Star Alliance – questions and answers

Group Members – Maja and Kumar Sourav Mohanty

1. How can be explained the sustained success of Star Alliance?

Star alliance competitive advantage

The success of Star Alliance can be explained through an effective governance structure using a NAO
and the sharing of knowledge and resources across the different airline. Having a large airline base as
a part of the alliance made it possible to create effective flight routes and short waiting times for the
customers, which created a competitive advantage for the alliance. In addition, they used IT based
management tools to make more efficient process and knowledge-sharing within the network, where
for example 18 of the airlines used the same IT platform. They exchanged best-practices and linked
up the member airline’s individual routes to world wide web that helped in seamless travel of
passengers. Through the network, they amalgamated the individual lounges and offered fully
compatible frequent flyer programs and new products like round the world tickets. They shared
information on know-how methodologies to evaluate improvements, future aircrafts, sourcing
materials and other types of services. They arranged joint marketing campaigns that furthered global
branding of Star Alliance that turned out to be economically efficient for the alliance.

2. Trace the evolution of the management of the alliance. What are the drivers of these
changes?

The changes in the management of the alliance went from having a NAO structure, then during its
formative years it was mostly a democratic and open structure which was managed by committees.
Each committee was run by a representative from a founding member airline and by executives and
experts from each member airline. Later, to manage the Star Alliance there was established a firm
which had the responsibility and task of managing the alliance and helping develop the network, both
at a technical and organizational level. As the network increased they established many subsets where
smaller alliances within the Star Alliance was created to manage the member diversity and to allow
for differentiation within the alliance. Another goal was to make the alliance more flexible.

The driver of these changes were the economic and regulative pressures from. It was also a demand
from customers for seamless travels and managerial issues within the alliance. Another driver was the
increase in size of the alliance from airlines acquiring other airlines, creating an increased demand for
more logistics and challenges regarding coordination.

3. Can you identify potential problems inside the alliance?

One potential problem is to balance the interest of the members within the alliance, and making
decisions which serves all members. One problem, as mentioned in the article, is for example when
one airline wants to invest in the alliances resources, while other members are in a cost-cutting
program and are not willing to make the same investments. This shows that the different airlines might
have different interests and perspectives, which can be challenging in managing the alliance as a
whole.

With the increasing pressure from the regulative agencies to shift towards market consolidation, Star
Alliance is facing problems to further institutionalize and professionalize its network’s management
by considering mergers and acquisitions or through coordination of prices, capacities and services.