code share business transactions
May 18, 2018 | 8:40 am
#1
Original Poster
Join Date: Aug 2009
Posts: 568
code share business transactions
This is a spin off from a topic on Air France about the same AF flight LAX-CDG being $200 less if purchased as codeshare through Delta or KLM.
What are the financial transactions between the two airlines involved when a codeshare ticket is purchased?
Same question for what happens between the airlines when I use my Delta miles to purchase a flight on AF metal. Why would AF offer miles flights for Delta?
side question- If I work real hard, I can occasionally find a saver rate business ticket on AF LAX-CDG for Delta miles. Any way to get more access to such flights? I have only Ivory status on AF. Should I cross over to an AF miles card, if such a thing exists.
What are the financial transactions between the two airlines involved when a codeshare ticket is purchased?
Same question for what happens between the airlines when I use my Delta miles to purchase a flight on AF metal. Why would AF offer miles flights for Delta?
side question- If I work real hard, I can occasionally find a saver rate business ticket on AF LAX-CDG for Delta miles. Any way to get more access to such flights? I have only Ivory status on AF. Should I cross over to an AF miles card, if such a thing exists.
May 18, 2018 | 2:17 pm
#2
FlyerTalk Evangelist
Join Date: Apr 2001
Location: MEL CHC
Posts: 22,919
B747-437B has at times been involved with codeshares as airline management. From a 2009 thread. how does a codeshare work exactly (under the surface)
There are more ways to structure a codeshare agreement than might be apparent on the surface. I've negotiated codeshares that were based upon "hard blocks", "soft blocks", "moving block", "free sales", "revenue sharing", "open sale", "sell and report" and various other systems.
In a "hard block", the operating carrier makes available a fixed number of seats to the marketing carrier. This is usually done on a fixed cost per seat basis. The marketing carrier then applies its own yield management to these seats and sells them in competition with the operating carrier. If the marketing carrier fails to sell all the seats, then they go empty.
In a "soft block", the marketing carrier reserves the right to return to the operating carrier any unsold seats at various given points in time. Their liability to the operating carrier is reduced accordingly. The payments due may vary depending on whether the operating carrier is able to resell the seats returned.
In a "moving block", the marketing carrier guarantees a minimum number of sales over a given period based upon inventory ranges made available by the operating carrier. These ranges may be fluid or prenegotiated or a combination of both depending on specific operational day.
In a "free sale", the marketing carrier sells the operating carrier's inventory without any restrictions at either mutually agreed fares or unilaterally set fares.
In an "open sale", the marketing carrier sells the operating carrier's inventory until the operating carrier stops them from selling any more.
In a "sell and report", the marketing carrier sells the operating carrier's inventory independent of the operating carrier's systems and simply updates the systems subsequently with details of sales completed.
In a "revenue sharing" system, the marketing carrier and the operating carrier share all costs and revenues in pre-determined proportions, irrespective of who the actual cost may be incurred by or where the revenue may have been generated. This is the system used by most alliances who have attained anti-trust immunity.
Beyond this there are further restrictions as to traffic rights and markets in which the codeshares may be marketed and the settlement procedures and whether surcharges may be applicable and literally hundreds of other possibilities.
In a "hard block", the operating carrier makes available a fixed number of seats to the marketing carrier. This is usually done on a fixed cost per seat basis. The marketing carrier then applies its own yield management to these seats and sells them in competition with the operating carrier. If the marketing carrier fails to sell all the seats, then they go empty.
In a "soft block", the marketing carrier reserves the right to return to the operating carrier any unsold seats at various given points in time. Their liability to the operating carrier is reduced accordingly. The payments due may vary depending on whether the operating carrier is able to resell the seats returned.
In a "moving block", the marketing carrier guarantees a minimum number of sales over a given period based upon inventory ranges made available by the operating carrier. These ranges may be fluid or prenegotiated or a combination of both depending on specific operational day.
In a "free sale", the marketing carrier sells the operating carrier's inventory without any restrictions at either mutually agreed fares or unilaterally set fares.
In an "open sale", the marketing carrier sells the operating carrier's inventory until the operating carrier stops them from selling any more.
In a "sell and report", the marketing carrier sells the operating carrier's inventory independent of the operating carrier's systems and simply updates the systems subsequently with details of sales completed.
In a "revenue sharing" system, the marketing carrier and the operating carrier share all costs and revenues in pre-determined proportions, irrespective of who the actual cost may be incurred by or where the revenue may have been generated. This is the system used by most alliances who have attained anti-trust immunity.
Beyond this there are further restrictions as to traffic rights and markets in which the codeshares may be marketed and the settlement procedures and whether surcharges may be applicable and literally hundreds of other possibilities.
Airlines buy ff miles from your ffp to award(bribe) you to fly their airline. Its all about the money. Selling ff miles for cash is a far better business than running an airline
Last edited by Mwenenzi; May 18, 2018 at 2:41 pm
May 18, 2018 | 8:08 pm
#3
FlyerTalk Evangelist
Join Date: May 1998
Location: Massachusetts, USA; AA 2.996MM & Plat Pro, DL 1MM, GM & Flying Colonel
Posts: 25,037
This is a spin off from a topic on Air France about the same AF flight LAX-CDG being $200 less if purchased as codeshare through Delta or KLM.
What are the financial transactions between the two airlines involved when a codeshare ticket is purchased?
Same ques
What are the financial transactions between the two airlines involved when a codeshare ticket is purchased?
Same ques
...
tion for what happens between the airlines when I use my Delta miles to purchase a flight on AF metal. Why would AF offer miles flights for Delta?...As for the second, there are several factors. Two of them are:
1. AF is required to offer seats to DL frequent flyers as a condition of its membership in SkyTeam. That membership carries advantages that far exceed the cost of a few award seats, many of which (because of demand forecasting and award capacity controls) would have been empty otherwise.
2. The exchange goes both ways. DL offers award flights to AF Flying Blue members also. The transactions are netted out, usually on a monthly basis, and money changes hands to reflect a difference either way. Differences are consistently small relative to the overall volume of award seats. The effect of this is therefore nearly neutral in a financial sense, but the availability of partner awards is a big plus in customer retention.