Jet-Kingfisher alliance fails to take off

Jet-Kingfisher alliance fails to take off
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First Published: Wed, Jan 14 2009. 12 41 AM IST

Growing apart? Kingfisher’s Vijay Mallya with Jet Airways’ Naresh Goyal after they announced an alliance on 13 October. The two airlines have since gone ahead with independent, and often conflicting,
Growing apart? Kingfisher’s Vijay Mallya with Jet Airways’ Naresh Goyal after they announced an alliance on 13 October. The two airlines have since gone ahead with independent, and often conflicting,
Updated: Wed, Jan 14 2009. 12 41 AM IST
New Delhi: Three months after rivals Jet Airways (India) Ltd and Kingfisher Airlines Ltd announced an ambitious operating alliance that would help both cut costs in the background of a slowing economy and slowing business, the airlines seem to be flying their separate ways, according to analysts and government officials.
Both airlines declined comment for this story.
The alliance would have covered at least 800 flights operated every day by the two airlines, but it is far from being executed on the ground or in the air, say analysts and officials at India’s aviation ministry.
Growing apart? Kingfisher’s Vijay Mallya with Jet Airways’ Naresh Goyal after they announced an alliance on 13 October. The two airlines have since gone ahead with independent, and often conflicting, plans. Abhijit Bhatlekar / Mint
On 13 October, Naresh Goyal, the chairman of Jet and Vijay Mallya, the chairman of Kingfisher, said they were coming together to form an alliance given the harsh economic environment and would cooperate under eight specific areas: code-sharing flights, interline agreements, joint fuel management to reduce fuel expenses, common ground-handling, cross-selling of flight inventories, network rationalization, cross-utilization of crew on similar aircraft types and reciprocity in frequent flier programmes to achieve profitability.
Code-sharing refers to a ticket marketing practice among airlines that allows carriers to share codes used in airline reservation systems. On the ground, this helps customers purchase a single ticket on a journey that has two flights such as a New Delhi-Amsterdam one and an Amsterdam-New York one on two different airlines.
The mid-October announcement had raised high expectations, with Goyal calling it a “completely new industrial model for aviation in India which would be based on an unprecedented depth of cooperation between the two companies”. Mallya had said the alliance would “benefit customers by delivering the most comprehensive integration in the industry”.
The alliance, which also meant neither airline needed as many people as it had on the rolls, ran into trouble in its first few days when a plan by Jet Airways to sack 1,900 staffers ran into trouble with high-decibel employee protests and intervention by politicians.
Last week, a senior ministry official said the administration has not been officially informed of any alliance or any efforts jointly planned by the two airlines. “Nothing at all, absolutely nothing,” said M. Madhavan Nambiar, secretary, ministry of civil aviation, when asked if the alliance had sought any permission from the government. “I don’t think they have done anything or they have communicated anything.”
Although it has not progressed on approvals for such arrangements with Kingfisher, Jet Airways has taken aviation regulator director general of civil aviation’s permission for code-sharing flights with its low-fare subsidiary JetLite Ltd. Such permissions were announced on 21 October.
The move, the airline said then, was “part of of its ongoing efforts to offer passengers synergistic benefits when they choose to fly (on the) Jet group”.
Even on international flights, Jet Airways and Kingfisher have gone ahead with independent and, often, conflicting plans.
Kingfisher, after a presentation made to the civil aviation ministry in early September, sought bilateral rights on several international routes which the airline planned to operate, according to a ministry official who asked not to be quoted, based on the premise that it would be able to break into those routes with a “superior” product.
By December, the airline moved ahead, removing an earlier freeze on its international expansion and announced launch of flights from January on routes including Mumbai-London, Mumbai-Hong Kong, Mumbai-Singapore, Bangalore-Colombo and Chennai-Colombo. Jet operates flights on four of these five sectors. For instance, it has two daily flights connecting Mumbai and London, daily flights between Mumbai and Hong Kong, and Mumbai and Singapore. JetLite flies at least 10 weekly services on the Chennai-Colombo sector.
A meeting in the second week of December between Goyal and Mallya, said a report by an aviation consultancy firm, was unsuccessful in thrashing out a plan to share international routes. “Jet also faces increasing pressure from Kingfisher Airlines, which is pressing ahead with its international expansion plans,” said the Centre for Asia Pacific Aviation, or Capa, in a report on Jet Airways reviewed by Mint last week. “It comes despite a meeting between Jet’s chairman Naresh Goyal and Kingfisher chairman Vijay Mallya on 12 December 2008 to discuss ways of avoiding network duplication and to agree on code-share arrangements on international routes.”
Half a dozen emails with queries sent to and several calls made to a Kingfisher Airlines spokesman did not elicit answers from the firm. When asked by Mint in November on where the alliance was headed, Mallya had just said, “You will see.”
“Whatever was announced at that time remains,” a Jet Airways spokeswoman said on Monday, but did not say what has been achieved so far. “I don’t think we will discuss that—it’s not that it’s 10%, 20% or 50% done, it’s an ongoing alliance.”
A travel industry executive said the two airlines missed an opportunity to work together when travel agents recently boycotted selling tickets of Jet Airways in December, threatening to do the same with Kingfisher Airlines; the former succumbed to pressure eventually. “Working together, the two airlines could have built much better bargaining positions vis-à-vis travel agencies with whom they were at loggerheads during the recent zero-commission crisis,” said Aloke Bajpai, chief executive officer of online ticketing portal Ixigo.com.
Bajpai said that if the two carriers, controlling at least 60% market share, would have been able to come together, they would have been able to get a sweeter deal from the travel agents than what was eventually achieved through one-on-one negotiations.
Still, Capa’s India CEO Kapil Kaul said he remained optimistic about the alliance. “I have a feeling both of them have more urgent issues like raising funds and restructuring at hand right now. They might clean up the act respectively before they come up to the table with each other,” he said, adding he expects the alliance dynamics will be largely decided by the events of 2009. “It (the alliance) would be open to realignment, because 2009 could be as uncertain as last year, so you can’t say that (it’s over) as yet.”
tarun.s@livemint.com
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First Published: Wed, Jan 14 2009. 12 41 AM IST