraints and market stability. More
specifically, they identified four advantages of alliances:
Access to new markets by tapping into a partners under-
utilised route rights or slots;
Traffic feed into established gateways to increase load
factors and to improve yield;
Defence of current markets through seat capacity
management of the shared operations; and
Costs and economies of scale through resource pooling
across operational areas or costs centres, such as sales
and marketing, station and ground facilities and
purchasing.

In their work, Agusdinata and Klein (2002, pp. 203-204) present
a very interesting approach on the factors that facilitate airline
alliances. These two factors are: Restriction on foreign ownership
and control and The nature of airline alliances.

Under the first factor, even though the airline industry is a
vehicle to promote globalization all over the world it remains,
ironically, nationalistic in nature. In order for an airline to expand
operations into another countrys territory, the governments of
any two countries have to establish bilateral agreements
3
that
will ultimately lead to an infinite chain of agreements on a world-
wide scale. It is the limitation with regards to the carrier(s)
included in such bilateral agreements the one that has become a
main obstacle to true liberalization on the airline industry. If a
designated airline company is to represent a country in a
bilateral negotiation, then the nationals of the country in
question must have majority ownership and dominant
managerial control over the airline. Therefore, the only way to
achieve international world-wide expansion would be by forming
alliances with other carriers and integrating their networks. So
far, some development has been made in this sense, being the
most important one the deregulation in the US market followed
by liberalization in Europe. However, as long as restrictions on
ownership and control remain in place, alliances are likely to be
the only way for airlines to globally expand their operations.

Now, with regards to the nature of airline alliances as a factor
that facilitate them, it is presented that despite the possible
future weakening of regulatory constraints thanks to
liberalization efforts in major markets, it is presumed that
alliances will still play an important part in the global market.
Additionally, it is expected that these alliances will stay and will
not necessarily evolve in mergers, mainly because the flexibility
offered by the alliances compared to mergers is what is required
within a turbulent and uncertain industry such it is the airline
industry. Furthermore, the size of the financial resources needed
for an airline to establish its own global network are enormous
and bearing in mind the volatile nature of past financial results
- the adequate return on such investment remains uncertain.

To respond to this highly competitive and volatile climate,
airlines are forced to adopt organisational forms suited to cope
with such environment. A primary requirement of such an
organisational form should be the increased competitive ability to
survive in an environment that is characterised by fierce
competition so that the benefits of entering new markets may be
reaped and changing customer demand may be fulfilled. The
answer presented by the airlines is to form global alliances
groups because such organisational form is flexible, has rapid
growth potential and promises to provide a worldwide network
within which member airlines can offer seamless global services.
(Agusdinata & Klein, 2002, p. 204)

3
Typical bilateral agreements will include consensus on issues such as: i) the
carrier(s), in other words, the designated airlines, (ii) the routes flown, (iii) the
types of traffic rights granted for the designated airlines, (iv) the frequency of
flights and capacities and (v) tariffs.

Despite the fact that strategic alliances are a must in todays
business environment and the multiple reasons and benefits that
organizations can expect from entering into strategic alliances, it
seems it is not an easy task. The numbers with regards to the
level of success of strategic alliances are not motivating at all,
showing that 50% to 70% of this partnership efforts fail.
Research suggests that 40% to 55% of alliances break down
prematurely and inflict financial damage on both partners (Dyer
et al., 2004, p.109); The failure rate of strategic alliances
strategy is projected to be as high as 70 percent (Kalmbach and
Roussel, 1999) (Elmuti & Khatawala, 2001, p. 206); The
overall success rate of alliances hovers near 50%, and the
average life span of a joint venture is just five to seven years
(Ernst & Bamford, 2005, p. 133); It is widely accepted the fact
that the majority (70 percent) of alliances either fail outright, fall
captive to shifting priorities or achieve only initial goals, and 55
percent fall apart within three years after they are formed
(Segil, 2004, p. 31). Although strategic alliances are increasingly
perceived as strategic weapons even for competing within a
firms core business (Harrigan, 1987), they are enormously
complex to manage successfully and they are frequently subject
to instability, poor performance and premature dissolution.
(Parkhe, 1993). (Morrish and Hamilton, 2002, p. 402)

Existing alliances have already proven to be very rewarding, both
to the airlines (increasing profits) and to the consumers (betters
schedules and lower fares). Despite the proven success of
alliances, results from the airline sector and particularly from
other branches of industry, clearly show that alliances are rather
unstable, though no less stable than mergers (Agusdinata &
Klein, 2002, p. 210). Many alliances in the airline industry have
emerged, alliances have failed and new alliances have been
forged and the speed of change has sometimes been bewildering
for observers. (Evans, N., 2001, p. 230)

In a commentary on alliance failures, Flight International (2000,
p. 3) suggests that the prospect of alliance instability is greater
now than ever. It identified a number of notable failures:
The KLM/Alitalia collapse
The Swissair break from Delta following Deltas tie-up with Air
France;
The Austrian Airlines split from its European Partners to join
the Star Alliance
The Termination of Canadian Airlines membership of One
World after being taken over by Air Canada.

However, we find also authors such as Gomes-Casseres who
criticizes the focus that some academics and consultants have
had over the rate of failure on strategic alliances; This focus on
termination rates misses the central point: alliances are a means
to an end, not an end in themselves. Alliance longevity is
irrelevant strategic success is what counts (Gomes-Casseres,
1998). In the same line of thought we can find Agusdinata and
Klein (2002, p.204), who state:

It is not only the intrinsic flexibility of any airline alliance that makes it subject to
change but also the rapidly changing environment in which it is situated as well as
the changing perceived benefits and competitive pressures which force all alliances to
rethink their objectives many times during their existence and which, in turn, may
lead to a redesigning or a dissolution of the alliance in question.

2.6. Critical Success Factors in Alliance Formation

It is interesting to see how with the reinforced need for
organizations to participate in strategic alliances to achieve
competitive advantage, but with such levels of failure statistics,
executives are in a position where they need to find the magic
formula to apply in their strategic alliance ventures in order to
make them successful. Therefore, multiple sets of models,
frameworks, critical success factors, results from research,
commandments and any other type of consultancy creations are
available for executives to choose. Such critical success factors
for strategic alliances vary from simple concepts of trust and
communication, to complex models involving several steps and
methodology. To make a strategic alliance succeed, its
managers must be able to create an environment of trust,
maintaining broad strategic vision and feel genuine empathy for
others, even those who are still competitors in other areas
(Ellis, 1996, p.8); Strategic and financial analyses contribute a
level of confidence to the alliances, but, like all new business
ventures, collaborative relationships draw energy largely from
the optimistic ambition of their creators (Moss, 1994, p. 99);
The effective management of relationships to build collaborative
advantage requires managers to be sensitive to political, cultural,
organizational and human issues (Moss, 1994, p. 108); The
success or otherwise of the alliance, whatever its nature or
purpose, depends largely on how the details are communicated
to and implemented through people (Rijamampianina et al,
2005, p. 94).

According to Elmuti & Khatawala (2001, pp. 210 215) the
success factors for strategic alliances can be classified as follows:
- Senior management commitment
- Similarity of management philosophies
- Effective and strong management team
- Frequent performance feedback
- Clearly defined, shared goals and objectives
- Thorough planning
- Clearly understood roles
- International vision
- Partner selection
- Communication between partners: maintaining relationships

One important element to be analyzed as a critical success factor
for alliance formation is the element of trust. As it is stated by
Kleyman and Seristo (2001, p. 307), in addition to contractual
stipulations, there are two prominent mechanisms in place which
can to some extent mitigate the risk involved at high levels of
integration, namely trust and alliance-specific investment. The
tighter the cooperative integration between partners, the higher
the need for trust between them.

Additional work can be found in The eight Is that create
Succesful Wes (Moss, 1994) and the Alliance Success Factors
presented by Gomes-Casseres (1998). Also, Segil (2004) state
that the success on the alliances relies on the capacity to
measure the benefits, and present in their work a set of metrics
that can be applied to measure the advances and success of
these partnerships. As stated by Segil, creating the alliance is
the easy part; managing it and measuring its success is much
more challenging (2004, p. 35).

Agusdinata and Klein (2002, p. 205) focus on those elements
that provide stability to the alliance, and therefore can be taken
as critical success factors. Such elements are based on the ability
of the alliance to cope with economic downfall and to react in a
chameleon-like way to changing competitive environments. An
alliance has to be able to harvest and secure the benefits of
increased economies of scale and scope during the upturn and
peak periods of the economic cycle so that it is able to engage
niche carriers in price battles during times of economic downfall.
For the authors, the three most important categories of internal
stability are:
1. Trust, mutual forbearance and multi-culturalism
2. The level of network overlap of the members networks and
the number of partners in the alliance.
3. The learning situation created by an alliance.

Now, another perspective could be to analyze the factors that
could have an impact over the failure of the alliances. According
to Elmuti & Kathawala (2001, pp. 208 209), the reasons of
why strategic alliances fail can be explained by the following
factors:
- Clash of cultures and incompatible personal chemistry
- Lack of trust
- Lack of clear goals and objectives
- Lack of coordination between management teams
- Differences in operating procedures and attitudes among
partners
- Relational Risk
- Performance Risk
- Strategic alliances might create a future local or even global
competitor.

As we can see from above, the need for organizations to
embrace in the creation and implementation of strategic alliances
that would allow them to achieve competitive advantage has
been reinforced by work presented by different authors.
However, the fact that there is a high percentage level of failure
of such initiatives, create a challenge for executives today to find
the appropriate combination of factors that will assure the
success of their partnerships. Different results from research and
concepts from academic and consultants can be found on critical
success factors for strategic alliances, as well as different
frameworks and methodologies; however it is clear that every
alliance is different, every industry is different, every company is
different, and therefore a best practice in the consolidation of
alliances is difficult to be developed.

2.7. Are the current SAs in the industry being a source
of competitive advantage?

Above the reasons that organizations might have to enter
strategic alliances, and that have been presented above in this
document, there is a concept that embraces them all, and it is to
achieve competitive advantage. Michael Porter (1985)
introduced the concept of Competitive Advantage and it relates
to the ability of an organization to discover and implement ways
of competing that are unique and distinctive from those of their
competitors and that can be sustained over time.

It seems to be a general agreement over the academics that
strategic alliances are a source of competitive advantage. In the
global economy, a well-developed ability to create and sustain
fruitful collaborations gives companies a significant competitive
leg up (Moss, 1994, p. 96); the ability to form and manage
them [strategic alliances] more effectively than competitors can
become an important source of competitive advantage (Dyer et
al., 2001, p. 37); Strategic Alliances are giving companies a
competitive advantage (Segil, 2004, p.31); Strategic alliances -
a fast and flexible way to access complementary resources and
skills that reside in other companies have become an important
tool for achieving sustainable competitive advantage (Dyer et
al., 2001, p. 37); Cooperating to compete in any form gives
participants greater opportunity for growth and a stronger
competitive edge (Amin, Hagen & Starret, 1995; Brandenburger
& Nalebuff, 1996; Clarke-Hill et al., 2003) (Rijamampianina et
al, 2005, p. 93).

