Codeshare, alliances, joint ventures…how do airlines work together?

“Alone we go faster, together we go further”: airlines have taken this African proverb and are constantly finding new ways to work better together to maximize operations and profits for each. A subject that seems technical and to which passengers give little importance, even though its impact on their trip is anything but negligible

The success of an airline depends on its ability, first of all, to fill its planes and, secondly, to have the most extensive network possible to be attractive to its customers. And in that order: a large network with sparsely filled planes is like creating a money-losing machine.

Some airlines manage to have very extensive networks and take you (almost) everywhere, such as Turkish Airlines which serves the largest number of countries in the world. But for a large number of airlines their means, their geographical location and even the size of their native market do not allow them to play on this field and yet they have to offer a maximum of destinations on pain of seeing even the passengers of their natural market go to competition. For this purpose, the airlines, regardless of their size, collaborate with each other in order to pool their resources and offer the greatest possible choice to their customers.

Collaboration between airlines: a vital issue

No airline can succeed alone, and even those that refuse to play the alliance game multiply partnerships, and it is easy to understand why.

Can an airline alone serve almost all the airports in the world? Certainly not: this would require a gigantic fleet that none of them can afford and a plethora of personnel.

And then it would not be profitable: it is still necessary, as we said, to fill the planes.

An airline like Lufthansa has no economic reason to serve a city like Portland, Maine: it would not be able to fill its planes. On the other hand, by collaborating with United, this becomes possible: Lufthansa (and other United partner airlines) “bring” passengers to New York, for example, from where United flies them to Portland in a plane filled with its own customers and those of its partners. One ticket and one contact person for the customer, flights with Lufthansa flight numbers but all or part of the flights on United, whereas if everyone had tried to serve the destination alone it would have been impossible.

For the same reason, Air France relies on Delta for a finer service of the American territory (and Delta on Air France for Europe), British Airways on American Airlines etc.

It has become so commonplace that we don’t even pay attention to it anymore: the ones find it a way to offer more choice to their customers and the others find it a way to fill their planes with passengers. A win-win game in which even the passenger most often benefits!

To achieve this, airlines have found several ways to collaborate, from the most flexible to the most engaging depending on the needs. But the passenger has everything to gain by understanding the mechanisms because it can have an impact on his trip, whether everything goes well or even more so if he has to face problems.

Interline: a flexible collaboration

Sometimes the best is the enemy of the good and there is no point in setting up complicated mechanisms when it is possible to make them simple.

Sometimes airlines “just” need to share routes and be able to sell another airline’s tickets to their customers, either alone or in addition to a flight they operate themselves.

The latest example is Emirates and Etihad.

The case of Emirates is a very good example: the airline wants to focus on long-haul flights and relies on numerous regional partners for medium-haul services rather than operating routes that do not fit its business model and where it would not be profitable or less profitable than its partners whose model it is.

Technically speaking, in the case of interlining, an airline sells you a ticket between a point A and a point B operated by its partner or a connecting flight of which it operates one segment and its partner the second.

Passenger benefits: one single contact, one single ticket and their luggage is checked-in from end to end, so there is no need to collect it and check it in again between flights.

Disadvantages for the passenger: First of all, if he is a member of a loyalty program, he will not always earn miles or not on the whole route. In the case of Emirates and Etihad, for example, a customer who is a member of the Emirates Skywards program will not receive credit on Etihad flights and vice versa. Then it is only a commercial partnership with no impact on the operations, which means that the connection slots are not optimized. You are sold two flights, if that means a 7 hour connection, too bad for you.

It’s simple, flexible, easy to implement but it’s minimalist. You don’t have to be part of the same alliance, it’s a fairly opportunistic approach before, perhaps, going further.

So to go further there is the codeshare.

Codeshare: a more optimized commercial and operational partnership

We have already talked about codeshare in detail but let’s do a fast recap. Compared to interlining, it is more optimized commercially and operationally, but is more cumbersome to implement, more restrictive and more engaging.

It consists for an airline not only to market tickets on the flights of a partner airline but also to add one of its flight numbers on it.

Thus, an Air France flight between Paris and New York will of course have an Air France flight number but also possibly a KLM flight number, a Delta number, a Tarom number etc. A single flight but filled by the commercial channels of several airlines with their own customers. Sometimes the same flight will have up to 10 different flight numbers.

In the case of codeshare there is a revenue sharing between the selling airline and the one operating the flight even if most of the revenue goes to the one operating it. Connections are also most often optimized because this is part of the airlines’ strategies to feed their hub. It is also a way for airlines to work with others who are not members of their alliance.

Benefits for the passenger: a single contact, optimized connections and the earning of points on the loyalty program, provided that the passenger is a member of the program of one of the airlines marketing the flight, which can cause problems when one is a member of the program of a partner airline.

Many passengers have unpleasant surprises. Take the example of the Paris-Geneva flight operated by Air France and sold by Air France and Swiss. Members of both airlines’ frequent flyer programs will be able to earn miles, but only if they purchase the ticket from the airline of their program.

If I buy my CDG-GVA from Air France with an AF flight number and I am a Miles&More member, I will not be credited with anything (same thing in the opposite case). Another point: since Swiss is a member of Star Alliance and Air France is a member of Skyteam, a member of the Star Alliance program who buys a ticket from Swiss will not receive any credit because Air France is not a member of the same alliance.

