Undergraduate Honors Theses

Thesis Defended

Spring 2018

Document Type

Thesis

Type of Thesis

Departmental Honors

Department

International Affairs

First Advisor

Joseph Jupille

Second Advisor

Antonio Papuzza

Third Advisor

Shuang Zhang

Abstract

Alliances are a key way through which airlines collaborate in search of profits. Competition from low-cost carriers necessitates cost reduction and drives legacy carriers to search for new sources of revenue. Legacy carriers find methods to compete with low-cost carriers through alliances with other carriers. This honors thesis will study how the competitive threat from low-cost carriers has driven the formation of alliances.

Low-cost carriers have disrupted the airline industry as a whole by creating an entirely new airline business model focused on “no-frills” and providing the customer with low fares. It is understood that legacy carriers ally with one another as a method of sharing resources, reducing costs, and finding opportunities for international expansion. I argue that these reasons for alliance stem from the competitive threat of low-cost carriers, which has necessitated collaboration among other airlines to continue to compete and provide a valuable service to customers.

To turn a consistent profit, airlines need to cut costs like labor, fuel, and passenger service to compete with low-cost carriers. Although some may perceive that low-cost carriers are directing the airline industry, legacy carriers continue to have the advantage over low-cost carriers in long-haul, intercontinental flights. While the source of alliance formation stems from a competitive environment, legacy carriers have a new opportunity for revenue in the international aviation market.

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