Airline alliances have evolved from being a loose form of co-
operation with each other to becoming one of the most important
strategies to be competitive, especially in the medium and long-
haul international market. (Agusdinata & Klein, 2002, p. 201).

Airlines have to find suitable organisational ways of coping with
this highly competitive and volatile climate. A basic requirement
of this organisational form should be to increase the competitive
advantage of surviving in a highly competitive environment so
that the benefits of entering new markets may be reaped. This
can be achieved if the new organisational form is flexible and
allows rapid growth potential. (Agusdinata & Klein, 2002, p. 210)

The competitive position of an organization can be measured by
their capacity of creating value. In competitive terms, as stated
by Porter (1985, p. 38), value is the amount buyers are willing
to pay for what a firm provides them. A firm assures its
profitability if has the capacity of generating sufficient value that
it exceeds the costs involved in creating the product, and this
creation of value shall be the goal of any generic strategy. The
creation of value on the organizations can be explained through
the Value Chain Model presented by Porter (1985).

As we have presented above, when analyzing the types of
strategic alliances and the reasons behind them, we see that
cooperation at different levels within the alliances members is
present in various stages of its value chain impacting the
capacity of such alliances to create value and enhance the
competitive position of such organization. I consider that by
understanding and disaggregating the different activities covered
by a cargo airline, with the support of the Value Chain Model
developed by Porter (1985), the identification of opportunities of
cooperation within an alliance formation process and focusing in
engaging cooperation in value-adding activities can generate a
higher impact in the results of the alliance and therefore secure
the benefits behind its formation.

Below, in Section 4 of this document, I present a Value Chain
Analysis for a Cargo Airline, which can be adapted to any airline
participating of the WOW or SkyTeam Cargo Alliance.

2.8. Are customers perceiving the benefits of the
alliances?

Despite the fact that Strategic Alliances have been in the
business environment for a while, it has been an element of
discussion and evaluation the impact and benefits that such
alliances have brought to their members, but much more
discussion has generated the fact that final customers are
perceiving and getting benefits or not of such partnership
ventures.

During the past couple of years, much has been written with
regards to the new challenges that organization face in order to
satisfy and create value for their customers. When analyzing the
aims of the two group-alliances presented in this document, the
focus on customers is clearly identified. For example, SkyTeam
Cargos mission statement explicitly express the idea of being a
customer driven alliance; We, SkyTeam Cargo, aim to be the
most effective and customer-driven Air Cargo Group in the global
logistics industry (SkyTeam Cargo Website, 2006).

So, how do customers benefit of such alliances? Different
opinions have been presented and multiple benefits can be cited
by the executives of the members of such alliances. How do
clients benefit? By getting a better and expanded product for the
same price. It also cuts their organizing costs, as all the
alliances routes are now available in a coordinated fashion. This
one-stop-shopping reduces labor costs and speeds up the
organization of the transport (Wiebner, 2003, p. 39).

However, perception from the top executives of the major freight
forwarding companies in the world in some cases leave out some
questions with regards to the effectiveness and transferred value
that these alliances have brought to their businesses.
Presumably alliances are created to provide a global offering to
the major freight forwarders, the key customers of airlines
accounting for over half of global air freight. But they remain
distinctly lukewarm about them (Conway, 2004); Like many
other forwarders, Tomasulo [EGLs Vice-president of airfreight
and gateways] doesnt care whether a carrier is an alliance
member he just wants good service at a reasonable price
(Armbruster, 2002, p. 22); According to Thomas Mack, senior
vice-president airfreight at freight forwarder Schenker, the big
deficiency in the formal cargo alliances is that they do not have a
shared bottom line (Conway, 2004).

And the perception of the major freight forwarders should be an
important element to evaluate and to be addressed by the
current Air Cargo Alliances, due to the fact that everyday, more
and more, they are achieving a stronger dominant position in the
Air Cargo Industry. The large multinational forwarders, it is
said, are on an inexorable upward path toward dominance on the
global air cargo stage while small and medium-sized companies
are increasingly becoming bit-part players pushed to the outer
margins (Hastings, 2004). Additionally, the Freight Forwarding
Industry has suffered of a major transformation and
consolidation of major players over the last couple of years, with
billionaire mergers and acquisitions in place, creating very
powerful organizations of which airlines need to be aware of. And
these organizations are choosing with whom they want to work,
based on complex negotiations and with the creation of their own
Preferred Carrier Programmes. Instead, such forwarders seek
global coverage through their own preferred carrier programmes,
where they concentrate traffic with 10-12 partner airlines. Thus,
in effect, they create their own a la carte alliances. (Conway,
2004)

So, how much are airline cargo alliances really worth? As stated
by Air Cargo World (2004), It is a question not easily answered,
and not one of the top cargo executives from the airlines
constituting Sky Team Cargo is willing to cite figures that would
demonstrate the value of their alliance.

2.9. Implementation Practices for Strategic Alliances

Strategic Alliances have been a subject of study during the past
ten years, with academics presenting analysis over different
issues concerning the definition, implementation and evaluation
of such cooperation agreements. Different models to be applied
have been developed by various authors, trying to establish a set
of parameters of guidelines that could help managers to get the
true benefits of strategic alliances.

The development of an alliance can be divided into three main
stages: formation of the alliance, management of the alliance
and evolution of an alliance (Baharum, 2004, p. 65). These
three stages can be seen in various models presented by
different authors who have evaluated the development of
international strategic alliances during the 1991 1998 period,
such as El-Hajjar (1991), Pekar & Alio (1994), Bronder & Pritzl
(1992), Lorange & Roos (1993), Faulkner (1995) and Whipple &
Frankel (1998). From the above, Bronder & Pritzl (1992) and
Pekar & Allio (1994) introduce a fourth stage: Partner Selection.

Strategic Alliances models developed from 1999 2004 focus
more on alliance management, like the results we find in the
studies of Koza & Lewin (1999, 2000), Pett & Dibrell (2001),
Isabella (2002) and Draulans et al (2003). (Baharum, 2004).

In section 5 of this document, I will present an adapted practice
and framework that could be used by cargo airlines to develop
strategic alliances.

3. Methodology and Limitations of the Paper

In order to complete my research, a combination of different
methodologies was used, based mainly on the utilization of the
Case Study methodology, supporting my findings on a qualitative
evaluation of secondary data. Despite the efforts made to obtain
sources of primary data within the companies evaluated in this
document, I was not able to obtain a positive response from
them in order to gather some inside information and their
internal perceptions over the evolution and management of the
strategic alliances evaluated in my research.

Is in this first point, where the main limitation to my research
exists. Focusing mainly on secondary data on the results and
structure of the strategic alliances, does not allow to deliver
conclusive results that can be generalized to other partnership
experience at a strategic level in the Air Cargo Industry.
However, extensive research from secondary sources, including
academic journals, books, industry publications and others was
made in order to obtain as much information as possible to
minimize the effects of this limitation.

Now, as it was mentioned before, my research was conducted
based on the Case Study methodology. According to Yin (1994),
the Case Study is a preferred approach when how or why
questions are to be answered, when the researcher has little
control over events and when the focus is on a current
phenomenon in a real-life context. For my research, these three
criteria were applicable, seeking to understand how strategic
alliances can be a source of competitive advantage for airlines in
the air cargo industry in todays business environment and
reality.

Yin (1993) listed several examples along with the appropriate
research design in each case. There were suggestions for a
general approach to designing case studies, and also
recommendations for exploratory, explanatory, and descriptive
case studies.

In exploratory case studies, fieldwork, and data collection may
be undertaken prior to definition of the research questions and
hypotheses. This type of study has been considered as a prelude
to some social research. However, the framework of the study
must be created ahead of time.

Explanatory cases are suitable for doing causal studies. In very
complex and multivariate cases, the analysis can make use of
pattern-matching techniques.

Descriptive cases require that the investigator begin with a
descriptive theory, or face the possibility that problems will occur
during the project.

Critics of the case study method believe that the study of a small
number of cases can offer no grounds for establishing reliability
or generality of findings. Others feel that the intense exposure to
study of the case biases the findings. Some dismiss case study
research as useful only as an exploratory tool (Tellis, 1997).
Stake (1995), and Yin (1994) identified at least six sources of
evidence in case studies, being:
Documents
Archival records
Interviews
Direct observation
Participant-observation
Physical artifacts
For the specific case of my research, I worked with most of the
sources presented above, except with interviews as it was
explained above. Physical artifacts were not applicable to this
research.
Another important element to highlight during my research is the
fact that most of the concept and analysis made on the topic was
supported by my personal professional experience of over seven
years in managerial positions in the Air Cargo Industry. My
knowledge of the business environment, of the activities
involved, of the key players and the dynamics of air cargo in
todays world was of great help when analyzing data, evaluating
theory and determining conclusions.
The utilization of my knowledge and experience in the industry
where the topic of strategic alliances was developed can be
identified with the Grounded Theory methodology, which has
been used to generate theory where little has been done or to
give a fresh view on existing knowledge.
Grounded theory is regarded by Glaser and Strauss (1967) as a
general theory of scientific method concerned with the
generation, elaboration, and validation of social science theory.
For them, grounded theory research should meet the accepted
canons for doing good science (consistency, reproducibility,
generalizability, etc.), although these methodological notions are
not to be understood in a positivist sense. The general goal of
grounded theory research is to construct theories in order to
understand phenomena. A good grounded theory is one that is:
(1) inductively derived from data, (2) subjected to theoretical
elaboration, and (3) judged adequate to its domain with respect
to a number of evaluative criteria. Although it has been
developed and principally used within the field of sociology,
grounded theory can be, and has been, successfully employed by
people in a variety of different disciplines (Haig, 1995).

While there are a number of similarities between phenomenology
and grounded theory there are also some fundamental
differences. These centre largely on sources of data and the use
of literature to inform and locate the developed theory. With
phenomenological studies, the words of the informants are
considered the only valid source of data. Grounded theory, on
the other hand, allows for multiple data sources which may
include interviews, observation of behaviour, and published
reports. With regard to the use of literature, phenomenological
findings are generally contextualised within the existential
framework of meaning and choice (Goulding, 1998).

4. Value Chain Analysis for a Cargo Airline

The concept of value chain introduced by Porter (1985) allows to
evaluate an organization by disaggregating the firms
strategically relevant activities to understand their behavior,
their impact on cost and their potential source of differentiation,
so it can generate value and gain competitive advantage. The
fundamental notion in the value chain analysis is that a product
gains value (and costs) as it passes through the vertical stream
of production within the firm (design, production, marketing,
delivery, service). When created value exceeds costs a profit is
generated.(Hegert and Morris cited by Armisted et al, 1993, p.
221)

The Value Chain Model presented by Porter (1985) identifies nine
generic categories of activities, which are linked together,
divided between primary activities and support activities. Primary
activities are the ones involved in the physical creation of the
product and its sale and transfer to the buyer as well as after
sale assistance. (Porter, 1985, p. 38). Support activities, on the
other hand, support the primary activities and each other by
providing purchased inputs, technology, human resources and
various firm - wide functions. (Porter, 1985, p. 38).

