American and Delta have announced that they’ll be ending their interline agreement on September 14. I immediately assumed this was Delta’s doing, and sure enough, it is… sort of. Delta has decided to raise rates significantly, and American won’t pay it. For that reason, the relationship is ending. Why do I place the blame on Delta? The rationale being used to jack up rates makes no sense.
Delta and American have had an interline agreement for decades. A basic interline agreement means a few things…
- American can sell tickets with Delta flight segments on them (and vice versa)
- American can check bags through to Delta flights (and vice versa)
- American can reaccommodate disrupted passengers by sending them to Delta on an agreed upon rate (and vice versa)
The first part really isn’t all that important these days. American and Delta both have pretty expansive networks, especially considering their joint venture and alliance partners. So the chance you’d need to combine the two on one ticket just to reach a far flung destination is pretty slim.
Yes it means you can’t do a single ticket with American one way and Delta the other, but you shouldn’t be doing that today. Delta already doesn’t allow cheap fares to be put on tickets issued by non-partner airlines. So you’ll be paying a lot more to put them on one ticket than two in most cases.
What does matter is the reaccommodation agreement and the ability to transfer bags when people are reacommodated. I recently learned that an interline agreement isn’t required to have a reacommodation agreement. (
Did you know that Virgin America and Southwest have one? Update @ 817p on 9/14: Despite Virgin America’s CEO saying so at the recent Boyd conference, Southwest says it does not have a reaccomm agreement with the airline.) But for most airlines, it’s a basic requirement and American confirmed that it can’t do reaccomm without interline on a systemwide basis. That’s because a reacommodation agreement means that tickets and funds can be reconciled by the giant Airlines Clearing House. It’s a simple process that works.
Delta, as you know is running a great operation these days, and it’s proud of that fact. It should be. But it has this delusional belief that because its operation is so great, it should be able to charge non-partners a ton more money to take passengers. In particular, I understand Delta recently went to American and at least one other large US carrier and demanded hefty rate hikes above the standard industry settlement rates. It offered to pay the same rates in return, but it knew that it wasn’t reaccommodating nearly as many passengers because its operation is running well. This was a money grab.
How do I know? Well take a look at this quote from Delta’s release on the ending of the interline agreement.
“Thanks to employees’ stellar operational performance, Delta customers enjoy an industry-leading experience. Unfortunately, we couldn’t reach an agreement with American that adequately addressed the number of IROPs customers that American transferred to us,” said Eric Phillips, Senior Vice President – Revenue Management. “In July, for example, American sent passengers to Delta for reaccommodation at a five-to-one ratio. At that rate the industry agreement was no longer mutually beneficial.”
Delta clearly thinks it’s worth a lot more money, and American balked. The problem here is that the Delta quote makes no sense. Yes, American is putting 5 times more people on Delta than the reverse, but Delta is the one that benefits more in that case, not American.
This means American is readily handing over 5 times as many customers to Delta at the last minute. At that point, these are people who are filling seats that will otherwise go empty, and Delta gets paid for it. Even better, this doesn’t cannibalize any of Delta’s existing business. It’s pure profit with a little opportunity to win over American passengers thrown in.
Delta sees it differently. It thinks its operation is so good that other airlines should be willing to pay more. But by ending this agreement, does American really suffer? Sure, it might not be able to put people on Delta anymore (at least not without writing a check), but I would be amazed if this meant more people stopped flying American and started flying Delta. This just means that each airline will have fewer options when it’s trying to get people back on track, and that sucks.
As mentioned, I understand American wasn’t the only one told its rates would be going up. But since nobody else has announced the ending of an interline agreement, that means the new rates must have been agreed upon. That seems crazy, but good for Delta. It fought one battle and won. Had American caved on this, then I’d say Delta was smart. But American didn’t, and Delta needs to rethink this.
For American, the cost was just too much. Should American have just sucked it up? Without knowing the full details I can’t say for sure, but at some point you do have to draw the line. Should Delta have come down? Now, yeah. Since at this point it’s just not getting any of that incremental business. This didn’t have to be a public negotiation. Delta could have quietly backtracked and gleefully made some money at American’s expense.
Now, that’s not happening. Everyone loses, and that’s a real shame, to say the least.
