Connecting within Oneworld
Following 2010 approval by U.S. and Japanese authorities for antitrust immunity, American Airlines (AA) and Japan Airlines (JAL) began sharing routes in 2011 that connect mainland North America with East Asia through a nonequity joint venture. Flights between Honolulu and Japan are not included in the agreement. This joint venture is similar to one forged among AA, British Airways, and Iberia for trans-Atlantic travel that began operating in 2010. In both cases, the agreements allow representatives from each airline to jointly manage capacity, sell and promote space on flights operated by each other, divide revenues, and schedule connecting flights. ...view middle of the document...
Second, there has been a long-term trend toward greater price competition, which hinders airlines’ ability to pass on increased costs to passengers. This situation has been exacerbated by the emergence of discount airlines and customers’ ability to search the Internet for lower fares. Third, the global recession has affected passenger demand negatively, and the airline industry has responded by adding capacity sparingly. Fourth, the Japanese nuclear disaster along with North African and Middle Eastern political turmoil have softened air passage demand to these areas.
Although the growth in international passenger jet travel has been a major factor spurring globalization, no airline has sufficient finances or aircraft to serve the whole world. Yet passengers are traveling the whole world and perceive advantage in booking on airline connections that will minimize both distances and connecting times at airports, while offering them reasonable assurance of reaching their destinations with their checked bags more or less on schedule. Thus, airlines have increasingly worked together to provide more seamless experiences for passengers and to cut costs.
The above discussion, however, should not imply that all cost cuts necessitate collaboration. For example, in recent years, airlines have implemented a number of cost-saving changes that cover the gamut from passengers’ ticket purchase to their arrival at destination. Online purchases of electronic tickets have largely replaced airlines’ need to pay hefty commissions to travel agencies and to issue and maintain costly inventories of paper tickets. Self-service check-in at airports reduces the need for agents. On board, especially on short flights, less is included in the price of the ticket, such as food, pillows, and headphones. In fact, the trip may be on one of the airlines’ discount subsidiaries.
A Bit of History: Changing Government Regulations
Historically, governments played a major role in airline ownership. Many government-owned airlines were monopolies within their domestic markets, money losers, and recipients of government subsidies. However, there has been a subsequent move toward privatization.
What Governments Can Regulate Despite the move toward privatization, governments still regulate airlines and agree on restrictions and rights largely through reciprocal agreements. Specifically, they control:
* Which foreign carriers have landing rights.
* Which airports and aircraft the carriers can use.
* The frequency of flights.
* Whether foreign carriers can fly beyond the country—for instance, whether Iberia, after flying from Spain to the United States, can then fly from the United States to Panama.
* Overflight privileges.
* Fares airlines can charge.
There have been several notable regulatory changes in recent years. First, the U.S. domestic market has been deregulated, which means that any approved U.S. carrier can fly...