4AB: Levels of Integration

Coordination alliances

 the first levels of cooperation among partners, usually in terms of schedules, codesharing, pricing, and frequent flyer programmes. Ex. global network created by the three major alliances - star, skyteam, and oneworld - Lowest level of integration 

Integrated units - joint ventures 

occurs when two firms continue to carry out the business operations but form a separate entity.  Airlines can integrate part of the network or company unit.

 joint service

generally require either a revenue sharing agreement (based on some level of assumed costs attributed to the operating partner) or a cost-and-revenue sharing agreement

Joint venture

 an agreement between airlines to share revenues on a route (according to an agreed contract).

• is a temporary contract between participating companies that dissolves at a specific future date when the project is completed

Managerial level of integration - Merger of Shares 

• occurs when two firms continue to carry out business operations as one single firm rather two separate firms

Company integration - full merger/acquisition 

• Acquisition is the takeover of one company by the other. 

• KLM and Air France, reached the European market share  

Code-Share Agreement 

• Allows for a flight operated by one carrier also be marketed by another carrier with its own flight number 

• Flight is operated by one airline (administrating or operating carrier) while seats are sold for the flight by all cooperating airlines or marketing carrier using their own designator and flight number

Code

• refers to the identifier used in a flight schedule, generally the two-character IATA airline designator code and flight number. 

Interline agreement

• Simply a commercial agreement between airlines to handle passengers when they’re travelling on multiple airlines on the same itinerary