Gutsy, but I can see where Delta’s coming from. The best guess I can make is that Delta wants AA’s customers to get angry at AA when they foul up, which is less likely to happen if AA successfully writes the customer over to Delta. Perhaps Delta believes that in the long-term, this makes the customers more willing to shift loyalties to Delta overall, and that this is more valuable than filling that handful of seats.
SirWired – Entirely possible Delta believes that, but I don’t. Seems to me Delta would be better off taking a disgruntled/delayed/canceled AA passenger and showing off what it perceives to be a superior product. If people are going to switch, that’s likely going to help by giving them free trial. (Though more likely than not, people won’t switch. They’re either locked in to the frequent flier, which Delta loses on every time, or they shop on price.)
“At that point, these are people who are filling seats that will otherwise go empty, and Delta gets paid for it”
While it may seem reasonable to say that seats at the last minute would not have been sold, there are reasons they did not sell them and would like to keep them open including:
– last minute re-accommodation for their own passengers
– allows their own customers to standby or confirm earlier flights (same day standby)
– allows their employees to use standby travel (commuting crew, flight benefits)
– some seats are actually sold at the last minute (emergency travel, when spirit cancels a flight-their customers buy walk up fares on other airlines, and many more reasons).
Airlines can’t sell 100% of every flight, they sell 85% to 90% because they need a buffer for misconnections, cancellations, delays etc. If AA is over booking their flights too much because of their operation, Delta shouldn’t have to be their backup plan. It’s a fair system when it’s 1:1 or fairly close, but 5:1 sounds very high to me.
The seats are empty—that’s why American can grab them. Nothing is stopping Delta from accommodating their own passengers first. So what Cranky states still holds true. Delta is giving up pure profit here in the hope that enough American passengers get mad during the integration to switch their allegiance to Delta. I just don’t see it happening.
AA flights out HNL often have a load factor over 100%
Anthony – The main reason airlines can only run into the 85 percent range is that they have to maintain a business schedule so they can’t perfectly match supply to demand. But there are plenty of flights that go out 100% full on a regular basis. It’s just that random Tuesday morning flight to Baton Rouge that brings down the average.
But more importantly, Delta can decide whether to take reaccomm or not. Airlines are supposed to ask permission before sending to another airline. Whether that’s enforced or not is another issue, but Delta doesn’t have to take a passenger that another airline wants to send over. Now it’s just made sure it never takes any passenger from American.
There is a lot of discussion about DL showing off their “superior” operation (aside: as a DL Diamond, AA Gold and former UA Premier I will attest that DLs operations are pretty darn smooth even after Tstorms in ATL and blizzards in NYC).
My gut is that this is more of the old NW “too clever by one-half; passive-agressive” style-games where DL is trying to hit competition financially by forcing them to pay more through the clearinghouse or, if not, to buy walk-up tickets. DL must see that AA (and maybe UA) were overselling planes at low fares and then dumping the surplus low margin on DL. (NOTE: The two types of tickets that airlines usually write over to other carriers are usually high value frequent fliers that airlines want to keep happy or the very lowest fare classes–literally the left standing when the seats are filled). If the 5:1 ratio is correct then DL rightly feels it will win more than it looses in this game. To me its’ “too clever by one-half” because AA has traditionally run a pretty good operation and once the merger is in place I except that odd ticking snafus and USAIr style overbooking will shrink and then DL will be left with less recourse.
I must admit that overall I hate this since I often book multi-segment trips that involved AA and DL flights as my travel frequently involves a visit in Chicago.
Delta claims United agreed to the higher rates in August.
“United, which has been sending more passengers to Delta than American does, agreed to those terms in August, Delta spokesman Anthony Black said Friday.”
Of course we do not know whether the terms offered to American were in fact the same ones as United and it doesn’t much matter in any case.
Gary Leff – My understanding is they were offered the same terms. And more power to Delta for getting United to agree. But there’s no reason it can’t have different terms with different airlines (it didn’t approach everyone here, just a few outliers). And since American has balked, Delta should back up to something more reasonable so it can still take the traffic.
Do you think Delta’s strategy is that stranded AA passengers that don’t get booked onto a DL flight will get so disgruntled with AA that they choose DL on their next trip? If current AA customers can count on getting moved onto a DL flight when things go south whats the benefit of flying DL? A better rewards program? Ha ha ha!
