The effect of airline alliances in civil aviation on fair competition: A legal analysis

Abstract

Since the late 1990s, global network airlines have enrolled in one of the three existing global alliances (GAL) namely the Sky-Team, Star Alliance and Oneworld. By 2011, the airlines in the alliance dominated over two-thirds of all international traffic. This research seeks to examine the legal and economic analysis, and consequent interpretation of airline alliances within civil aviation and how this affects fair competition. The evolution of global airline alliances is characterised by the analysis of their size, as well as the volume of the partnership and code-share agreement between the alliances. The findings of this study indicate that the aviation international regulatory framework recognises that these principles have thus far been enacted and applied throughout the legal and/or regulatory instruments. However, with the ever-expanding commercial aviation industry, the desire for business growth and regulatory framework are not always aligned. Airline alliances have proved to be cost-effective and efficient and enabled passengers to reach their designation on schedule. Furthermore, they have also enhanced fair competition in the airline industry with the result that the market now operates more effectively. This research recommends that airline alliances should be allowed, but that competition regulatory authorities must be empowered to scrutinise them and closely monitor the conditions imposed on the alliance to ensure the protection of the smaller players in the industry and any anti-competitive effects mitigated adequately. The regulatory competition bodies should lay out policies and procedures encouraging fair competition in the industry by seeking to eliminate unfair and procedurally flawed barriers and consideration given to the fundamental benefits to be enjoyed by the businesses and stakeholders alike in the formation and existence of these alliances.