In Figure 4, I present the Value Chain Model created by Porter
and in which I will base our analysis.

Figure 4 The Generic Value Chain (Porter, 1985)

The model presented by Porter is more oriented to
manufacturing companies in which each of the primary activities
can be easily identified. For Service Organizations the model
proposed by Porter has little meaning by not being able to
relate to the descriptive terms of the primary activities
(Armistead et al, 1993). However, I will base my analysis by
relating to the concept of value chain as a whole, and therefore
some of the primary activities shall be modified in order to
present the set of activities needed to execute the service.

I will start my analysis by identifying those Primary Activities
that a cargo airline performs, and linking them in each of the five
generic primary activities presented by Porter in his model.

4.1.1. Inbound Logistics

Porter (1985, p. 39) defines the Inbound Logistics Activities as
those associated with receiving, storing and disseminating
inputs to the product, such as material handling, warehousing,
inventory control, vehicle scheduling and returns to suppliers.
However, for the specific case of a cargo airline, being a service,
none of these sub-activities are related to their value chain.

In order to define the sub-activities related to the Inbound
Logistics for the airline, I try to answer the question of what

Inbound
Logistics

Operations

Outbound
Logistics

Marketing
& Sales

Service

PROCUREMENT
TECHNOLOGY DEVELOPMENT
HUMAN RESOURCES MANAGEMENT
FIRM INFRASTRUCTURE
M
A
R
G
I
N

M
A
R
G
I
N

Support
Activities
Primary Activities
activities are needed to be fulfilled in order to be able to offer the
service to the market? Also, are these activities generating
additional value or are a possible source of competitive
advantage for the organization? For the analysis, I have decided
to replace the Inbound Logistics name of the primary activity
with Operational Coordination, which refers more directly to the
operation of the airline.

Therefore, the following sub-activities have been identified for
the Operational Coordination activity:

Fleet Sourcing: This activity relates to the identification,
evaluation, negotiation, financing and put into operation of
the required fleet that the airline needs to operate. It can
be divided into Long Term Fleet Sourcing, which include
those aircraft to be part of the main fleet of the airline and
with long-term contracts; and Short Term Fleet Sourcing,
which is related to the negotiation of additional aircrafts to
cover special high-demand seasons or shortage of aircraft
of the main fleet due to maintenance requirements.

Fuel Purchasing: This activity relates to the negotiation and
purchasing of the required fuel needed to cover the
operation by the airline. Taking into account the high
impact on the cost, any savings achieved due to a
successful negotiation has a very significant impact on the
financial results of the organization. Hedging negotiations
with main fuel providers are important alternatives to
minimize uncertainty over the variable prices of fuel in the
market.

Insurance Coverage Negotiations: Due to the high risk
involved in the operation of an airline, a very important
component of their operation is their Insurance Coverage.
This activity involves all the negotiation and contracting of
the insurance policy to cover the airlines operation. The
cost related to the Insurance is also a big component over
the fixed costs of the organization; so any saving has a
direct impact on the financial results.

Ground & Cargo Handling Agreements: This activity relates
to the identification, negotiation and contracting of Ground
& Cargo Handling activities with providers in the airports
where the airline operates. In some airlines stations, the
company has its own Ground & Cargo Handling staff, but in
others these activities are outsourced. The cost related to
this activity is an important component within the variable
costs of the airline and, additionally, the negotiation of
quality standards and services related to the cool chain for
perishable cargo is an important source of differentiation to
achieve competitive advantage.

Aero - commercial Negotiations & Policy: The airline
industry is highly regulated. Therefore, the flight permits
that the airline possesses are one of their most important
assets added to the possibility of acquiring additional flight
permits due to new negotiations. The airline is able or not
to operate to a specific market or route based on the
status of their flight permits or the possibility to obtain
one. Thus, this activity is of great strategic importance for
the long term viability of the organization. Due to the
impact of this activity in the capacity of the organization to
generate value, I consider important to see it as a separate
Main Primary Activity.

Scheduling Activities: This activity relates to the definition
of routes that the aircrafts of the airline will operate within
a specific period of time. This definition is affected by legal
(flight permits), operational (airports, ground & cargo
facilities, crew, aircraft capabilities to operate, fuel
availability, etc.), commercial (fly where the customers
need and where the cargo exist), financial (profitable
operations) and security (of the aircraft, of the cargo, of
the people) issues. A key factor in airlines profitability is
how they operate their aircraft, and their ability to
minimize the impacts of trade imbalance in routes, which is
covered by the scheduling activities. As with the Aero
commercial Negotiations & Policy, I consider important to
see Scheduling as a separate Main Primary Activity.

In Figure 5, I present a graphic model of the activities
described above.

Figure 5 Inbound Logistics Activities modified for a
Cargo Airline.

4.1.2. Operations Activities

In his model, Porter (1985) defines the Operations Activities as
the activities associated with transforming inputs into the final
product form. In this case, we can divide the Operations
Activities in two: Ground Operations and Air Operations

Within Ground Operations, we find the following sub activities:

Cargo Reception at Origin: Implementation of procedures
to assure efficient, agile and secure cargo reception
procedures.

Cargo Preparation at Origin: All activities related to
preparing the cargo to be loaded and transported to
destination, according to security and safety regulations,
as well as optimizing the space & weight capabilities of the
aircraft.

Documentation Preparation at Origin: All activities related
to the preparation of all documentation needed to comply
with customs and security regulations at origin and/or
destination.

Aero
Commercial
Negotiation
& Policy
M
A
R
G
I
N

Fleet
Sourcing

Fuel
Purchase

Insurance
Coverage

Ground &
Cargo
Handling
Agreemts.

Operational
Coordination

Scheduling
Activities

Loading/Unloading & Attention of Aircraft at
origin/destination: Includes all the activities related to the
attention of the aircraft while is on the ramp.

Cargo Preparation at Destination: All activities related to
preparing the cargo to be delivered to the final customer at
destination.

Cargo Delivery at Destination: Implementation of
processes to assure efficient, agile and secure cargo
delivery procedures.

For Air Operations we find the following activities:

Crew Coordination: All activities related to the
administration and assignment of the necessary crew to
cover the operation.

Aircraft Dispatch: All activities related to the secure
dispatch of the aircraft at origin. All these activities are
regulated by international accepted procedures.

Aircraft Coordination: All activities related to the
coordination of the aircrafts to cover the defined schedule.

There are other two important activities that interrelate
directly with the Operations Activities, which are Flight Safety
and Maintenance. In the case of Flight Safety, it has control
and follows up over the procedures and processes to avoid
any kind of incidents that could put in any type of risk the
operation. Maintenance, in the other hand, is a critical and
very important activity within the organization assuring the
reliability and effectiveness of the aircraft and ground
equipment when operating.

In Figure 6, I present the graphic model for these activities.

Figure 6 Operations Activities Cargo Airline

4.1.3. Outbound Logistics

Porter (1985, p. 40) defines these activities as those associated
with collecting, storing and physically distributing the product to
the buyers.

In the case of a cargo airline, taking into account that the
delivery of the service to the customers is given within the
operations activities, we will not include these activities in the
value chain of the airline.

4.1.4. Marketing and Sales

The activities associated with providing means by which buyers
can purchase the product and induce them to do so, classify
within this section of the Value Chain (Porter, 1985).

Sales and Marketing activities can be classified in the following
main sub-activities:

Advertising: All activities oriented to position the airlines
brand in the markets where it participates.

Sales Force Administration: All activities related to the
planning and implementation of sales programs in each of

Aero
Commercial
Negotiation
& Policy
M
A
R
G
I
N

Cargo
Recepti
on
Origin

Cargo
Prepara
tion
Origin

Docum
ent
Prepara
tion
Origin

Loading
&
Unloadi
ng A/C
Attentio
n

Operation
al
Coordinati
on

Scheduling
Activities

Ground
Operations
Air
Operations
Cargo
Prepara
tion at
Destina
tion
Cargo
Deliver
y at
Destina
tion
Crew
Coordin
ation

Aircraft
Dispatc
h
A/C
Coordin
ation

the markets covered by the airlines direct or indirect sales
force. For indirect sales force we relate to the General
Sales Agents Network, which are sales representatives in
markets where there is no direct presence of the airline.

Sales Force Operation: All activities related to the day-to-
day activities of the sales force.

Business Development: Comprises all the activities that
involve the identification, evaluation and implementation of
new services or routes within the airline portfolio.

Yield Management: Includes all the activities related to
pricing strategy in each of the markets where the airline
participates, assuring competitiveness and profitability.

In Figure 7, I present the graphical view of these activities.

Figure 7 Sales & Marketing Activities

4.1.5. Service Activities

To use the concept of Service Activities in a service organization
can lead to confusion. Porters (1985, p. 40) definition of these
activities presents them as those providing service to enhance
or maintain the value of the product.

Aero
Commercial
Negotiation
& Policy
M
A
R
G
I
N

Operational
Coordination

Scheduling
Activities

Ground
Operations
Air
Operations
Sales
Force
Operat
ion
Business
Develop
ment

Yield
Mana
gemen
t

Sales &
Marketing
Sales
Force
Admi
nistrat
ion
Adver
tising

I can identify two main sub set of activities that I would classify
among this category, which I will rename as Post Service
Experience activities. These two sub-sets are:

Formal Claims Activities: Relate to all the activities
involved in receiving, processing and settlement of formal
claims from customers. These Formal Claims are regulated
by International Convention Agreements, such as Warsaw
and Montreal Conventions, and specific cases, times and
settlement values apply.

Post Service Information: The need of on-time
information over the status of every shipment is key and a
major requirement from customers. This activity is
supported mainly by an additional activity, to which I will
refer later that is Information Systems & Technologies

In Figure 8, a graphic explanation of these activities in the
Value Chain Model is presented.

Figure 8 Post - Service Experience Activities Cargo Airline

4.1.6. Other Primary Activities

Two additional Primary Activities can be identified when
evaluating the business of a cargo airline. Those are Information
Technology Activities and Security Activities.

Aero
Commercial
Negotiation
& Policy
M
A
R
G
I
N

Operational
Coordination

Scheduling
Activities

Ground
Operations
Air
Operations
Formal
Claims

Post
Service
Informa
tion
Sales &
Marketing
Post
Service
Experience

INFORMATION TECHNOLOGY ACTIVITIES

In a business such air cargo, where time definite services
are everyday more demanding and speed and reliability is
a must when delivering the service, providing information
for customers, suppliers and authorities is a key strategic
factor.

SECURITY ACTIVITIES

Strict and on-going security regulations require for airline
to develop adequate and up to date security procedures
that should be taken into account when evaluating the way
the cargo airline is set up. Compliance with international
regulation in this sense is a must for every operator.

Figure 9 Primary Activities Cargo Airline

In Figure 9, a complete model presenting the Primary Activities
identified for a cargo airline is presented.

