International Airlines Case Study

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Cooperative agreements between potential or actual competitors are determined by various strategic purposes, which include entry into a foreign market and the sharing of costs. It is also a way of merging complementary skills and assets that neither company could easily develop on its own. Pearce & Robinson (2007) agree with Barla & Constantatos (2006) who argue the need for cooperation arises mostly from the desire of major airlines to offer global services, increase service quality, exploit size economies, and gain market power (Barla & Constantatos, 2006). Dacin et al (2007) agrees with Varadarajan & Cunningham but he gives the following as being the determinants: the ability to share costs and risks, combine complementary skills, formulate technical standards and dominant designs, access new markets and technologies, preempting key competitors and reserving learning opportunities.
1.1.3 The Airline Industry in Kenya
American Airlines, the third-largest U.S carrier and its parent AMR Corp are filing for bankruptcy protection (Peterson & Daily, 2011). Bankruptcy protection enabled the airline to cut labour costs in the face of high fuel prices and dampened travel demand. On filing for bankruptcy the incoming chief executive officer said “The world changed
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Global airlines that have been able to weather this storm have not done it alone; most of them are in some sought of collaboration with other airline(s). Kenya Airways entered into a strategic alliance with KLM, this has enabled the airline to dominate Africa and become a regional “king”. Since no single airline in Kenya has the capacity or financial muscle to provide a global system that can provide connection to every destination, it would only be possible through strategic alliances whereby the airlines will come together to form such a
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