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Codeshares-Do They Really Help The Airline?  
User currently offlineSHUPirate1 From United States of America, joined Sep 2003, 3670 posts, RR: 16
Posted (10 years 7 months 3 weeks 1 day 12 hours ago) and read 2732 times:

OK...I'm flying to New Orleans this Memorial Day weekend on a UA/US combination (ticket booked on UA)...here's my question...let's say that the only flight on either carrier with a low-fare seat available going is US (routed through DCA), and the only flight on either carrier with a low-fare seat available coming back is UA (routed through IAD on AWAC/ACA)...in the pre-codeshare days, you had to suck it up and buy a higher-fare ticket (and the difference in this situation, as I just got finished with it, is a good 350 dollars that I simply don't have)...now, I can buy a ticket with UA, with the flight going to New Orleans on US on 5/28 (USAir 2171 LGA-DCA, USAir 235 DCA-MSY) and the flight returning to New York on UA on 6/1 (Air Wisconsin 5752 MSY-IAD, Blue Ridge 7462 IAD-LGA)...and I can save myself a whole heap of money...unfortunately, one of the two airlines (either US or UA) is hurting themselves with this...so my question is, does codesharing (except to cities the other airline doesn't serve) actually help the airline? In my opinion, it doesn't...


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12 replies: All unread, jump to last
 
User currently offlineCaptaingomes From Canada, joined Feb 2001, 6413 posts, RR: 55
Reply 1, posted (10 years 7 months 3 weeks 1 day 12 hours ago) and read 2712 times:

I would argue, although I don't have figures to back up my claim, that code sharing is a way for airlines to remain competitive, and increase the potential market share, although it decreases yields in many cases. But if an airline doesn't take part in this, they lose competitiveness, and may lose many customers as a result. It is just a cost of doing business in the airline business in order to reach the maximum number of clients as possible.

I'm looking forward to seeing other arguments.



"it's kind of like an Airbus, it's an engineering marvel, but there's no sense of passion" -- J. Clarkson re: Coxster
User currently offlineANstar From United Kingdom, joined Nov 2003, 5319 posts, RR: 7
Reply 2, posted (10 years 7 months 3 weeks 1 day 12 hours ago) and read 2686 times:

Origin Pacific in NZ is a good example of how codesharing worked. Since QF pulled the agreement they are loosing money and talking about bankruptcy. So obviously Origin was doing ok out of it

User currently offlineInnocuousFox From United States of America, joined Dec 2003, 2805 posts, RR: 14
Reply 3, posted (10 years 7 months 3 weeks 1 day 12 hours ago) and read 2666 times:

I have to agree that it is a good idea with carriers that don't have a lot of overlap - such as having American/European partnerships. That way, you can book a flight from a smaller city to a hub, hub to hub, and then hub to smaller city all on "one carrier". However, if it between carriers that serve primarily the same markets - or at least with a sizeable overlap - it's just a way of inching their presence up the screens when people are searching for flights.


Dave Mark - Intrinsic Algorithm - Reducing the world to mathematical equations!
User currently offlineSHUPirate1 From United States of America, joined Sep 2003, 3670 posts, RR: 16
Reply 4, posted (10 years 7 months 3 weeks 1 day 11 hours ago) and read 2634 times:

I'm not referring to those international codeshares where the airlines involved don't even fly to more than a dozen or so common airports...I'm referring to codeshares like UA/US and CO/DL/NW (and to a lesser extent AA/AS, although they don't serve more than two dozen or so common airports), where I can fly, say, UA or US on a route, and UA has the only low-fare seat one way, and US the other way...in theory, it should provide flexibility for the passenger, and the codeshares succeed in that sense...however, in return for passengers having more flexibility, yields are hurt (and in my case, absolutely flattened, and that's happened on more than one occasion, specifically my ISP-RDU trip in March)...what I am trying to say is, if I'm running an airline, I'm simply not putting my code on flights between two cities I serve (even if not nonstop, if I can purchase one ticket on one fare basis, for example, it makes sense for US to put a code on UA's LAX-SFO flights, as somebody would have to purchase two tickets to fly US on that route) but it makes no sense for US to codeshare on UA's LGA-ORD, as a passenger could just as easily fly LGA-PHL-ORD on US, unless they are connecting to a UA city that US doesn't serve (such as OKC, for example)


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User currently offline4jaded From United States of America, joined Apr 2004, 248 posts, RR: 0
Reply 5, posted (10 years 7 months 3 weeks 1 day 10 hours ago) and read 2566 times:

When I worked for America West I can tell you that we had alot of Continental Airlines FF's and code share business. I saw that drop off significantly after that deal was finished. I am sure it depends on the codeshare itself.

User currently offlineSnnams From Ireland, joined Apr 2004, 288 posts, RR: 1
Reply 6, posted (10 years 7 months 3 weeks 1 day 10 hours ago) and read 2564 times:

Code sharing can be a mixed blessing, and I agree with 4jaded: it depends on the code share itself and the given situation.

An example is when Aer Lingus entered oneworld. It code shared with BA on services beyond Heathrow to cities in Europe which Aer Lingus did not serve themselves. When EI saw how many passengers they were turning over to BA each day, it went and opened practically every previously code shared route itself as a direct service from Dublin.. good for Aer Lingus, not so good for BA. For some airlines, it can be an excellent way to "prove" a route without really incurring any major costs.


