Air Transport World

Push/pull: international relationships: from cartels to individual competitors to interest associations to alliances, airlines have turned a number of corners.(Airline Relations 2004)

Airline relationships with each other have gone through an extensive period of maturation during the past 40 years, most dramatically in the international arena. The industry has transitioned from a close-knit association of thinly spread operators legally coordinating commercial activities in a sanctioned cartel, self-regulating fares and service levels to provide maximum benefits for both airline and passenger or so they claimed to today's system of alliances battling on a global stage increasingly open to free-market competition.

The number of cities around the world with international airports 40 years ago was only about a quarter fewer than today. But the volume of international passenger traffic was some 23 times less; traffic on most routes was very thin.

That was an era of tight regulation; the industry still was considered a fledgling and de facto accorded public utility status. Bilateral air services agreements between nations, for which the 1946 UK-US Bermuda accord served as a prototype, were very restrictive. Capacity often was predetermined and usually split 50/50 on third and fourth freedom traffic routes. International passenger fares and cargo rates were negotiated predominantly through IATA Traffic Conferences and filed with governments under "double approval" regimes in the bilaterals--both nations had to approve.

Even basic elements of service levels were agreed through IATA; regulated services not only included seat width and pitch but also onboard services--and in great detail. The process gained notoriety from debates over the size of sandwiches, bar services, inflight sales and, later, inflight entertainment. There generally were only two classes of service, first and economy.

On many routes outside the US, carriers participated in sharing "pools," particularly of revenues but often also of costs, traffic, capacity and frequency, on the grounds that this ultimately would offer better service to the customer, such as spreading the limited number of flights around the day or around the week rather than competing for prime time.

In Soviet-dominated Eastern Europe, capacity and tariffs were predetermined, comprehensive pooling was the order of the day and carriers established joint maintenance and spares agreements. …

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