Would an airline ever partner with a startup to increase their load capacity and what cost structure would they expect?

Airlines operate in an oligopolistic (3 to 5 competitors) market. A new entrant in the market only adds up an already stiff competition to maintain a reasonable load factor which is usually very close to breakeven. A start up airline is usually a loss making airline as it has to sell below operating cost to attract passengers from other airlines (cut throat competition). Other airlines having more staying power than a start up airline would jealously guard their market share and would tend to drive out the start up airline through predatory pricing. Predatory pricing (selling below operating cost) is aimed at driving out new entrants. Whether a start up airline survives or not will depend on its staying power (financial) in the market before its brand is established.

Mergers and acquisitions in airline industry are done to reduce competition in order to improve yield by cutting down overall capacity. Airlines do partner in code share to improve load factors & expand markets geographically. Only well established airlines enter into alliances such as Star Alliance, Sky team, and Oneworld. Member airlines of an alliance also share other resources on the ground such as check-in and ground handling facilities to cut the costs.

Even the code share agreements which are mutually beneficial to both airlines take place only between equal brands and not between a well established brand and a start up brand which has a long way to go to establish its credibility. A successful start up airline should rather pursue its own innovative model and create space for itself within the given market before it could be accepted by its competitors for any kind of partnership.

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