Both airlines to synchronise networks to tap US, Europe traffic; eye $1 billion in revenues
Spreading wings beyond its alliance with Gulf-based Etihad, India's Jet Airways on Wednesday signed an agreement with Air France-KLM to offer connectivity to over 200 destinations in Europe and the US.
The development comes at a time when traffic to Gulf nations, which is a mainstay of Jet, is slowing down.
Etihad holds 24% equity stake in Jet, and uses the later to feed its hub in Abu Dhabi for onward journey to European and the US markets.
According to a statement by Jet and Air France-KLM, the alliance is expected to generate over $1 billion of revenue for the partner airlines.
The tie-up is based on 'metal neutrality' business model, whereby the partner airlines are indifferent to which plane (metal) ferries the passenger.
The network and routes of the two airlines will be synchronised in a way that they do not compete with each other, as is the case with code-share pacts.
As per the plan, the two airlines are also likely to ink an agreement to collectively bargain for better fuel price, aircraft maintenance services.
When asked whether the development is likely to have any impact on its existing relationship with Etihad, Naresh Goel, chairman, Jet Airways, said that the relationship with Etihad will remain intact, but it will now give passengers more options as they can travel directly to Europe or via Gulf.
"The Indian aviation market is growing fast enough for everyone to have a larger pie of it," said Vinay Dube, CEO at Jet.
According to an estimate, around 1.2 million passengers travelled between India and Europe in recent years, which the alliance expects to increase to 1.7 million by 2019.
Jean-Marc Janaillac, chairman and CEO of Air France-KLM, declined to comment on query if the airline planned to pick equity in Jet.
Analysts said it was a natural progression for Jet to begin focusing on other markets, especially when the Gulf market, where it has been operating for long, is witnessing a slowdown.
High-value cargo, including pharmaceuticals, express and e-commerce, is the other business the agreement is likely to look at. This is aimed at creating synergy between the partnering airline's cargo networks, improving efficiencies in warehousing, exchanging capacities, among others.
Mark Martin, founder & CEO of Dubai-based Martin Consulting, said though the development will not have any impact on the Jet-Etihad partnership; it may, in fact, improve the earning for Etihad due to its equity in Jet. Further, the 'bread-butter' traffic from/to the Gulf will still be fed to Etihad by virtue of its 26% equity partnership with Jet.
"However, this does send out a clear message to Etihad to focus on their core earning whilst also give Jet more autonomy with charting its growth path," said Martin.
DNA Money's email to Etihad seeking comment on the development did not elicit any response.
The development comes at a time when Etihad's equity investments in two other airlines -- Alitalia and Air Berlin -- proved to be a dampener. Both have reportedly declared themselves bankrupt.
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