TransAtlantic Deregulation: The Alliance Network Effect

About this Report

Open skies agreements in Europe have been in place for several years now and have fostered the development of many types of multinational airline alliances. Both broadbased strategic alliances and less integrated code-share alliances have changed the structure of the airline industry over the past five years and are generating new pressures on the remaining restrictive bilateral agreements in the region. It is therefore appropriate that we focus on transatlantic deregulation as we continue to examine the nature and evolution of international deregulation in the airline industry. In December 1999, The U.S. Department of Transportation released its first public documentation of the effects of multinational alliances.

That report, International Aviation Developments: Global Deregulation Takes Off, provided significant evidence of profound effects of multinational alliance development in transatlantic markets:

• It identified pro-competitive changes in industry structure—better, more competitive service as alliances expand and overlap.
• It documented enormous consumer benefits, both in terms of improved service and price reductions.
• It noted important consequences of alliance development not just for air travel consumers, but for local and national economies as well, due to greatly increased air travel.
• It noted important benefits for domestic European consumers and airlines as increased transatlantic traffic feed enabled European carriers to significantly expand their networks.

That report also noted that we are in the initial stages of global deregulation and alliance development. It pointed to continued expansion of alliances for years to come, with growing benefits for consumers, and suggested that new ways of competing may well evolve in international markets as the deregulation process continues to unfold. This second report looks at further developments in transatlantic markets by updating and expanding information presented in our first study.