Ocean Shipping Alliances: The Wave of the Future?

Abstract

Over the last decade, carriers have entered into operational relationships known as alliances to increase their product offerings and to reduce their costs. Carriers have been able to do so because alliances enable partners to rely on and to combine other carriers' operations in addition to their own. Although alliances have drastically improved operational efficiency, larger carriers will not take the logical next step and merge for a variety of reasons. Ironically, regulation through the Federal Maritime Commission is not one of the factors dissuading carriers from consolidating. This paper explains, from the carriers' point of view, the advantages and disadvantages of entering into alliances and explores the history of the US regulatory regime of cooperative agreements, including alliances. Thereafter, this paper analyses the factors that potentially will influence the future of alliances and predicts the effect of each of these factors. Overall, this paper concludes that carriers would prefer to enjoy the benefits of alliances without having to ally or to merge with another carrier; therefore, the real long-term goal of large carriers is the improvement of their services without the aid of another large carrier, regardless of whether the improvement is through an alliance or a merger.