I apologize if this has been exhausted elsewhere on FlyerTalk, but can someone with expertise in this area please explain some of the economics to me?

The most obvious case for code-shares seems to be to provide a coded flight for onward connections to places that an airline doesn't serve -- e.g., DL code-shares with AF for flights out of CDG, so one can book a Delta flight from IAD-CDG-XXX. This seems to especially make sense in countries in which it is not so easy to buy tickets for another airline and/or the airline doesn't offer e-tickets, e.g., traveling from RUH-FRA-IAD on LH-UA, it's difficult to buy a United ticket in Riyadh, so there's a (slight) benefit to having the whole thing coded as Lufthansa.

But there are some strange aspects. I ask because I am on a DL-coded, AF-operated trip now IAD-CDG-DXB, returning IST-CDG-IAD. When I wanted to make a change to the return, my travel agent told me that, although AF had availability IST-CDG-IAD for the day that I wanted to fly, there was no more DL-coded inventory available for this itinerary. This was Y fare basis, so I am assuming that it wasn't because I was on a cheap ticket. I have never seen this before. So, how do the economics work? Does DL essentially buy a bunch of seats from AF and then re-sell them on their own? Why does Delta code-share with many IAD-CDG-XXX AF-operated flights, but not with IAD-AMS-XXX KL-operated flights? Similarly, it seems like every domestic NW flight out of DTW has a KL flight number, but no domestic UA flights out of IAD have LH flight numbers. How is it in Air France's interest for me to buy the ticket from Delta? Reciprocity on some other routes? Getting American travelers to choose to connect in CDG (on AF) for onward trips to Europe? Or is it in fact the case that having a DL flight number increases access to these flights (and sales) for U.S.-based travelers?

Another strange circumstance, for which I do not understand the rationale for code-sharing, is that most (if not all) United and US Airways flights in the U.S. are coded both airlines, and sometimes it is significantly cheaper to buy an entirely UA-operated itinerary with entirely US-operated flight numbers, or vice-versa. (I have seen the same thing with Emirates and Sri Lankan out of Dubai.) Or, for a UA-operated flight, sometimes US flight numbers will be available but UA flights won't be. I wonder what the underlying economics of this are that make sense. And, given the price transparency available nowadays (at least for domestic flights), how could it be that the prices are so different in these types of cases? It's not like the only way to buy an airline ticket is to go down to the Airline X city ticket office and buy whatever they're selling coded on their airline. Perhaps people flying CLT-ORD are connecting either in Charlotte or Chicago, so the respective airlines hold some of their coded inventory to support these connections (e.g., the different supply and demand for XXX-CLT-ORD on US versus CLT-ORD-YYY on UA might result in different prices for people buying CLT-ORD tickets depending on whether it's US or UA coded)?

Of course it comes down to supply and demand somehow, and of course airline pricing is incredibly complicated, and I assume that airlines are operating rationally, and I understand the benefits of code-sharing in many cases, but these quirks puzzle me. Does anyone have a Codesharing 101 primer?

Mecabq let me see if I can try and answer some your questions.

For the NW/KL codeshare agreement they have 100% anti-trust immunity so they can and do share revenue across the Atlantic and coordinate schedules and slap each others codes on most every flight the other operates that has even the smallest potential for a codeshare. Without their anti-trust immunity they would not be doing this. They are in fact the two airlines that are the closest to one another across the North Atlantic.

For your question about DL/AF ex IST. Most agreements are set up so that the non-operating airline (in this case DL) gets a certain number of seats on the flight and once they are gone, they are gone. How the revenue gets shared I am not sure about.

For the US/UA question it is like this basically to connect 2nd tier cities that the other airline doesn't serve and to connect to international flights. One might fly CID-ORD-CLT-ILM on a mixed of metal but every flight might have either a UA or US code and lets UA say they serve ILM and US serve CID (if they dropped their service, can't remember for sure but you get the idea).

Hope this helps some. ^

There are different types of code share agreements. Sometimes airlines just buy a fixed number of seats off each other. I can well imagine that the result of this can be diverging prices offered as one airline runs out of its allocation.

A few years ago, Air France cut its flights between Paris and Vietnam (Hanoi/Saigon). At the same time they entered into a code sharing agreement with Vietnam Airlines - so they could now publicise "daily flights".