Now, I shall make a brief analysis of the Support Activities that
reinforce the Primary activities of the organization, so we can
complete the Value Chain. I can identify 3 major support activities
for the airline which are: Human Resource Management, Quality
Control Activities and Corporate Support Activities, that refers to a
similar concept of Firms Infrastructure presented by Porter.

4.1.7. Support Activity Human Resource
Management

As stated by Porter (1985), HRM consists of activities involved in
recruiting, hiring, training, development and compensation of all

Aero
Commercial
Negotiation
& Policy
M
A
R
G
I
N

Operational
Coordination

Scheduling
Activities

Ground
Operations
Air
Operations
Sales &
Marketing
Post
Service
Experience
SECURITY
INFORMATION TECHNOLOGY ACTIVITIES
types of personnel supporting both individual primary and
support activities of the entire value chain.

Taking into account the specialization of the business and the
industry, HRM plays a very important role in recruitment for
operational processes such as pilots and technical personnel for
maintenance.

4.1.8. Support Activity Quality Control

The interaction and implementation of quality control with all the
Primary Activities in the organization has a strategic impact on
cost reduction and also level of quality of the processes leading
to differentiation; therefore, the importance of these activities to
be in the Value Chain of the Organization.

4.1.9. Support Activity Corporate Support

In this set of activities, we include all the organizational activities
related to general management, finance, legal and administrative
departments. Support to the entire chain is given by these
activities from the Corporate Office of the Organization. Different
to what is presented in Porters model, we include the Purchasing
Support Activities in this section.

After our complete analysis, in Figure 10, I present a proposed
complete Value Chain for a cargo airline operation.

Figure 10 Value Chain Model for a cargo airline

Aero
Commercial
Negotiation
& Policy
M
A
R
G
I
N

Operational
Coordination

Scheduling
Activities

Ground
Operations
Air
Operations
Sales &
Marketing
Post
Service
Experience
SECURITY ACTIVITIES
INFORMATION TECHNOLOGY & SYSTEMS
MARGIN
HUMAN RESOURCE MANAGEMENT ACTIVITIES
QUALITY CONTROL ACTIVITIES
CORPORATE SUPPORT ACTIVITIES
Support
Activities
Primary Activities

5. Frameworks for implementation of Strategic Alliances in
the Air Cargo

In this chapter, I intend to present an adapted framework to be
implemented by air cargo carriers in the development of strategic
alliances as a source of competitive advantage. In order to do that,
I shall evaluate each of the stages covering the model, being:
Strategic Evaluation, Alliance Definition, Partner Selection, Alliance
Implementation, Alliance Evaluation and Alliance Management.

Strategic Evaluation

The implementation of a strategic alliance within a cargo airline
should be driven by a strategic motivation. Therefore, any action
related to the development of cooperation agreements at a
strategic level should be the result of a thorough strategic
evaluation made by top management in the organization.

Different models for strategic planning within organizations have
been developed by academics and consultants, models that will
not be analyzed in depth in this document. Johnson et al (2005),
propose the following activities to evaluate the strategy of an
organization :

Analysis of the environment: Using tools such as PESTEL
Analysis and/or the Five Forces Model developed by Porter
(1985).
Definition of Market Segments and Critical Success Factors
Internal Analysis: Using tools such as SWOT and Value Chain
Analysis.
Identification of Strategic Capabilities & Competitive
Advantage
Competitive Strategy Position
Strategy Development Options
The Companys Development Method, in which strategic
alliances is one of them.

As we can see from the above model, presented by Johnson et
al, only the identification of strategic alliances as a possibility for
the organization comes after the complete strategic evaluation,
and strategic alliances is one method for developing such
strategy.

On the other hand, Bronder & Pritzl (1992) present a structured
procedure for developing strategic alliances including four critical
phases: strategic decision, alliance configuration, partner
selection criteria and alliance management. During the formation
stage, the Strategic Decision phase includes the situation
analysis, identification of strategic co-operation and evolution of
shareholder value potential. According to Bronder & Pritzl (1992)
the firm must assess the impact of environmental factors on its
current position to evaluate available opportunities to them and
threats that the organization must encounter in order to achieve
their strategic objectives.

Alliance Definition

Once the strategic decision by the management of the
organization is to develop its strategy through the
implementation of a strategic alliance, the alliance definition
stage is in place. Some of the authors presented above, combine
the strategic evaluation and the alliance definition stage into one,
however, I consider that the strategic evaluation phase is of
great importance to determine the feasibility or not of a strategic
alliance as a method to develop the strategy of the organization.

Lorange and Roos (1993) present two phases within the
formation process of strategic alliances. Both phases deal with
different types of political and analytical considerations, that will
lead at the end to the creation of the alliance.

In the alliance definition stage, it is of great importance for the
organization to define clearly the objectives that are being
pursued by entering into such strategic cooperation. Kleymann
and Seristo (2001, p. 304) state that it is possible to classify the
objectives of alliancing as to whether they are efficiency-seeking
or market-oriented; in the latter category, one can distinguish
between market-offensive and market defensive objectives.
(See Figure 11)

Efficiency-seeking objectives can be achieved through joint
resource utilisation. There are also economies of density to be
reaped. An important market defensive objective can be called
competitor taming: vulnerability is one reason of firms to enter
coalitions (Eisendhardt and Schoonhoven, 1996), and entering
an alliance dampens or completely eliminates competition with
partner airlines. Another defensive objective is related to
entrenchment, i.e., the strengthening of ones position in the
home market through being able to link the home market to the
world. Offensive objectives include value-enhancementof the
product through the offering of better connections, access to an
extensive route system, and, in some cases, being linked to a
prestigious brand (either that of a partner or of the alliance
itself), or learning new skills, especially in the fields of revenue
management and marketing. Lastly, there is the objective of
gaining environmental control. This refers to the fact that a
single airline often does not have much control over
environmental factors, which range from prices charged by
suppliers to the regulatory authorities. A group of airlines is likely
to have more negotiating might with airport authorities, ground
handling companies and maybe to some extent even lobbying
power at government level. (Kleymann and Seristo, 2001, pp.
304, 305)

Market-Defensive
Objectives
Efficiency-Seeking
Objectives
Market-Offensive
Objectives

C
o
m
p
e
t
i
t
o
r

T
r
a
i
n
i
n
g

S
t
r
e
n
g
t
h
e
n
i
n
g

p
o
s
i
t
i
o
n

i
n

h
o
m
e

m
a
r
k
e
t

V
a
l
u
e

E
n
h
a
n
c
e
m
e
n
t

E
f
f
i
c
i
e
n
c
y

t
h
r
o
u
g
h

j
o
i
n
t

r
e
s
o
u
r
c
e

u
t
i
l
i
s
a
t
i
o
n

E
c
o
n
o
m
i
e
s

o
f

S
c
a
l
e

L
e
a
r
n
i
n
g

P
r
o
c
e
s
s
e
s

H
u
b

D
o
m
i
n
a
n
c
e

N
e
t
w
o
r
k

E
n
h
a
n
c
e
m
e
n
t

E
n
v
i
r
o
n
m
e
n
t
a
l

C
o
n
t
r
o
l

Alliance
1
Alliance
2
Figure 11 Strategic Alliance Objectives
(Kleymann and Seristo, 2001, p. 306)

Partner Selection

One critical success factor in the formation of an alliance is
making sure to select the adequate partner to develop the
strategy. It is evident that a right partner will determine the
future of an alliance through good working relationships,
developing right corporate culture, business harmonisation,
suitable technology and others (Baharum, 2004, p. 92).

Bronder & Pritzl (1992) emphasize that a firm should be able to
determine precisely what sort of partner it should be looking for.
Analysis should be focused on fundamental, strategic and
cultural fit between the potential partners. The alliance achieve
fundamental fit when activities and expertise complement in a
way that increases value potential. Strategic fit includes the
harmonisation of business plans, joint specification of
appropriate configuration and common time frame for achieving
goals. Cultural compatibility is another important issue to be
addressed when selecting a partner.

Pekar & Allio (1994) perspective on this stage is to have a clear
understanding on the partners motives for joining the alliance,
creating strategies for accommodating all partners management
styles and addressing resource capability gaps that may exist for
a partner.

Isabella (2002) in her study in partner selection, emphasise the
importance of ensuring the optimal partner match and not simply
having the best partner. On the other hand, Faulkner (1995)
divide its partner selection criteria into Strategic Fit and Cultural
Fit. The main issue in evaluating strategic fit is whether the joint
value chain seems likely to achieve sustainable competitive
advantage for the partners, through aligning their skills and
assets and potential synergies that can be projected. Cultural fit
deals with an attitude of understanding the cultural differences,
and willingness to compromise in the face of cultural problems.

With regards to partner selection in the airline industry, Evans
(2001, p.238), citing the work of Medcof (1997), presents five
criteria: The first of the four is that the partner has the capability
to carry out its respective role within an alliance. The second
criterion proposed by Medcof relates to the compatibility of
partners both in cultural and operational terms. Thridly, partners
should be able to demonstrate equal commitment to an alliance
through having commensurate levels of risk. The fourth partner
selection criteria cited by Medcof related to the control of an
alliance and whether it is likely to contribute to alliance
effectiveness. A fifth partner selection criterion, is geographical
fit, where airlines that are forming alliances should be careful
and avoid forming partnerships with airlines that have
overlapping markets, except at the margins.

Alliance Implementation

This stage covers the action in the complete process. Here is
where the different activities to be performed under the
partnership agreement are defined and implemented. Great
emphasis has to be made to this stage due to the importance of
executing the right actions in order to deliver the alliances
objectives.

Bronder & Pritzl (1992) under the Configuration Stage presented
in their model, state that aspects such as field of cooperation,
intensity of cooperation and opportunities for multiplication
should be decided upon deciding to form a strategic alliance. The
field of cooperation is based on the direction of cooperation and
value chain activities involved.

Evans (2001), presenting its conceptualization of the
collaborative strategy process in international airlines, when
defining the structure of the alliance present collaboration in
activities covering different areas, such as marketing, the
definition of the product or service, computer systems, logistics
and others.

Another important tool to be used by airlines when defining the
activities and coordinating the implementation of activities
included in the strategic alliance is the Value Chain Model
(Porter, 1980), and as a reference, the Value Chain Model for Air
Cargo Alliances developed in Section 4 of this document can be a
good guideline. Based on the different activities included in the
value chain, airlines can standardize procedures, define common
performance indicators, standardize reports and even integrate
processes.

Alliance Evaluation

According to Evans (2001, p. 233), in this stage the strategic
alliance is evaluated against selected criteria purporting to
measure the success of the alliance. The evaluation of the
alliance is fed back into the analytical phase so that any changes
based upon experience can be incorporated.

