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]
