2. CONTENT
• KEYTHEORIESOF ALLIANCE
GOVERNANCE
• THE REASONS OF CHANGE
• KEYTHEORIESOF ALLIANCE
GOVERNANCE
• ADJUSTMENT FOR SURVIVAL
• SURVIVALWITHOUT MAJOR
ADJUSTMENT
• THE ULTIMATEGOVERNANCE
STRUCTURE FOR SURVIVAL
• LESSONTO LEARN FROMTHIS
CASE
• CRITICALANALYSIS

3. KEY THEORIES OF ALLIANCE GOVERNANCE
•GOAL
•LEGAL FORM
•FINANCIAL AGREEMENT
•COMMUNICATION STRUCTURE
•SCOPE AND EXCLUSIVITY
•PERSONAL RELATION
•REPUTATION
•DECISION MAKING
•GOVERNANCE BODY
•CULTURAL DIFFERENCE
•TRUST AND COMMITMENT
•CONFLICT RESOLUTION
•LEADERSHIP
•NORMS
Source: Roijakkers, N. & Man, A. 2010 J.J Reuer 2004

4. BACKGROUND
“INTERNAL AND EXTERNAL DYNAMICS IN ALLIANCE FORCE COMPANIESTO
CHANGEALLIANCE STRUCTURE”
-DAS &TENG (2000)
“ALLIANCE GOVERNANCE NEEDSTO CHANGETO MEET CHANGING BUSINESS
REQUIREMENT”
- ERNST AND BAMFORD (2005) AND REUER AND ZOLLO
(2000)
Source: Roijakkers, N. & Man, A. 2010

5. ALLIANCE GOVERNANCE- THE REASONS OF
THE CHANGES
FIVE REASONS (MENTIONED INTHE CASE)
•ENVIRONMENTAL DYNAMICS
•INTERNAL CHANGE
•SUCCESS AND FAILURE OF ALLIANCE BUSINESS
•RELATIONSHIP BUILDING
•INHERENTTENSION
Source: A. P. De Man et al. (2013)

6. KLM & NORTHWEST AIRLINES
•ADJUSTMENT FOR SURVIVAL (1989-1997)
•SURVIVAL WITHOUT ADJUSTMENT (1997-2007)
BACKGROUND
DUTCH AIRLINE KLM (PART OF AIR FRANCE NOW) 1989 US: NORTHWEST AIRLINE (DELTA AIRLINE
MERGE)
AIM: GETTINGTHE BENEFIT OF US GOVERNMENT’S AIRTRAFFIC
DEREGULATION AND UTILISING MAXIMUM CAPACITIES
OBJECTIVES: USING HUB AND SPOKE SYSTEM & GETTING BENEFIT OF CODE
SHARING
Source: Roijakkers, N. & Man, A. 2010

7. ADJUSTMENT OF SURVIVAL (1989-1997)
PROBLEM: ENVIRONMENTAL DYNAMICS
C: US-DUTCH OPEN SKY AGREEMENT (1992) - A: KLM- NWA BLOCK SPACE
AGREEMENT- R.T: GOAL, SCOPE
C: NWA BANKRUPTCY (1993) – A: INCREASE SHARE 25%TO KLM – R.T: LEGAL FORM
FORMATION OF “NETWORK GROUP” AND “PASSENGER GROUP”TO MINIMISE
RISK.
PROBLEM: INTERNAL CHANGE
C: NWA “POISON PILL” STRATEGY – A: ENHANCED ALLIANCE AGREEMENT - RT:
DECISION MAKING,TRUST AND COMMITMENT
Source: A. P. De Man et al. (2013)

8. SURVIVAL WITHOUT MAJOR ADJUSTMENT (1997-2007)
• INCREASE OF SCOPE: NORTH ATLANTIC & INDIA
• EXCLUSIVITY: KLM (EUROPE MIDDLE EAST AFRICA), NWA (NORTH AMERICA), SALES
PARTNER’STICKET
• GOVERNANCE BODY:THE ENHANCE AGREEMENT HELPS BOTH MANAGEMENT ARE
PART OF EACH OTHER.
• FINANCIAL AGREEMENT: FIFTY-FIFTY PROFIT STARING ONTRANSATLANTIC ROUTE. (A
VIRTUAL JOINTVENTURE)
• COMMUNICATION STRUCTURE: MULTIPOINT, INFORMAL, CONTINUOUS
COMMUNICATION
• TRUST AND COMMITMENT: 10YEARS CONTRACT, CLOSE DOWN SALE ON PARTNER’S
AREA
Source: Ard-Pieter de Man, 2013

