Airline Alliances, Codeshares, And Joint Ventures Explained

For better and worse, airline partnerships are more complex than ever before. The Star Alliance was formed 25 years ago. SkyTeam and oneworld joined the scene quickly, and while they all still exist, the global alliances have definitely been deemphasized in recent years. With so many alliances having so many airlines, how much can they have in common?

Airlines want to work with other airlines that complement them best, and this can come in many different forms. There are a few examples of partnerships outside of alliances.

• Even though Qantas is in oneworld, the airline has a joint venture with Emirates for flights between Australia and Europe
• Even though Air Canada is in the Star Alliance, the airline codeshares with Cathay Pacific, Virgin Australia, and more
• Even though Alaska Airlines now belongs to oneworld, the airline has partnerships with all kinds of independent airlines, ranging from Condor to Icelandair

The different levels of cooperation between airlines

Interline agreements, codeshare agreements, alliance membership, and joint venture agreements are just some of the levels of cooperation that airlines have. I wanted to take a closer look at the differences between these agreements. Before I do that, I need to add two things.

• This stuff is really nuanced given how many different agreements airlines have, so my goal here is to generalize so that beginners can understand the basic distinctions, rather than getting into the nitty-gritty
• There are endless agreement structures out there, and there’s no consistency as to how revenue is split as part of these arrangements

Let's take a look at the four kinds of agreements.

What are airline interline agreements?

Interline agreements are the most basic agreements you can have with an airline. Interline agreements are commercial agreements between airlines to handle passengers when they travel on the same itinerary. Passengers can check their bags through to their final destination, get boarding passes all the way to their destination, and potentially be rebooked on another airline in the event of irregular operations.

There are airlines that have interline agreements but don't have robust partnerships. The interline agreement between Etihad and dozens of other airlines is not a major global alliance.

This is a level of cooperation we see between airlines that don't partner with one another, and that may not be good for them.

Some airlines pull out of interline agreements. Delta and American had an interline agreement that was cut many years ago. Why? Delta found that American was rebooking more passengers on Delta during irregular operations than the other way around, so the carrier no longer thought the arrangement was in its best interest.

The next level of cooperation between airlines is a codeshare agreement. Two airlines realize there is value in working together and decide to place their codes on each other's flights. It drums up business for the airlines that are in a codeshare agreement.

Alaska Airlines and Icelandair have a codeshare agreement. Alaska Airlines gives some of the codeshare flights to certain gateways in the United States.

If you want to fly from Reykjavik to Los Angeles, you will not be able to. You can book a Seattle to Los Angeles flight on Alaska Airlines if you have anIcelandair code.

You will notice that the flight number is different when you book a codeshare flight. If you booked throughIcelandair, your Seattle to Los Angeles flight would have anIcelandair flight number.

To be clear.

• The Seattle to Los Angeles flight is just an ordinary Alaska Airlines service, but some passengers may be booked on partner airline flight numbers, as part of a codeshare
• A particular flight could have five different “codeshare” flight numbers, as several airlines can use the same flight as a codeshare

Both airlines get a cut for booking someone on the other airline. Most of the ticket revenue goes to the operating carrier, with a small amount going to the airline that sold the flight. Increasing the number of flights that passengers have access to is the biggest advantage of this arrangement.

What are airline alliances?

The big three alliances, oneworld, SkyTeam, and Star Alliance, have only been around for 25 years. The basic way that alliances work.

• Airlines pay dues to belong to these global alliances, and have to agree to deliver certain benefits to passengers on a reciprocal basis
• While many airlines belonging to alliances will also codeshare, as such that’s not a requirement or a given
• The main benefit for consumers is that they can expect consistent benefits across the alliance, especially with elite status, like priority check-in, priority boarding, mileage earning and redemption, etc.
• Airlines have to reimburse one another when their members use certain benefits; this includes when you credit miles to the program of another airline, when you access lounges, etc.

Even if they choose to belong to them, different airlines place different levels of emphasis on these alliances. Delta is a founding member of SkyTeam, but it is almost entirely focused on joint ventures rather than benefits from being part of an alliance.

What are airline joint venture agreements?

A codeshare agreement is similar to getting married. A joint venture agreement requires extensive government approval. Pricing and schedules are coordinated when airlines form a joint venture.

The idea is that two airlines are acting as one under a joint venture, and that revenue sharing depends on the specific arrangement.

This is different from a merger because airlines form joint ventures between specific regions. American has joint ventures with British Airways, Finnair, and Iberia, while Japan Airlines has a joint venture.

A joint venture is either good or bad for a consumer. Since the airlines are operating as one, it gives you the most flight options in terms of schedules. Airlines try to make the experience consistent across brands. It could lead to higher fares as it reduces competition, because it is like a competitor being eliminated in the market.

There are many different types of agreements in the airline industry. I think the easiest way to sum it up is that an interline agreement is like a friendship, a codeshare agreement is like an engagement, a joint venture is like a marriage, and an alliance is like having a big family.

Hopefully the above provides a fairly basic summary of all of this.