Airlines announce codesharing relationships all the time, and I usually don’t give them a second look. But when an announcement came through yesterday that Korean and American would begin codesharing, I had to do a double take. This may very well ruffle some feathers, but more importantly, it’s a window into how airlines have come to realize that alliances don’t solve all their problems.
This is actually a very tiny agreement in scope. Korean will put its code on American’s flights between Seoul/Incheon and Dallas/Ft Worth starting in April of this year. People who book Korean on American’s flight will also be able to earn Korean SkyPass miles. But that’s it. There’s no codesharing beyond Dallas and no American code goes on to Korean metal… yet.
What’s really interesting here is the web of relationships that will be impacted. American is a member of oneworld, and oneworld has always been the most liberal of the alliances. There is no restriction on partnering outside of the alliance, and that’s why we’ve seen some odd couplings, such as American working both with oneworld member Qatar and competitor Etihad which is building its own alliance. But while American does codeshare with a lot of non-oneworld airlines, I believe this is the first codeshare that American will have with a member of either SkyTeam or Star Alliance. There’s a reason for that.
Star is the most strict and doesn’t allow its members to really partner outside of the alliance unless its a niche carrier that serves a market that can’t be served by the alliance members. (I’m still not sure how United continues to partner with Jet now that Air India is in Star.) SkyTeam used to have similar restrictions but I’m told that those have recently been loosened. Airlines can now partner outside of the alliance more freely, and that apparently includes partnering with direct competitors (American) of alliance members (Delta). With that rule change, Korean was free to go and pursue a deal that won’t make its partner Delta happy.
Of course, we all know that the Delta and Korean Air relationship has been strained (to say the least) for quite some time. But for Korean, it doesn’t seem to be concerned about the health of that relationship in this particular case. The concern is more about the Dallas market. Korean already flies to Dallas from Incheon 4 times a week in the winter (daily in the summer), but that’s not much of a business schedule. With this relationship, Korean can now serve the market daily and provide more options for the business travelers in Seoul who need to get to Dallas. (Samsung, for example, has a big presence in Dallas.) I would assume in the future, Korean will also put its code on American flights beyond Dallas as well. Delta, with a minimal presence at DFW, can’t provide any of this help for Korean, so the airline looked elsewhere.
Meanwhile for American, this is a great deal. I can only imagine just how much money those flights to Seoul are losing right now. Opening up the ability to sell to Korean loyalists in Korea will only help improve the profitability of that flight. The only concern for American: will its joint venture partner Japan Airlines be angry? According to American, JAL did give its blessing. But in the future, if the agreement expands further and includes American’s code on Korean flights beyond the hub into Asia, then the tension might ratchet up.
What’s really interesting here though is that the airlines looked at this and basically said, “who needs an alliance?” They both have specific needs that their alliances can’t really help, so they’ve opted for self-help by crossing enemy lines. This isn’t a new thing, but it’s becoming more and more common. And seeing airlines now partner with arch-rivals of their existing partners shows just how important it is to the business.
I like these kinds of partnerships. When done right, they can help both airlines to fix a specific issue. But it does diminish the importance of the alliance itself. Of course, that’s already been happening with alliance partners taking a back seat to joint venture partners anyway. This is just further proof that alliances can’t solve all problems.
[Original empty airplane photo via Shutterstock]
21 comments on “Strange Bedfellows: Korean to Codeshare with American”
There has been a lot of discussion regarding this on a few websites, however not one has mentioned that AA last year got a Samsung contract. As Samsung is big in Dallas this is probably the big driver, not alliance considerations.
Curious – why do you assume to AA flights between DFW and ICN are losing money?
Wonder if this might actually mean that KE eventually kills the DFW route, and just relies on AA to do it?
WRT losing money, just for grins I pulled a few flights next week to see what’s available on the AA flight. On Tuesday, there are 7 of 16 seats still available in first, 24 of 37 available in business, and 47 of about 190 available in coach. Next Friday, they show as sold only 4 seats in first and 9 in business, and some of those might be blocked for air marshals or crew.
Coach is probly 60-70% full on these.
Empty seats don’t mean the flight is losing money, just how full seats don’t mean the flight is making money.
There probably are spots where you can take a guess at the fares and loads and come up with a guess, but you’ve also got to take in account all the employee loaded freight on the lower deck. (As opposed to only counting the self loading freight on the upper deck.