Evaluating the performance of alliances is complex given the
multifaceted objectives of many alliances and the difficulties
involved in ascribing financial measures. (Evans, 2001, p. 239)

Partners in an alliance have both common and individual
corporate goals. Studies of strategic alliances have measured
and evaluated performance in different ways, such as alliance
longevity (Beamish, 1987), in terms of meeting the objectives of
individual partner firms (Dollinger and Golden, 1992; Thomas
and Trevino, 1993) and by resource alignment among partner
firms (Das and Teng, 2000). Other studies have used new
product development (Deeds and Hill, 1996) and profitability
(Cullen et al., 1995; Reuer and Miller, 1997). These measures
are a combination of financial and non-financial outcomes.
(Morrish and Hamilton, 2002, p. 403)

Management of the Alliance

According to Bronder & Pritzl (1992) in order for the strategic
alliance to be successfully managed, it is necessary for the
partner to adapt to changing condition and to learn from one
another. This phase can be divided into three stages, being:
Contract Negotiation, Co-ordination interface and Learning,
adaptation and review.

Lorange & Roos approach the management process of strategic
alliances through four important aspects to considered under this
stage:
The setting of objectives for the strategic alliance network as
a whole.
Developing strategic program for implementing particular
objectives.
Delineating the near-term tactics in relevant budgets
Monitoring of bottom line progress, longer-term strategic
progress and protection of the firms core competences.

Faulkner (1995) states that the right attitude is needed in
managing the alliances. Additionally, commitment and trust are
other vital elements to develop close interpersonal relationships
in making an alliance effective.

Pekar & Allio (1994) found that there are four stages in the
strategic alliance process: effective alliance operation which
required senior management commitment, appropriate caliber of
resources devoted to the alliance, linking of budgets and
resources with strategic priorities and measuring and rewarding
alliance performance.

6. Conclusions and Recommendations

The utilization of strategic alliances as a source of competitive
advantage in todays world is a reality. No matter the size of the
organization or the industry in which it participates, most
organizations see in a strategic alliance an interesting opportunity of
growth, knowledge, efficiency and profitability.

The airline industry has not been aside of this reality, and initially
during the 1990s a wave of alliances came in place in the
passenger airlines industry, boosting their competitive position,
expanding their networks and increasing levels of market share for
members of the alliances. However, is not until the year 2000 when
major initiatives of strategic alliances in the air cargo business took
place, as it was presented in the introduction of this document, with
the creation and launching of SkyTeam Cargo and WOW
Alliance.

Multiple definitions on strategic alliances have been presented in
this document, highlighting the importance in identifying those
partnerships that are really strategic for an organization and others
which are part of their tactical activities to conclude the
organizations day to day functions. Are those strategic partnership,
that are created as a response to a strategic objective or as a
method of development of a strategy the focus of my research.

In the airline industry, different type of strategic alliances have
been experienced. Apart from routes, the most common forms of
collaboration involve code sharing; block spacing; shareholdings;
and franchising. Results of a survey conducted by the specialized
publication Airline Business on the number of existing airline
alliances on a 5-year period, showed an increase of 18.3% on the
total number of alliances, as an evidence of the importance of such
forms of partnership in this industry.

Different reasons can be identified as the drivers for such expansion
of airline alliances over time, being the following two the main
issues to be highlighted: the regulatory framework and the nature
of airline alliances.

The first one, relates to the regulatory framework in which the
industry has been developing. Under the first factor, even though
the airline industry is a vehicle to promote globalization all over the
world it remains, ironically, nationalistic in nature. In order for an
airline to expand operations into another countrys territory, the
governments of any two countries have to establish bilateral
agreements that will ultimately lead to an infinite chain of
agreements on a world-wide scale. It is the limitation with regards
to the carrier(s) included in such bilateral agreements the one that
has become a main obstacle to true liberalization on the airline
industry and the main motivators for airlines to look for strategic
alliance in order to expand their operations. Now the second issue,
relates to the fact that despite the possible future weakening of
regulatory constraints thanks to liberalization efforts in major
markets, it is presumed that alliances will still play an important
part in the global market. Additionally, it is expected that these
alliances will stay and will not necessarily evolve in mergers, mainly
because the flexibility offered by the alliances compared to mergers
is what is required within a turbulent and uncertain industry such it
is the airline industry. Furthermore, the size of the financial
resources needed for an airline to establish its own global network
are enormous and bearing in mind the volatile nature of past
financial results - the adequate return on such investment remains
uncertain.

Regardless of the fact that strategic alliances are a must in todays
business environment and the multiple reasons and benefits that
organizations can expect from entering into strategic alliances, it
seems it is not an easy task. The numbers with regards to the level
of success of strategic alliances are not motivating at all, showing
that 50% to 70% of this partnership efforts fail. Multiple sets of
models, frameworks, critical success factors, results from research,
commandments and any other type of consultancy creations are
available for executives to choose. Such critical success factors for
strategic alliances vary from simple concepts of trust and
communication, to complex models involving several steps and
methodology.

It seems to be a general agreement over the academics that
strategic alliances are a source of competitive advantage. When
analyzing the types of strategic alliances and the reasons behind
them, we see that cooperation at different levels within the
alliances members is present in various stages of its value chain
impacting the capacity of such alliances to create value and
enhance the competitive position of such organization. Therefore, a
disaggregated model of a Value Chain for a Cargo Airline has been
presented in this document.

As a final point, different frameworks and practices for
implementation of strategic alliances were evaluated, and an
adapted model was presented as a reference for future partnership
efforts. Such model cover different stages being: Strategic
Evaluation, Alliance Definition, Partner Selection, Alliance
Implementation, Alliance Evaluation and Alliance Management.

With regards to future areas for research in this topic, I consider
that there is still a lot of work and research to do in order to
measure the impact that these alliances are having over their
customers. Analyzing the perception of major players in the
industry on a commercial level, mainly taking into account the
consolidation and high bargaining power from major freight
forwarders is going to be a key element in the consolidation and
future success of such partnerships.


Annexes
Annex # 1
Characteristics of Services WOW Alliance

Time Definite (Always using LAT/TOA)

Performance Guarantee* 100% refund of the paid net weight charge in case of delay
Capacity Guarantee*
(auto-confirmation)
Up to 200 kg Auto KK (auto confirmation)
Online Tracking

Seamless Transfer

Transportation Speed
Fastest possible routing
Same Quality Standards


Online Tracking

Seamless Transfer


Transportation speed Use General Cargo speed


Online Tracking

Transportation speed Usual General Cargo speed

Seamless Transfer

Source: WOW Alliance Web Page www.wowtheworld.com
ANNEX # 2
WOW Alliance Members Profile

Lufthansa Cargo
Lufthansa Cargo is the logistics & cargo division of Deutsche
Lufthansa, which is an aviation group with a worldwide network
of about 400 subsidiaries. According to Lufthansas Company
Profile, presented by Datamonitor (2006) the group has
operations in over 97 countries, focusing in seven business
areas: passenger transportation; logistics; maintenance, repair
and overhaul (MRO); airline catering; leisure travel; information
technology; and financial and other services.
As presented by Datamonitor (2006), the passenger
transportation segment covers 185 cities in 97 countries with a
fleet of 413 aircraft. Together with its partner airlines the group
serves 409 destinations. The group is focusing on tapping
passenger traffic in growth markets such as China, India and
Eastern Europe. This division is directly operated by the Groups
parent company, Deutsche Lufthansa. Lufthansa is a founding
member of the Star Alliance, a multilateral airline grouping in the
passenger services.

The logistics segment undertakes freight transport. It covers 510
destinations spread across the world. This segment is operated
by the groups wholly owned subsidiary, Lufthansa Cargo.
Lufthansa Cargo markets cargo space, and also transports cargo
and mail. It augments its own air services with trucking services
or flights operated jointly with partner carriers. The largest
portion of freight is handled at the Lufthansa Cargo Centre at
Frankfurt airport, Germany.

As it is stated in the Annual Report (2006), the core business of
Lufthansa Cargo is airport-to-airport transportation, which is
constantly strengthened through customer-oriented service
improvements. The target customer is the forwarder. Their
products and processes will in future be tailored more closely to
forwarder needs. Premium products, bilateral cooperation and
operational excellence will additionally continue to underpin the
foundations for the lasting success of the Lufthansa Cargo
business system.
Lufthansa Cargo results for the 2005 period were positive despite
the multiple difficulties that the company and the industry faced
during the period. Total Revenue for the year totaled 2,752
million Euros, with an operating profit of 108 million Euros.
These results represented a growth of 11.5% in sales and over
300% in operational profit. However, margins are still low
compared to the average in the industry.
Singapore Airlines Cargo
Singapore Airlines Cargo is the Cargo Division of Singapore
Airlines. According to Datamonitors Company Profile (2005),
Singapore Airlines (SIA) activities cover various aviation
businesses, principally commercial passenger services, through
SIA and its regional subsidiary Silk Air. The companys portfolio
includes the freight division SIA Cargo, and the airport
management division Singapore Airport Terminal Services
(SATS). Unrelated business such as SIA Engineering, are also
part of the SIA family. The Singapore government owns 57% of
SIA through Temasek Holdings.

SIA has about 100 aircrafts in its fleet and flies to over 40
countries. The airline owns a 49% stake in the UKs Virgin
Atlantic Airways and 25% of Air New Zealand. In addition, its
subsidiary Silk Air is predominantly involved in transporting
package holidaymakers to and from India. SIA and Silk Air
belong to the Star Alliance marketing network, which includes
United Airlines, Deutsche Lufthansa, and Scandinavian Airlines
System, which broadens the range of destinations available on
its network. The companys other businesses include SIA Cargo,
the worlds third-largest air cargo carrier. In addition, SATS is
responsible for the management of roughly 80% of airline
services through Singapore International Airport. (Datamonitor,
2005)

Companys results for the 2005 financial year represented total
revenue of S$ 10,302.8 millions, compared with S$9,260.1
millions on previous year. In terms of Operating Profit, the
company decreased a 6.7% passing from S$697.9 millions in
2004 to S$651 millions in 2005.

SAS Cargo

SAS Cargo Group A/S was established in June 2001 as an
independent subsidiary to Scandinavian Airlines System. SAS
Cargo is owned 100% by the SAS Group, and about 70% of the
cargo capacity that the airline offers comes from the SAS fleet.
The remaining 30% is placed on either passenger or freighter
aircraft from various other airlines. SAS Cargo has its own
airfreight handling facilities in Copenhagen, Gothenburg, Oslo,
Stockholm and Newark. At other destinations the handling
services are bought from professional handling agents.

SAS Cargo Group A/S is an international airfreight company
specialized in transportation of airfreight and airmail from airport
to airport. Via their hubs in Scandinavia the airline fulfills their
customers need for fast and reliable transportation of airfreight
between the continents. Their core business is to serve
customers who have a demand for airfreight to, from and within
Scandinavia. Thanks to a well-developed route network
customers can reach destinations around the world.(SAS Cargo
Annual Report, 2005)

Their customers are primarily freight forwarders who organize
shipments and logistics for the shippers. In general, the shippers
are manufacturing companies with products that either need fast
access to the market or semi manufactured products that need
fast transport to the next production facility.