User currently offlineSHUPirate1 From United States of America, joined Sep 2003, 3670 posts, RR: 16
Reply 7, posted (10 years 7 months 3 weeks 1 day 10 hours ago) and read 2538 times:

Snnams-Those are beyond-gateway cities, which, IMO, are fine...what I don't understand is when an airline code-shares on a route like LGA-MSY (stopping in DC in each direction) when the only reason a passenger (like me) would use the codeshare is to get a lower fare, thus depressing yields...heck, either United Airlines or US Airways is losing 350 dollars as a result of me "mixing and matching" between the two carriers, as I am currently allowed to do...not that I should be complaining, but UA and US sure will be in bankruptcy court (as UA currently is, and US soon, it appears, will be doing, although hopefully they only file Chapter 11, and not Chapter 7)


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User currently offlineBoysteve From United Kingdom, joined Apr 2004, 958 posts, RR: 0
Reply 8, posted (10 years 7 months 3 weeks 1 day 9 hours ago) and read 2510 times:

On some routes codeshare enables some carriers to create a cartel agreement to avoid them competing. BA and QA codeshare on LHR to Australia flights via both Singapore and Bangkok. In the case of Bangkok these flights operate daily just 15 minutes apart! However as they are both codeshare flights they are not really in competition with each other. I guess it's just taking alliances such as one world and star alliance a stage further


User currently offlineSnnams From Ireland, joined Apr 2004, 288 posts, RR: 1
Reply 9, posted (10 years 7 months 3 weeks 1 day 9 hours ago) and read 2503 times:

SHUPirate1,

I see your point, but maybe that 350 Dollars is the difference between flying and not flying for many poeple. If I had to pay that kind of fare for a domestic trip (or in my case an intra europe flight), it would put me off taking the trip all together, or looking to an LCC. Carriers like UA and US have an alltogther different from of competition these, and they seem to be acting accordingly.



User currently offlineTango-Bravo From United States of America, joined Jun 2001, 3806 posts, RR: 29
Reply 10, posted (10 years 7 months 3 weeks 1 day 9 hours ago) and read 2478 times:

SHUPirate1: You could not be more correct in your closing sentences "...does codesharing...actually help the airline? In my opinion it doesn't..."

It is sheer folly for airlines to imagine that they are helped by codesharing when they share/divvy up the same fare with another airline when they could have and would have captured the same revenue (albeit from a different passenger with a different destination) by keeping the passenger online (airlinespeak for one's own airline) and keeping 100% of the ticket base fare revenue. It should be a no-brainer, but as none other than Gordon Bethune has stated, "this (the airline industry) is a stupid business run by stupid people."

Here's an example to illustrate. My airline can fly you from SEA to BOS on our flight numbers in one of two ways for the same fare. From SEA via ORD on a connecting flight with our codeshare partner -- or non-stop. Since it can be reasonably assumed that our codeshare partner will not carry our passneger on the ORD-BOS leg for free, we have forfeited about half of the revunue we could have had had the pax flown on our non-stop SEA-BOS flight. Plus, the fare SEA-ORD (typically 80-90% of of our SEA-BOS fare) that we couldn't sell because it was occupied by the BOS bound pax was also lost. All of which is a textbook case of serious revenue dilution -- when the whole issue of losses in spite of load factors at record high levels comes down mostly to a revenue issue! We would have carried just as many SEA-ORD pax and our SEA-BOS non-stop would have carried the same load factor -- and, between the two flights, we would have kept 100% of a considerably larger base fare revenue pie.

And the issue of costs is by no means helped by codesharing (and costs, along with weak and diluted revenue, is the other factor keeping airlines in the red in spite of strong load factors). It is costly enough for one airline to deal with its own issues on a day-to-day basis. It becomes considerably more costly when it becomes necessary to deal with the service issues of a codeshare partner in addition -- even while revenues are being diluted in the process. Which is the double-whammy incurred by code-shares: real revenue (what the airline gets to keep) goes down while costs go up.

In conclusion, except for some of the confusion caused for pax (like "who do I check-in with?") and the possibility of getting "caught in the middle" between two airlines (represented as one in codeshares) determined to pass the proverbial buck when customer service issues arise, codesharing is great for pax; it does not in any way help an airline. Those who would have us believe otherwise are simply proving the veracity of Gordon Bethune's view of the industry and those who (mis)manage it.

As empirical evidence for whether codesharing really help airlines, take a look around. Is it the airlines who are totally immersed into codesharing who are losing big $$$ or is it the airline who lack such "helpful" arrangements?


User currently offlineDeltAirlines From United States of America, joined May 1999, 8913 posts, RR: 12
Reply 11, posted (10 years 7 months 3 weeks 1 day 8 hours ago) and read 2447 times:

My view on codesharing is that what it does is increase the potential frequency, which gives customers more options. This helps create more of a market, which means more people will fly instead of taking other options.

SHU - I just miss you twice at MSY. I'm flying into MSY on the 28th at 1153 (from BOS) on AA, and leaving on the 1st at 1301 (to DFW)...only a few hours difference both ways.

Jeff


User currently offlineSHUPirate1 From United States of America, joined Sep 2003, 3670 posts, RR: 16
Reply 12, posted (10 years 7 months 3 weeks 1 day 7 hours ago) and read 2434 times:

DeltAirlines: ROFL about just missing you both ways at MSY...

Tango-Bravo: Welcome to my Respected Users list...not only did you see what I was talking about, but you touched on the revenue-sharing aspect that I hadn't even brought into the equation (BTW, I'm assuming you are referring to SEA-ORD on AS and ORD-BOS on AA, versus SEA-BOS nonstop on AS)...it's really a lose-lose situation (for the airline) all the way around...they have to share revenue (your argument), are given more opportunities for a lower fare (my argument, see my LGA-MSY situation), and they are forced to put up with the other airlines' service (or possibly lack thereof, and they also risk the other airline's service being so good that they do not want to go back, as I used to look for US first and UA second, now I look UA first and US second)...like you said, the airlines making money are the ones that don't have agreements, and the airlines who are losing money hand-over-fist are the ones that are cooperating to such a great extent with other carriers...



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