CODE SHARE

Code-Sharing
• A codeshare agreement, also known as codeshare, is a business
arrangement, common in the aviation industry, in which two or more
airlines publish and market the same flight under their own airline
designator and flight number (the “airline flight code”) as part of their
published timetable or schedule.
• Typically, a flight is operated by one airline (technically called an
"administrating carrier") while seats are sold for the flight by all
cooperating airlines using their own designator and flight number.
• The term "code" refers to the identifier used in flight schedule,
generally the two-character IATA airline designator code and flight
number.
• Thus, XX123 (flight number 123 operated by the airline XX), might
also be sold by airline YY as YY456 and by ZZ as ZZ9876.
• Airlines YY and ZZ are in this case called "Marketing airlines"
(sometimes abbreviated MKT CXR for "marketing carrier").
• The process whereby an airline uses the two letter code of another
carrier to identify its flights.
• Began as a result of passengers’ preference for on-line rather than
interline connections. Code Sharing is sometimes used to give the
impression that a connection is on-line when in fact it is interline.
• Now often used by carriers to form cooperative, rather than
competitive relationships with other airlines.
• One of the most common marketing practices of airline alliances is to
sell or distribute a flight under a “code-share” arrangement.
• Under such an arrangement, one of the airlines in the alliance or
partnership operates the flight with its own aircraft, while one or
more non-operating partner airlines place their own airline code on
an alliance flight for distribution purposes.
• The code-share partner can then market and sell its own tickets for
the flight, which is actually operated by another alliance airline.
• Although interlining was once commonplace, many carriers have
dropped interline agreements with other carriers as a cost saving
method. Of course, many LCCs such as Southwest, have never
interlined.
• A codeshare agreement takes interlining a step further. Each partner
places its airline code on some of the partner’s flights marketing and
selling these flights as their own.
• In this example, the Lufthansa-operated flight LH423 is also listed in a
SABRE GDS display as United flight UA/LH8852 (i.e., UA flight
operated by LH).
• Thus on the flight availability display for Boston (BOS) to Frankfurt
(FRA) on January 31, 2007, there are two “different” non-stop flight
departures shown, both leaving at 16:40.
• Of course, there was only one aircraft departing Boston for Frankfurt
at 16:40 on that date, but the different GDS listings allow both
Lufthansa and United to sell tickets for this Lufthansa-operated flight
under their own name (and on their own websites).
• Such code sharing is common within global alliances. Lufthansa and
United are partners in the Star Alliance.
• Lines 3 and 4 of the GDS display example show a connecting flight
alternative for the same BOS–FRA request for January 31 availability.
• Air France flight AF337 departs BOS to Paris Charles de Gaulle Airport
(CDG) at 17:40, and connects to AF1418 from CDG to FRA the
following morning at 07:35.
• This two-line display is an illustration of how connecting flights are
shown on GDS screens – seats must be available in a desired booking
class on both flight legs in a connecting itinerary for an agent to be
able to book a seat and issue a ticket from Boston to Frankfurt.
• Lines 5 and 6 of this example provide another example of the impacts
of code sharing on GDS displays.
• The connecting alternative shown on lines 5 and 6 is in fact the same
AF-operated flight from BOS to CDG, connecting to the same AF flight
from CDG to FRA. However, the BOS–CDG flight shown on line 5
carries a Delta code-share label, which Delta can market and sell as
part of its alliance membership in SkyTeam, on behalf of its partner,
Air France.
• Supporters of the code-sharing practice claim that it increases the
number of options available to consumers for travel in a city pair.
• Opponents of this practice claim that it only serves to clutter GDS
displays and confuse consumers. In the example shown, the entire
first page of this GDS display is used up by what are effectively only
two different flight options, thereby displacing other alternatives
lower on the screen.
• For consumers, there is also the possibility of brand confusion – one
can purchase a United ticket from Boston to Frankfurt on the United
website, with little warning that the flight will actually be a Lufthansa-
operated flight offering a different on-board product and requiring
passengers to check in at a different terminal.
Code-sharing activity between airlines can be divided into two types:
• that designed to cement traffic feed, and
• that designed to reduce the intensity of competition on a route.
• Code-sharing to control feed is, mostly, a legitimate activity
from the consumer viewpoint.
• Two or more airlines may agree to share their codes, so that
their connections will appear as on-line in the GDS displays.
• Ideally, they will then co-ordinate their activities to provide,
as far as possible, genuinely seamless connections for each
others’ passengers. All airlines will then benefit.
• In particular, long-haul airlines will gain feed from short-haul markets.
It may not be possible for them to fly these shorthaul routes
themselves, because of ownership and control rules.
• Even if they can, it will often make more sense to rely on a specialist
short-haul airline, with a more appropriate cost structure, to do so.
• Code-sharing to reduce the intensity of competition is, inevitably,
much more controversial, carrying, as it does, connotations of
collusion between supposed market competitors.
• Such activity has a long history in the airline industry. Prior to the
development of Code-Sharing in the late 1980s, airlines commonly
formed “Pooling Agreements” whereby all the revenue on a route
was put into a single pot and divided up at the end of each year
according to a pre-agreed formula.
• Modern Code-Sharing agreements, in their extreme form, are little
different. All the flights on a route carry the codes of both the
“competitors” and are jointly marketed by both the airlines.