In Star Alliance, only Miles&More members will be credited on this flight, not the others, unlike Skyteam members who will buy their ticket with Air France.

In the case of a codeshare between two member airlines of different alliances, the only members to be credited with miles are those of the airline operating the flight, the one marketing it and the partner airlines of the one operating the flight.

Another thing to know for the passenger: if it is a flight in Europe and it is delayed, in case of codeshare and in application of the EU261, it is the airline operating the flight that must compensate him.

For the customer, the codeshare allows access to a larger offer, having only one contact person and one ticket, but with the risk of ending up on an airline with a lower level of service and less comfortable aircraft (but the reverse is also possible).

The alliance

The alliance is the level of partnership that comes above the codeshare. There are three major alliances in the world today: Star Alliance (Lufthansa, United, Singapore Airlines ….), OneWorld (British Airways, American Airlines, Qatar Airways …..), and Skyteam (Air France, Delta…).

The main principle of an alliance is to deliver to their passengers and, especially, to the members of their loyalty programs, consistent benefits during each of their travels, no matter the airline they travel on: priority lanes, lounge etc…

A very good example in Skyteam is Skypriority: a set of clearly identified and signposted services put in place by all member airlines for the “elite” passengers of their loyalty programs.

Miles can also be earned on all partner airline flights, regardless of which airline markets and operates the flight, without the need for the flight to be codeshare. In practice, codeshare is very common between member airlines of an alliance, but if, as a Flying Blue member, I take a Delta flight that is not in codeshare with Air France, I will still earn miles and XP (according to reciprocal crediting of points and miles schemes that may hold some surprises).

Passengers may also use their miles from a member airline’s frequent flyer program to redeem tickets on another member airline’s flight.

There are exceptions like the deplorable one of ITA in Skyteam but this is an anomaly that should not last and they are very rare.

The difference with the basic codeshare is that the airlines pay to join an alliance and they reimburse each other for the benefits granted to the passengers of their partner airlines. For example, Air France pays when I go to a Delta lounge and, in the same way, when I fly on Delta it “buys” from Flying Blue the miles that will be credited to me (otherwise the loyalty program “owes” me a credit for which it had no revenue).

On the other hand, the alliance does not allow to have a common strategy on the offer and the proposed routes because although partners within the alliance the airlines remain competitors on the market. This is the role of the joint venture.

The Joint-Venture: the ultimate stage of partnership

Airlines that form a joint venture decide to coordinate their routes, prices and flight frequencies. This has a significant impact on markets and competition and requires government approvals.

It is as if several airlines decided to form a single company to operate part of their network. The joint venture most familiar to the French public is that between Air France, KLM, Delta and Virgin Atlantic on transatlantic routes.

Within the Skyteam alliance alone, these three airlines would be competitors and would try to “steal” customers from each other, even if some flights were operated in codeshare. Within the framework of the joint venture, they operate as a single entity, without competition between them, sharing the market.

The three airlines coordinate their flights for optimal connections and fleet utilization, agree on prices and share revenue. In this case the flights are of course in codeshare.

It’s not a merger because technically speaking the airlines remain independent, may even be part of several joint ventures, may compete on other routes and it only concerns a specific part of their operations but that’s the stage just before.

Note that a joint venture can exist outside an alliance. While Air France, KLM, Delta and Virgin Atlantic are members of Skyteam, Delta has multiplied its joint ventures with airlines outside the alliance. For example, Delta has a joint venture with LATAM and Virgin Atlantic joined Delta and Air France-KLM before joining Skyteam.

The benefit of a joint venture for the customer is a larger offer with optimized schedules, but for some it also comes with a detrimental reduction of competition.

What about the wet lease in all this?

Sometimes you book a flight on one airline and you fly on an aircraft of another airline, sometimes with a crew of the airline you have to fly on, sometimes with a crew of the other one, and this is not codeshare!

But what is it about then?

In fact it’s not a partnership of any kind, just the rental of aircraft and crews.

Sometimes, for one reason or another, an airline does not have enough aircraft to run its program. In this case it rents an aircraft and sometimes its crew from another airline.

There are several scenarios:

– Wet lease: aircraft and crew rental

– Dry lease: aircraft rental but flight operated by a normal crew

– Damp lease : a mix of both.

From the outside this may seem surprising but it is “just” renting.

That said, if you are flying on Air France or British Airways this summer you are likely to be confronted with it.

Bottom line

In order to offer more choices to their customers and also to optimize their revenues and the use of their fleet, the airlines resort to different types of partnerships. Depending on whether we are talking about an interline, codeshare, alliance or joint venture, the system chosen is more or less engaging and structuring for them and brings more or less benefits to customers.

What about you? Have you ever traveled on an airline other than the one you purchased your ticket from? Good or bad surprises?

Image : Star Alliance by Gil C via Shutterstock

Bertrand Duperrin
Bertrand Duperrinhttp://www.duperrin.com
Compulsive traveler, present in the French #avgeek community since the late 2000s and passionate about (long) travel since his youth, Bertrand Duperrin co-founded Travel Guys with Olivier Delestre in March 2015.
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