Code-Share Partnership: A Saviour for the Ailing Aviation Sector?

By Amogh Pareek

Introduction

There has been a constant and steep rise in the number of air-travellers over the years. In 2017, a staggering 4.1 billion passengers flew across the world (passengers meaning that if a person flew thrice, it was counted as 3 passengers).[1] In order to accommodate this overwhelmingly large number of travellers, the airline industry has an ingenious solution – Code-Share Partnerships [“CSPs”]. CSP is a common business arrangement between two airlines, wherein they agree to share the same flight by allowing the partner airline’s identification code to be put on to their own airline.[2] This means that a flight operated by one airline is jointly marketed and its tickets are sold by other airlines, which are its partners. The operating airline is called the administering carrier [“Operator”] while the marketing partner airlines are called the marketing carrier(s) [“Marketer”].

“Code-Share” signifies the Marketers putting their own airline codes on flights operated by some other players, i.e. the Operators, resulting in sharing of the airline codes between the partners. Thus, an Operator with a flight code AB1234, may have a CSP with a Marketer, who would sell tickets to the same flight with a different code like XY6789.

Types of CSPs

There are primarily three types of CSPs:

  • Free Flow / Free Sale Codeshare: Free flow CSPs are the most common type of CSPs.[3] In such agreements, there is no limit (except the maximum authorised sale limit) for the Marketer to sell tickets to its Operator’s flight. No seats are locked to any of the airlines, and any partner airline can sell any number of seats.
  • Capped Free Flow / Free Sale Codeshare: They also operate in the same manner as Free Flow Codeshare, except that the maximum number of tickets that can be sold by a Marketer is capped. Thus, it becomes a quota-system wherein each Marketer is allotted a specific, limited quota of the number of tickets that it can sell for the Operator’s airline.
  • Block Space Codeshare: In such CSPs, an entire block of seats of the Operator’s flight is sold by the Marketer to its customers. The marketer retains full control over the seats and booking from the time they are booked and till the time they’re transferred back to the Operator.[4]

Further, based on the geography of the routes covered by CSP partners, the classification is done in the following manner:

  • Parallel operation on a trunk route: Also known as “Online Codeshare”, such agreements entail both the Operator and Marketer operating the same sector, and giving their codes to the other party. An example of this is flights between Paris and Milan, operated by Air France and Alitalia, which have not only each others’ codes but also their own.[5]
  • Unilateral operation on a trunk route: Sometimes referred to as “Network-extension Codeshare”, these are CSPs wherein a Marketer puts its code on a sector operated by another carrier (Operator), but not by itself. Moreover, it is not necessary that the flight on which the code is put connects to one of the flights operated by the Marketer itself.[6] For instance, a flight from Paris to New York, which is operated by Air France also bears a code put on it by Delta Airlines.
  • Behind and beyond route [“BBR”]: In BBR CSPs, the Marketer has its code on a flight in which the passengers travel after traveling in the Marketer’s own flight. Thus, if a flight (operated by British Airways) travels from London to Vegas via Washington, having the US sector operated by the United Airlines, then such an agreement would constitute a BBR CSP between United Airlines and British Airlines.

What’s In It For The Airlines And For The Passengers: The Good And The Bad

The instances of airlines entering into CSPs with other airlines is on a rampant increase. In June 2019, Vistara Airlines entered into a CSP with United Airlines,[7] opening up over 20 destinations across India for United Airlines. In April 2019, there was a CSP agreement between SpiceJet and Emirates,[8] which opens new routes and destinations between India and places like Africa, West Asia, Europe and so on, while improving Emirates’ connectivity to India through 9 different gateway points including Goa, Visakhapatnam and the likes.[9] Also, IndiGo Airlines, by entering into a CSP with Turkish Airlines, opened itself to a multitude of destinations across Europe including Amsterdam, Athens and Brussels.[10]

Are CSPs all goody-two-shoes?

