Star Alliance in 2020

Formed in 1997, Star Alliance was the first global airline network or constellation. Its aim was to shift the airline industry away from a network of loose bilateral agreements between individual airlines to a more comprehensive network of multilateral agreements between members. A wave of deregulation in the industry in the 1970s and 1980s, which opened free travel between countries, led to the creation of three major global constellations: Star Alliance, Oneworld, and SkyTeam. These networks conferred many benefits on their members, such as cost sharing, loyalty program management, and increased flight load. However, in early 2020, the outbreak of the COVID-19 pandemic had devastating effects on the airline industry. The focus of airline alliances thus shifted from greater connectivity between members to survival in the new global landscape. Would this strategy help airlines survive the COVID-19 crisis? Was group-based competition needed to thrive during a pandemic? Their main concern was whether or not the powerful frameworks they created would be able to help member airlines survive this crisis and regain their pre-pandemic financial stability.

This case is suitable for undergraduate- and graduate-level courses on alliances, mergers and acquisitions, business strategy, and globalization. It is also useful in executive education courses on alliances and mergers and acquisitions. This case is designed to teach students about the strategic thinking of global airline industry alliances, the ways in which these constellations develop, and the methods in which these groupings and their members respond to major external shocks. The case can also be used to teach the ways in which government and regulation play a large role in the shape and function of an industry. This case is set in 2020, when the global airline industry faced a crisis from the COVID-19 pandemic. The history and structure of the industry are presented broadly, enabling instructors to discuss a wide range of topics, such as network and scale economies, government regulations, organizational strategies, and international co-operation. The idea behind such broad framing is that students have to understand the fundamentals of the industry and of the alliance before they can make educated guesses about the industry’s future. After working through the case and assignment questions, students will be able to<ul><li>understand the role of alliances in a global, regulated industry;</li><li>learn the fundamental economics of airlines;</li><li>learn how a network of alliances, or constellation, can be managed; and</li><li>explore how alliances respond to severe industry shocks.</li></ul>

• alliance
• ecosystem
• global
• airlines