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Experts dissect pros, cons of interlines and codeshares for aviation industry

EXPERTS are pushing for the Nigerian Civil Aviation Authority ( NCAA) to make readiness to interline a prerequisite for the renewal of Air Operators Certificates ( AOCs) saying this will induce airlines into embracing agreements that would provide profitability and passenger comfort.

This is however as players state that for interline to work it needs not be by fiat and a lot of legal framework needs to be in place coupled with the commitment of all partners as well as similar business culture unless it would be just talk.

Giving his opening remark at the Aviation Safety Round Table Initiative Breakfast Meeting tagged: Utilizing interline and codeshare agreements as tools for domestic airlines profitability and passenger comfort President of ART, Dr. Gabriel Olowo in his opening remarks said:

“Domestic airlines are numbering 21 right now and they are growing, but they are subjecting passengers to untold hardships. Most of them will not tell you the reasons why they are delaying, technical reasons and sometimes when they tell you technical reasons for so long they stop talking to you when it becomes an embarrassment, these are the airlines.

“Poor on time performance is a pointer of two things, one: inadequate fleet, two: depleting fleet thus affecting turnaround time posing safety and consumer protection questions. its either the aircraft is not enough or the few that they have are dropping. So turn around becomes impossible. In the circumstance therefore, pooling through interlining, codeshare agreements would have provided the needed remedy, which is world known best standard. Interlining makes it mandatory to be in the clearing house and this directly or indirectly measures the economic health of the airline.

Chief Operating officer of Ibom Air, George Uriesi who spoke on interline and codeshare agreements: A Nigerian airline perspective stressed that interlines are wonderful tools to boost airline profitability especially as the domestic business environment is highly conpetitive.

Ureisi stressed that airline seats are highly perishable products and so airlines must do what they can to optimise the uptake of capacity stressing that interlines enable airlines see exactly how many more seats they fill as a result of interlines and how much it impacts on the business.

He however stated that one major challenge of interline in the domestic market is finding an equally committed partner with a similar business culture in terms of Organisation, operational capacity as well as discipline to get the perfect agreement arrangement.

He said,”our airline has 700 to 710 flights per month depending on how many days we have in that month. So let’s say 700 and then if I have one passenger at the price of say N30,000 let just say. One extra passenger on those flights that amounts for about N21million of additional revenue, if I have five passenger as a result of the same agreement that’s N105 million additional revenue I wouldn’t have gotten if I don’t have a codeshare. Think about it practically of those basis.

“You can’t have 100% load factor on every flight, you’re going to have seats and if you can just fill only one that right there is N21million at N30,000 for an airline like ours and many others.

” The issue in our market is that it’s a lot to setup a codeshare agreement. Having cone out fresh from an intensive period of negotiation coming from last year till now, we haven’t even started we are at the last phase of aligning our system…

“The challenge when you have to think about how do I optimise the uptake of my product, I should cooperate with someone but the biggest challenge in our market is finding a partner with a similar business culture as yours. Why? Because workforce have to mix in other for a codeshare or interline to work. You look at the routing some you both would do and some he has to do while some you have to do all kinds of schedule coordination…”

Dr. Samson Fatokun, the International Air a Transport Association ( IATA) Regional head who spoke described interline as a commercial agreement between airlines to handle passengers traveling on multiple airlines on same itinerary

He canvassed that interline in Nigeria was the way to go but stressed that interline or partnership should be done from a position of strength not weakness but stressed that many carriers in Nigeria and West Africa were not aligned with because of their weaknesses.

He however cautioned that interlines and other such agreements should not be imposed as things like interline do not require government approval but may need some coaxing through regulatory inducements to make it acceptable.

“You don’t need to be everywhere to make money, you can make money without flying to some routes and that is what our airlines need to start understanding. Why are other airlines not coming to Nigeria because some of the things needed are not there and then have to make themselves marketable. A foreign airline cannot go everywhere in Africa because of the bi-lateral restrictions but they want their passengers to continue to their final destinations but except we have an attractive network not many of our carriers.

Dr. Alex Nwuba who also spoke said there were some limitations to interline and codeshare especially for Nigerian airlines to be part of the IATA clearing house and with the various charges including IATA clearing houses charge, security charges

“For global network and that’s the point, the benefit justifies the setup but for low cost and many domestic carriers cost appears to be an issue. Some of this cost include GDS distribution fees, IATA agency commissions and incentives to key partners to ensure market share. Cost to GSA s for representing the partner airline. Recurring charges applied to interline tickets. Unilateral and Bilateral interlines are considered two budgets so each needs to be accounted for individually…”

He said the are quite a lot of costs associated to the platforms but if the airlines can look for a domestic option, it would be welcome.

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