Strategic Alliances Practices on Performance of Local Airlines in Kenya

Abstract

Freedom in the airline industry coupled with deregulation has created variation in fares in response to demand, created by the challenging and ever-changing competitive environment leading to the entry of many airlines in the industry. However, airlines have been met with many challenges to remain operational and competitive in the industry. Airlines have changed their dynamics of operation to counter network carriers in the industry by forming strategic alliances, which have become a powerful tool for these airlines, enhancing revenue, expanding networks, and rationalizing costs. The main purpose of this study was to assess strategic alliance practices on the performance of local airlines operating in Kenya. Specifically, the study sought to:

• Determine the effect of entry behavior practices,
• Competitive market practices,
• Bargaining power, and
• Transaction costs on the performance of local airlines

The study was anchored on the following theories:

• Market power,
• Transaction cost,
• RBV of a firm, and
• The institutional theory

The study used a descriptive research design and targeted all 59 Airline companies currently operating in Kenya. The study purposively targeted the heads of Strategy, Marketing, Product and Development, and Finance, yielding a total of 236 respondents. However, the study scientifically applied a 30% sampling technique of the target population to attain a representative sample size of seventy–one study respondents. Primary data were collected using a structured questionnaire through a 'drop and pick' method. A pilot study was conducted on six Airlines to test the reliability and validity of study tools. The collected data were analyzed both descriptively and inferentially using Statistical Package for Social Sciences (SPSS) computer software Version 24. The study results were presented in statistical frequency distribution tables. The study results revealed that entry behavior, competitive market, bargaining power, and transactional cost all had a statistical and significant positive effect on performance. Moreover, the study showed that strategic alliance practices jointly accounted for approximately 80.82% (R² = 0.8082) variation in the performance of these local Airline firms in Kenya. The study hence recommended that the management of local Airlines improve on these strategic alliances to improve their performances.