Types Of Airline Agreements

In terms of size, more and more individual airlines have opted for one of the three remaining global alliances. For example, while the respective alliances were created between 1997 and 2000 out of a total of 14 airlines, the number of member airlines increased to 52 in 2016 to reach 27 in Star; 13 in SkyTeam; and 12 in oneworld. Alliances currently occupy a dominant position in the global aviation market. In concrete terms, the global market share of the three “mega-alliances” was about 59% in 2008. Company alliances have particularly high market shares – at least 70% based on network capacity – in intercontinental markets, such as the North American-Europe market. Interline agreements are the most basic types of agreements you can have between airlines. An Interline agreement is simply a commercial agreement between airlines to treat passengers when travelling with several airlines on the same route. This allows passengers to check their luggage to their final destination, check their location to their destination, possibly be re-routed to another airline in case of irregular operation, etc. This type of code-sharing agreement is less formal than other types of revenue-sharing contracts. This species generally covers a number of partner flights and is very diverse. In this case, the operator has most control over issues such as schedule changes, seating allocations, etc.

Chen, Y., Gayle, P. (2007). Vertical contracts between airlines: analysis of the balance of code-sharing alliances. International Journal of Industrial Organization, 25, 1046-1060. Immunity from cartels and abuse of dominance concerns the right of partner airlines to jointly set fares on their common network. This form of cooperation can be seen as a complement to code-sharing; At this stage, all groups of airlines covered by antitrust immunity are part of one of three airline alliances. Currently, there are no multi-alliance partnerships that fall under antitrust immunity. Early studies of airline cooperation have focused on the possibility of reducing competition through parallel airline partnerships due to antitrust immunity. A political response to these concerns has been the dissensation – or release – of the immunity provision of overlapping parts of air transport networks. Wan et al. (2009) focuses on assessing the price effects of airline partnerships on overlapping parts of partner airline networks. They find that these effects are different from one alliance to another.

Zou et al. (2011) also document the differences in pricing between partnerships. Alderighi et al. (2015) assess a sample of prices offered by European markets. They find that code-sharing increases the overall level of prices and that marketing carriers tend to offer higher prices for code-sharing services than airlines.