Just had a conversation over the weekend with a friend that had numerous delays on a recent trip and it concluded with “I should’ve flown Delta since they were on time.” Clearly DL is doing something right in the operations dept. I get why they would want to monopolize on that, but in this business things can swing the other way pretty fast.
I’ll bet this is right. I’d guess that Delta is thinking of a long-term strategy. This decision will cost them money in the short term, but they hope that the reputational damage to AA will be worth the cost.
Totally agree with A and I have to disagree with Cranky on it being a bad move. Delta’s ops are going to be better for the foreseeable future. Atlanta is a huge trump card for Delta vs AA and UA. Not only does it not suffer from the delays of NYC and ORD, but by funneling so much of their traffic through a hub where they have so much extra equipment laying around they just are not going to have the kinds of non-fixable ops issues the other carriers experience.
Because their ops will continue to be head and shoulders above AA and UA, I can see the logic of leveraging the one thing that a transportation company is supposed to do well. I know a lot of people on frequent flyer boards and blogs are AA fanboys and fangirls because AAdvantage is much more generous than Skymiles. However, the high value flyers (the ones that make or break an operation’s profitability) over the long-run are going to reward the carrier that gets them to a client meeting on time or home after a long week on the road.
Delta is basically betting that AA will not improve its operation and the high value elites will start to defect. They’ve made it clear they will not buy loyalty through the FF program as long as they run a fantastic operation that offers what should be of the most value to people looking to be “transported”. This is a shot across the bow of AA and UA reminding them who’s on top. When you’re printing money the way they are, that incremental revenue is not nearly as valuable as leveraging one of your strengths against a foe’s weakness to steal their best customers.
ATL is not much better in delays when it comes to Weather. Any rain storm in the area, ATL goes into 15+ min delays, and sometimes it ripples to ground stops at other airports.
Now without this agreement, passengers that need to get out and find there is room on DL will be forced to buy the most expensive walk up fare which would probably be more profitable for DL than the fare received from AA for the same seat.
But he won’t switch to DL.
Loyalty programs such as AA and DLs act like anchors.
Given most re-protection bookings will be at the last minute, DL has probably suggested a higher rate to reflect what they charge at the last minute.
I think this is good decision by DL, inasmuch as it highlights their performance and might push AA into fixing theirs.
Why keep AA pax happy, collecting their AAmiles while falling back on DL to pick up the prices when AAs performance falters.?
It’s a further maturing of the market. This is about profit not market share.
A – That does seem to be the strategy, but I just don’t agree with it, as mentioned in a previous comment.
On a.net the thread about this has a quote from UA that stated the desired order to reaccom. Well, let’s just say it was DL dead last and almost to the point of saying don’t do it….
I agree that this will be a poor long-term decision for DL, but that time will tell if this is true.
so happy that DL finally got rid of the agreement AA not nice and neither r their pax so good for DL
CF: Does AA have any agreements with Southwest?
dont know but they r a horrid co. after what they did to TWA and now hear they will outsource all tkt counters and ramps when the deal is finally together in oct half country to piedmont services and western part to envoy which is ex american eagle bg
Hrm, Scaremonger much?
There are limited agreements in place between AA & WN.
Fake Herb Kelleher – No, American does not. Since Southwest doesn’t have interline agreements with anyone it makes it harder to do a reaccomm agreement. American says it won’t do one without an interline.
Airlines might be headed in the same direction as Southwest and Jet Blue…..as far as those two are concerned they are the only game in town. Several flights cancelled or delayed ?…..sorry, you have to wait until they have seats available on their own airline; could be 4 – 10 – 24+ hours, doesn’t matter. You need to leave immediately or it has to be today (wedding, funeral, business meeting ?), you’ll be buying a ticket on a another airline at top dollar (walk up rate), if they even have seats available. This will be a mess for sure.
You’re mostly right – JetBlue has one interline agreement – with Virgin America, for premium pax (booked Mint) to transfer to VX 1st class.
JoEllen – I don’t think that’s the case, at least not to that extreme. They still rely on a lot of partners/alliance members/etc. So it won’t become a closed system. It’s just becoming tighter.
Sean – JetBlue and Virgin America do not have interline agreements with each other. Both carriers have interline agreements with several foreign carriers but not with each other.
Thanks for your thoughts on this, Brett. I was going to email you this morning to ask you to cover this one; I should have known it would be today’s post!