SAS Cargos vision is to be a part of the worlds leading air
transportation and logistics business. As a natural consequence
of this SAS Cargo was a founding member when the WOW air
cargo alliance was formed in 2002. Four airlines with focus on
cargo have integrated their systems and processes in order to
have easy access to each others route network. (SAS Cargo

Since the company was separated from SAS Group and
established as an independent legal entity in 2001, SAS Cargo
has been successful both in terms of revenue and profit. 2005
was its best year ever, where revenue exceeded 3 billion (3.306)
SEK (356 Million EUR) for the first time ever. Profit was also
bigger than ever amounting to 68 million SEK. (SAS Cargo

Japan Airlines Cargo

Japan Airlines Cargo is the Cargo division of Japan Airlines.
According to Datamonitor Company Profile (2005), Japan Airlines
Corporation, also known as the JAL Group, is a Japanese
company engaged mainly the air transportation business. The
JAL Group is composed of 295 subsidiaries and 98 affiliates.

JAL Groups business is classified into four main divisions
including: air transportation; airline-related business; travel
services; and other businesses.

In air transportation, JAL Groups operations include air
passenger services and baggage handling; air cargo services;
maintenance of aircraft and parts; painting of aircraft exteriors;
seat reservations and information on passenger services;
supplying electricity and compressed air to stationary aircraft; in-
flight catering service; sale of fuel for aircraft; and management
of aviation fuel supply facilities. Air transportation business is
conducted through 10 subsidiaries including: JAL International,
JAL Domestic, Japan Asia Airways, Japan Trans Ocean Air,
JALways, JAL Express, Japan Air Commuter, J Air, Harlequin Air,
and Hokkaido Air System. (Datamonitor, 2005)

Airline-related business includes passenger services and cargo
handling, in-flight catering businesses, the maintenance of
aircraft and ground equipment, and the supply of aviation fuel.
These activities are conducted by a total of 97 subsidiaries,
including 58 consolidated companies and 68 affiliated companies.
(Datamonitor, 2005)

As presented in their Annual Report (2005), Operating Revenues
for their Cargo Division totaled U$2,051 million dollars, of which
over 80% is represented by revenue generated in their
international operations. Total Revenue for the Cargo Division
grew 7.1% compared to previous year. On their consolidated
results, in terms of profitability, a recovery was made from the
losses presented in 2004, generating a Net Profit of over U$281
million.
ANNEX # 3
SkyTeam Alliance Members Profile

Aeromexico

Formed in 1991, Aeromxico Cargo is the Cargo & Logistics
Division of Aeromxico Airlines and an active member of the
SkyTeam Cargo Alliance since 2000. It is headquartered in
Mexico City and operates 98 offices throughout the Americas,
Europe and Asia. (SkyTeam Cargo website, 2006)

Aeromxico Cargo offers cargo capacity in the cargo hold of
Aeromxico flights and on third party carriers, providing
extended services as the Cargo Airline of the Americas. Its
principal hub is located in Mexico City, Mexico.

Aeromxico Cargo provides service on 350 daily flights, reaching
76 destinations in 15 countries, operating a fleet of 77 aircraft.
For year 2005, their Cargo Operation Revenue was of U$136
million.

Air France Cargo

Dedicated exclusively to airfreight since 1974, Air France Cargo
ranks fifth worldwide in its sector. Air France Cargo operates
over 1,700 flights daily to over 200 destinations, providing its
customers with identical levels of skill and expertise all over the
world. (SkyTeam Cargo website, 2006)

It owns one of the worlds biggest specialized fleets, with 258
aircraft, including twelve dedicated freighters and offers some of
the most regular and frequent services. Air France Cargo
operates out of dedicated infrastructure following the
construction of the G1XL cargo terminal, the perishable goods
station, the Express Hub and the Hahn (Germany) Hub.

On 5 May 2004, the merger between Air France and KLM was
signed. In the fiscal year 2005/06 Air France and KLM carried 70
million passengers and 1,4 million tons of freight and mail.
Cooperation between Air France Cargo and KLM Cargo then
increased to begin the commercial operations synchronization
phase, before starting to integrate selected activities as of mid-
2005. By joining forces in the cargo arena, Air France and KLM
are set to become the worlds biggest non-integrator operator,
generating combined turnover of 2.7 billion euros. (SkyTeam
Cargo website, 2006)

From the past both Air France Cargo and KLM Cargo have been
on the forefront of transporting and handling general and special
cargo. Building on this experience, AF-KL Cargo offers a wide
range of air transport services in the market, providing seamless
connections throughout the world. The services we offer, are
developed in close cooperation with our customers, taking a
close look at their transportation needs in the entire logistic
process.

To respond to these needs, AF-KL Cargo offers a high quality
range of airport-to-airport services and specialized teams with
extended knowledge of the logistic needs of specific markets.
The professional staff is dedicated to deliver what they promise.
AF-KL Cargo believes that people make the difference.
Responsiveness, commitment, professional capabilities and drive
to perform is the real value of AF - KL Cargo. (SkyTeam Cargo
website, 2006)

Alitalia Cargo

Since 1947, Alitalia has been an important point of reference in
the history of the development of Italy. The values, which during
these years have been expressed through Company initiatives,
have reinforced the image of Alitalia as an ambassador for Made
in Italy products and Italian culture. (SkyTeam Cargo website,
2006)

For more than 50 years of activity in the air logistics field, Alitalia
Cargo, Alitalias cargo division, has been searching for the best
solutions to suit his Customers needs.

It has deleveloped a dynamic and extensive product portfolio
suitable for every kind of goods. It provides highly specialized
and competitive air transportation and logistic services through
an extensive network covered by both all cargo and passenger
capacity. It serves around 103 cities in 52 countries, working
through it hubs of Milan - Malpensa and Rome Fiumicino.
(SkyTeam Cargo website, 2006)

It is currently the sixth ranked AEA carrier, holding around four
percent of the European market and it is the leader on Italian
market, the third largest export market in Europe. Alitalia
Cargos renewed fleet is composed of five MD11 freighters, plus
the entire belly-hold capacity of 172 passenger aircraft.

For year 2005, total revenue on their cargo division was of
U$595 million, movilizing around 1.361 billion tonne
kilometres. (SkyTeam Cargo website, 2006)

CSA Cargo

CSA Czech Airlines was founded as Czechoslovak State Airlines in
October 1923 and performed its first transport flight from Prague
to Bratislava on the 29th of that month. Currently, Czech
Airlines Cargo offers exceptional coverage of Central and Eastern
European destinations with connections to the Middle East and
North America. (SkyTeam Cargo website, 2006)

At the beginning of the 1990s, CSA embarked on a radical
modernization of its fleet. As of 1990, CSAs fleet consisted
solely of Russian-produced aircraft. Since the first A310 - 300
from the Western European consortium of Airbus Industries was
added in 1991, CSA has modernized its fleet to include ATR 72s,
Boeing 737-500s and Boeing 737-400s. CSA currently operates
49 only Western European and American aircraft on its flights.
CSA will also be upgrading its fleet with the addition of three new
Airbus A320 200 aircraft. (SkyTeam Cargo website, 2006)

CSA Cargo network of operation covers 120 cities in 51
countries, with over 200 daily departures. CSA Cargo handling is
performed in one of the most modern cargo terminal in Europe
Prague Ruzine. Together with the Road Feeder Service and
courier centre, equipped with advanced technology it represents
an effective logistic base for Central and Eastern Europe.

Delta Air Logistics

Delta Air Lines traces its roots back to 1924, when Huff Daland
Dusters was founded as the worlds first aerial crop dusting
organization. In 1928 the company became Delta Air Service. In
1941, the company moved its headquarters from Monroe,
Louisiana to Atlanta, Georgia. (SkyTeam Cargo website, 2006)

Delta Air Logistics, Deltas cargo division, began during World
War II when it operated cargo flights for the U.S. Army Air Force.
In 1944, the airline established an air cargo department using a
DC-3 passenger aircraft with cargo bins to transport three
commodities: newspapers, shrimp and tomato plants. Delta
introduced DEPS (Delta Expedited Package Service), a service for
small packages, in 1970. The next year, Delta expanded the
DEPS shipment options and renamed the service Delta Air Lines
Special Handling (DASH). DASH grew rapidly, as five shipments
produced nearly as much revenue as three passengers. In 1975,
Delta offered a high-priority cargo service termed Delta Air
Express for shipments of any size and weight. In December,
1995, Delta formed a separate cargo organization, today known
as Delta Air Logistics, which brought cargo marketing, sales,
service and administration functions into a single unit. (SkyTeam
Cargo website, 2006)

Delta Air Logistics is well-positioned to provide superior customer
service and innovative solutions well into the new millennium
with its membership in the SkyTeam Cargo worldwide alliance
and the U.S. Sales Joint Venture, its new domestic pricing
structure and the incorporation of several technological initiatives
including GF-X. Delta Air Logistics carries cargo on 7,800 daily
flights to 494 destinations in 86 countries. (SkyTeam Cargo
website, 2006)

For year 2005, its total revenue for the Cargo Division was of
U$520 million, mobilizing a total of 1.923 billion tonne-
kilometers in their operation.

KLM Cargo

KLM Royal Dutch Airlines was founded on October 7, 1919. The
carriers first scheduled flight started on May 17, 1920 between
Amsterdam and London. By the end of that year the company
had carried 345 passengers, 22 tons of cargo and 3 tons of mail.

KLM Cargo operated around 700 flights to almost 200
destinations.

On 5 May 2004, the merger between Air France and KLM was
signed. In the fiscal year 2005/06 Air France and KLM carried 70
million passengers and 1,4 million tons of freight and mail.

Korean Air Cargo

Korean Air Cargo was launched in 1969 and, in 1971, became
the first airline to offer full freighter service on transpacific
routes.

It currently has worlds largest freight capacity on transpacific
routes and is the largest freighter carrier on intra-Asian routes.
In 2004, Korean Air Cargo was ranked number one cargo carrier
in the world in terms of international FTK. (SkyTeam Cargo
website, 2006)

Currently, it provides 51 freighter services weekly to the
Americas, 29 to Europe and 47 within Asian-Pacific region.

Korean Air Cargo operates state-of-the-art facilities in major
cities across the world ensuring its shipments are processed
efficiently on the ground. It has recently opened state-of-the-art
facilities at JFK and Incheon.

With one of the worlds largest fleets of B747F series, including
eight of the cutting-edge B747-400ERFs, Korean Air Cargo
continues to invest in modernization of its freighter fleet and
improvement of facilities including cargo terminals and IT
systems while optimising the existing infrastructure and
resources to provide more reliable services to customers.

North West Airlines Cargo

NWA Cargo, the cargo subsidiary of Northwest Airlines. NWA
Cargos freighter fleet 14 Boeing 747 freighter aircraft fly from
key cities throughout the United States and Asia and connect at
the carriers cargo hub in Anchorage, Alaska, facilitating the
quick transfer of cargo between large cities on both sides of the
Pacific. NWA Cargo also transports freight aboard the passenger
fleet of Northwest Airlines.(SkyTeam Cargo website, 2006)

Northwest Airlines began in 1926 carrying air mail from the Twin
Cities of Minneapolis/St. Paul to Chicago with a "fleet" of two
rented, open-cockpit biplanes-a Thomas Morse Scout and a
Curtiss Oriole. For the first nine months of operation, cargo was
the only revenue onboard.