These examples show that the airline industry is embracing CSPs with open arms, and for good reason. CSPs enable airlines to offer a wide range of options beyond their own networks and routes without any additional costs or procedural difficulties like mergers etc. Also, CSPs enhance the presence of an airline in global markets, where they would otherwise have little recognition.[11]

The passengers get to choose from a wider variety of flights, more flexible timings and better connectivity to different routes, all without any added costs as cost benefit incurred to the airlines is further transferred to the passengers.

The pitfalls surrounding CSPs

One of the major conundrums in CSPs is regarding the passenger liability. Generally, passenger liability in CSPs are regulated by the Guadalajara Convention [“Convention”].[12] Thus, if the Operator does whole or part of the carriage of passengers, then both the Operator and Marketer are subjected to the rules of the Warsaw Convention. Thus, in the case of any claims or disputes, they can be claimed either against the Marketer or the Operator. However, the problem arises when the countries in which the airline is registered, is not a signatory to the Convention. Also, this problem is compounded by the difference in the contractual terms of the two airlines regarding passenger liability.

Further, CSPs also hamper the flexibility on the passenger’s part in terms of alterations to the flight such as mileage upgrade, complimentary upgrade and so on.[13] Also, the details of booking are usually not disclosed by the airlines at the time of booking. Such niggles only exacerbate the major issues with CSPs.

Recommendations and Conclusion

The majority of issues with CSPs could be solved by international regulatory bodies like the IATA introducing a model draft governing CSPs, laying down the policy regarding issues like passenger liability, stringency in bookings and so on. Airlines may be given the freedom to adopt this model policy with minor amendments.

However, despite this, there would still be some airlines which would neither be signatories to the Convention and nor be the members of IATA. However, this number would be fairly small, considering the fact that not all of the remaining airlines would have ongoing CSPs, and thus, a majority of the problematic cases would be solved.

Given the scale of benefits offered by CSPs to both airlines and passengers, it is not surprising that CSPs have been gaining rapid momentum over the last few years. India has remained no stranger to this wave and thus, we see new CSPs coming up every few months. The ailing aviation industry of India could greatly benefit from the advent of CSPs, and in spite of the issues surrounding it, CSPs continue to be a win-win situation for both – the industry and the passengers.

The author is a third year BBA LLB student at National Law University, Jodhpur.


[1] Traveler Numbers Reach New Heights, IATA Press Release 51 (Sept. 6, 2018), https://www.iata.org/pressroom/pr/Pages/2018-09-06-01.aspx.

[2] Overall Analysis of Code-Share Agreements in Global Markets, Herdem Attorneys at Law (Nov. 26, 2015), http://herdem.av.tr/analysis-code-share-agreements-global-markets/.

[3] Codeshare – types and benefits, The Winglet (Oct. 23, 2014), https://thewinglet.boardingarea.com/codeshares-types-benefits/.

[4] Id.

[5] Margherita Colangelo, Introduction to European Union transport law 68 (2nd ed., 2016).

[6] Id.

[7] Vistara inks code share agreement with United Airlines, LiveMint (June 18, 2019), https://www.livemint.com/companies/news/vistara-signs-codeshare-agreement-us-based-united-airlines-1560868839564.html.

[8] SpiceJet and Emirates enter into code-share agreement, Business Line (Apr. 22, 2019), https://www.thehindubusinessline.com/companies/spicejet-and-emirates-enter-into-codeshare-agreement/article26912428.ece.

[9] Id.

[10] Around the world in 6E ways, IndiGo Airlines (Dec. 20, 2018), https://www.goindigo.in/codeshare.html; IndiGo announces codeshare with Turkish Airlines; to offer 20 global destinations to its passengers, Economic Times (Dec. 21, 2018), https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/indigo-announces-codeshare-with-turkish-airlines-to-offer-20-global-destinations-to-its-passengers/articleshow/67195733.cms?from=mdr.

[11] Supra note 2.

[12] Article II, The Guadalajara Convention, 1861.

[13] Supra note 3.

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