A Magazine for airline executives
2013 Issue No. 3

Codeshare Success

Cross-Departmental Coordination Is Essential For Enhanced Codeshare Revenue

Codeshare partnerships are of great benefit in extending carriers’ network reach. But they should also be a critical component of an airline’s financial plan — with cross-departmental coordination creating numerous opportunities to substantially enhance revenue.

What really makes an airline codeshare partnership successful? At the core, a successful codeshare partnership relies on cross-departmental cooperation and coordination.

The goal of a codeshare partnership is to expand the carrier’s network reach, provide a seamless positive experience to the passenger and produce a quantifiable financial benefit to all airline partners involved.

Several factors are generally involved in making a codeshare partnership successful.

Key among these factors is coordination across the many different airline departments involved in a codeshare agreement — with a clear definition of the responsibilities of each department in interacting with other departments.

For any airline new to codeshare partnerships, clearly defining the departments’ responsibilities (along with the necessary cross-departmental coordination) is crucial to success.

Airlines already involved in codeshare agreements may discover additional opportunities for even greater success by improving existing cross-departmental coordination.

Ineffective cross-departmental coordination can result in a poor customer experience, a codeshare offering that does not meet market needs, or a codeshare relationship that does not deliver on financial goals.

Drawing on the years of experience of Sabre Airline Solutions® consultants — including those who currently provide alliance and codeshare consulting services to carriers worldwide — we have collected some industry-best practices in crucial areas of responsibility that require cross-departmental coordination as an airline first explores codeshares or seeks to improve existing partnerships.

While information presented here is not necessarily exhaustive — and may or may not cover all the departments of an airline’s organizational structure — it highlights the key points of responsibility and coordination across numerous different and diverse business functions.

Several departments are commonly involved in codeshare agreements, including:

  • Chief commercial officer,
  • Alliances,
  • Sales and marketing,
  • Legal and government affairs,
  • Network planning/forecasting,
  • Schedule publication/distribution,
  • Central reservations,
  • Revenue management,
  • Pricing,
  • Finance and revenue accounting,
  • Airport operations.

We will examine each department individually, with the understanding that the departments must coordinate codeshare activities with each other to maximize the potential of an airline’s codeshare relationships.

Cross-Departmental Coordination

As an airline seeks to establish a new codeshare partnership or expand an existing one, it is critical that several departments across the airline cooperate and coordinate for a successful outcome.

Chief Commercial Officer

The chief commercial officer drives the high-level codeshare strategy at a global-alliance level — or on a bilateral basis. In other words, the core of the financial strategy and objectives of the codeshare arrangement must come from the chief commercial officer.

This role is responsible for setting the high-level codeshare strategy and objectives for the airline with the alliances department and propagating that strategy through all involved departments across a carrier’s organization.

The chief commercial officer also directs the alliances department in exploring and/or establishing new codeshare partnerships.

In essence, the chief commercial officer is the “sponsor” of the codeshare partnership and, therefore, the primary authority for maximizing revenue from the codeshare relationship.

Alliances

The alliances department has the central role in coordinating the execution of the carrier’s codeshare strategy.

Requests for potential codeshare partnerships — or expansions to existing partnerships — can come from various entities within the carrier’s corporate structure, but particularly from the chief commercial officer, network planning/forecasting, or sales and marketing. Requests may also come from the alliances departments of partner airlines.

Expansions to existing codeshare partnerships may involve adding new markets or increasing services in current markets.

The alliances department works with the network planning/forecasting department to determine the feasibility and forecasted economic benefit of proposed partnerships or expansion of existing ones using “what-if” scenarios.

Before a codeshare partnership can begin or expand, the alliances department collaborates with the legal and government affairs group for regulatory approvals and execution of commercial contracts with partners.

These may include the financial settlement terms for codeshare passengers, prorates, exclusions and possibly annexes to supplement the codeshare agreements.

In some cases, the alliances department also consults with the legal and government affairs department on issues such as scope limitations that apply to the marketing or operating airlines.

Once the economic, legal and strategic feasibility of the codeshare agreement has been established, the alliances department must get approval from the chief commercial officer and the legal and government affairs departments to proceed. This happens prior to engaging with sales and marketing to launch the new codeshare partnership.

Together, the alliances department and the schedule publication/distribution team ensure all constraints of the codeshare agreement or annexes are followed during the publication and sale of codeshare flights.

Additionally, the alliances department, along with pricing and revenue management, verifies the codeshare services offered are consistent with the respective agreements and follow the carrier’s overall codeshare strategy.

Once the codeshare partnership is under way, the alliances, finance and revenue accounting departments periodically evaluate whether the codeshare arrangement is meeting financial expectations.

Then the alliances department enlists the assistance of other departments involved to determine which aspects of the codeshare need to be re-examined, changed and/or renegotiated to improve financial performance and meet the carrier’s financial and strategic goals for that particular codeshare partnership.

Sales And Marketing

Once the decision to initiate or expand a codeshare partnership has been made, the alliances department works closely with sales and marketing to roll out the new codeshare services that are to be offered.

Sales and marketing promotes the new services/destinations offered through various sales channels and travel agencies, utilizing research data and specific direction from the alliances department.

Also in coordination with the alliances department, sales and marketing produces joint marketing campaigns with the codeshare partner.

Finally, sales and marketing may suggest ideas for codeshare offerings, which should be communicated to the alliances team to determine whether the opportunities are worth pursuing from a revenue standpoint as well as to ensure they fit the carrier’s and partners’ codeshare and brand strategies.

