This presentation summarizes a proposed joint venture between British Airways, American Airlines, and Iberia Airlines to jointly manage capacity, prices, and share revenues and expenses on routes connecting North America and Europe. The joint venture would allow the airlines to cut costs through better coordination while also avoiding price competition. Customers would benefit from an expanded network with more direct flight options. However, some argue large airline alliances could eventually dominate the global market and lead to reduced competition, higher prices, and less innovation. The presentation also discusses various strategies airlines have used to remain profitable without forming alliances, and methods the joint venture partners could employ to divide revenues and costs.

1. Welcome
To
OUR PRESENTATION

2. PREMIER UNIVERSITY
• COURSE TITLE : INTERNATIONAL BUSINESS
• COURSE TEACHER: MS. FARAH ISRAT
• SUBMITTED BY
NAME STUDENT ID NO
ISMAM MAHAMUD 1302710106443

3. PRESENTATION ON
JOINT VENTURE OF BRITISH
AIRWAYS, AMERICAN AIRLINES
AND IBERIA AIRLINES

4. Introduction
• One World Alliance, lunched in London in September 1998 by
British Airways and American airlines, is one of the best known
airlines alliances. It has 11 full members and 19 affiliates who
between them offer services to 720 destinations in destinations
in 170 countries.
• In 2008,BA and AA got together with another One world
member, Spanish airline Iberia, to seek approval for a non
equity joint venture covering routes that connect North America
and 27 European countries.

5. What are the implications for AA,BA,IBERIA airlines ,solvency and for
Customers, If the joint venture of airlines proposal approved??
• If the proposal approved, it will allow representatives from each airline to jointly
manage capacity and decide on prices and means allocating revenues and expenses.
• The major impetus for this venture is to cut operating costs by better controlling
capacity
• Avoiding disruptive price competition among them , and scheduling so as to gain
better gate utilization.

6. Customers benefits
• Airline strategic alliances can benefit passengers in two ways: (1)
through scale effects; and (2) through link effects.
• Scale effects are related to the size of the network, particularly
geographical scope, containing proportion of direct flights and access
to new services in the post alliance period.

7. Why should an airline not be able to establish service anywhere in the
world simply by demonstrating that it can and will comply with the local
labor and business laws of the host country?
• *governments continue to limit expansion and it isn’t necessarily about labor or
business laws.
• *protected industry because they play a role in national security.
• *Protectionism also plays a role.
• When considering either the international or simply the domestic environment, a
major consideration is whether economic interests in the airline industry are
better served through regulation via the market.
.

8. 2
• Opponents argue that local interests are often ill-served by
deregulation since airlines are free to discontinue service and to wage
predatory price wars that put competitors out of business, at which
point the survivors will then raise prices.
• Opponents also raise fears there may eventually be too few survivors
to allow for the competition that was envisioned by the proponents
of deregulation; the high barriers to entry in the industry further
exacerbate this situation.

9. • Another major consideration deals with the political dimensions of
the question.
Because most governments see airlines as a key national industry, they
oppose giving foreign carriers access to domestic routes on grounds of
both national security and consumer welfare.

10. What will be the consequences if a few large
airlines or networks come to dominate global air
service?
• The consequences would be both positive and negative. On the
positive side, passengers should be able to travel almost
anywhere in the world on a single airline (or network).
That in turn should minimize the risk of missed connections and
lost baggage.
Operating economies should be realized as a result of the higher
utilization of airport gates and ground equipment—consequent
savings may or may not be passed along to passengers through
lower prices.

11. • On the negative side, it is quite possible that minimal competition
would lead to poor service and/or high prices. In addition,
competition among the destinations associated with particular
airlines would likely decline, as would the special services offered by
the “niche” airlines.

12. Some airlines, such as Southwest and Alaska Air, have survived as
niche players without going international or developing alliances
with international airlines. Can they continue this strategy?
• When there is sufficient traffic on the city pairs that a route serves, there is little
need to have feeder or connecting routes for an airline to be profitable.
In fact, without the need for hubs to make connections, some airlines can operate
in smaller but closer-to-downtown airports, such as Midway in Chicago or La
Guardia in New York.
They can avoid the costs associated with the transfer of bags to connecting flights
and the payment of overnight expenses to passengers who miss connections.

13. • In addition, they may be able to overcome any disadvantages from
small-scale operations by targeting their promotion to regional and
niche groups and by running low-cost operations that charge low
fares.
Conventional wisdom would suggest they can in fact survive in their
present operational mode and that attempts to expand and/or modify
their operations might make them more, rather than less, vulnerable.

14. Many airlines have recently been no more than marginally profitable. Is
this such a vital industry that governments should intervene to
guarantee their survival? If so, how?
*government played major roles in airline ownership.
*moving towards privatization nowadays.
*These airlines do monopolies the domestic market, money losers and also are the recipients of the
government subsidies.
*Government should intervene to guarantee these airlines survival.

15. What methods could the three joint-venture
partners use to divide revenue and expenses on
the North Atlantic routes?
• *use OF code- shared route to divide their revenue and expenses.
• *code sharing is AA6143 – JAL432 which uses the America Airline
6143 and the passenger change to Japan Airline 432.
• *The code should be added to the code of which airline that the
passengers buy that flight ticket as a commission.
• *The total from the revenues and expenses for each flight will be
calculated through this code

16. • THANK YOU