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Star Alliance denies berth to Air India

Star Alliance denies berth to Air India
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First Published: Tue, Aug 02 2011. 12 53 AM IST
Updated: Tue, Aug 02 2011. 12 53 AM IST
New Delhi: Air India has been denied entry into the prestigious Star Alliance grouping for reasons that aren’t exactly clear.
A statement from Star Alliance said Air India is yet to meet the conditions that were contractually agreed upon in late 2007, when the airline was extended an invitation to join the grouping—a move that would have meant an increase in passenger traffic because the airline would have become the automatic choice for customers on other Star Alliance members that travel to India.
Two officials at the civil aviation ministry said the rejection came after the ministry didn’t agree to a demand from the alliance to give Jet Airways (India) Ltd the go-ahead to join the grouping.
An Air India spokesperson denied that the airline had not met the conditions prescribed for joining Star Alliance.
This marks the first time in 14 years that an airline previously extended an invitation has been denied permission to join the alliance, which has 27 members. Air India was expected to join the grouping by 31 July and the move would have increased the carrier’s annual revenue by 5-15%, according to internal estimates.
Star Alliance’s statement, released early on Monday after a Sunday decision of its chief executive board decided to “unanimously...put on hold” Air India’s effort to join the alliance, said: “This is due to the fact that Air India has not met the minimum joining conditions that were contractually agreed (upon) in December 2007.”
Despite the wording, this could well be the end of Air India’s hopes of joining the alliance. “No” extension will be given to the airline to join the grouping, Christian Klick, a vice-president at Star Alliance headquarters in Frankfurt, said in an email.
In a July meeting of Star Alliance officials, aviation minister Vayalar Ravi, aviation secretary Nasim Zaidi and Air India chairman Arvind Jadhav, the ministry had refused to accept any conditions on Air India’s entry.
“Star Alliance told us that they will draft a letter on behalf of Jet Airways which the ministry needs to sign as a no-objection certificate for Jet to also be a Star member before Star gives a green signal for Air India to join,” a top ministry official said, speaking on condition of anonymity. “This was an atrocious demand and was completely rejected.”
A second ministry official, who also did not want to be named, confirmed the demand: “They said either we take Jet and Air India or none is welcome.” The row could escalate, with the Indian authorities planning to issue an official statement, he said. “We will reply appropriately to Star. As far as we are concerned, Star can forget India,” he added.
A Star Alliance spokesperson said: “We have always, in public and in conversations with the government, made it very clear that we believe that because of the importance of the Indian market, it requires more than one local carrier to satisfy the travel demand of the alliance customers. We have the same situation in China or in the US.”
This person added: “But to be very clear, yesterday’s decision was based on separate evidence, not on this topic.”
A Jet Airways spokesperson declined to comment. Last month, chairman Naresh Goyal said in Singapore that his airline was evaluating both Star Alliance and rival grouping SkyTeam.
Star Alliance’s Klick said Jet hadn’t yet formally approached the grouping. “We’ve not received such (a) request. Because of the importance of the Indian market, we will maintain our options open,” he added.
Air India needed to meet at least 87 requirements to join the alliance and may have met most of them, according to a letter from Star that has been reviewed by Mint.
Gerhard Girkinger, chief project manager at Star Alliance, who has been supervising the integration process with Air India, wrote to the carrier on 30 July and said that much of the work was “done”.
“I can confirm the status of the integration based on the attached spreadsheets. From my perspective, this means we are basically done although I need formal sign-off. All the other components depend on a joining date,” Girkinger wrote.
Klick did not deny the communication. “Notwithstanding the fact that Air India must have breached our confidentiality agreement with such information, I can confirm the following: The decision to accept compliance to the full set of minimum joining conditions as contractually agreed to in 2007 is not taken/confirmed by a project manager in the Star Alliance Service GmbH responsible for the implementation of a certain set of so-called components,” he said.
It wasn’t immediately clear whether Air India would get back the Rs 62 crore it has paid as joining fee to the alliance. It has also spent money besides this as part of the project, a key element of its turnaround. This includes amounts spent on branding, lounges and on a system to integrate its two codes (one each for Air India and Indian Airlines that merged to create the new Air India) that cost $190 million (Rs 836 crore today), although this amount would have been spent anyway as part of the integration process.
Klick said the aviation ministry hasn’t “formally” told the alliance that if Air India isn’t allowed to be part of the grouping, then no other Indian airline would. “And when looking at the aviation industry in today’s globalized environment, we have so far not seen countries blocking airlines from commercial success. Alliance decisions are usually based on commercial grounds and not based on government opinion,” he said.
A retired Air India official said the development would hurt Air India’s prospects.
“It is very unfortunate that Air India failed to comply with all requirements by the stipulated extended deadline,” said Jitender Bhargava, a retired executive director at the airline. “As membership of Star Alliance would have led to enhanced revenue, so very critical for Air India, all out efforts should have been made.”
Liz Mathew contributed to this story.
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First Published: Tue, Aug 02 2011. 12 53 AM IST