Through acquisitions and organic growth, Northwest has grown
to be the worlds fifth largest passenger airline and the largest
cargo carrier among U.S. combination passenger and cargo
airlines. For year 2005, total revenues for cargo were of U$0.9
billion. (SkyTeam Cargo website, 2006)

ANNEX # 4
Major Studies of Airline Alliances

Study Analyses Sample Period Findings
Oster and Pickerell (1986) Conceptual
Nearly all the 50 largest carriers had formed code-
sharing alliances with a major airline by 1985
Pustay (1992) Conceptual
Identified the following impediments to true
globalisation: infrastructure limitations, traffic rights,
foreign ownership of flag carriers,antitrust, threat of
government intervention to prevent emergence of
global carriers.
Gellman Research
Associates (1994)
Counterfactual
study: 2 trasatlantic
alliances
BA/USAir, KLM/NW,
1st. Qtr. 1994, 1 qtr.
Profitability increases for all parties with BA and KLM
gaining more that their partners in terms of net profit.
Youseff and Hansen
(1994)
Case Study: simple
linear regression. Swissair and SAS
1989-1991, 2
years
Increases in flight frequency; variation in fare levels;
the strongest service levels had the lowest fare
increases. Point to the redistributive nature of alliance
impacts.
US General Accounting
Office (1995)
Intensive
interviews with key
people
KLM/NW, USAir/BA,
UAL/Lufthansa,
UAL/Ansett,
UAL/Bmidland 1994, 1year
All carriers in the 5 alliances enjoyed increased
revenues and traffic gained at competitor's expense
not industry growth.
Dresner et al. (1995)
Empirical:
categorical
variables
Continental/SAS,
Delta/Swissair,
KLM/NW
1987-1991, 4
years
Mixed successes with traffic volumes.
Comment:restricted to equity alliances between the
US and Europe. In general, alliances did not benefit
partners.
Park (1997)
Estimated
econometric
models
panel data KLM/NW
Delta/Swissair/Sabena
1990-1994 4
years
Traffic increases at the expense of rival airlines.
Complementary alliances - lowered airfares. Parallel
alliances - increased airfares.
Oum et al. (2000)
Empirical:
econometric
models;
regressions 2 airlines
1986-1995 9
years
Increased profitability, increased productivity,
decrease in pricing levels.
Oum et al. (2000) Event Study
Database of 58
alliances
1989 - 1998, 9
years Positive abnormal return of 0.40% on event day 0
Oum et al. (2000)
Empirical
Regression
Panel data of 4 major
alliances
1992-1994, 2
years Increased traffic on alliance routes
Bueckner and Whalen
(2000) Empirical
3rd qtr fare data US
Dpt of Transportation 1999, 1 qtr
Alliance partner charge approximately 25% lower
interline fares compared to those charges by non-
allied carriers.
Source: Morrish & Hamilton, 2002.

Reference List

Agusdinata, B., de Klein, W., 2002. The dynamics of airline alliances. Journal
of Air Transport Management, (8), pp. 201 211.

Air Cargo World, 2004. Sky Team Adds. Air Cargo World Magazine. Vol. 94,
Issue 10, pp. 6 8.

Airbus, 2006. Airbus Global Market Forecast 2006 2025. Available on-line at
http://www.airbus.com/en/corporate/gmf/ . Last date accessed January 13,
2007.

Airline Business, 1999. Circling the globe Annual Alliances Survey. Airline
Business, July, pp. 33-65.

Airline Business, 2005. Alliance Values. Airline Business Magazine. Vol. 21,
Issue 9, p. 9.

Armbruster, W., 2002. Not a Selling Point. JoC Week. Vol. 3, Issue 21, p. 22.

Armistead G., Clark, G., 1993. Resource Activity Mapping: The Value Chain in
Service Operations Strategy. The Service Industries Journal. 13 (4) 221
339.

Baharum, S., 2004. A Sustainable Competitiveness Model for Strategic
Alliances. PhD Theses. University of Greenwich, London.

Bamford et al., 2004. Launching a World-Class Joint Venture. Harvard
Business Review. February Issue, pp. 91 100.

Baum, J., Calabrese, T., Silverman, B., 2000. Dont go it alone:alliance
network composition and startups performance in Canadian biotechnology.
Strategic Management Journal 21 (3), pp. 267294.

Bonoma, T., 1985. Case research in marketing: opportunities, problems, and
a process, Journal of Marketing Research, Vol. 12, pp. 199-208.

Borys, B., Jennison, D., 1989. Hybrid Arrangements as Strategic
Alliances:Theore tical Issues in Organizational Combinations. Academy of
Management Review 14 (2), pp. 234249.

Bronder, C., Pritzi, R., 1992. Developing Strategic Alliances: A Conceptual
Framework for Successful Co-operation. European Management Journal, Vol.
10, pp. 412 421.

Brouthers, K., Brouthers, L., Wilkinson, T., 1995. Strategic alliances: choose
your alliances. Long Range Planning 28 (3), pp. 1825.

Brueckner, J.K., Whalen, W.T., 2000. The price effects of international airline
alliances. Journal of Law and Economics XLIII, pp. 503545.

Burgers, W., Hill, C., Kim, W., 1993. A theory of global strategic alliances: the
case of the global auto industry. Strategic Management Journal 14 (6), pp.
419432.

Button, K., Haynes, K., Stough, R., 1998. Flying into the Future: Air Transport
Policy in the European Union. Edward Elgar, Cheltenham, UK.

Chan, S., Kensinger, J., Keown, A., Martin, J., 1997. Do strategic alliances
really create value? Journal of Financial Economics 46, pp. 199221.

Chen, F., Chen, Ch., 2003. The effect of strategic alliances and risk pooling on
the load factors of international airline operations. Transportation Research:
Part E. Vol. 39, Issue 1, pp. 19 34

Contractor, F., Kundu, S., 1998. Modal choice in a world of alliances:
analyzing organisational forms in the international hotel sector. Journal of
International Business Studies 29 (2), pp. 325358.

Contractor, F., Lorange, P. (Eds.), 1988. Co-operative Strategies and
International Business. Lexington Books, Lexington, MA.

Conway, P. 2004. Team Work. Airline Business Magazine. Vol. 20, Issue 11,
pp. 58-59.

Datamonitor, 2005. Japan Airlines Company Profile. Datamonitor, New York,
2005.

Datamonitor, 2005. Singapore Airlines Company Profile. Datamonitor, New
York, 2005.

Datamonitor, 2006. Lufthansa Company Profile. Datamonitor, New York,
2006.

Das, S., Sen, P., Sengupta, S., 1998. Impact of strategic alliances on firm
valuation. Academy of Management Journal 41 (1), pp. 2741.

Doz, Y., 1996. The evolution of co-operation in strategic alliances: initial
conditions or learning processes? (special issue) Strategic Management
Journal 17, 5584.

Doz, Y., Hamel, G., 1998. Alliance Advantage: the Art of Creating Value
through Partnering. Harvard Business School Press, Boston.

Doz, Y., Olk, P., Ring, P., 2000. Formation processes of R&D consortia: which
path to take? where does it lead? Strategic Management Journal 21 (3), pp.
239266.

Draulans, Ard-Pieter de Man and Volberda, 2003. Building Alliance Capability,
Journal of Long Range Planning, Vol. 36, pp. 151 166.

Dussauge, P., Garrete, B., 1995. Determinants of success in international
strategic alliances: Evidence from the global aerospace industry. Journal of
International Business Studies. Vol. 26, Issue 3, pp. 505 530.

Dyer, J., Prashant, K., Singh, H., 2004. When to Ally & When to Acquire.
Harvard Business Review. July August Issue, pp. 109 115.

Dyer, J., Kale, P., Singh, H., 2001. How to make Strategic Alliances work. MIT
Sloan Management Review. Summer Issue, pp. 37 43.

Easterby-Smith, M., Thorpe, R. and Lowe, A., 1991, Management Research an
Introduction, Sage, London.

El-Hajjar, 1991. Strategic Alliances, Motivation, Management & International
Competitiveness.

Ellis, C., 1996. Making Strategic Alliances Succeed The Importance of Trust.
Harvard Business Review. July August Issue, pp. 8-9.

Elmuti, D., Kathawala, Y., 2001. An overview of strategic alliances.
Management Decision. 39 (3), pp. 205 217.

Emory, C.W. and Cooper, D.R., 1991. Business Research Methods, 4th ed.,
Richard D. Irwin, Boston, MA.

Ernst, D., Bamford, J., 2005. Your Alliances are too stable. Harvard Business
Review. June Issue, pp. 133 141.

Evans, N., 2001. Collaborative strategy: an analysis of the changing world of
international airline alliances. Tourism Management, (22), pp. 229 243.

Faulkner, D., 1994. International Strategic Alliances: Co-operation to
Compete. Mc. Graw Hill, New York.

Flight International, 2000. Reed Business Information, London.

Flores Jr., R., 1998. Competition and trade in services: The airlines global
alliances. World Economy. Vol. 21, Issue 8, pp. 1095 - 1109.

Glisson, L., Cunningham, W., Harris, J., Di Lorenzo-Aiss, J., 1996. Airline
industry strategic alliances: marketing and policy implications. International
Journal of Physical Distribution & Logistics Management, Vol. 26, No. 3, pp. 26
34.

Glaister, K., Buckley, P., 1998. Measures of performance in UK international
alliances. Organization Studies 19 (1), pp. 89118.

Gibson, B., Rutner, S., Mundy, R., 1996. Building successful alliances: Are
shippers doing their part?. Transportation Quarterly. Spring Issue. Vol. 50,
Issue 2, pp. 35 46.

Gimeno, J., 2004. Competition within and between networks: the contingent
effect of competitive embeddedness on alliance formation. Academy of
Management Journal. Vol. 47, Issue 6, pp. 820- 842.

Glaser, B. and Strauss, A., 1967. The Discovery of Grounded Theory:
Strategies for Qualitative Research, Aldine, Chicago, CA.

Glisson, M., Cunningham, W., 1996. Airline industry strategic alliances:
marketing and policy implications. International Journal of Physical
Distribution & Logistics Management. Vol. 26, Issue 3, pp. 26 34.

Gomes-Casseres, B., 2003. Competitive Advantage in alliance constellations.
Strategic Organization. Vol. 1 (3), pp. 327 335.

Gomes-Casseres, B., 1998. Strategy before Structure. [online]. Available
from:
http://www.alliancestrategy.com/MainPages/Publications/AAAug98.shtml.
Last date accessed: 13 April 2006.

Gomes-Casseres, B., 1998(a). Do you really have an Alliance Strategy?
[online]. Available from:
http://www.alliancestrategy.com/MainPages/Publications/SandL.shtml . Last
date accessed: 13 April 2006

Gomes-Casseres, B., 1994. Group versus Group: How Alliance Networks
Compete. Harvard Business Review. July August Issue, pp. 62 74.

