Hello everyone, today we will briefly talk about the transportation agreement between airlines. As you may have heard before, both agreements are transport agreements (both cargo and people) between two (or more) airlines. But maybe I haven’t had the opportunity to get to know it in depth. So today we will talk about the two most common protocols: SPA and Code Share.
Both types of agreements are transportation agreements involving more than one airline. This cross-airline agreement is collectively referred to as: Interline Agreement. Both are collaborations between airlines. Let us briefly analyze the difference between the two.
SPA
I believe that everyone has been to the spa, right? After the spa, the skin is supple and supple. However, my friends, in air transportation, SPA does not represent a spa, but a Special Pro-rate Agreement.
The meaning of this kind of transportation agreement is that Airline A has no capacity or insufficient capacity on a certain route. Then apply for a transportation agreement initiated by Airline B, which owns the same route locally. The main purpose is to supplement the capacity of Airline A. Then Airline A needs to pay Airline B the agreed price after using the route of the SPA agreement.
In practice, the SPA process can be very slow, of course, if the efficiency of both parties is high, it can also be very fast. However, this agreement involves the interests of both airlines and the allocation of positions. It needs to be reviewed and approved at various levels, and there are still various local processes to go through. So you should apply in advance.
This agreement is also very common with offline airlines. Offline means that there is no local aircraft to fly, and a certain voyage is transported by the aircraft of the other airline in the agreement. Just take a chestnut (not a real case): For example, AA has no plane in Guangzhou, but wants CAN-LAX goods. Then AA can sign a CAN-TPE SPA agreement with BR (or CI) in Guangzhou. Then, after arriving in Taipei, you can connect the AA flight from TPE to LAX. Then, on the CAN-TPE voyage, AA used the SPA with BR for interline transportation.
This kind of transportation agreement must be recognized by both airlines in advance and a formal SPA agreement can be signed. Generally speaking, the agreement will stipulate specific matters such as specific routes, flight frequencies, aircraft types, standard charges, settlement cycle, settlement methods, etc. And a very important point is that the positions of the SPA protocol are all standby, which is what we often call “standby positions”. This should also be well understood. People have limited positions, why should they give you a little bit? If I don’t even have enough of my own position, how can I split the position with you? Therefore, the position of SPA must be standby.
If it is the situation mentioned above, if Airline A wants to use the position of Airline B due to insufficient capacity, Airline B will generally not consider it. Because Airline A has its own planes, but the capacity is insufficient.
Therefore, the SPA agreement must be signed as an airline. It means that the head office should sign, not the local branch. Airline visa, not GSA visa.
In the case of the SPA agreement, Airline A can use its own waybill number, but only the flight number of Airline B. This is an important difference between SPA and code share. It is also for this reason that airlines using SPA need to record at the local customs, and the customs can pass the formal implementation.
When it comes to customs filing, it is very interesting. Not many customs districts in China can agree with the SPA agreement. In fact, this kind of transportation usually needs to be transferred through customs, but this tedious step is avoided by using SPA. I have personally handled the filing of the SPA agreement with a certain airline in Guangzhou. At that time, we wanted to use the aircraft of a Korean airline to transport the goods from ICN to CAN, and then use our own flight to ship abroad. In fact, there are 3 countries involved – Korea, China, the final destination country. In fact, this method is very similar to Hong Kong’s entrepot trade, which involves trade between more than two countries and regions. Some customs areas in China may not have dealt with similar situations, so the attitude towards SPA is more cautious. Therefore, even if the SPA between the two airlines is settled, it can only be implemented through local customs filing.
The usual SPA agreement is that only general goods can be shipped, and special goods, including all DG, mail, PER, VAL, HUM, etc., are not allowed. But if the agreement has additional stipulations, that’s another matter.
Code Share
Code share means code sharing. You may be a little familiar with this term. Because we may have encountered it when we were on a plane. For example, I tried to fly from Guangzhou to Shanghai. I booked the FM flight, but the actual flight was CZ. That’s when I knew, I booked a codeshare flight.
Code-sharing chestnuts are not uncommon. For example, when I first entered the industry, I came into contact with the code-sharing flights of Air China and Lufthansa. At that time, Lufthansa had an all-cargo aircraft flying CAN-FRA in Guangzhou, and the flight number was LH8399. At that time, Air China used Lufthansa aircraft to transport CAN-FRA cargo. CA’s flight is the famous CA3208. At that time, Air China could use the 999 waybill to receive the goods from Guangzhou-Flange, and at the same time, it also had its own flight number: CA3208 (the friends at the No. 1 cargo terminal raise a claw). But the actual flying is the LH aircraft. This is the biggest difference between SPA and Code Share: the ability to use your own flight number.
Of course, there are other differences between Code Share and SPA, that is, many Code Share flights are equivalent to signing rigid contracts. For example, assuming that LH shares 4 MDs with CA for each flight, then LH will charge the fees for these four MDs regardless of whether CA uses these four MDs. From another angle, that is, these positions are not standby.
Of course, Code Share also needs to be filed at the customs. But I have never performed such a grand ceremony. So I can’t give you the details.
Summarize
Whether it is SPA or Code Share, it is an approach to increase your capacity and network, and there is no such thing as good or bad. Both parties to the agreement are based on their own commercial interests, hoping to maximize the benefits. There is no such thing as anyone taking advantage of whom. If Airline B’s position is very full, then it is impossible for him to sign a SPA agreement with Airline A, or it is just a formality and cannot be implemented in practice. If Airline B is dissatisfied with the position, he might as well try the SPA and let others help him fill the position, the data is good, and there is also revenue.
For freight forwarding practitioners, it is not necessary to pay too much attention to this agreement. The only thing that needs to be considered is that under the SPA agreement, it is necessary to comprehensively consider the historical cargo rate of Airline B to analyze the probability of standby.
Alright, that’s it for this issue. See you next time.