Passengers often need to fly to destinations that are not available directly from their local airport. Bernie Baldwin reports on how the latest advances in interlining are making that easier.
Every airline wants to be able to offer its customers choice, including as much of a route network as possible. While no airline flies to every airport on the planet, carriers can extend their networks by collaboration.
As much as possible, travellers like to be able to purchase travel in simple transactions, especially if they have to use more than one airline to reach their destination. The first level of collaboration to enable this is the interline agreement, in which two or more airlines agree to handle passengers travelling on multiple airlines. This usually means each party to the agreement will handle baggage until the passenger’s final destination too, as well as check-in for their destination.
Hahn Air is a German scheduled and executive charter airline which, alongside its flight operations, offers indirect distribution services to other airlines and thus provides ticketing solutions to 100,000 travel agencies in 190 markets. The company’s head of corporate strategy, industry and government affairs, Jörg Troester, explains how variable the terms for an interline agreement can be.
“When it comes to interline agreements, there is a standard set of prerequisites established by IATA that participating airlines have to fulfil,” he begins. “In addition to being a member of IATA, the partners need to have at least one GDS (global distribution system) connection in place; they need to establish system connectivity and to implement procedures for reservations, pricing and ticketing processes. They also need to agree on the handling of special services, ancillaries and baggage.
“Looking at the enormous effort that an individual airline needs to go through when establishing an interline partnership, it becomes obvious that a potential partner airline will only agree to a cooperation if it comes with great benefit for both sides. However, as an interline agreement is typically formed between airlines with completely different business models, the benefits vary from airline to airline,” Troester continues.
“For example, an agreement formed between an international legacy carrier and a regional airline would mean an immense network expansion as well as a considerable increase in ticket sales for the smaller partner. However, the more established partner will most likely collect a higher interline service charge (ISC) and will take advantage of increased passenger traffic through the regional carrier’s feeder flights.
“Another example is a low-cost airline partnering with a regional feeder airline,” Troester adds. “The partnership will most likely mean higher efforts on the side of the low-cost carrier when it comes to synchronising services and procedures. However, the additional stream of passengers will make up for it. At the same time, the regional carrier will benefit from having access to the attractive sales outlet that is the website of the low-cost carrier. As these two examples may illustrate, no two interline agreements are alike and the airlines entering the agreements are hardly comparable.” Thus 50:50 arrangements for interline deals are highly unlikely.
Growing Greek carrier, SKY express, recently completed an interline collaboration with American Airlines, enabling the booking of a single ticket across the networks of both carriers. So anyone organising a trip from the USA to the European countries to which SKY express operates can then book onward flights to any one of the carrier’s 35 Greek destinations in one transaction.
Yannis Lidakis, commercial director at Sky express, points out that in addition to American Airlines passengers across USA benefitting from the new agreement, third carriers also having agreements with American – such as JetBlue and Alaska Airlines – are also allowed to participate.
As for the variability of interline agreements, Lidakis has similar views to Troester. “Depending on the system integration capabilities, as well as the commercial policies between the interlining parties, the agreement framework may vary, but not to a large extent,” he confirms.
Through-transfer of passengers’ hold baggage is vital to interlining, but also a challenge both logistically and economically. “Provided that interline baggage allowance terms are transparent to both the airline and the handler as well as the passenger, the hurdle is not insurmountable,” Lidakis states. “All in all, the benefit for travellers is enormous so it is definitely something to strive for.”
IT obviously plays a significant role in interlining and Sky express is always on the lookout for products to aid the process. “Fundamentally though, it revolves around enabling online bookings by passengers themselves. This is a very arduous task, but we are confident that it will be even more rewarding not only for the partnering carriers but first and foremost for passengers,” Lidakis stresses.
Troester agrees that the challenge of baggage check-through is “massive” when it comes to synchronising passenger handling and baggage processes between partners. “That’s especially true if a low-cost carrier is involved in the partnership. Airlines, of course, need to carefully weigh expected advantages against the implementation efforts and costs,” he advises.
Regarding IT and its significant role in interlining, Hahn Air continually enhances its products, although as Troester explains, his company’s approach differs from many. “With its business model, Hahn Air has mastered the notion of interlining. However, the Hahn Air business model is very different from that of other airlines entering into interline agreements,” he remarks.
“Hahn Air rarely acts as the operating carrier and almost exclusively functions as the validating carrier. With the product HR-169, Hahn Air offers airlines the Hahn Air ticket as an additional sales channel. An interline agreement with Hahn Air can expand the distribution reach of a partner airline to up to 190 markets and 100,000 travel agencies in the world. In addition, they join the world’s largest interline network with hundreds of potential interline partners without having to form individual bilateral interline agreements,” Troester elaborates.
