Bob Crandall blasts codesharing in this morning’s New York Times (link via Julian Sanchez). He thinks the government ought to crack down. The piece contains numerous half-truths.
He identifies 1983 as the start of INTERNATIONAL codesharing. But the practice of codesharing dates back to the 1930s when Western Airlines flew from Los Angeles to Salt Lake City, and United flew from Salt Lake City to the East Coast. Neither could fly coast to coast on their own because the government granted all route authorities back then. But Western, for its financial survival, was given permission to coordinate with United and they operated each others planes and shared crews.
For 70 years codesharing has both been about the economics of leveraging large capital investments (planes) and about navigating regulatory waters. It still is! As Crandall observes, KLM wanted to offer lots of US destinations, and their partnership with Northwest allows them to. Crandall thinks this is disingenuous — but of course KLM can’t offer domestic US flights on its own because the US government will not permit it. So what is KLM to do?
Plus, codesharing benefits consumers because you have more than one airline offering pricing on the same route. Prices are often different. You actually get competition not just through different planes but through different sellers of seats on the same plane!
Another half-truth is the Pan Am example. Pan Am flew international routes because of its political muscle. They were content to allow other airlines to fly domestically and deliver customers to Pan Am for international flights. Permission from the US government for more airlines to fly internationally meant that Pan Am was dead without a domestic route network. So they tried codesharing, and they tried acquiring National Airlines but that merger failed.
What Crandall doesn’t mention is that his former airline, American, is getting a bit left out in the cold as other carriers are leveraging international codeshares. Part of this is American’s fault, and part of this is the government’s. But his argument is rather convenient because it cuts against American’s competitors more than against AMR.
American codeshares with British, but they aren’t permitted to codeshare across the Atlantic because of competition concerns about flights to Heathrow. BA would have to give up slots at LHR before the AA/BA combination can move forward. Meanwhile, United and Lufthansa have even entered into revenue sharing for their transatlantic flights, and the KLM-Northwest-Continental combo looks to get stronger with the Delta-NW-Continental combo, that may even bring Air France into the mix.
Although KLM is insisting on Air France privatization before this all happens. So codesharing may lead to less government!
But Crandall is clearly arguing from the self-interest of the company he ran for 13 years.
