On May 14, 1997, Thai Airways International Public Company Limited and four other world leading airlines, namely Lufthansa German Airlines, United Airlines, Scandinavian Airlines System, and Air Canada, officially announced the formation of "Star Alliance", an intergrated worlwide air transport network. On October 26, 1997, Varig Brazillian Airlines joined the Star Alliance as its newest member. Partnership between the six carriers was significant of forming the strongest airline alliance in the history of commercial aviation with the most extensive network covering major destinations over six continents.

The formation of Star Alliance was the result of various changes in the world's economic situation, trends in the international commercial aviation industry as well as the increase in passanger demands for air travel. As a result, aviation resources from one airline cannot sustain and respond to these changes erffectively and sufficiently. Many important external factors which pushed THAI towards entering into strategic global alliances may be summerized as follows:

   1. Changes in the World Economy
In today's era of globalization , as countries aound the world find their econonmies inextricably interlinked, they become economically dependent upon one another. In due course, the demand for air travel and cargo has extensively increased and such demand has spread to more destinations around the world than ever before. Therefore, this has resulted in the development and expansion of the transportation market worldwide (Market Segmentation). The establishment of the Star Alliance network emerged in response to such demands as well as to facilitate the needs of air travellers by operating the extensive routenet of the six airline alliance.

2.Other Airline alliances in Operation
Globalization has forced many countries around the world to implement free trade policy, privatization, and an open market as well as an open sky policy. This has resulted in fierce competition in the commercial airline business between countries. Consolidation and alliances between airlines have become necessary in order to create advantages in route networks which one airline could not absorb singlehandedly due to the exorbitant expenses that would be incurred and resources that would be involved. Alliances are formed in order to assist member airlines in their cost synergies which include an increase in bargaiining power in cases where there is joint purchasing of spare parts and services, joint reservation and sales offices and joint airport lounge facilities.

   3. Changes in Passenger Demands
Prior to the launch of Star Alliance, member airlines undertook extensive research into customer expectations and demand in air travel. It was found that in the era of news and information technology, people travel more frequently and more choices are made available as a means of transport. Reserch showed that passengers expect a hassle-free, simplified journey which offers global coverage and recognition while maintaining the cultural diversity of each home carrier. The Star Alliance was therefore formed in order to efficiently meet these needs and demands, where a single airline could not successfully satisfy beforehand. Through alliances, partner airlines are able to create the following product synergies:

- Flexible schedules and easier connections
- Reduced change of terminals
- Through check-in
- Lounge access worldwide
- Worldwide recognition of status
- Integrated frequent flyer programs

Ever since the Star Alliance was formed in May 1997, the alliance has been welcomed by passengers form all corners of the world. Today, the logo and brand name of Star Alliance has been the symbol of quality and convenient air travel, recognized and accepted worldwide. Star Alliance has proven to be the largest and strongest global alliance between major airlines. The positive feedback has confirmed that the airline made the right move in joining the alliance, the benefits that THAI and its employees will receive being categoriezed as follows:

1. Increased Airline Competitiveness
In today's fierce and increasingly competitive aviation industry where many alliances have been formed to strengthen and maintaiin their positions in the business, one airline cannot survive in the market alone. One airline cannot efficiently compete and will eventually lose customers to stronger ones. As there are various limitations in meeting passenger demands on an individual carrier basis, the Star Alliance will increase the quality of services provided and will further boost THAI's ability to compete with airlines around the world by using the network coverage of all member airlines within the alliance group.

2. Increased Global Network Coverage
One of the major factors in making an airline successful in today's era of free trade is to have global access. By joining Star Alliance, THAI's route network coverage has increased around the world, the combined total number of destinations served by all Star Alliance members. This remains one of the major advantages in attracting passengers and valued customers who fly within the Asian region to choose THAI as their first choice carrier.

3. Support Bangkok as the Aviation Hub
The success of Star Alliance operations will help in our efforts to transform Bangkok
International Airport into the regional aviation hub with airlines flying to and from major destinations across the world (Global Coverage), all made possible through the Star Alliance network. Passenger originating from other countries travelling on Star Alliance airlines into the Asia Pacific region will experience THAI's routenet firsthand when passing through Bangkok, the regional aviation hub.

4. Create a Global image for THAI
When the Star Alliance partnership was formed, an agreement was reched that the word "Star Alliance" would become both the marketing image and the global brand for the network of airlines. In effect, this helps support and strengthen THAI's unique image, products and services, hence shifting the level of competition from a regional to a global scale (Global Airline).

5. Increased Efficiently of Airline Resources
As a result of fierce competition in the aviation industry, airlines around the world have turned their attention to controlling costs and reducing expenses. Airlines engaged in alliances will have more alternatives in terms of cost reductions than any single airline. Member airlines within the same alliance family are able to share resources, some of which are joint sales and reservation offices, joint airport lounges, bargaining power when purchasing spare parts and outside services, and development of hardware and software systems to enhance passenger services.