“The Hahn Air solution is open for airlines of any business model, including low-cost carriers. Due to the ample experience of Hahn Air in integration processes, the administrative hurdles are much lower. It is, however, important to note that Hahn Air sells its HR-169 ticket through travel agencies and online travel platforms only,” he comments.
Alternatives to traditional interlining are emerging with companies such as Air Black Box and Kiwi.com aiming to offer airlines other ways to collaborate.
Patrick Edmond, managing director of Altair Advisory, one of whose clients is Air Black Box, knows from his airline days that legacy interline relationships can be very complex. “The particularly fraught element is the so-called SPA, or Special Prorate Agreement, which sets out how the airlines will split the revenue. To deal with this, airlines need to have interline revenue accounting departments who can calculate the revenue split, and relationships with IATA Clearing House to deal with the settlement, which may not be until a month after the flight,” he explains.
“All this is anathema to LCCs, who want process simplicity and fast cash. That’s why Air Black Box designed third-generation interlining: to make the sale of connecting flights possible for any carrier, LCC or network carrier, ticketed or ticketless, rather than only being the preserve of legacy carriers,” Edmond adds, while also confirming that through-baggage is part of the offering.
“In the legacy interline world, baggage transfer – and who’s responsible when something goes wrong – is covered by standard IATA resolutions. Again, this works if your airline has an interline revenue accounting department and if you are happy working through compensation proration and the like,” he continues. But this level of cost and complexity just doesn’t work for LCCs or non-interlining airlines – it’s basically been a “no entry” sign on the door of the interline system. That’s what we at Air Black Box are aiming to change.”
Kiwi.com provides Virtual Interlining, which Carol Barnes, the company’s head of global communications, describes as the act of combining flights between carriers without interline or codeshare agreements.
“Virtual Interlining (VI – or self-connecting to the layman – is a simple idea, making transport providers connect even when the companies don’t work together,” she continues. “Prior to VI, a traveller had two choices. They could fly with a normally interlined full-service carrier or they could spend hours and hours searching every possible airline, every possible connection and every possible price to find the best deal and hoping the price/seat was still there when they came back to it.
“The Virtual Interlining (or self-connect) algorithm is becoming more popular because it offers unique itineraries to any traveller. Such itineraries are often cheaper and provide many alternatives to reach the final destination, predominantly due to making it possible to mix low-cost and legacy carriers into a single itinerary. Sometimes this is the only way to reach the final destination from a traveller’s home airport,” Barnes notes.
“Virtual Interlining holds many benefits for travellers but also for airports – particularly secondary ones – with increasing traffic being the main one. If you take the situation that the airport is not a hub, but it wants to grow beyond natural point-to-point traffic (based on the destinations served from the airport), then one of the only options is to attract people who are not just intent on reaching that given airport as the final destination,” she adds. “An airport supporting VI itineraries can then become a self-styled virtual hub, by providing connections that are not managed by an airline or a group of airlines, but created directly by passengers or by platforms like Kiwi.com that build those unique self-connecting itineraries for their customers.
“In Europe, low-cost carriers (LCCs) are spreading their networks. That’s why many airports are willing to invest in stopover programmes that make the transition from one airline to another a smooth experience at the airport,” Barnes emphasises.
According to Patrick Edmond, it was travellers creating their own connections because there was no better alternative, but in doing so taking the risk of a missed connection, which led Air Black Box to develop it third-generation interlining solutions. “These allow the sale of connecting itineraries, with protection against missed connections and with through-checked baggage – basically, we are synthesising the passenger benefits of legacy interline, but without the cost and complexity for the airlines,” he declares.
“This means that legacy airlines can partner with LCCs and sell connections combining legacy and LCC flights. Meanwhile the ThruBag application allows the passenger to benefit from end-to-end checked baggage, just like a legacy connection; it also means that LCCs can feed legacy carriers and generate extra ancillary revenue by selling ThruBag as an ancillary,” the advisor confirms.
“Above all, Air Black Box’s third-generation interlining gives passengers a greater choice of connections and opportunities to save money on their travel. By creating and packaging new connection opportunities using existing flights (even on non-affiliated airlines), third-generation interlining makes more efficient use of existing airline capacity. That’s unlike the inefficiencies of legacy codeshare and alliance partnerships where you can only book connecting flights on your airline’s specific partners.
“Ultimately, in a world where we need to think about the environmental impact of flying, this enables existing flights to fill as many seats as possible and thus reduce emissions per seat,” Edmond concludes.
Moreover, the combinations possible create an almost infinite network. In this case, rather than the sky, the earth is the limit.
Author: Bernie Baldwin
Published: 18th January 2022
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