Creating Profit Through Alliances - business models for collaboration E-book | Page 83

Alternatively, depending on the region, type of
pipeline and specific requirements, the capacity could
be offered to others, or not.
Luc Meesters: “In case of a shared investment in an
oil pipeline, the risk of having too little demand is
slight. Refineries are built for periods of more than 30

Reciprocal hiring agreement

years, and up to the present the demand for fuel has
only continued to grow. In other industries, however,
this may be different. The obligation to purchase a
minimum capacity or paying a penalty if not meeting
the nominated volumes, could then be a solution to
keep the costs for each partner below a specified
level.”

The costs for the coordination of the planning
processes is generally borne by the party that incurs
the costs.
A good example is offered by code sharing in the
airline industry. This is an agreement by which two or
more airlines include the same flight in their
schedule. A seat can be purchased from one airline,
though the route is actually operated by a partner
airline under a different flight number or code. This
offers greater access to cities through a given airline's
network without having to operate extra flights, and
makes connections simpler by allowing single
bookings across multiple airlines.

A reciprocal hiring agreement will mainly entail
agreeing to tariffs for the deployment of personnel.
These tariffs can vary from a cost-plus tariff (specific
salary and equipment costs, plus a bit of overhead) to
regular market-level tariffs.

In most cases, the booking systems of the
participating airlines are linked to ensure the
availability of seats and to provide the right price
information from the operating carrier to the
marketing or selling carrier. There can be various
mechanisms to determine the price for the seat that
has to be paid to the operating carrier. At one end
this can be part of the price for the total journey,
equivalent to the number of miles travelled with
each airline, or it can be a fixed amount. In most
cases the conditions are reciprocal. IATA, the
International Air Transport Association, has a clearing
house to execute the billing and financial settlement
of all these inter-airline sales transactions.

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