David Kennedy likes to start at the beginning and make it all look quite simple. The six months he has just passed as chief operating officer of TWA were spent focusing on the basics of the airline business; making travel safe, reliable, comfortable and affordable. The other airlines had planned to wait until TWA folded. Now, they must think again.

"These are heady days for the airlines," he says. "The last three years taken together have been the most profitable period in the history of aviation."

But, for a number of reasons, he warns against irrational exuberance. True, he says, the international industry recorded net profits last year of $5 billion (£3.4 billion), but that represented only 3.4 per cent of revenues. Factor in that fuel prices are at their lowest for years - they now account for perhaps 16 per cent of expenditure compared with 30 per cent in 1980 - and the possibility of turbulence seems less remote.

Next, include the impact of Asia's financial crisis, and the fact that airlines currently have balanced their supply and demand ratios unusually well; the industry, he is saying, must keep its eyes on the radar screen.

But it is customers who should keep their eyes peeled when it comes to the new buzz-word, alliances. The trend covers every relationship, from mergers through limited equity exchanges to mere code-sharing agreements. A recent trade magazine article identified 502 airline industry alliances, and, says Mr Kennedy, in many cases they represent something of a confidence trick on an unsuspecting public.

"There aren't a lot of consumer benefits, really, in airline alliances. They are represented as an easier way, if you want to go from A to C and there is no direct service," he says. "In fact you don't have to have an alliance to get there, that's called an interline agreement and it's been in the system for years.

"Alliances are a form of marketing arrangements between carriers that enable them to access wider markets than they would get from their direct point-to-point services. And in the very big alliances they are effectively a way of trying to tie up the market - this is why the regulators are starting to get concerned about the impact on competition," he adds.

For example the European Commission has expressed concern about the proposed British Airways-American Airlines alliance. It may not approve the deal unless the companies agree a list of conditions designed to prevent them having a dominant position on too many routes.

Earlier this year the six largest US domestic carriers announced three separate alliances, narrowing the market further.

Some carriers are already using their alliances for what they term "schedule and fare co-ordination", a polite term for capacity and price fixing.

"There is starting to be a few orange or maybe even red flags raised about the trend domestically in the United States," he says. "The companies will try to do it until they are stopped, and this is why, from the consumer's point of view it is very important that the regulators keep a very close eye on this."

From an airline's point of view, however, especially a small or medium-sized one offering full-service rather than low-cost flights, joining an alliance is probably essential, and allows access to traffic which is outside its own immediate market.

"It is not a strategy in itself just to be a member of an alliance. The idea that you have protection with a whole lot of others grouped together - it doesn't work that way."

Aer Lingus, where he worked for 26 years, is right to seek a partner, he believes. It now has a profitable transatlantic service, driven by passengers from the increased number of US companies that have invested in Ireland, its more economical planes, and the partial relaxation of the Shannon stop-over rule.

"It seems to me from what I've read that their focus is on getting a partner who would help them to consolidate their position on the Atlantic by ensuring that they have access to a good, strong domestic US partner. And that seems to me to be absolutely right and very important for them," he says.

Aer Lingus would also gain from the possible development of Dublin as a gateway to European cities that don't have non-stop service to the US. One barrier to this strategy, however, is the Government stipulation that 50 per cent of transatlantic flights must go through Shannon.

One alliance-related issue, not just for Aer Lingus but for all medium-sized airlines, is how to maintain a good brand name while still marketing the benefits of the new group.

Aer Lingus brings a valuable brand to the table, as well as a very good reputation for providing a safe, reliable service with friendly staff, he says, and points out that over all the years, no other full-service airline ever gained more market share than the State-owned airline on Irish routes.

Other developments are also changing the industry, such as the online booking systems. These have become increasingly complicated, and while they have been regulated to prevent significant bias in favour of the owner of the system, the airlines can still charge hefty fees to include competitors on the system.

The introduction of code-sharing can also introduce a degree of bias, he adds, allowing the same flight to be shown a number of times on a travel agent's screen, once by each airline participating in an alliance.

The Internet may change all of this, undermining the high price of access for airlines to the systems at one end and travel agents' commission at the other.

"It's early days yet. At the moment the Internet is being used for a very small percentage of sales, but it's an increasing percentage. All the airlines have developed their own websites and are pushing their products pretty vigorously through the Internet," he says. "At the moment they are effectively using it primarily for special sales. Because it is such a small proportion of the total they can put out special offers on this which isn't going to dilute their total market base."