It may come as no surprise that the long-awaited study by the US General Accounting Office has concluded that codesharing alliances can be lucrative. But what is surprising is the degree to which these partnerships profit, and the speed with which the agreements produce results.

The GAO study, commissioned by the Senate last year, is expected to define significantly the global codesharing debate, along with an earlier Gellman Research Associates' analysis.

The report's findings include revenue gains for alliance partners in 1994. Northwest Airlines gains $175 million from its alliance with KLM, while the Dutch carrier's revenues were enhanced by $125 million. British Airways garnered $100 million against a $20 million benefit for partner USAir. Smaller alliances have also benefited, as exemplified by American Airlines and South Africa Airways, whose linkup produced $2 million each in 1994.

In terms of traffic, the KLM-Northwest alliance last year added 350,000 passengers to the carriers' linked systems. Estimates for United Airlines-Lufthansa add an extra 210,000 passengers since the agreement went into effect last June. A year on, the alliance should add 1,000 daily bookings.

Though the study does not pinpoint the sources of the extra reveneue, it does give some validity to American's long-standing complaint that alliances profit by taking passengers from non-allied airlines. The report suggests that there is also increased traffic stimulation in the markets where alliances exist. GAO analysts stress that the revenue impact comes not only from codesharing ties in specific markets, but from the 'halo' effect of combining two large systems together.

It identifies antitrust immunity as a highly effective marketing tool and suggests it would be an effective bargaining chip in bilateral negotiations. The study suggests that the US Department of Transportation's aviation and international economics group needs to be strengthened in terms of personnel (it currently has a staff of four), as well as access to codesharing data, especially from non-US airlines. To that end, GAO suggests a requirement to enhance reporting of market data from codesharing alliances, or making reporting part of bilateral demands.

Also, the GAO concludes that the DOT should adopt the European Union's rules regarding the appearance of airline codes on computer reservation screens. That would mean listing no more than two codes - one for each carrier - for a single flight. American and TWA have complained that codeshare flights often have more than three listings, obscuring their single-coded direct flights from travel agents amid 'screen clutter'.

Source: Airline Business