Mumbai / New Delhi: Underscoring how a soaring industry has been grounded by high costs, owners of bitter airline rivals Jet Airways Ltd and Kingfisher Airlines Ltd, which together control some 60% of India’s domestic airline market, were believed to be discussing possible cooperation.
The talks, which were still under way in Mumbai as this newspaper went to the press, were first reported by CNBC-TV18.
Monday’s meeting was being held at Kingfisher’s offices in Mumbai with most senior executives participating. Some reports initially suggested both Jet Airways founder, owner and chairman Naresh Goyal and Kingfisher Airlines chairman Vijay Mallya were participating.
A person close to the development, who did not want to be named, said the deal had been brokered by National Congress leader and India’s agriculture minister Sharad Pawa, considered close to Mallya.
Mint couldn’t independently confirm Pawar’s involvement.
It was unclear what form a cooperation will take, but even as senior management teams of both airlines continued to be in discussions, there was talk that it will involve some sort of code sharing on international routes as well as working together in ground handling and sharing of frequent flyer programmes.
Joining hands? Kingfisher’s Vijay Mallya (left) and Jet’s Naresh Goyal.
Mint couldn’t independently ascertain the contours of any possible cooperation pact between the two airlines though at least one Kingfisher official, speaking on condition that he wouldn’t be identified, claimed the idea was to leverage each other’s passengers and networks.
While there was growing speculation that an official announcement could come late Monday or early Tuesday, Mint also couldn’t ascertain if the collaboration would involve any financial transaction or require regulatory approvals.
But the very fact that they were considering some form of cooperation is a stunning sign of how rapidly the fortunes of India’s airlines have deteriorated in recent months just as both airlines, as well as the government-owned Air India, embarked on a large international route expansion.
But soaring jet fuel costs, a souring economic environment and, for the first time in recent memory for the nascent industry, falling passenger numbers, forced Jet to scrap its flights to San Francisco via Shanghai even as Kingfisher froze its international plans weeks after launching its maiden flight from Bangalore to London.
Both airlines have been laid low by mounting losses. Jet Airways posted its largest quarterly loss of Rs772.5 crore for the three months ended June, but was saved by a one-time reversal of depreciation that added Rs915.87 crore, giving it a paper profit of Rs143.38 crore. Kingfisher Airlines is yet to announce results for the April-June quarter, though Mallya told Mint in September that the airline’s losses were rising.
Both airlines have tried to woo passengers, especially India’s business travellers. Jet has relied on consistent service and its relatively veteran status while Kingfisher, in keeping with owner Mallya’s flamboyance, has been an upstart relying on a perky cabin crew with a hip attitude.
Both airlines have also made significant acquisitions last year to sharply increase their market share. Jet Airways bought out Air Sahara and renamed it JetLite while Kingfisher acquired Deccan Aviation’s Air Deccan, eventually merging it with Kingfisher.
At the end of August, Jet and JetLite had a 30.2% share of passenger traffic and Kingfisher, 28%, according to Directorate General of Civil Aviation data.
National Aviation Co. of India Ltd-run Air India had 15.7%, leaving India’s once ubiquitous airline a distant third.
In Monday’s trading on a bullish day in Indian stock markets, shares of Jet Airways were up 11.12% to Rs291.80 a share while those of Kingfisher were up 32.35% to Rs51.35 each on the Bombay Stock Exchange. The exchange’s benchmark index, the Sensex was up 7.42%.
“The idea is to be non-compete. At the end of the day the competition for these two is not from domestic carriers but from the big boys like Lufthansa, British Airways,” said KPMG’s Mark Martin.
K. Raghu from Bangalore contributed to this story.