Overall Analysis of Code-Share Agreements in Global Markets
Code sharing on international markets has become a significant opportunity for airlines which has grown rapidly in recent years across the airline industry. Considering the impossibility for one airline to provide customers demand of seamless service and from anywhere to anywhere service on its own aircraft, code sharing appears to be a reasonable and practical alternative. In order to meet customer demands at feasible costs, airlines started to seek commercial partners to contribute them provide the required network and service coverage. Since, cross-border mergers, which are ordinary in other industries, may be prohibited for airlines in many jurisdictions, alliance relationships between airlines have extended to satisfy an obvious need for network cooperation, as a close substitute for mergers.
In general, code share is an agreement between two airlines which enables one airline to put its two-letter identification code on the flights of another airline. Accordingly, a flight operated by one airline is jointly marketed in computerized reservation systems as a flight by one or more other airlines.
Although there is no exact definition in Montreal Convention, Guadalajara Convention defines that, parties of code share agreement are divided into two parts as operating carrier and marketing carrier. The airline that actually operates the flight and the one providing the plane, the crew and the ground handling services is called the operating carrier. The company or companies that sell tickets for that flight but do not actually operate it are called marketing carriers.
Types of Code-Sharing
Code-share agreements can be divided into three major types:
Parallel operation on a trunk route
At this kind of code share agreement, two carriers both operate the same sector; give its code to the other's operated flights. An example of this is flights between Paris and Milan, operated by Air France and Alitalia, which have each other’s codes as well as their own.
Unilateral operation on a trunk route
For unilateral operation, a carrier puts its code on a sector operated by another carrier, but not by itself, and not connecting to one of its own operated flights. For example, Delta puts its code on Paris-Boston, operated by Air France.
Behind and beyond route (connecting to a trunk route service)
Behind and beyond routes means, a carrier puts its code on sectors that is not operated by itself but operated by another carrier and provides connections with its own operated services. The classic example of this sort of code-share is, for example, when British Airways sells a journey from London Heathrow to Chicago, via Washington, with the US domestic sector operated by United Airlines. However, because of the existence of a code-share agreement, they can nevertheless be distinguished from a traditional interline journey, on which passengers simply take connecting flights designated only by the code of the operating carrier.
Advantages for the Airlines
Achieve network extension and better connectivity – Code-sharing allows airlines to offer their passengers a wide range of travel options which can extend beyond their own network and route structure. The advantage of code share agreements for airlines is to broaden the offer that airlines can make to customers in terms of the number of destinations and the flight timings that airlines may offer potential customers, without the costs and difficulties involved in additional investment in equipment or in mergers with other airlines.
Spread risk and facilitate extra presence – Considering the perspective of an airline business, code-share agreements enable airlines to spread risk and facilitated extra presence without necessarily the need to invest in new aircraft for their fleet.
Code-share agreement also increases the presence and awareness of an airline in global markets where it would otherwise have no profile. Accordingly, it enables the airlines to facilitate the marketing of its services and helping its seats to be sold via a marketing carrier which may be much better known in that market. Code-share agreements enable an airline to market a flight operated by another carrier and of course airlines are only willing to use their brand in this way if they are confident that the other carrier is safe and has a suitable product. Therefore, the presence of a code-share agreement can give confidence to both customers and distribution channels that journeys involving the partner can be sold with the expectation of a good overall level of service, in terms of suitability of the product and seamlessness of ticketing and flight connection arrangements.
Passenger liability on code-share agreements is regulated under Guadalajara Convention Article 2. Accordingly, if an actual carrier performs the whole or part of carriage which, is governed by the Warsaw Convention, both the contracting carrier and the actual carrier shall be subject to the rules of the Warsaw Convention, the former for the whole of the carriage contemplated in the agreement, the latter solely for the carriage which he performs. Any complaint to be made or order to be given under the Warsaw Convention to the carrier shall have the same effect whether addressed to the contracting carrier or to the actual carrier. Thus, in case of a passenger claim, charges can be either against marketing carrier or operating carrier.
Code share agreements may cause some issues in terms of passenger liability. In this regard, the problem is most likely to emerge where the states in which the airlines are registered are not signatories to the Guadalajara Convention. For these airlines, code share flights are regarded as successive carriage flights under the Warsaw Convention and passenger liability therefore rests with the airline operating the flight. Problems may occur where the operating carrier's contractual terms on liability differ from those of the code share partner (for example, hits on compensation). This issue is unlikely to arise where the code share partners are signatories to the Guadalajara Convention.
Benefits for the Passengers
There are several benefits appeared with the code-share agreements for passengers. As a brief list, coordinated schedules for easier connections, more convenient connecting times and arrangements for making connections, the ability to check your baggage and obtain a boarding pass to your final destination, more extensive international networks and easy way to reach them, the resources of two carriers to deal with operational problems and disruption arising, improvement of product/service quality of one of the partners can be counted.
Using code-share agreements and alliances between airlines on international markets have become a dominant feature of the airline industry. The ultimate motivation for airlines to enter into code-share agreement is commonly the opportunity to cite greater network extent beyond their route and greater customer reach coming with market awareness and brand recognition. Therefore, code-share agreements between airlines on international market, with its various features, enable both airlines and passenger enter into a mutually advantageous era to reach global and convenient way of transportation.