Creating Profit Through Alliances - business models for collaboration E-book | Page 89

AG, a Swiss manufacturer of dermatological and
dermocosmetic products. Spirig Pharma AG will utilise
one of 3M‟s immune response modifier (IRM)
molecules to further its development of treatment for
sun damaged skin. In this case just a unilateral
licensing agreement is sufficient.

The choice of organisation form has a direct influence
on the behaviour of both parties. If it is both parties'
objective to develop a large amount of new shared
knowledge, for example, then a joint venture would
be the obvious choice, despite the fact that a joint
venture implies greater overhead costs (notary,
accountant, and so on) and will demand more time in
terms of reporting and governance.

KLM-Northwest
The KLM-Northwest alliance dates back to 1989 and
was one of the first alliances in the airline industry.
Although KLM has since merged with Air France and
Northwest with Delta Airlines, the alliance still exists
and remains successful. Henk de Graauw, until 2010
Director Alliances for KLM, clarifies the different types
of alliances and their benefits.
“KLM actually has four types of alliances. With
suppliers such as General Electric, for the
maintenance of aircraft engines, even to serve other
airlines; with retail partners such as American
Express, for the combined credit and frequent flyer
card; with providers of other modes of transportation,
such as our 10% stake in the high speed train to
Brussels, which we incorporate into our product as an
alternative to a flight; and most important of all,
horizontal alliances with our competitors.”
The horizontal alliances vary in intensity. First there is
the more tactical collaboration on a route between
two airlines that need not even be in the same
alliance. The main objective is code sharing: one
airline sells a flight and buys the transport capacity
from the other airline.
The international association of airlines, IATA, has
rules for this inter-airline billing and provides clearing
services. In general, if a ticket is sold for a flight

involving more than one leg, the revenue will be split
according to the miles per leg, with a certain
minimum price per mile for the partner that is
delivering the half-product.
The collaboration is extended to other aspects in the
case of the three large airline alliances: Skyteam,
OneWorld and Star Alliance. Within these alliances
there are special inter-airline billing agreements
which have a larger extent of revenue sharing. In
addition, airlines jointly invest in lounges, align
frequent flyer programmes, and collaborate in
marketing and sales.
The three alliances differ with respect to their
exclusivity policy. Members of the Star alliance are
prohibited from code sharing with airlines from
outside the alliance. The Skyteam members are
relatively free to do so, as long as it does not harm
the interests of other Skyteam members. OneWorld is
a very open alliance and has the most code sharing
with airlines outside the alliance.
As collaboration with a partner on a certain route
intensifies, new problems tend to arise; for example
the question of who should invest in extra capacity?
Or in adverse times, who should be the one to keep
its airplanes grounded?

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