This seems to me like in part a consequence of the fact that each of the three remaining long haul US-based carriers have big enough networks (particularly including joint ventures) to be most things to most people.
Although airlines’ unwillingness to sell interline tickets to non-partners was a pain on my last trip. I wanted the long haul to be on US Airways (since I’m flying from PHL and want a nonstop to Europe), while only Air France serves the island at the time of year I’m going. I thought I’d be able to buy the two flights on a single ticket, with AA/US just adding the standalone AF fare to the standalone AA/US fare. No dice, which means I need to add an overnight (since I’m not willing to have an interline connection on separate tickets without significant cushion). In the old days, this transaction would have been routine. Neither airline got (much) more or less money from me than they otherwise would have; their unwillingness to sell interline tickets just made the trip a pain it didn’t have to be.
I recall benefiting from this arrangement a few years ago after volcanic ash extended a stay in BCN after an AA mechanical at JFK prevented the return flight from arriving. AA BCN put us on AF in J (same class as the original inbound) to CDG and Delta onto to ATL, where we picked up an Eagle flight to BNA. Very smooth. This means one less option for AA managers — and pax —in the event of IROPs. Hubris on the part of Delta or frugality on the part of “Discount Doug” Parker?
Brett, I’m not sure that you’ve done a (recent) post on reacommodation but it could be useful for all the readers. You’re by far the expert, but in my experience, even if it’s available it’s not always offered. After the UA/CO merger, I had a CO flight and my “middle segment” was cancelled. A better option – with fewer segments, which would have been cheaper (probably) for the airline was available, but because it was on UA I had to bring it up specifically (and nicely) to the poor woman wearing a CO uniform behind the desk that day.
As someone else noted, just because there’s an agreement doesn’t mean the airline will offer it. It could be that the “other airline” (probably UA) that paid up wanted the flexibility to reaccomodate on DL – but only as an absolute last resort and wouldn’t tend to offer it, ever. In that case, UA might actually “win” if they get closer to a 1:1 ratio with DL, since DL would reimburse them at the higher rates. UA retains flexibility, but would move heaven and earth and reaccomodate with every other partner first.
TimH – It’s true that it’s not always offered. In general if something is delayed due to issues outside the airline’s control, then they are more reluctant to put you on another airline. But even when something goes mechanical, it can still be problematic to get put on the airline you want at times.
Years ago when I worked for TWA and we had to put someone on another airline for reprotection, there was a list to follow of airlines to use and in which order. DL was at the bottom and you only used DL under penalty of death (your own). While other airlines took the ticket at face value for a segment, others may charge a set fee or percentage. But DL charged (say in coach) the highest published Y fare they had. Not say a Y0 or YB that they may sell, but the full Y that no one was ever sold, but they used to charge airlines to repro passengers. That $50 segment TWA might have charged could be on DL to repro $1000.00. You could have purchased a new ticket on DL for the passenger for less then to repro them.
And yes airlines do have agreements with other carriers like WN for ‘back end’ things like reprotection passengers or airline employees self ticketing to fly on the other carrier like WN.
I have been endorsed to another carrier exactly once in my 500,000+ miles of flying. I was surprised that the airline did that because there were other available routings, but they were sold out and I guess it was cheaper to send me to another carrier.
I don’t see it happening as much in these days of the mega-carriers. All three carriers can re-route their pax through a multitude of hubs to get you on your way these days. So, while it’s nice to have the ability to endorse a ticket over from, the usefulness is much less that it was before the days of mega-carriers.
DL obviously thinks they’re going to recoup the revenue from somewhere — that’s what I’d like to hear.
If everyone else agreed to the higher rates, then perhaps the numbers on their end wouldn’t look too different, but it still doesn’t make sense to cut AA out of it (and subsequently fly around with empty seats vis a vis seats with pax).
I wonder how much of this is actually that AA is more generous about offering reaccom on other airlines than DL is. I’m a DL Diamond Medallion and I have never been offered reaccom on another airline, and in cases when I’ve tried to ask for it I’ve gotten a ton of pushback. Granted, DL runs a good operation so I don’t need it often, but DL is definitely not generous in offering it.
Delta does not want it’s best customers flying anyone but Delta.
