rect effect of this was an economic recession in the
United States from 1990 to 1991 combined with in-
creased operating costs due to security concerns
during the Gulf War. Further, residual effects from
the Airline Deregulation Act (ADA) might have ag-
gravated these problems. Consequently, five airlines
filed for Chapter 11 bankruptcy during this time:
Continental Airlines, Pan American World Airways
(Pan Am), Eastern Air Lines, America West Airlines,
and Trans World Airlines (TWA). Unfortunately,
Pan Am and Eastern ended their operations as a re-
sult. With the exception of Air Canada, Canada’s air-
line industry struggled as well.
The ADA, signed into law in 1978, gradually dimin-
ished the federal Civil Aeronautics Board’s control
over airfare, encouraged the creation of new airlines,
and allowed international airline companies to pro-
vide service anywhere in the United States. The intent
was to increase competition, thereby increasing qual-
ity and decreasing airfare. The result in the 1980’s was
a chaotic series of birth, demise, and takeover of new
and smaller airlines. This also happened in the 1990’s
to some extent, but the increase in competition led to
a significant increase in code sharing and global alli-
ances among the world’s major airlines.
American Airlines and Qantas of Australia began
the code-sharing strategy in 1990. This allowed dif-
ferent airlines to use the same flight number to the
advantage of passengers on their way to interna-
tional destinations. More important, the strategy
globally streamlined airline scheduling and the bag-
gage-handling process. This also increased all air-
lines’ marketing power because they could, with the
help of another company, advertise new routes to
places they could not previously reach. By 1991,
code-sharing agreements were necessities for all ma-
jor airlines with international connections. Ameri-
can Airlines, Air Canada, Canadian Airlines, Delta
Air Lines, United Airlines, Northwest Airlines, TWA,
Continental Airlines, and US Air (US Airways by
1997) had code-sharing agreements with airlines all
over the world. In addition, the bilateral “open
skies” agreement of 1995 between Ottawa and Wash-
ington opened thirty-two new routes into the United
States for Air Canada and Canadian Airlines. This
was good news for both airlines, especially Canadian
Airlines, which struggled to stay in business due to a
shortage of domestic Canadian routes throughout
the 1990’s. Unfortunately, Canadian Airlines did go
under by 2000.
International Alliances Two major global alliances
formed in the late 1990’s: the Star Alliance and the
Oneworld Alliance. Since these are a result of code
sharing, it could be said that American Airlines and
Qantas began the international airline alliance
movement. American Airlines, British Airways, Ca-
nadian Airlines, Cathay Pacific Airways (of Hong
Kong), and Qantas founded Oneworld in 1998. It is
currently headquartered in Vancouver. In 1997, Air
Canada, United Airlines, Lufthansa, Scandinavian
Airlines System, and Thai Airways International
founded the Star Alliance.
Besides the benefits of code sharing, these alli-
ances have been able to combine their frequent-
flyer programs and share terminals and concourses
in the world’s major airports. Furthermore, these al-
liances are not limited to those listed above; their
memberships totaled up to twenty major airlines.
For American Airlines, the alliance seems to have
been an alternate solution to its merger plans with
Canadian Airlines and British Airways. Though a
merger never came to fruition, it was attempted
from 1995 through 1999 and infuriated airline exec-
utives in North America and the United Kingdom.
Although governments have investigated these
alliances, they were not sued for breaking antitrust
laws.Southwest’s Success Southwest Airlines’ rise be-
gan shortly after the passage of the ADA. By 1999,
Southwest was one of the most profitable airlines in
the world. While the major airlines focused on alli-
ances, code sharing, and the “hub-and-spoke” flight-
route strategy, Southwest began to acquire several
lucrative regional routes in the Pacific West, the Mid-
west, and Florida focusing on direct flights between
cities. Although the major airlines in America
owned several regional airlines that also focused on
the direct-route strategy, they did not apply as much
marketing force to those routes as Southwest did in
the 1990’s.
The result was that Southwest trumped the major
airlines in terms of advertising these regional routes.
The profit margins in the 1990’s show the effective-
ness of its marketing and logistics strategies: In 1991,
Southwest’s net profit for the year was $26.91 mil-
lion; at the end of 1999, the year’s net profit was
$474.37 million, placing it sixth in the world in oper-
ating profit, despite the fact that it did not partici-
pate in the alliances. Southwest’s rise may have given22 Airline industry The Nineties in America