9. GOVERNANCE STRUCTURE
• KLM CEO BECOME NON-EXECUTIVE DIRECTOROF NWA AND NWA CEO ON KLM SUPERVISORY BOARD
• FORMATION OF ALLIANCE STEERINGCOMMITTEE (INCLUDES EXECUTIVE & SENIORVPS OF BOTH
COMPANY)
• PROVIDE MORE FOCUS ON BUILDING PERSONAL RELATIONSHIP BUILDING
• USE BOTH SPECIALISTAND GENERALIST MANAGERS FORQUALITYASSURANCE
• REULAR STAFF MEETINGWITH STEERINGCOMMITTEE FOR SUGGESTION
• NO FORMAL COMMUNICATIONWITH CEO ALL COMMUNICATION LEVEL IS INFORMAL
• PROMOTE MULTITASKING BETWEENTHE MANAGERS.
• REGULAR CALLSAND EMAIL REQUIREDTO SOLVETHE PROBLEMS BEFORE REACHTO OFFICIAL MEETING.
Source: Ard-Pieter de Man, 2013

10. THE ULTIMATE G. S FOR SURVIVAL
Corporate
level
Corporate
level
KLM NWA
Corporate
levelCross-board positions
Alliance Steering Committee –
Executive VPs and Senior VPs
Passenger Working Group (PWG)
Network Working Group (NWG)
Operational Working Group (OWG)
Cargo Working Group (CWG)
Financial Working Group (FWG)
Source: Source: Ard-Pieter de Man, 2013

11. LESSON TO LEARN FROM THIS CASE
•IMPORTANCE OF CLEARVERTICAL DIVISION OF LABOR IN ALLIANCE
•IMPORTANCE OF A FIFTY-FIFTY PROFIT SHARING ARRANGEMENT IN
CONTRACTUAL ALLIANCE
•IMPORTANCE OF SPECIALIST AND GENERALIST MANAGERS IN
MAINTAINING QUALITY
•IMPORTANCETHAT PEOPLE FULFILL MULTIPLE ROLES IN ALLIANCE
•IMPORTANCE OF EXTENSIVE USE OF INFORMAL CHANNELS
Source: Roijakkers, N. & Man, A. 2010

12. IMPORTANCE OF CLEAR VERTICAL DIVISION
OF LABOR
THEVERTICAL DIVISION OF LABOR COULD GREATLY DEALWITH
ENVIRONMENTAL DYNAMICSTHROUGH:
•KLM-NWA ALLIANCE’S WORKING GROUP- DYNAMICS, SUCH AS
PASSENGER, NETWORK, OPERATIONAL, CARGOAND FINANCIALWORKING
GROUP
•ALLIANCE STEERING COMMITTEE RESPONSIBLE FOR SUBSTANTIAL
CHANGES- A BOTTOM UP PROCESS
Source: A. P. De Man et al. (2013)

13. IMPORTANCE OF A FIFTY-FIFTY
•REDUCING INTERNAL FRICTION OF ALLIANCE
- AFTER “9/11”- GIVING UP SOMETO MEET LOW MARKET DEMAND-
DECREASING REVENUE
Source: Roijakkers, N. & Man, A. 2010

14. IMPORTANCE OF A MIX OF SPECIALISTS AND
GENERALISTS IN ALLIANCE
•SPECIALISTS- SPECIFIC KNOWLEDGEWITH MANY DIFFERENTTYPES OF
CHANGES
•GENERALISTS- FOCUSING ON BROADER CONTEXT OF ALLIANCE
Source: Roijakkers, N. & Man, A. 2010

15. IMPORTANCE THAT PEOPLE FULFILL MULTIPLE
ROLES IN ALLIANCE
FOR INSTANCE, ONE ALLIANCE MANAGER IS A MEMBER OFTHE PASSENGER
WORKING GROUP, ATTENDSTHE ALLIANCE STEERING COMMITTEE MEETING
AND REPORT ABOUT HOW DEVELOPMENTS INTHE SKYTEAM ALLIANCE.
- SIGNALING POSSIBLE PROBLEM
- RECONCILINGVARIOUS COMMITTEES ANDWORKING GROUP
Source: Roijakkers, N. & Man, A. 2010

