In aviation, one of the most exciting bits of news for frequent fliers is when airlines sign codeshare agreements. Nowadays, these kinds of deals are frequent among carriers, which use them to expand their networks, even if they don’t operate the flights. But, when did codesharing start? Why is this type of deal important? Let’s investigate further.
Tracing back the history of codeshare agreements
Codesharing can be traced back to the 1960s. In 1967, Allegheny Airlines (which would become USAir) agreed the first codeshare with a commuter airline in the US. After the deregulation act of the US domestic market in the 1970s, this practice became more popular.
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The term codeshare agreement was born with Qantas and American Airlines in 1989. They offered a hub-and-spoke style service using their homes at the airports in Los Angeles, Sydney, and Melbourne.
In Europe, codesharing agreements became popular in 1993, following EU deregulation. In 2007, the European Commission published a final report on the competitive impact of airline codeshare agreements. This paper showed that 100 out of 100 airlines surveyed had already signed a codeshare with one or more carriers across the world.
That was 13 years ago, and since the practice has enhanced more. This year alone, we’ve seen some crazy codeshare agreements, for example:
- American Airlines and Qatar Airways
- Icelandic and airBaltic
- LATAM Brazil and Azul
- TAP Portugal and Avianca
- LATAM and Malaysia Airlines
How do they work?
A codeshare agreement, as Upgraded Points wrote, “is a business arrangement in which two or more airlines publish and market the same flight under their own airline designator and flight number as part of their published timetable or schedule.”
In plain terms, that’s why you can see Ethiopian’s code, ET, on a GOL Linhas Aereas ticket, for instance. Let’s say you travel from Addis Ababa to Sao Paulo with Ethiopian. But that’s not your final destination. Instead, you’re planning to go to Brasilia, so you take a flight with GOL Linhas Aereas at Guarulhos International Airport. When you planned the trip, you only bought one ticket, which serves all the legs on the journey.
There are three types of codesharing agreements: parallel operation, connecting operation, and unilateral operation.
The parallel operation is when two airlines operate the same route and use each other’s codes as their own.
The connecting operation is like the example above with Ethiopian Airlines and GOL. It is when an airline sells a ticket between A and C but only goes to point B. Then, the codeshare partner flies the second leg between B and C.
Finally, the unilateral operation is when one airline is not involved in the operations in any way. So, what does the carrier that does all the hard work wins with this kind of agreement? It leverages from the other airline’s brand to get passengers to fly with them, as Pranchi Juneja wrote.
Codeshare vs. interline agreements
Codeshare and interline agreements are often mixed up due to their similarity. Interline agreements can be understood as a passenger service agreement for flights between two different airlines. Meanwhile, a codeshare agreement is an alliance between two carriers to increase their networks. The codeshare gives airlines access to more routes without flying to those destinations by themselves.
Moreover, an interline agreement includes baggage handling, check-in agreements, or even the possibility of rebooking through another airline if one flight is canceled. The interline agreement smooths the customer experience.
Why are codeshare agreements important?
For airlines, the importance of codeshare agreements is the access they gain to new markets. For instance, GOL wouldn’t be able to fly to the Middle East with its current fleet. With the codeshare it signed this month with Ethiopian, now its passengers can fly to Ethiopia and beyond.
These kinds of agreements will prove vital in the next months, as the recovery from the current crisis goes on. Airlines are reducing their fleet sizes and cutting routes, so having a codeshare agreement will help maintain some sort of global connectivity.
What else do you know about codeshare agreements? Let us know in the comments.