Smincie – American has been clear that it sees its new Asian routes as an investment. While I don’t know specific route profitability, I think it’s a safe bet that this isn’t making money for the airline.
I remember just a few years ago when people were predicting a future where you book and service as an alliance customer, not airline customer. In essence one similar to the regional/mainline in the US, but at a global level.
It would seem in the era of big data and easy relationships, the future seems to be less alliance focused, but still interesting competitive cooperation across the globe.
I like the idea of airlines breaking away from hard and fast alliance rules mostly because while I have my preferred airline alliance sometimes they do not offer the schedule or route that works. A couple years ago I was doing an insane amount of traveling in Canada. With DL being my primary airline my only codeshare option north of the border was Westjet, which is fine but they just do not fly everywhere AC does. Sure, I have some United miles through AC but about enough to get some free magazines. Would rather have taken skypesos for flying into YGK and other oddball Canadian airports.
Terry Maxon at the Dallas Morning News Aviation Blog is reporting that in the 12 month period since AA started service to Seoul, Korean carried 114,192 passengers vs 140,784 in the prior 12 months without AA competition.
Let’s face it, AA needs all the help it can get over the North Pacific since it’s not big like UA/DL in that market using their own aircraft.
JL also maintains a code-share relationship with KE for flights between Japan and Korea.
Korean Air is a poor member of SKY TEAM. There are so many restrictions between Korean and Delta that I fly ASIANA from ORD to Inchon. As a Delta member I only get straight miles when flying Koreas Air and that only works on certain fares. You don’t earn Elite miles on Delta when flying Korean. With their poor attitude Korean Air needs all the help it can get.
Green747, I think your beef is with Delta. According to Cranky, Delta unilaterally shut off all elite qualifying miles. For some reason or another, Delta has decided to play hardball and is hitting KAL accordingly.
http://crankyflier.com/2013/06/14/correction-of-the-week-delta-and-koreans-spat/
Put me in the group that believes code-share and marketing sham are one and the same things.
Yes, come up with any alliance, partner, preferred airline, our esteemed favorite, whatever. Just don’t call the resulting flight product a code-share.
Here, these are two independent airlines operating under their own certificates and authority. The flight should be designated with the operating airline’s code and any asterisking of a flight should be made unlawful. In any event, it’s anti-transparency related to customer service.
If each airline wants to market the same service, fine. Just don’t do it with something called a “code-share. DOT could probably get rid a a hundred or more pesonnel who have to review and approve these things. It’s a waste. Stop the non-sense!
Or just learn to read on the websites where you buy tickets. They all clearly disclose who is operating the flight.
I’m not sure I even buy that Star Alliance is that strict about limiting out of alliance codeshares. Because if that’s true, I’m still now sure how Lufthansa got away with setting up codeshare agreement with JetBlue to feed through JFK to various US east coast cities, rather than using US Airways through PHL.
Jetblue is kind of member of LH Group as they own ~15 % of the airline.
http://www.lufthansa.com/us/en/JetBlue-a-strong-partner-for-Lufthansa-in-North-America
Here in Japan, the big carriers already do quite a bit of alliance-hopping in their partnerships. JAL partners with Air France and China Eastern (both SkyTeam), and ANA partners with TAM (formerly Star, now oneworld) and Garuda (SkyTeam), as well as Delta’s best friend Virgin Atlantic…
I recently flew on a KLM code share ticket operated by DAL. What was interesting is that we connected to VIE on Austrian (Star Alliance) all on the KLM ticket. Infuriatingly, though, DAL couldn’t issue our boarding passes (since Austrian was not SkyTeam) and as such, we missed our connection due to the absurd check in policies at CDG. If you can check my bag all the way through, you should be able to give me boarding passes all the way through.
If *A restrictions are so strict, then why does SQ have an agreement with VX and B6?
Ed C – Well, for JetBlue it’s more of a niche market that can’t be served. JetBlue fees Singapore at JFK and United simply can’t provide any of that. As for Virgin America, that I just don’t know. In general, Singapore is not thought of as the best and easiest Star Alliance partner. It has long been in a more arms-length relationship with Star. So maybe there was something different in it for them. Not sure.
It will be a nyc concept. Other airlines might follow the similar suit.