How do airlines pay/compensate each other for award tickets?

[aus_flyer]

It's a question I've always wondered, but I've never seen any discussion on the topic - anywhere!

The question... how do airlines pay/compensate each other for award tickets?

Does anyone know?

I'm sure everyone can speculate, but I'm wondering if anyone has ever heard the "inside" story?

 

[medhead]

I wouldn't think there is any inside story or need to speculate. At a guess it would be done via a financial industry standard process that is detailed in the alliance agreements.

alternative answer - with cash?

 

[Mal]

I don't think you'll find a proper answer - Commercial in Confidence type material I assume.

Perhaps there is a payment system based on maybe the number of miles flown and class or a fixed cost for each route / cabin.

But these are only guesses...

 

[aus_flyer]

I don't think you'll find a proper answer - Commercial in Confidence type material I assume.

I suppose I'm just surprised that with the number of industry insiders floating around the different forums that the answer has never been posted - anywhere!

 

[v8Statesman]

I suppose I'm just surprised that with the number of industry insiders floating around the different forums that the answer has never been posted - anywhere!

Would you post something in a public forum that may get you fired?

 

[medhead]

I don't think you'll find a proper answer - Commercial in Confidence type material I assume.

Oh come on.
Companies pay each other all the time in this sort of situation. Sure you're not going to get the exact formula used. But there must be a standard way for assigning a value to the service provided, auditing the service provision and then making adjustment payments on a fixed schedule. This would all be agreed and detailed in the alliance agreement and it isn't going to be anything special just because these are FF points.

In fact, QF already value the provision of award flights in their accounts. I'd be willing to bet that they use a similiar formula to value the provision of flights to other airlines.