A comparative performance analysis of airline strategic alliances using data envelopment analysis Hokey Min a, * , Seong-Jong Joo b a James R. Good Chair in Global Supply Chain Strategy, Department of Management, BAA 3008C, College of Business Administration, Bowling Green State University, Bowling Green, OH 43403, USA b Department of Supply Chain Management, College of Business, Central Washington University-Des Moines, 2400 S. 240th Street, Des Moines, WA 98198, USA article info Article history: Received 27 March 2015 Received in revised form 2 December 2015 Accepted 17 December 2015 Available online xxx Keywords: Airline strategic alliances Performance measures Data envelopment analysis abstract As “open skies” agreements became more common among different countries and thus began to open up international routes to further competition, the global airline industry has undergone accelerated structural changes for the last two decades. These changes include the consolidation and expansion of airline strategic alliances throughout different regions of the world. Though airline strategic alliances are generally perceived to be a major driver for enhancing the operating efficiency and the subsequent competitiveness of participating member airlines, the concrete evidence supporting such a perception is still lacking in the literature. This paper is one of few attempts to evaluate the comparative efficiency of the strategic alliances among global airlines and then assess the managerial impact of airline alliances on the airline's comparative performances. © 2015 Elsevier Ltd. All rights reserved. 1. Introduction In the wake of prolonged world-wide recessions and sky- rocketing oil prices, the airline industry lost $16 billion in 2008 and $9.9 billion in 2009 (Zacks Equity Research, 2011). Although there is a growing optimism for the revival of the airline industry with the recent profit gains, the global airline industry has been hit hard by rising fuel prices, instable yields, weak traffic volumes, security hassles, and increased taxation for the last few years. To make it worse, the competition in the global airline industry gets tougher after a series of deregulations and “open skies” agreements across the world that liberalized commercial aviation services and then opened up international airports and transcontinental routes to full competition. To survive in this deteriorating market condition, many international flag carriers chose to consolidate their opera- tions and created economies of scale through mergers and acqui- sitions (M&A) due in part to changes in ownership laws and freedom of the air. M&A of airlines, however, can backfire because it may limit services to smaller regional routes, increase airfare, create potential strife among integrated workers, raise cost asso- ciated with increased frequent mileage rewards, and subject combined airliners to antitrust scrutiny. As illustrated by the recent mergers of Delta and Northwest in 2008, United and Continental in 2010, and Southwest and Air Tran in 2010, M&A is the continuing trend of the airline industry. Despite its popularity and potential benefits, many M&A efforts did not bring fruits to the merged companies. Defying the conventional wisdom, many M&A attempts did not go well as they were planned and might undermine the performances of the merged companies (King et al., 2003). In fact, the Weekly Corporate Growth Report reported that 70% of the M&A failed to achieve its anticipated value and 60e80% of the M&A underwent a slow and painful demise (Palmer, 2005). Considering this high risk of M&A failures, airline strategic al- liances (airline alliances hereafter) including code-sharing, equity swaps, insurance pooling, and joint governance have become a popular alternative to M&A. Generally, airline alliances refer to a distinct form of the market entry mode which provides airlines with a low-cost means of gaining access to new markets and local infrastructure such as airports (Doz et al., 1990). One of the most popular and simplest forms of airline alliances is code sharing which is a commercial agreement between two airlines (operating and marketing carriers) that allows an airline (marketing carrier) to put its two-letter identification code on the flights of another airline (operating carrier) as they appear in computer reservations systems (US General Service Administration, 2011). For example, * Corresponding author. E-mail addresses: hmin@bgsu.edu (H. Min), sludoc95@hotmail.com (S.-J. Joo). Contents lists available at ScienceDirect Journal of Air Transport Management journal homepage: www.elsevier.com/locate/jairtraman http://dx.doi.org/10.1016/j.jairtraman.2015.12.003 0969-6997/© 2015 Elsevier Ltd. All rights reserved. Journal of Air Transport Management 52 (2016) 99e110