Time to work together again?

posted on 15th June 2021
Time to work together again?

As Covid-19 vaccinations roll out across the world, so airlines are keen to get back into the skies and start operating as many services as possible. Air Black Box chief commercial officer Patrick Edmond argues now is the best time for airlines to rethink their attitudes to interlining as new technology makes the practice easier

As the aviation industry emerges from Covid-19, airlines are looking at all possibilities to regain their traffic, rebuild their networks, and recover from the nightmare that the last couple of years has represented.

It has been bad enough for airlines to miss out on one summer of activity, as summer is when most airlines make their profits for the entire year. Now, many airlines face their second summer of either no, or very restricted, revenue across many parts of the world.

While it is unclear when those revenue restrictions will lift, it is obvious that the post-Covid-19 aviation world will look very different from the old one.

Many airlines have already received bailouts, some running into billions of dollars, from their respective governments while other airlines have shut down. And there will be further casualties well into 2022.

The airlines that remain face a different network landscape. Network carriers, who have had to retrench their networks to weather the crisis, are now finding that their alliance partners have also cut back their networks and can no longer provide the same kind of connecting feed they could previously enjoy.

On the other hand, LCCs, which are typically more resilient in an economic downturn, see opportunities to further expand their market share. As a result, legacy airlines are looking for new cooperation opportunities and LCCs must realise how they can provide feed traffic to those legacy carriers.

The fundamental problem is that legacy interlining is not fit for purpose. Yes, it works for network carriers, but network carriers represent a diminishing share of global air passengers.

Moreover, legacy interlining relies on complex and resource-intensive processes that were defined perhaps 50 years ago in an era of regulated fares and state-owned flag carriers protected from competition.

LCCs, on the other hand, do not have interline departments. They do not prorate connecting tickets. They do not use the IATA Clearing House to settle interline payments.

In short, they are not set up for old-style interlining. But there is a new emerging option in terms of interlining, which we could call third-generation interlining.

Out with the old
The old legacy approach was the first generation. Early self-connecting itinerary providers represent the second generation.

Now, third-generation interlining combines the benefits of legacy interlining with the reach of LCCs and legacy carriers, and even multimodal travel providers including train operators, bus operators or ferry companies.

Third-generation interline solution providers like Air Black Box connect these different providers and allow them to offer a new global network.

With third-generation interlining, LCCs can partner with network airlines. They can offer seamless itineraries booked in a single transaction, sell (and collect commission for) ancillaries on the other airline and enable travellers to check their bags through to their final destination – a long-standing pain point for self-connecting passengers.

And the best thing of all? There is no extra complexity for the LCC. The solution provider installs all of the plumbing to join the individual passenger name records (PNRs). The solution provider takes care of the payment and settlement. And the solution provider handles the disruption recovery in case of irregular operations (IROPS) or schedule changes.

What about full-service carriers? Third-generation interlining opens up a whole new world of partnership opportunities for them.
As I like to say to network airlines: “Imagine you could interline with anyone. Well, now you can.” Network carriers who want to offer a high standard of customer service with through-checked bags and aligned ancillaries can now do so. Suddenly, they have a new option for rebuilding their networks, and indeed for building new networks.

This approach can work anywhere globally, although there are some regions where we see particular opportunities. For example, in Europe and Asia, LCCs have taken a very high market share and provide potentially interesting feed opportunities for long-haul airlines serving those regions.

Of course, this is not just about LCCs connecting to network carriers; third-generation interlining also enables them to connect with other LCCs. For ultra-low-cost carriers (or ULCCs) who do not even offer connecting flights on their own networks, third-generation interlining gives them a straightforward way to do so.

Stripping out tech complexities
Which airlines stand to gain the most from adopting third-generation interlining? As real estate agents are fond of saying, it is ‘location, location, location.’

In this context, that means carriers with solid networks in a particular region or which provide feed at major hub airports.

So what does that mean for alliances? Even before the pandemic, we witnessed a reevaluation of partnerships and alliance membership. More and more airlines were forming partnerships outside their alliances.

Indeed, it may well be that we have already passed peak alliance and now alliances will progressively become less important as airlines adopt new ways of working together.

If third-generation interlining offers network carriers and LCCs a new way to work together, what are the challenges?

First, the two types of airlines have different DNA and work in very different ways. One of the core strengths of the latest third-generation interlining solutions is the ability to join these two worlds together with a minimum of complexity, allowing each airline to continue using its normal processes.

For example, an LCC does not have to join the IATA Clearing House or set up an interline revenue accounting function. And a network carrier does not have to change its processes to deal with ticketless airlines – the interlining solution takes care of that.

A big challenge, of course, comes in the shape of disruption recovery. One of the core principles of LCCs is process simplicity; most do not offer connecting flights because connecting flights bring the complexities of delays, missed connections and re-accommodation costs.

But, again, this is one of the significant advantages of third-generation interlining – the interlining provider takes care of all that complexity, facilitating the airlines to focus on their core business.

Uninterrupted baggage journeys
In the past, checked baggage was a major issue for self-connecting passengers. Passengers had to collect it off the carousel in the transit airport, check it in again for the next flight, and go back through security.

In the case of international passengers, that meant going through customs and immigration too – stressful at the best of times, and even more so when they are trying to make a connecting flight with no protection if they miss it.

Solutions including Air Black Box’s uninterrupted baggage transfer service ThruBag make this a thing of the past. Self-connecting passengers can check their bags to their final destination airport and spend their time in the transit airport relaxing, shopping and using the airport facilities.

In addition, LCCs can sell the ThruBag service as a lucrative ancillary, while full-service carriers can bundle it in with the ticket and offer the same level of convenience as a network airline connection.

We know the post-Covid-19 world will be very different. Airlines already faced no shortage of challenges, and now they are facing an even more challenging environment.

But it is not all bad, as technology is opening the way for new airline partnerships, bringing more choice and convenience for passengers and a new way to grow networks, partnerships, and revenue for airlines.

So amid all the clouds, that is a silver lining worth celebrating.