I’ve actually had a few times when airline A being able to book a ticket including segments on non-partner airline B is very useful. Google Flights often finds round trip tickets on United flights one way and Alaska the other, all booked on United, and much less expensive than two one ways. So while Cranky may not see that part of the agreement as being especially important, it is sometimes useful.
Sure, but overall, it’s rare. Rare means it sometimes happens…
Jimmy – I’d be very surprised to see a rountrip ticket including United and Alaska pricing much cheaper than two one ways. If you have examples, send them over.
I’ve bumped into random stories where an airline would need to reaccomodate a passenger on Southwest and the agent would call up reservations, make a reservation for the customer, then hand the customer a company check written out to southwest to purchase the ticket..
I wonder if we will see any of this happening between AA and DL?
Nick – I asked about that. Sounds like if it’s a really good customer (fancy pants elite) and the situation warrants, then American will do what’s needed. But it’s not going to be a set-in-stone policy.
There is a trend of arrogance going on in this industry–carrier vs. customer. “We do whatever we want to do, you customers be damned.” None of those many Airlines for America PR ads make me feel any better about the state of things these days, either..
Yes, we customers are somewhat at fault, too. The FF programs. Airlines know we love the idea of getting something out of them, but with the recent changes to the programs, most of us have no idea of what is going on. Miles? Tell me anyone can figure out ahead of a trip, how many miles they’ll be getting and be able to adjust travel to take advantage of service, fares, and the programs. My award miles are now about a quarter of what I used to get before the 2014 changes. Of course, award miles for actual flying, being prudent on what you spend, are really not important anymore. “Dear flying customer–Drop Dead!” And, complementary upgrades? Recently, I’ve found them to be just about nil for anyone other than what I guess are the biggest spenders, and that has nothing to do with actual traveler, it’s who’s paying and most of us don’t have someone to pay the freight for us.
Yes, yes we do right about now have some marvelous fares, fares never really advertised, of course. These cheap fares, to me are not really put out there to get business. No, it’s is all about stiicking it to some competitor, kill them off and then raise the fares to the sky.
Airports are for all airlines, not just the highest bidder. Air Traffic Control, same. But, having interline agreements, joint fares, something besides an alliance foisted on us…customers, you really don’t count anymore. Eventually, DOT will have to get more involved in this stuff even if it may look like re-regulation, but if DOT’s doesn’t, it’s going to be a long, hot decade for the typical customer.
End of rant!
> So the chance you’d need to combine the two on one ticket just to reach a far flung destination is pretty slim.
I recently had to go on a last minute business trip, and the combination of flights that worked best for the situation was AA outbound and return on Delta, on the same ticket. I hadn’t flown either airline in several years.
Oliver – Why couldn’t you have done it on two separate tickets?
Well, in some cases for tinternational travel, you just need to have both segments under the same ticket …
Could you specify which cases? I’m not aware of the need to have both segments within the same ticket. Are you saying it’s a government requirement? If so, please elaborate.
I can cherry pick data with the best of ’em, but I do have one question: When DL says that AA sent them pax at a rate of 5:1, does that include US’s pax as well? If not, those numbers are somewhat misleading.
Dan – I don’t know for sure, but I will assume those are both AA and US.
AA’s operation will be getting significantly better in the next 12 months. The old US management team, which had US at the top, is laser focused on this and is doing everything in their power to match and beat DL. Flights are boarding earlier, doors close on time, schedules are padded to the legal limit, and the penalty is high if a delay is not safety related.
They are also spending millions on replacing and upgrading older ground equipment. Literally 100s of brand new carts, tugs, loaders, and trucks have been delivered this year. Fleets having sustained reliability problems, such as the 767, are getting focused teams working on every aspect of their operation. Some heavy maintenance is being picked up by the maintenance teams in South America, SCL, GRU, EZE, GIG, where the planes are sitting all day rather than waiting for their return to the US for repair.
Overall their should be a big change soon!
You hit the nail on the head. Companies get greedy, and consumers lose. Thank you for your in-depth analysis of the situation and suggested remedies, Cranky.
Is AA is sending DL 5x more passengers for re-accommodation because AA is more willing to pay to get those passengers on their way to their final destinations sooner and DL is not? I think DL tries to hold onto their passengers longer, so they don’t have to pay up, and once the operational issue clears up, the passengers are back on a DL flight. Is it not possible that these delayed passengers are paying for their own tickets on other airlines so they don’t have to deal with these delays. I’d like to see how much a DL flight’s load change from pre delay to post delay.
