Jet-Kingfisher pact won’t be in full swing for at least 5 months

Jet-Kingfisher pact won’t be in full swing for at least 5 months
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First Published: Thu, Nov 20 2008. 01 00 AM IST
Mumbai: The much talked about operating alliance between Jet Airways (India) Ltd and Kingfisher Airlines Ltd will have to wait at least five more months to become a full-fledged one. This is mainly because both carriers will have to respect the ongoing contracts with various suppliers, including fuel, food and ground handling services.
“This was a hurriedly concluded alliance agreement. Both Kingfisher and Jet are not quite sure about the areas and nature of the cooperation. There is no question about crew-sharing as both of them have very few common type of aircraft,” said a retired senior executive of the National Aviation Co. of India Ltd, who is currently working as a consultant to some aviation projects. He asked not to be named.
“Of course, there could be some savings by joining hands. But there will be very marginal benefits for Jet and Kingfisher in terms of joint fuel purchase since they are buying from state-owned oil marketing companies. One will have to wait for the details of the alliance structure,” he added.
Executives of Jet Airways and Kingfisher Airlines met last week to prepare the blueprint for this operating alliance agreement, that was signed on 13 October. “Three senior executives of each carrier met last week and more members are slated to meet by mid-December,” said a senior Jet Airways executive on condition of anonymity. “Sharing of ground handling services such as sharing common buses that are used on the tarmac would be the first among few things to start with. Later on, Jet and Kingfisher will start approaching oil marketing companies for joint purchase of jet fuel.”
A senior Kingfisher Airlines executive, who did not want to be named, confirmed the development, but did not disclose the details of the high-level joint committee that is working on this alliance.
“There are several contracts for both Jet Airways and Kingfisher that are up and running. We need to talk to these parties to renegotiate jointly or terminate. And this is a time-consuming process. I would say this operating alliance will start from the next financial year,” he said.
A senior executive from Indian Oil Corp. Ltd, who did not want to be named, said Jet and Kingfisher have hinted joint purchase of jet fuel, though they have not formally approached the company.
After ground handling and fuel purchase initiatives, he said, the alliance will look at route rationalization, implementing frequent flyer programmes and joint catering.
“The airlines have taken a cooperative route towards profitability though this innovative alliance in order to optimise the use of each other’s resources aimed at cost reduction and increased asset utilization without any equity sharing. These extraordinary measures have been necessitated by the current economic environment and stressed financial position of the airlines,” wrote Ajay D’Souza, head, Crisil Research, in a report dated 14 October.
“Execution of the alliance on the ground, however, could prove to be the key challenge as both airlines would seek to maximize profits and returns for their respective shareholders. Most of the other alliances globally which do not involve common equity ownership are between carriers who operate in different geographies offering services on complementary routes. This is not the case with this alliance where both carriers are operating in the Indian markets,” the report said.
Both Jet and Kingfisher executives didn’t disclose the savings arising out of cooperation in various sectors, but Vijay Mallya, chairman of Kingfisher Airlines, had said in mid-October that this alliance will help save Rs1,500 crore.
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First Published: Thu, Nov 20 2008. 01 00 AM IST