Originally Posted by
double_d
Hi there, does anyone have any info on the franchise agreement between RE and EI in terms of how the commercial terms of the relationship works? I'm aware that RE perform the operational elements of the flights, but how does each party benefit and who controls the route selection and yield management- do EI retain a percentage of the revenue received from sales of each seat before passing the remainder to RE, or do EI effectively charter the ATR's off RE, paying them a set fee regardless of pax or yield?
From
Irish Times article today:
Aer Arann and Aer Lingus moved to reassure passengers yesterday that it was business as usual for the regional service during the examinership process.
Aer Lingus is not thought to be owed any money by Aer Arann. Under the terms of the franchise deal, the bookings are made through Aer Lingus’s website.
Aer Lingus takes a franchise fee from each passenger fare and pays the balance to Aer Arann when the aircraft has flown the route.
Fairly standard franchise arrangement. You buy a ticket for €100, Aer Lingus takes a franchise fee (no idea what % this is - I would guess 5% +/- 2% but could be entirely wrong) and remits the remaining €93-97 to Aer Arann
after the flight has taken place. Holding back the cash until after the flight is similar to what a credit card provider would do as well.
This also means that Aer Arann take the risk of not filling the aircraft, not Aer Lingus.