AA-Delta Interlining Impact: Small But Not Insignificant

By | September 17, 2015

American and Delta failed to renew their agreement on interlining, a longtime practice enabling a single ticket for flights on multiple, unaligned airlines and associated baggage transfers. It also allows a carrier to reaccommodate a competitor’s disrupted passengers. Corporate travel repercussions from the AA-Delta interline gap will be limited, but in some cases may cause inconvenience and added cost.

When travelers book a negotiated rate (or any other private fare), it’s probably not an interlined ticket in the first place. Most corporate contracts disallow that because the other airline would know the private price paid to the contracted carrier. Still, there’s plenty of business travel that doesn’t use negotiated fares. Even those organizations with discounts often use published prices. According to auditing firm Topaz International, its clients in 2014 used negotiated discounts on 57 percent to 74 percent of domestic segments, depending on air volume. For international, the range was 28 percent to 57 percent.

Image: Reuters/Francois Lenoir

Image: Reuters/Francois Lenoir

In cases where there is no negotiated fare, travelers usually can combine segments on multiple non-partner carriers into a single ticket. It could be a complex international journey not served by one carrier and its partners, or maybe a simple trip out on one airline but back on another. In corporate travel, these examples are uncommon but do happen.

“If you think about what causes someone to book two carriers on one ticket, it’s to get somewhere. They do it because they have to,” said Egencia vice president of supplier relations Chris Vukelich. “These airlines canceling their agreement will have an impact on people’s ability to get to especially smaller places. The traveler will have to pick up their bag and re-check it. For some, it will eliminate the ability to even do the trip. It’s a huge inconvenience for a not insignificant number of people.”

When there’s no interline agreement, two separate tickets are required. “That’s two transaction fees,” Vukelich pointed out. “If they change the trip, that’s two change fees.”

In cases of irregular operations, airlines always try to reaccommodate on their own flights but that’s not always possible. And that’s when travelers may really need interlining. Now, if it came to it, displaced Delta passengers can’t get to where they’re going on American — and vice versa — unless they buy another ticket.

Delta argues that with its superior operational performance of late, it reaccommodates way more AA passengers than the reverse, and couldn’t extract what it felt were appropriate terms. According to PlaneBusiness Banter, “For years, the agreement between the big major airlines has been more or less a routine slam dunk of sorts. The agreement comes up for renewal, the parties involved sign, and life goes on the way it had previously. But not this year. This year, Delta apparently decided to ask for more money from the other two major carriers if they wanted to continue to interline. Apparently, United ponied up. American did not.”

There are other reasons why the common practice is not ubiquitous: competition and technology.

Because such arrangements are voluntary, an airline can pick and choose with whom it will interline. Virgin America has agreements with 35 international carriers to feed traffic back and forth at their U.S. gateways. It wants to interline with U.S. carriers, too, but has been rebuffed.

“We have requested from all major domestic carriers to sign an interline agreement for two reasons: one, to enable smoother recovery from irregular operations; and two, to enable the business travelers with complex itineraries to include Virgin America,” said senior vice president of planning and sales John Macleod during a Chicago Business Travel Association event Tuesday. “We have been turned down by every single airline in the United States because they are not interested for fear that we would get a leg that they maybe are entitled to. It’s a competitive issue for us.”

United Airlines vice president of sales in the Americas John Slater appeared on the same panel. “We don’t interline with every air carrier around the world,” Slater responded. “There are commercial considerations that are taken into account. There’s always a balance of trade. What carriers charge each other to carry each other’s passengers is a major consideration.”

During a separate interview, Advito vice president Bob Brindley said, “The mainline carriers don’t want to be seen as providing a benefit to one of their competitors. Interlining is a holdover of the regulated environment where it was necessary to have an integrated air system. And now it’s definitely less necessary” and no longer as common.

Instead, the big airlines favor their alliance partners. Delta in 2013 ended deals with Turkish Airlines, Qatar Airways, Kuwait Airways and Aerosvit Airlines “to focus on maximizing the benefits of its global network and airline partnerships.” Here is Delta’s current list of interline partners.

American a few years ago cancelled its interline deal with Emirates. It shares codes and interlines with Etihad Airways and Oneworld partner Qatar, Emirates’ chief rivals. AA and JetBlue began interlining in 2010 and stopped four years later. AA still has more than 100 interline agreements, including nine in North America.

Emirates has interline arrangements with plenty of other airlines, including Delta and United. “Interlining is key for us,” said Matthias Schmid, the carrier’s vice president of sales in the United States, where the airline has 10 gateways. Without it, there is “more pressure on our local sales force because we have to fill capacity with locally sourced passengers. We are interested in interlining with partners in the United States but in markets where it makes sense.”

Southwest doesn’t cooperate with anyone, partly due to technological limitations.

“The reservations platform that Southwest Airlines sits on at the moment doesn’t allow for it easily,” said managing director of customer strategy and development Ryan Green. “There are challenges in not having airline partners when things go awry. We deal with that today. If we need to buy a ticket on someone else, we’ll just walk over to that counter and buy a ticket.”

Green said the upcoming migration to the Amadeus reservations platform would make interlining easier, should Southwest decide pursue the idea.

Additional info: The Chicago Business Travel Association covered travel expenses as part of The Company Dime’s participation in its event.

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