Mumbai: The biggest operational alliance in India’s aviation sector, between Jet Airways (India) Ltd and Kingfisher Airlines Ltd, has finally taken off.
Jet and Kingfisher, the country’s biggest private airlines by passengers carried, began cooperating at airport levels last month and are set to start code-sharing of flights, a top executive from Kingfisher and three officials from Jet said. The airlines are also working on their frequent flier programmes so passengers can use points gained on one in the other.
Code-sharing is a commercial agreement between airlines, under which they can mutually use their two-letter identification code to represent each other’s flights on computerized reservation systems. That way, the airlines get a larger network using fewer flights and potentially fly different legs of a journey by issuing a single ticket.
Code-sharing and network rationalization were two key objectives before Jet and Kingfisher when they proposed the alliance in October. The two airlines and other Indian carriers have been straining under intense competition, slowing demand and high fuel costs, and are likely to have posted a combined loss of $2 billion (Rs9,920 crore) for the previous financial year, according to industry estimates.
One Jet executive close to the development said the airline will withdraw some select flights to London as a prelude to the code-sharing agreement, while Kingfisher will slow its expansion in West Asia, Hong Kong, Singapore and other international destinations. “Instead of starting more flights, Kingfisher Airlines will code-share with Jet Airways for those destinations. The code-sharing was delayed due to internal issues and approval from regulatory authorities,” he said, asking not to be identified. The airlines are now in the process of getting regulatory approval for code-sharing, he added.
Vijay Mallya, chairman of Kingfisher Airlines, and Naresh Goyal, his counterpart at Jet, had in October jointly announced the alliance in Mumbai. Mallya had claimed the alliance would save at least Rs1,500 crore annually.
The alliance ran into trouble after Jet announced layoffs of up to 1,900 of its workers, leading to protests in Mumbai, where it is based, and forcing it to rescind the plan to trim its workforce. Most analysts had then said the cooperation plan was as good as buried.
Three months after the plan was announced, Mint reported on 14 January that the alliance had failed to take off, basing its reporting on delays in permissions sought from the civil aviation ministry and views of analysts. The airlines had declined comment then.
The alliance included so-called interline or special prorate agreements to leverage the joint network, combined purchase of fuel to reduce expenses, common ground handling, cross-selling of flight inventories using common global distribution, cross-utilization of crew on similar aircraft types, and sharing training and technical infrastructure.
“But the deal could not make much headway initially because of internal issues and technical issues involved. It took lot of time because Jet and Kingfisher are two big airlines,” the Kingfisher executive said. “We have already started sharing infrastructure at airports as an initial step. For instance, Kingfisher Airlines is using Jet Airways’ security scanners and Jet Airways’ airport staff is helping Kingfisher Airlines’ passengers.” He did not want to be identified as he is not authorized to speak to the media.
The executive said the two airlines are firming plans for code-sharing and mutual frequent flier programme benefits. “In a month’s time, we will be finalizing that. Apart from code-sharing, we are going to sign some more contracts in (the) next (few) months.” The two airlines are meeting this week to finalize associations in “critical areas”, he added.
Saroj K. Datta, executive director, Jet Airways, confirmed that code-sharing of flights with Kingfisher Airlines is under consideration, but didn’t give more details. “I cannot put a definite time frame for this. We will (start) code-sharing as and when we are ready. Of course, this will be subject to approvals.”
Aviation experts see the alliance as a temporary solution. An aviation-sector analyst with a global brokerage said though it made sense for the two firms to form an alliance, it would have a marginal impact. He too didn’t want to be named.
Sudhir Nair, head of Crisil Research, a part of Crisil Ltd, said the alliance may mitigate some costs for the two airlines but would not bring profits. “It makes sense to put up own infrastructure for airlines when the domestic aviation is growing at 30%. But when there is negative growth prevailing, it makes (a) lot of sense to cooperate and share infrastructure,” he said.