Liberalization of aviation industry

Abstract

The liberalization of aviation industry started in late 70's which triggered the acquisition, merges and alliance in different airlines. Such strategic actions were to respond to fierce competition resulted from liberalization. The international aviation market is still subject to regulation, and airlines may only have the opportunity to extend their networks to foreign countries by entering an alliance agreement with a foreign airline. There are four major airline alliances in the world, namely Star Alliance, One World, SkyTeam and Wings, which capture most of the global aviation network. Although there is a concern that airline alliance will lead to anti-competition, it is found that this situation is limited to certain aviation market and there are various anti-competition regulations to control the behaviors of the airlines.

1. Introduction: the emerge of airline alliance

The pace of liberalization in global has increased in recent years. A number of states, such as United States, European Unions, Australia, Asian countries now actively pursue liberalized market access and conditions in their aviation relations with other States.

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In these countries, there are different degrees of liberalization . The major difference is the degree of downfall of grandfather airline. In the U.S., Pan American Airline - a traditional airline, went bankruptcy after deregulation. The situation is totally different in EU. Airlines, like KLM has no downfall phenomenon as it has subsidy and protection from Government. The commission of the European Communities (1996) claimed that the EU has been able to reap the benefits of deregulation without the major upheavals seen in the case of the United States where a number of airlines had to exit. The above cases showed that the level of impacts is varied by different situations.

However, there are three major impacts that generally applied in global. First, it seemed that it brought...