Code and revenue sharing
 

Something I've never quite understood is the concept of revenue sharing on codeshares. I get the concept, not sure I understand the specifics.

For example, let's look at the YYZ-FRA route. Both LH and AC operate on this route, but setting aside price, upgradeability, etc., from a pure revenue, non-status passenger, wouldn't you rather fly LH? Anyone done both?

So I have to think YYZ-FRA is profitable enough for AC to continue to run it, rather than just letting LH take the route and revenue share it. I know LH and AC already code share their existing YYZ-FRA routes. Or is this just common in airline alliances - two airlines run their own metal on popular routes and codeshare the others for convenience?

Anyone have any wisdom?

Not sure exactly what specifics you are looking for? The AC-LH code/revenue sharing agreement or code-sharing and/or revenue-sharing agreements in general? Or, something else related to how code-share tickets, costs, revenues are handled.

I'd say that the end objective is to provide the optimal frequency/capacity and fare for the route (from AC/LH perspective) so that passengers will rather choose AC or LH before anyone else on the competing routes. The revenue sharing aspect means that AC/LH don't compete with each other on the route in return for potentially better revenue for both. If this sounds anti-competitive that is because it is to an extent and why a number of revenue sharing ventures on transatlantic routes are getting considerable scrutiny from the various regulatory agencies.

Actual revenue sharing goes beyond basic code-sharing and typically involves a formal joint-venture agreement between the two airlines. A venture that is subject to regulatory considerations due to the above mentioned anti-competitive concerns.