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Strategic Alliances, Collaboration and Joint Ventures Case Study

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Case Title:

United and Continental Airlines Alliance – A Marriage of Convenience?

Publication Year : 2010

Authors: P Sethuraman, J Babu

Industry: Transportation

Region:USA

Case Code: SCJ0036IRC

Teaching Note: Not Available

Structured Assignment:  Available

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Abstract:
Rising fuel costs, a slowing economy and a weak dollar is putting pressure on the US airline industry into embarking on shotgun weddings. In an industry too fragmented to yield a decent return for any carrier, Continental and United Airlines formed an alliance on 19 June 2008. Under this agreement, passengers could book tickets on either carrier, earn credit in each others frequent-flier programmes and redeem miles on each carrier. Though alliances allow airlines to work together without going through the regulatory hassles of a merger, not all are truly strategic. The case highlights the effects of both mergers and alliances in the airline industry and analyses the reasons why Continental chose an alliance instead of a merger.

Pedagogical Objectives:

    This case study aims at achieving the following pedagogical objectives:
  • To understand the reasons for the US airline industry's poor health and debt burden.
  • To understand the consolidation dynamics of the US airline industry.
  • To discuss which works better - merger or alliance and the reasons for it.
  • To analyse the strategic rationale of the United-Continental alliance.

Keywords :  Airlines industry, Alliances, Mergers, Strategic, Continental, United, Bankruptcy, Consolidation, Big six, Open skies treaty, Delta-Northwest, Regulators, Star Alliance, Sky Team Alliance, Cost savings

Contents: 
Consolidation in the US Airline Industry
Big Six Airlines Domestic Share
United and Continental Airlines: The Alliance
United and Continental at the Time of Alliance
United’s Global Reach along with Star Alliance
Selected Airline Mergers, Acquisitions and Bankruptcies

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