Airlines Use New Tech to Create Partnerships That Increase Direct Bookings

This sponsored content was created in collaboration with a Skift partner.

Travelers are increasingly creating their own flight itineraries. They are creatively combining flights from different carriers — or self-connecting — to get the best value possible and reach destinations with fewer connections. Approximately 70 million passengers worldwide self-connected in 2018, an increase of 27 percent compared to 2017, according to research from consultancy firm ICF Next. This is equivalent to about 10 percent of all transfer passengers worldwide.

“Airlines have long helped each other sell tickets, using pragmatic arrangements called interline agreements and strategic marketing deals called codeshares,” said Sean O’Neill, travel tech editor for Skift. In a codeshare agreement, which is basically a marketing agreement, one airline operates the flight and other airlines are allowed to sell seats on the same flight under a different flight number. This kind of partnership increases complexity in operations, especially when it comes to settling revenue and accounts after a trip is completed.

An interline agreement allows a customer to book an itinerary in which each leg of the journey is being operated by a different airline. This agreement allows easy bag transfers between these airlines; bags are booked to the final destination and passengers don’t have to re-check in their bags when changing flights. This kind of agreement typically needs an intermediary – like a global distribution system (GDS) or an online travel agency (OTA) – to ultimately put these itineraries together and sell them to passengers.

No matter how airlines decide to partner, ultimately they all want to book more passengers by providing connections on routes that aren’t operationally profitable for them yet. “But due to the complexity and expenses involved in setting up codeshares and traditional interline agreements, low-cost and small carriers aren’t able to do it,” said David Gunnarsson, CEO, Dohop. “Low-cost airlines, with already low margins, cannot afford to make their operations more complex. Interline agreements require a high number of bookings per year in order to be profitable, and can take years to set up.”

Technology simplifies cooperation between airlines

So how can airlines take advantage of the benefits of such partnerships without incurring the same level of operational complexity or cost? easyJet, a U.K. based low-cost airline, made it possible with its Worldwide by easyJet platform. The platform enables a passenger looking to fly for example from Rio de Janeiro in Brazil to Munich in Germany, to book their travel on the easyJet website, even though easyJet doesn’t offer direct flights to Brazil. In this connecting itinerary example the transatlantic part of the route is operated by Norwegian, one of easyJet’s partners and the European part is operated by easyJet.

“easyJet used virtual interlining to deliver this kind of connectivity. It enabled two low-cost carriers to combine and create a network without the cost and complexity of a full interline or codeshare agreement,” Gunnarsson said. “In many ways, this is the perfect product for smaller carriers because it allows them to leverage the networks of other carriers in a very simple and straightforward manner.”

Dohop connected easyJet’s and Norwegian’s reservations systems so that customers can complete a search and book through one website. Seat maps, ancillaries, and everything else the airlines offer are made available on partner websites.

“For the budget-conscious customer, even though they have to self-connect, this is the best value and the most seamless booking experience they can get,” Gunnarsson said. With Dohop’s technology, airlines are also able to offer the same level of personalization they offer on their own websites. “Everything an airline can do on their own website, they can do it on their partner’s website,” Gunnarsson added.

Unlike other forms of partnerships, payments are made in real-time in virtual interlining, so there’s no revenue settlement later. Each airline issues its own ticket and directly communicates with its customers. So as far as customers are concerned, they don’t have to be worried about not getting the same level of service because the connection was put together by a travel agent or an OTA.

In September 2018, when discussing their partnership with Singapore Airlines with Bloomberg television, easyJet CEO Johan Lundgren said that the business model is “risk-free,” delivering the benefits of seamless travel without easyJet having to join a global alliance. With this model, over 53 million easyJet customers are now able to connect to other airlines’ or to easyJet flights within the same booking.

But self-connecting typically comes with risks beyond passengers having to transfer their own bags at the connecting terminal. Since partner airlines are not providing a single itinerary, a missed connection can cause customers a substantial amount of hassle. Dohop, however, protects connecting itineraries so that, in the case of a passenger missing their connection due to a delay, Dohop will rebook the passenger to their final destination. “This helps reduce the risks for airlines even more,” Gunnarsson said.

Apart from providing travelers with more choice, flexibility, and value, “Dohop’s role as a pure technology provider is to increase direct bookings, market share, and profits for airlines,” said Gunnarsson. “Airlines can now have greater control over their distribution strategy and reduce costs associated with intermediaries without negatively impacting their ability to meet their customers’ needs and demands.”

This content was created collaboratively by Dohop and Skift’s branded content studio, SkiftX.