| Summary: | This research sets to determine how alliances and acquisitions relate to each other and to evaluate how and why organisation decision makers choose. Transaction Cost Economics theory and the Resource-Based View confirm that acquisitions and alliances are evaluated concurrently when acquiring assets and capabilities where contracts and internal investments are not feasible and efficient. However, alliances and acquisitions relate only to a small number of studies. The literature suggests that alliances and acquisitions are appropriate in their separate contexts and offers no clear guidelines to decision makers when choosing between the two. The decision making variables are observed in the civil airline industry. The research design focuses on airlines that look for external routes and choose between codeshare alliances and acquisitions. In codesharing, airlines sell part of their flight services to alliance partners on certain routes. Three case studies have been included in this study, namely Alitalia SpA, Continental Ltd., and Easyjet Ltd. This study concludes that acquisitions deliver superior economic advantages over codesharing, with no interference from airline regulation authorities, although the difference between acquisition and codesharing advantages is usually limited. Acquisitions provide evident benefits compared to codesharing only where airlines require to streamline major sections of the route network. Acquisitions are also subject to significant ex-ante and ex-post costs that are higher than codesharing costs, therefore, acquisitions are usually favoured over codesharing for strategic and competitive reasons, specifically rapid market expansion and control of feeding traffic into international hubs. In conclusion, the choice depends on the business model that carriers adopt. Network carriers commonly prefer alliances over acquisitions because they achieve significant network economies, but are more sensitive to organisational diseconomies when merging their operations. Conversely, low-fare carriers prefer acquisitions over alliances because they seek rapid market growth and are less exposed to organisation diseconomies
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