By Doug Cameron and Susan Carey Stock Market Quotes, Business News, Financial News from http://commodity-market-news.com
Delta Air Lines Inc.’s ability to get thousands of its stranded customers to their destinations following its computer system failure Monday is being hampered by reduced cooperation among some carriers.
The problems continued Tuesday as hundreds more Delta flights were canceled.
For years, airlines routinely and easily placed passengers on competitors’ flights if they canceled their own in the event of a mechanical problem or poor weather, typically at a discount to the on-the-day ticket price. Under these pacts, stranded passengers normally wouldn’t have to pay to fly on the other airline.
The industry practice known as interlining had allowed carriers to send passengers and bags through each other’s networks. But it has become less prevalent as new types of alliances limited links between big airlines and non-members, especially low-cost carriers.
Big airlines had maintained interlining outside their broader alliances to give them a safety net in case of operational problems, but last year Atlanta-based Delta dropped its pact with American Airlines Group Inc. following disagreement over how much they would pay to send stranded passengers on each other’s flights.
That has left Delta passengers with fewer options — including on American, the world’s largest airline — at a time when high industry load factors leave an average of fewer than 20% of seats unfilled.
“In the old days, a lot was done by [staff] at the airports who knew each other and helped each other out,” said George Hamlin, an industry consultant.
After a power outage grounded hundreds of Delta planes Monday morning, passengers trying to fly on American and some other low-fare carriers would have had to pay the walk-up fare, typically the most expensive on a flight.
Delta still has domestic interline deals with United Continental Holdings Inc. and others such as Alaska Air Group Inc., but the lack of alternatives for passengers is particularly acute at airports such as Atlanta or New York’s La Guardia where American and Southwest Airlines Co. are big players alongside Delta.
United and Delta last year agreed to pay higher fares for their stranded passengers as part of a new interline pact, according to a person familiar with the situation. The two continue to place dislocated travelers on each other’s flights.
Delta and American declined to comment on whether they would try to revive their interline deal.
Delta shares fell 0.8% to $37.16 in afternoon trading Tuesday.
Interline fares are typically renegotiated each year through the nonprofit Airlines Clearing House, but Delta said it couldn’t reach a pact with American because it stood to gain less from the arrangement.
It said the Fort Worth, Texas-based carrier was suffering more delays and sending it far more passengers than it funneled to American. Meanwhile, Delta had built up the best operational record among the major network airlines over the past few years, reporting fewer cancellations than rivals.
Broader alliances such as Delta’s membership of the SkyTeam pact alongside Air France-KLM and others, or American’s Oneworld agreement with International Consolidated Airlines Group SA’s British Airways have also changed how carriers cooperate with one another.
The big alliances include interlining alongside other benefits such as revenue sharing, and airline executives said the large route networks they create make carriers in the group less motivated to cooperate with non-members.
Most low-cost airlines such as Southwest and Spirit Airlines Inc. don’t have interline deals with the big three carriers.
In some cases, bigger airlines’ computer systems don’t mesh with Southwest’s. The airline said it plans to replace its 30-year-old reservations system in 2017, which will allow for interlining.
The much lower fares often offered by the low-cost carriers can also make such deals uneconomic for both sides. Bigger airlines would rather hold a seat open in the hope of securing a walk-on fare, while low-cost carriers are unwilling to pay the premium to transfer passengers to larger rivals.
JetBlue Airways Corp. said it only has one domestic interline partner that it uses to assist with rebooking its customers. It declined to say which one.
It has about 40 interline agreements with foreign airlines, but those relationships are intended to boost JetBlue’s domestic traffic with passengers from its foreign partners, and vice versa.
Write to Doug Cameron at doug.cameron[a]wsj.com and Susan Carey at susan.carey[a]wsj.com
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