Indian Airlines network is becoming more global every day. Indian carriers are creating different alliances and new pacts every day.
- Air India is part of Star Alliance
- Jet Airways is nearing itself to Skyteam members and is part of Etihad Partners group.
- Vistara is joint venture between Tata and Singapore Airlines
Jet Airways recently signed metal neutrality pact with Air France – KLM.
Airline partnerships are more complex and advanced than ever before, both for the better and worse. About 20 years ago the Star Alliance was formed, which was revolutionary at the time. SkyTeam and Oneworld quickly joined the scene, and while they all still exist, the focus lately has been on joint ventures. After all, with these alliances having so many members, how much can these loosely affiliated airlines really have in common?
Airlines want to work with other airlines that complement them best, and this can come in many different forms. Just to give a few examples of partnerships that have emerged outside of the traditional alliances in the past several years:
- Even though Virgin Airlines should be one company, it is operating as separate subsidiaries like Virgin Australia, Virgin America (now part of Alaska Airlines), Virgin Atlantic. They don’t have a common Airline program
- Vistara is an entity of Singapore Airlines but isn’t treated as part of any alliance. In fact, Singapore recognized Vistara in this year March despite 3 years of operation.
- Singapore Airlines is Star Alliance member whereas Britsh Airways is one world, but first airline Vistara tied up is British Airways instead of another Star Alliance member.
- Even though Air Canada is in the Star Alliance, they codeshare with both Cathay Pacific and Virgin Australia
- Jet Airways belongs Etihad Partner Airlines but it has codeshare agreements with over a handful of airlines
With that in mind, I frequently get questions from readers asking to explain the difference between these various agreements, so I figured it would be fun to do that in this post. Before I do so, let me add two disclaimers:
- 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
- It’s my understanding that there are as many different agreement structures out there as there are agreements, so unlike how it may have been in the past, there’s no consistent answer as to how the revenue split works between airlines under each of these agreements
With that out of the way, let’s briefly discuss these four types of agreements:
Interline agreements
Interline agreements are the most basic kinds of agreements you can have between airlines. An interline agreement is simply a commercial agreement between airlines to handle passengers when they’re traveling on multiple airlines on the same itinerary. This allows passengers to check their bags through to their final destination, check-in all the way to their destination, potentially be rebooked on another airline in the event of irregular operations, etc.
This is a very basic level of cooperation, so there are airlines that have interline agreements that don’t otherwise partner. ExpertFlyer shows airlines that have interline agreements. Jet Airways has interline agreement with Garuda Airways for Bali tickets.
Codeshare agreements
A codeshare agreement is the next level of cooperation between airlines. This is when two airlines realize there’s value in working together, and they decide they want to place their “codes” on one another’s flights. Typically the main benefit of this is that it drums up business for the airlines that are in a codeshare agreement with one another.
- Jet Airways has deep codeshare with Virgin Atlantic, China Eastern, Bangkok Airways
- Jet Airways has minor codeshare on Delhi – Hong Kong route where Hong Kong Airline tickets on Jet’s Aircraft.
The idea is that this is beneficial for both airlines. I don’t think either airline is getting a huge cut when you choose to book a codeshare flight rather than directly with the other airline (there may be some small cut), but rather the main motivation is to boost business for both airlines by increasing the number of flights that passengers have access to.
Codeshare may have different levels:=
1. Award ticketing – Carriers can cross ticket award seats on each other network.
2. Miles Exchange – You can earn miles on your favorite airline while flying with their partner airlines.
3. Tier Recognition and Miles Enhancement – Some airlines would recognize your tier with a particular airline and offer you similar benefits as a premium customer on their airline would get. You would also get tier points for flying on them. Hence, your flight would count for elite frequent flyer credit. That might allow you to earn a certain amount of flight to earn higher tier or maintain your tier with your favorite airline.
Vistara has British Airways as only codeshare partner till date.
Alliances
The “big three” alliances — Oneworld, SkyTeam, and Star Alliance — have only developed in the past 20 years, though in the meantime many major global carriers belong to one of them. The basic way that alliances work are as follows:
- 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 redemptions, etc.
- Airlines have to reimburse one another when their members use certain benefits; for example, if you fly Singapore Airlines and credit your miles to United MileagePlus, then Singapore Airlines has to pay United for those miles, or if you are flying Lufthansa but are accessing a lounge using your Air Canada Star Alliance Gold Card, then Air Canada has to pay Lufthansa for that lounge visit.
Air India doesn’t have any codeshare partners. Rather it uses Star Alliance as its’ partner network.
As many have been hopeful that Jet Airways would join SkyTeam but it doesn’t look likely as Jet Airways might not be interested in joining the alliance any time soon. Rather it would just want to build its own Joint Venture with Delta, Air France-KLM, and their constituents.
While these are the biggest types of agreements out there, it seems like they’ve been deemphasized quite a bit lately.
Joint venture agreements
A joint venture agreement is a massive business decision that typically requires extensive government approval. When airlines form a joint venture they coordinate pricing and schedules, and have a revenue-sharing agreement.
Exactly how that revenue sharing agreement works depends on the specific agreement, but the idea is that two airlines are essentially acting as one under a joint venture.
Currently – Vistara is acting is Joint Venture with Silk Air and Singapore Airlines. Air India is trying to get near to Thai Airways by connecting multiple destinations from India to Bangkok. Whereas as Jet Airways is doing the same for Etihad to Abu Dhabi. The latest Air France – KLM agreement is first metal neutral joint venture for Indian carrier so far.
From the perspective of a consumer, a joint venture is both good and bad. The good news is that typically it gives you the most flight options in terms of schedules, since the airlines are operating as one. Airlines also often try to make the experience as consistent across brands as possible. The downside is that it’s like a competitor being eliminated in the market, so it could lead to higher fares as it reduces competition.
Bottom line
There are so many different types of agreements in the airline industry nowadays. While the exact terms vary with every partnership, 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, with everyone sort of doing their own thing.