16. IMPORTANCE OF EXTENSIVE USE OF INFORMAL
CHANNELS
•KLM-NWA- IMPORTANCE OF INFORMAL COMMUNICATION
•INFORMAL CONTACT- EVERY HIERARCHICAL LEVEL PLANS CAN BETESTED,
PROBLEMS DEBATED AND SOLUTIONS PROPOSED
•DYNAMIC BUSINESS ENVIRONMENT- SMOOTH OUT INTERNALTENSION
MAKE ALLIANCE EASIERTO ADAPT CHANGES
Source: Roijakkers, N. & Man, A. 2010

17. CRITICAL ANALYSIS
•DOES NOT MATCH WITHTHE PREVIOUS LITERATURE OF DYNAMIC CHANGE
SUGGESTED BY DAS &TENG, (2000); ERNST AND BAMFORD (2005) AND
REUER AND ZOLLO (2000)
•DOES NOT HAVE ANYVALIDITY, RELIABILITY AND GENERALIZABILITY AS
THIS ISTHE ONLY ONE EXAMPLE WE HAVE GOT ABOUTTHIS LITERATURE
•TALKS ABOUT CONFLICT BUT LIMITED INFORMATION ABOUT CONFLICT
RESOLUTION
•ABSENCE OF RISKANALYSIS
Source: Roijakkers, N. & Man, A. 2010

18. KEY WORDS
• AIR TRAFFIC DEREGULATION: US GOVT. DECIDED TO LOOSEN PROTECTIONIST POLICY FOR
LOCAL CARRIERS
• HUB AND SPOKE SYSTEM: ALLOW PARTNER TO USE THEIR OWN AIR TRAFFIC NETWORK TO
GAIN ACCESS TO LARGE NETWORK
• CODE STARING: DELIVERING CUSTOMER TO EACH OTHER NETWORK BY COMBINING
FLIGHTS
• C = CHALLENGE, A = ACTION, R.T. = RELEVANT THEORIES
• PRISON PILL: LEAVE POTENTIAL ACQUIRING PARTIES FACING HIGHER COST

19. KEY WORDS
• PRISON PILL: LEAVE POTENTIAL ACQUIRING PARTIES FACING HIGHER COST
• US-DUTCH OPEN SKY AGREEMENT: ALLOW DUTCH AIRLINE TO FLY MANY MORE US
DESTINATION AND US FLIGHT GET MORE SPACE IN AMSTERDAM SCHIPHOL AIRLINE.
• KLM-NWA BLOCK SPACE AGREEMENT: AN AGREEMENT THAT BOTH AIRLINES PURCHASE
SEATING CAPACITY OF THE PARTNER TO SELL THEM FOR THEIR OWN ACCOUNT.

20. REFERENCE
• BRIANTJEMKES, 2012. STRATEGIC ALLIANCE MANAGEMENT. 1 EDITION. ROUTLEDGE
• J.J REUER, 2004. STRATEGIC ALLIANCES:THEORY AND EVIDENCE (OXFORD MANAGEMENT
READERS). EDITION. OXFORD UNIVERSITY PRESS.
• JOHN CHILD, 2005. COOPERATIVE STRATEGY: MANAGING ALLIANCES, NETWORKS, ANDJOINT
VENTURES. 2 EDITION. OXFORD UNIVERSITY PRESS
• ROIJAKKERS, N. & MAN, A. 2010, "MANAGING DYNAMICSTHROUGH ROBUSTALLIANCE
GOVERNANCE STRUCTURES:THE CASE OF KLM AND NORTHWEST AIRLINES", EUROPEAN
MANAGEMENT JOURNAL,VOL. 28, NO. 3, PP. 171-181.
• TENG, B. & DAS,T.K. 2008, "GOVERNANCE STRUCTURE CHOICE IN STRATEGIC ALLIANCES",
MANAGEMENT DECISION,VOL. 46, NO. 5, PP. 725-742.
• ARD-PIETER DE MAN, 2013. ALLIANCES: AN EXECUTIVE GUIDETO DESIGNING SUCCESSFUL
STRATEGIC PARTNERSHIPS. 1 EDITION.WILEY.