Legal And Government Affairs

The legal and government affairs department plays an integral role in several aspects of the codeshare agreement, including:

  • Regulatory approvals (such as antitrust immunity in the carrier’s home country),
  • Regulatory approvals in the partner airline’s home country,
  • Regulatory approvals and route authorities for countries in which new services are offered,
  • Commercial contracts with partners as they relate to the carrier’s internal contractual constraints.

If the codeshare strategy is part of the airline’s global alliance strategy, the legal and government affairs department will be involved in negotiations with multiple partners.

Network Planning/Forecasting

Working in tandem, the alliances department and the network planning/forecasting team analyze each prospective codeshare opportunity as well as the expected economic benefit of any particular codeshare agreement.

There are several key aspects of this analysis, including:

  • Determining which airlines to put your codeshare on to reach a certain market,
  • Selecting partner airlines to codeshare on your operated flights,
  • Evaluating proposals from other departments for new markets for codesharing with new or existing partners,
  • Looking for new markets in which to codeshare with new or existing partners,
  • Increasing codeshare offerings in existing codeshare markets,
  • Selecting specific flights on which to codeshare,
  • Determining optimal weekly frequencies for codeshare agreements in a given market.

The network planning/forecasting department may forecast the profitability of a particular route or the network effect of adding new codeshare destinations.

Frequently, the alliances department and the network planning/forecasting department jointly develop several alternate scenarios from which to choose. These scenarios must be assessed for their projected impact on competitors as well as partners.

Schedule Publication/Distribution

The schedule publication department — or the schedule distribution department, as it is sometimes called — is responsible for distributing the schedule with codeshare flights to the central reservations department, partner airlines and third parties.

When a new codeshare partnership is launched or an existing partnership is expanded, the alliances department and the schedule publication/distribution department work together to ensure service offerings for sale are within the contractual agreement with the partner airline.

As well, the schedule publication/distribution department verifies the codeshare flights meet the business requirements from the alliances department as well as the terms and conditions in the annexes agreed upon by the partners.

The department might also be responsible for checking the codeshare flight assignments made by partner airlines to certify they meet the contractual requirements of the partnership. Any anomalies need to be resolved with partner airlines, with support from the alliances department.

At a more technical level, the alliances department may help facilitate specific details regarding how the schedule publication/distribution department will exchange schedule data with partner airlines, including the frequency of exchange and the deadlines involved.

Central Reservations

Central reservations readies codeshare offerings for sale. To do so, it works with the alliances department to determine the configuration required by the partner airlines’ codeshare agreements. If any customization of displays is required, the two departments jointly coordinate that activity.

Based on schedule data provided by the schedule publication/distribution department, central reservations displays codeshare flights and makes them available for sale. These two groups are responsible for communicating and processing schedule updates based on set deadlines so codeshare flight offerings are synchronized with the partner’s operating flights. Last-minute schedule changes involving codeshare flights are handled in much the same way.

Additionally, the alliances department and central reservations establish a protocol for notifying partners concerning schedule changes to codeshare flights. Policies for re-accommodating passengers in response to codeshare flight changes should be determined by these two groups as well.

With input from revenue management, central reservations confirms inventory and fares for codeshare flights are correctly displayed and made available for sale.

Specific inventory business rules may apply for particular partners, and establishing these may also involve the alliances department.

Careful coordination among central reservations, revenue management and pricing is crucial to ensure correct inventory and pricing are displayed for all codeshare partners.

Revenue Management

The revenue management department — sometimes referred to as the inventory control department — is responsible for making codeshare flight availability and pricing available to central reservations.

Accordingly, the revenue management department coordinates with central reservations to determine how availability and pricing for codeshare flights should be managed.

This may also involve the alliances department, if the codeshare partnership has any unique requirements.

Furthermore, the revenue management and pricing teams must collaborate to provide the correct pricing for codeshare flights to central reservations.

Pricing

The pricing department is responsible for providing pricing that is consistent with partners for new and existing codeshare markets. It also coordinates with the alliances department to ensure a consistent pricing approach is applied across all codeshare agreements.

In the event of changes, the pricing department with input from the alliances department, determines which price change alerts to monitor for codeshare partners’ pricing changes.

Working with revenue management, the pricing department ensures that consistent and correct fares are available for sale.

Finance And Revenue Accounting

The finance and revenue accounting team is responsible for setting up the procedures for reporting on codeshare performance as well as the policies for financial settlement with partner airlines. It also reports codeshare performance in conjunction with the alliances department. An adverse performance should trigger an examination of the partnership and/or services offered.

Finance and revenue accounting collects revenue from partners and/or distributes payment to them for codeshare flights in accordance with the codeshare agreement. The team also coordinates with the alliances department to ensure that the commercial arrangements for the codeshare agreement are in place before flights are sold so revenue can be collected on time and partners are paid precisely what they are owed.

Airport Operations

Together, the alliances and airport operations departments establish policies and procedures for handling codeshare passengers in accordance with the agreements with partner airlines.

Moreover, the airport operations department coordinates with central reservations on check-in processes and the management of marketing passenger name records (PNRs) on operating flights to ensure customers receive seamless service.

Improved Codeshare Return

Despite the variety of responsibilities each airline department assumes for codeshare agreements, the overall strategy should be consistent across all departments. In addition, each department should clearly understand its specific responsibilities in support of that strategy.

To effectively execute codeshare agreements, a carrier should employ industry-best practices as well as use robust technology to ensure departments are fully coordinated and equipped to make optimum decisions.