Goulding, C., 1998. Grounded theory: the missing methodology on the
interpretivist agenda. Qualitative Market Research: An International Journal.
Vol. 1, Number 1, 1998. pp. 50-57.

Haig, B., 1995. Grounded Theory as a Scientific Method. Philosophy of
Education Society. Available on-line at http://www.ed.uiuc.edu/EPS/PES-
Yearbook/95_docs/haig.html. Last date accessed January 15, 2007.

Hamel, J., Dufour, S., & Fortin, D., 1993. Case study methods. Newbury Park,
CA: Sage Publications.

Hamel, G., Doz, Y., Parlad, C.K., 1989. Collaborate with Your Competitors
and Win. Harvard Business Review. January February Issue, pp. 133 139.

Harrigan, K., 1986. Joint ventures:linking for a leap forward. Planning Review
14 (4), pp. 1014.

Hastings, P. J., 2004. Agents of Alliances. Air Cargo World Magazine. Vol. 94,
Issue 10, pp. 46 48.

Hunt, S., 1991. Modern Marketing Theory, Cincinnati, South Western.

IATA, 2005. IATA Passenger and Freight Forecast 2005 2009. Available
online at http://www.iata.org/ps/publications/9266.htm , last date accessed
15 January 2007.

Isabella, L., 2002. Managing an alliance is nothing like business as usual.
Organisational Dynamics. Vol. 31, No. 1, pp. 7 59.

Johnson, G., Scholes, K., Whittington, R., 2005. Exploring Corporate Strategy.
7
th
Edition, Prentice Hall, London.

Japan Airlines, 2005. Annual Report 2005. Available online at
http://www.jal.co.jp/en/aboutjal/, last date accessed 10 January 2007.

Karp, A., 2004. Airlines Pairing Off. Air Cargo World Magazine. Vol. 94, Issue
1, pp. 20 25.

Killing, J., 1988. Understanding alliances: the role of task and organisational
complexity. In: Contractor, F., Lorange, P. (Eds.),
Co-operative Strategies and International Business. Lexington Books,
Lexington, MA, pp. 5567.

Kleymann, B., Seristo, H., 2001. Levels of airline alliance membership:
balancing risks and benefits. Journal of Air Transport Management, 7, pp. 303
310.

Kogut, B., 1988. Joint ventures: theoretical and empirical perspectives.
Strategic Management Journal 9 (4), pp. 319332.

Koza, M., Lewin, A., 1998. The Co-evolution of strategic alliances.
Organization Science. Vol. 9, No. 3, pp. 255 264.

Lorange, P., Roos, J., 1993. Strategic Alliances, formation, implementation
and evolution. Blackwell, New York.

Lufthansa, 2006. Annual Report 2006. Available online at
http://www.lufthansa-
cargo.com/GB/content.jsp?path=0,19130,45036,45037,45039, last date
accessed 10 January 2007.

Miao, C., 2000. The effects of Strategic Alliances on Airline Profitability.
Economic Issues. Vol. 5, Issue 3, pp. 87 - 95.

Morrish, S.C., Hamilton, R.T., 2002. Airline Alliances who benefits?. Journal
of Air Transport Management. 8, pp. 401 407.

Moss Kanter, R., 1994. Collaborative Advantage: The Art of Alliances. Harvard
Business Review. July August Issue, pp. 96 108.

Ohmae, K., 1989. The global logic of strategic alliances. Harvard Business
Review, March/April.

Osborn, R., Baughn, C., 1990. Forms of interorganizational governance for
multinational alliances. Academy of Management Journal 33, pp. 503519.

Oum, T.H., Park, J.H., Zhang, A., 1996. The effects of airline codesharing
agreements on firm conduct and international air fares. Journal of Transport
Economics and Policy 30, pp. 187202.

Oum, T., Park, J., Kim, K., Yu, Ch., 2004. The effect of horizontal alliances on
firm productivity and profitability: evidence from the global airline industry.
Journal of Business Research. Vol. 57, Issue 8, pp. 844 853.

Park, J., Zhang, A., 2000. An Empirical Analysis of Global Airline Alliances:
Cases in North Atlantic Markets. Review of Industrial Organization. Vol. 16,
Issue 4, pp. 367 - 385.

Parkhe, A., 1993a. Partner nationality and the structure-performance
relationship in strategic alliances. Organization Science 4 (2), pp. 301324.

Parkhe, A., 1993b. Strategic alliance structuring: a game theoretic and
transaction cost examination of interfirm cooperation. Academy of
Management Journal 36 (4), pp. 794829.

Parkhe, A., 1993. Messy research, methodological predispositions and theory
development in international joint ventures, Academy of Management
Review, Vol. 18 No. 2, pp. 227-68.

Pekar Jr., P., Allio, R., 1994. Making Alliances work Guidelines for Success.
Long Range Planning, Vol. 27, No. 4, pp. 54 65.

Perry, C., 1998. Processes of a case study methodology for postgraduate
research in marketing. European Journal of Marketing. Vol. 32, No. 9/10,
1998, pp. 785 802.

Pett, T.L., Dibrell, C., 2001. A Process Model of Global Strategic Alliance
Formation. Business Process Management Journal. Vol. 7, No. 4, pp. 349
364.

Porter, M. 1980. Competitive Strategy: Techniques for Analyzing Industries
and Competitors. Free Press, New York.

Porter, M. 1985. Competitive Advantage: Creating and sustaining superior
performance. Free Press, New York.

Putzger, I., 2005. Uneven Progress. Journal of Commerce. Vol. 6, Issue 20,
pp. 30 32.

Richards, L., 1993. Writing a qualitative thesis or grant application in
Beattie, K. (Ed.), So Wheres Your Research Profile? A Resource Book for
Academics, Union of Australian College Academics, South Melbourne,
Australia.

Rijammpianina, R., Carmichael, T., 2005. A framework for effective cross-
cultural co-opetition between organisations. Problems and perspectives in
Management. No. 4, pp. 92 103.

Ring, P., Van de Ven, A., 1994. Developmental processes of cooperative
interorganizational relationships. Academy of Management Review 19 (1), pp.
90118.

Romano, C., 1989. Research strategies for small business: a case study,
International Small Business Journal, Vol. 7 No. 4, pp. 35-43.

Saint-Hilaire, A., 2006. Research Methods: Student Handbook. University of
Greenwich, London.

Segil, L., 2004. Partnering: Metrics Matter. Financial Executive. December
Issue, pp. 30 35.

Sheth, J., Parvatiyar, A., 1992. Towards a theory of business alliance
formation. Scandinavian International Business Review 1 (3), pp. 7187.

SAS Cargo, 2005. Annual Report 2005. Available online at
http://www.sascargo.com/?NavID=107, last date accessed 10 January 2007.

Singh, K., Mitchell, K., 1996. Precarious collaboration:business survival after
partners shut down or form new partnerships (Evolutionary perspectives on
strategy supplement). Strategic Management Journal 17, pp. 99115.

SkyTeam Cargo Website. About SkyTeam Cargo. [online]. Available from:
http://www.skyteamcargo.com/en/about/. Last date accessed: April 16, 2006.

Stake, R., 1995. The art of case research. Thousand Oaks, CA: Sage
Publications.

Stober, A., 2003. Who soars in open skies? A review of the impacts of anti-
trust immunity, and international market deregulation on global alliances,
consumers and policy makers. Journal of Air Transportation. Vol. 8, Issue 1,
pp. 111 133.

T. Fan et al., 2001. Evolution of global airline strategic alliance and
consolidation in the twenty-first century. Journal of Air Transport
Management. (7), pp. 349 360.

Taverna, M., 2002. WOW, SkyTeam Cargo consolidate alliances and look at
expansion. Aviation Week & Space Technology. Vol. 156, Issue 24, p. 52

Tellis, W., 1997. Introduction to Case Study. The Qualitative Report. Volume
3, Number 2, July, 1997. Available on-line at
http://www.nova.edu/ssss/QR/QR3-2/tellis1.html. Last date accessed January
10, 2007.

The Boeing Company, 2006. Boeing World Air Cargo Forecast 2006 2007.
Available on-line at http://www.boeing.com/commercial/cargo/index.html ,
Last date accessed 10 January, 2007.

Turney, R., 2002. Wowing Cargo. Air Cargo World Magazine. Vol. 93, Issue 5,
pp. 14-16.

USDOT, 1994. A study of international airline codesharing. Gellman Research
Associates, Inc., Commissioned by the US Department of Transportation
(USDOT), Washington, DC.

USGAO, 1995. Airline alliances produce benefits, but effect on competition is
uncertain. The US General Accounting Office (USGAO), GAO/RCED-95-99,
Washington, DC.

Wang, Zh., 2004. Deregulation and Globalisation: Process, Effects and Future
Challenges to Air Transport Markets. Journal of Academy of Business,
Cambridge. Vol. 5, Issue , pp. 455-463.

Wang, Z., Evans, M., 2002. Strategic Classification and Examination of the
Development of current Airline Alliance Activities. Journal of Air
Transportation. Vol. 7, Issue 3, pp. 73 - 101.

Warner, M., 2001. Will alliances improve air cargo? . Traffic World. Vol. 265,
Issue 50, p. 15.

Whipple, J., Frankle, R., 1998. The Alliance Formation Process. International
Food and Agribusiness Management Review. 1 (3), pp. 335 357.

Wiebner, M., 2003. No Flying Solo. Air Cargo World Magazine. Vol. 93, Issue
1, pp. 38 43.

WOW website. About Us [online]. Available from:
http://www.wowtheworld.com/aboutus.html. Last date accessed: April 16,
2006.

Yin, R., 1984. Case study research: Design and methods (1st ed.). Beverly
Hills, CA: Sage Publishing.
Yin, R., 1989(a). Case study research: Design and methods (Rev. ed.).
Beverly Hills, CA: Sage Publishing.
Yin, R., 1989 (b). Interorganizational partnerships in local job creation and job
training efforts. Washington, DC: COSMOS Corp.
Yin, R. (1993). Applications of case study research. Beverly Hills, CA: Sage
Publishing.
Yin, R., 1994. Case study research: Design and methods (2nd ed.). Beverly
Hills, CA: Sage Publishing.
Youssef, W., Hansen, M., 1994. Consequences of strategic alliances between
international airlines: the case of Swissair and SAS. Transportation Research,
A (Policy and Practice) 28, pp. 415431.

Zhang, A., Van Hui, Y., Leung, L., 2004. Air cargo alliances and competition in
passenger markets. Transportation Research Part E. 40, pp. 83-100.

Zhiqui, Ch., 2003. A Theory of International Strategic Alliances. Review of
International Economics. Vol. 11, Issue 5, pp. 758 769.

Analysis of Strategic Alliance As A Source of Competitive Ad PDF

Hochgeladen von

Dokumentinformationen

Originalbeschreibung:

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Analysis of Strategic Alliance As A Source of Competitive Ad PDF

Hochgeladen von

Copyright:

Verfügbare Formate

TIACA Juan Carlos Serna 1

Analysis of Strategic Alliances as a Source of Competitive

Das könnte Ihnen auch gefallen