I had a flexible C class ticket with AF. When I tried to change it to a day on which VNA was flying, there was constantly "no availability". Well.... I took a voluntary downgrade without compensation. (The AF office were so worried - why would any one fly in economy on VNA when they could fly in business on AF on a day either side - that they got me to put the request in writing.) As it happens, I knew the VNA purser and got re-upgraded on boarding. Most of C was empty - she told me that AF simply hadn't purchased more than a handful of seats. She said it was a "publicity stunt" so that they could claim an upgrade to their service. Sometimes AF pax who had to fly in economy on business tickets would walk into the business section and go ballistic when they realised seats were empty - whilst they'd been told "C was full" by AF reps. My friend would generally upgrade them where possible out of sympathy - but VNA would be making nothing out of it, except good will.

In conclusion, I feel the arrangement was a "cover" for a cut in real flights - as for the economics, I suppose AF has the connections in Europe, so for PAX based in, for example, London, its a way for VNA to access this market.

I personally dislike code-share. Seems to devalue brands - and often its not very clear to pax that the airline they are flying with is not the one they thought they were getting.

Two words: FLY AMERICA

If a flight # is on a US flag carrier, it counts as flying on a US airline for gov't accounting purposes.

Delta can put their flight # on an AF flight, charge $200 more, and people will buy it to comply with the law.

http://en.wikipedia.org/wiki/Fly_America_Act

Fly America is part of it. The other part is taxes and airport fees outside the US. In particular code shared Asia and intra-Asian flights. Overall they make it cheaper to fly a smaller number of flights on the largest wide bodies, vs more flights by different carriers on medium sized metal.

If you changed the ways taxes and airport fees worked in the US then code shares would actually be a good thing in the US. Three are a lot of routes between large cities where we have almost every major carrier (and several minor) carries on an absolutely huge number of flights on really small metal. Instead of 8 carries doing 40 flights, you could do a 4/4 code share, 20 flights. That's still a lot of competition and you'd end up with less pollution, and even better, less congestion. Less congestion, shorter flights, less chance of delays.

CO and virgin atlantic VS had "hard" codeshares in the iad-lhr route. CO bought the seats. exact seats, like in 5 AB, DF. etc. once they owned them they sold them as best they could, independent of VS, the operator of the plane. on two occasions, My wife and I purchased "upper class" tickets(considered more or less first class by VS) but sold as business class tickets by CO for slightly under $1000 rt about 3-4 years ago. they came with all the VS UC frills, excluding the limosine trip to airport.

we were also able to exchange seats into VS seats(row 1), once at the airport.

I do not know if this hard codeshare still exists, as I no longer have business in london, so no longer travel there.

The hard code share ended a few years ago. Definitely had it's advantages.

Thanks for all of the information. The "Fly America" is an interesting one. Some people may prefer it, but the U.S. government requires travelers on government business (at least in some cases -- I don't know if it's all) to fly a U.S. flag carrier on segments to and from U.S. soil. But code-shares are an exception, so it's OK to fly, for example, the Delta-coded, AF-operated flight IAD-CDG. (I wonder if that's the reason why Delta code-shares with AF on this flight? It wouldn't seem like a good candidate otherwise since IAD is not a hub for DL -- anyone connecting to CDG on DL would go through JFK, ATL, or CVG.)

Another stupid U.S. government rule that raises costs and lowers convenience for travelers. They would probably cite some vague "safety" or "security" rationale as the reason for the rule, but I'm sure that it's just protectionism.

I've negotiated codeshare agreements with carriers of all sizes and at the end of the day, I've found that not only does nobody understand all the possible loopholes and methods to execute these agreements, but I usually pick up a new idea at the end of the day as well.

That said, a majority of codeshares fall under 3 broad formats - a) Hard block, b) Soft block and c) Free sale.

A "hard block" is when Airline A (marketing carrier) buys a block of "x" seats from Airline B (operating carrier) and re-sells them under Airline A's flight number. Airline A pays Airline B for the fixed number of seats every day regardless of whether or not they are filled.

A "soft block" comes in different variants, but the most common type is that Airline A guarantees Airline B a certain number of seats sold over a certain period and is liable for that value at minimum. The difference between this and a hard block is that a soft block allows the variable demand curve to be more optimally accomodated.

"Free sale" is the most common form of modern codeshares, but requires a fairly complex synching of reservation systems. Essentially a free sale entitles both parties to sell "last seat availability" in all fare classes on a flight and for Airline A to pay Airline B at a prenegotiated SPA (Special Prorate Agreement) for each segment flown in a specific fare class. Alternatively, Airline A and Airline B may have a negotiated "override commission" percentage whereby Airline A retains anything from 7% to 20% of the value of the negotiated fare as their commission for marketing the segment.

There are plenty of variations on the above as well, with combinations and different aspects of each mixed together, as well as more complex setups like the opaque/transparent "reverse codeshare wetlease" arrangements. However, the above 3 are pretty much the basis upon which 90% of the world's codeshare agreements are based in some form or the other.