Kingfisher Airlines & Jet Airways tie up an alliance

The fight for survival has brought two of India’s biggest business rivals—Jet Airways owner Naresh Goyal and Kingfisher chief Vijay Mallya—together. After several rounds of “summit’’ talks, the two aviation czars have decided to form an operational alliance that will command nearly 60% of the market share of the domestic skies.Each airline is losing up to Rs 10 crore daily. This deal, which may ultimately lead to a consolidation once one of the players can access funds to buy out the other, could allow them to cut some losses. For now, there will not be any equity exchange between the two.The alliance will lead to cobranding, code share agreements, cross-selling of tickets, utilisation of flight crew and allowing fliers to redeem miles on each other’s planes. The two airlines may also not compete on domestic sectors by having flights on a sector close to each other’s timings, have better coordination in reducing capacity and hiking fares and possibly have common ground handling and fuel management at airports to cut costs. Mallya went to meet Goyal at Jet’s head office in Andheri and then on Monday evening, Goyal went to Kingfisher House at Vile Parle. After the final meeting, Mallya said, “It’s a meeting of minds and hearts and a path-breaking alliance between two of India’s largest carriers. We both recognize the economic realities and this will help us save humungous costs through improved efficiency. If we save money, we will pass on the benefits to the consumer. Such an alliance will add to shareholder value and lead to a sustainable future.’’ Goyal said the deal with “my friend’’ Mallya was not a cartel. “The world over, airline alliances have been formed. But this is the first such alliance in India. Through code shares and route rationalisation, we will save costs and that will be good for consumers. Today, if some airlines close in these tough times, we will go back to a monopoly and we don’t want that. This is serious cooperation.’’ Market buzz credited aviation minister Praful Patel with bringing the two together to form brand GM (Goyal-Mallya) of Indian aviation. However, Patel laughed this off. “I didn’t get into this. I just cautioned the entire industry and did not ask anyone in particular to shake hands. This (Jet-Kingfisher alliance) is born out of necessity and adversity. Airlines have first to be able to survive for a later-day fight (for market leadership),’’ Patel said. The two tied up for what Patel called the “writing on wall’’—huge losses and no early sign of recovery from the current turmoil. And just when high oil prices—that had triggered their troubles—started to cool off, the global meltdown has led to twin troubles for cash-strapped airlines: a further drop in traffic and banks not willing to lend money to the ‘risky’ aviation business. Attempts such as cutting flights and laying off staffers haven’t helped pull the airlines out of the woods so far.Now they are again willing to take unthinkable steps, like Jet and Kingfisher coming together. Said an airline owner, “Talks between Goyal and Mallya started basically to evolve a consensus on two things—route rationalisation (read cutting flights) and hiking fares in the hope that others will also be forced to do so.Both the airlines are financially stretched, and it’s a matter of time before they face the heat from creditors (if they aren’t already). Airlines want to survive somehow until the next government is in place and then try for a change of policy to allow foreign airlines to buy stake in domestic carriers.’’Kingfisher, which lost Rs 1,000 crore last fiscal, has been forced to cut down drastically on Mallya’s ambitious international plans. The airline, which launched a Bangalore-London flight recently, had ordered ten A-340s for being flown on a non-stop India-US route. But now it has sold three A-340s to a Nigerian carrier and converted its order of five to the medium range A-330.Airbus was to deliver Kingfisher’s first A-340 during the Hyderabad air show but the European major’s statement of activities during the expo had no mention of bringing this plane. In addition, the AAI is also breathing down Kingfisher’s neck for payment of dues.

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