My son’s DL flight ex PDX was delayed due to inbound weather. He was going to misconnect in SLC. He asked if he could be routed through SEA on AS. They did so, gave him a meal voucher, and by the time he reached his destination had refunded his credit card for his bag and comfort plus seat. Good customer service, I’d say.
Richard – Good question, and I don’t know the answer. I don’t imagine they’d tell me either.
What’s the reaccommodation period that we’re talking about here? If it’s T-2 hours, that’s one thing, and likely means Delta wouldn’t otherwise have a shot at filling those seats. If it’s T-24 hours, that’s another. 7 days? And it may be longer still.
Without that detail, I’m not sure how any of us can speak to the issue at hand.
Audi5000 – This is usually something that’s used during irregular operations. Most often it’s same day or if it’s at night, it bleeds into the next day. It can maybe go a bit longer than that, but for the most part, it’s within a day.
I found it interesting that you had a discussion with David Cush last week, and he expressed an interest in obtaining feed from the majors – AA/DL/UA, while the majors appear to be doing everything they can to NOT cooperate with each other – if it is in the interests of the customer. Did VX anticipate this, or see it coming? I suspect so. I’d like to see their crystal ball!
Between the termination of this interline agreement and other steps that airlines are collectively taking, such as ending ground handling services for each other, it’s clear that the ordinary customer will suffer from (further) deteriorating “service”.
Perhaps if passengers make enough noise DOT will be prompted to “intervene”? (As mentioned above)
While I would hate to see that, the majors are doing all they can to encourage such action, in my view.
In the good old days for IROPS “Rule 240” would apply (“Rule 240” on a paper ticket and any carrier would take the ticket and try to help out).
WN may not have formal interline agreements, but there are most likely station agreements in some locations.
I feel like this is kinda late to the game but this comes from my experience as an agent. American is one of the worst carriers I deal with. We’ve had so many issues with them over the years. Yes, there are agreements where if we want to take seats from other airlines that we call and verify but we’ve had plenty of times when American fails to do that. Then, if we reroute passengers onto American, we’ve had situations where they’ve denied passengers because the bags have not been given to them yet which was allowed in the agreement. They’ve even denied passengers to put on their own non-revs before. I have a lot of friends in other cities that have told me similar horror stories in dealing with American.
I think Delta’s issues with American go deeper than just money.
December 2013, I flew AA out of ATL to MIA on a connecting flight from ICN on KE. Their were about 6 passengers that came to the gate sent via DL that AA would not board due to the “money for the fare has not been transferred to AA from DL.” These passengers had the DL vouchers in hand, but were sent back to get “checks” from DL. I don’t think they made our flight because we were at T-30 at that time. So in my mind the issue has gone back a while in time. Surprisingly, DL had at least 3 more flights to MIA that day as well as 2 more to FLL, so they must have been full to redirect these passengers to AA.
DL’s computer system is designed not to play well with others. It will build a res, but not attach the etkt. Or it will make 3 different reservations. One time, it will work just fine, but the next pax will be all screwed up. Don’t be so quick to judge AA to be in the wrong.
My source? I’m on the front lines and I’ve seen how great DLs system moved tickets I pushed to another carrier. Hint: It’s not done well.
I blame American. American has turned anti passenger and spiteful in their treatment of customers, so it makes sense that American charges delta more when the program uses aa planes vs delta planes.
Unfortunately, airlines (or the people making decisions for them) don’t look at the bigger picture. Due to confidentiality agreement, I can’t mention the airlines’ names , but two fierce competitors in my region will not come to any kind of re-accommodation agreement due to a sordid history of tit-for-tat politics and bruised executive egos. They simply won’t engage with each other on any level and this has only caused them, and to some extent their customers, pain. WHY? Because they still often protect passengers on each other during disruptions, but their process to re-accommodate have cost them money to develop and require manual settlement/accounting…to no perceivable end.
So, in short, they use each other frequently (out of necessity), but they refuse to make it easier for themselves. Total silliness!
Bet DL wishes it had that agreement back now. I sure do, then I might not have gotten stranded tonight.
And that is the topic of Monday’s post…