The practices is the civil aviation industry. It

The globalization has led to the growth of
Competition in recent years, especially since the 1990s. The growth has been in
terms of both geographical regions and as well as in the range of economic
activities now subject to competition law. In India, Competition Act was passed
on December 2002 and came into effect on 13th January 2003. The Civil
aviation industry is one such sector which is most effected by anticompetitive
practices. It also plays an integral role in development of the economy of our
country. Competition in markets promotes efficiency, encourages
innovation, improves quality, boosts choices and reduces cost. As such
competition ensures freedom of trade and prevents the abuse of economic power
and also promotes economic growth which in turn leads to political stability.
It is also driving force for building up the competitiveness of the domestic
industry as business that do not face competition at home are less likely to be
globally competitive. 1
One of the most affected sectors by anticompetitive practices is the civil
aviation industry. It plays an integral role in development of economy. The air
passenger transport industry has been one of the major drivers behind rapid
globalization of the world businesses and the consequent shortening of the
distances on the planet. There are certain factors concerned to the airline
industry that are anti-competitive such as ‘ Frequent Flyer Programs’ and ‘Code
Sharing Agreement’ that are operated by various airlines and which tend to
restrain competition in the market. In order to gain efficiency hub and spoke
networks are formed wherein the traffic feed was brought in to the central
place (the hub) from other areas in the vicinity of the hub (the spokes). This
hub and spoke network is prevalent today all over the world. Hub-and-spokes
refers to the network of bilateral alliances between United States and other
individual East Asian countries United States acts as a hub and Asian countries
such as South Korea, Taiwan and Japan fall under the category of spokes.
Globally, New York, London, Amsterdam, Dubai, Singapore and Tokyo are the best
examples of the hub wherein passengers flow in from all corners of the region
and again take off for their respective destinations.2
Through FFPs, an airline strengthens the airlines market position and also
tends to fetter competition in the market by making it difficult for new
entrants to enter the market and expand. Thus air line industry has been one of
the major drivers behind rapid globalization of the world business and has
consequently shortened the distance on the planet. “If you are a global company and India is not on your map, then you have
missed the bus”

3.2 Concept of Aviation Alliance

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An
airline alliance is an agreement between two or more airlines to cooperate on a
substantial level. These alliances provide a network of connectivity and
convenience for international passengers and international packages.  Alliances also provide convenient marketing
branding to facilitate travelers making inter-airline code share connections,
frequent flyer programmes etc within countries.3 Airlines alliance result in
benefits for passengers like lower prices due to reduced costs, a wider choice
of flights, destinations and rewards due to reduced costs and more streamlined
transfers. Most of the largest passenger airlines worldwide are members of one
of three major alliances namely, One World, Star Alliance, Sky Team.

An
airline alliance not only benefits the passengers through an extended network
but may also result in a bane for the passengers as they may result in creating
a monopoly leading to increase in prices and deficiency of services. The
ability of an airline to join global alliance is often restricted by
regulations and laws of the country of origin of that airline which may delay
its joining the alliance. Sometimes the landing rights are owned by the
government of the country in which their head office is situated. Hence, if an
airline mergers with a foreign airline, it loses its national identity and thus
existing agreements may be declared void by the country which objects to the
merger.

            Now a day’s code sharing is popular
among the Indian carriers where the domestic carriers can fly overseas once
they complete five years of domestic operations in addition to other mandatory
requirements and legal liabilities which tend to increase and become
complicated. India is a party to Guadalajara Convention, which was adopted in
the year 1961. The Convention ensures that a carrier performing carriage
without having entered into a contract with the passenger will be liable
according to the Warsaw Convention as modified by the Guadalajara Convention.
This Convention has also made a distinction between a contracting and an actual
carrier.

            Code sharing involves one airline
advertizing and selling the services of another as its own and the
transportation of passengers and cargo on an airline other than the one
identified in the travel documents. The carrier performing the flight is
referred to as the operating carrier while the other airline is identified as
marketing or contractual carrier. Code sharing agreements enable airlines to increase
their traffic and revenues thereby profits, network size, service frequency,
offering more destinations through its frequent flyer programmes and
coordination of operations. For Example,
in India, Jet Airways has a code share agreement with Brussels Airlines in
order to give its passengers wider destinations in Europe to choose from.
Similarly, Air India has a code-sharing agreement with airlines like Lufthansa
and Singapore Airlines.4

            Frequent flyer programmes on the
other hand, is a loyalty programme offered by all airlines in the world today.
Under this, members earn frequent flyer miles or points depending on the
distance and class of travel flown. These credited miles may then be redeemed
for air travel or even on partner airlines of the FFP of which the flyer is a
member or on free stays with partner hotels, free car rentals with car rental
partners among other several benefits like discounts vouchers, dining etc
depending upon the points available in the member’s account and points required
for redemption.

1 G.R
Bhatia, “Combating Cartel in Markets-
Issues and Challenges”, available at www.cci.gov.in,
last visited on 8th June 2015 at 8pm.

2Cha V.D, “Powerplay:
Origins of the U.S. Alliance System in Asia”, International Security(2010) , 34(3) :p.158-196

3 Fernandez de la Torre, Pablo E. “Airline Alliance: legal perspective”. [email protected]

4 Sandra
Arnoult, ” Piedmont’s Roots Run Deep” ,(www.atwonline.com)

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