A year on, Jet, Kingfisher fail to fly in formation

In 2008, when full-service carriers Jet Airways and Kingfisher Airlines announced an operational alliance to improve efficiency and profits, it was supposed to change the dynamics of India’s aviation sector.

More than a year after their much-publicised partnership, industry insiders say the two have not been able to move beyond tactical alliance.

What this means is, while they have joined forces in the areas of sharing ground handling services, parts and airport equipments, they have failed to tie up for sharing of routes and customers.

So, what went wrong?

A senior executive with a rival airline, who did not want to be named, said one of the primary reasons is that the two carriers are competitors and their services are not complementary.

“In such a scenario, there is always the question of who gives up what and in which areas. Such alliances, where you need to enter into code-share and interline agreements, to drive cost efficiency can be tricky if you are competitors,” he said.

Some industry experts even blame the absence of “clear-cut policy” for code-sharing between domestic carriers as the reason for the delay in the deal.

“The DGCA (Directorate General of Civil Aviation) has a broad guideline for it (code-sharing policy). So, any approval for code-sharing is arbitrary. When Jet and Kingfisher asked for clearance, the DGCA did not even look into it,” said an airline executive in the know.

He said Jet-Kingfisher alliance also faced opposition from other carriers, who viewed it as an attempt to kill competition in an industry with only a handful of players. “It was seen as a move that would lead to monopolistic practices in the now competitive market.”

The two leading carriers by number passengers carried had said they would cooperate in eight areas that involved code-sharing pacts, interline agreements, jet fuel management, sharing of ground-handling, cross-selling of flight inventories, network rationalisation, cross-utilisation of crew and merging of loyalty schemes.

Guru Malladi, partner - advisory services, infrastructure, real estate and government, Ernst and Young, says India’s aviation sector had not yet reached the maturity for a strategic tie-up of the kind that jet and Kingfisher had envisioned.

“We (India) do have many players to pressurise airlines into alliance. These alliances can bring in immediate benefits to airlines but, it appears, Jet and Kingfisher have only gone for tactical alliance and not entered into any strategic relationship,” he said.

Malladi says the argument that there was no proper policy for code-sharing is weak. “A framework for it (policy) exists. Some operators may see it as inadequate but if they (airlines) want to connect on it they can do it,” he said.

Samyukt Sridharan, chief commercial officer (CCO) of SpiceJet, said, today most airlines were cooperating for spares, airport equipments and had informal arrangement to transfer passenger to each other in case of cancellation of flights.

“We do this to avoid any inconvenience to our passenger but we have never thought of anything beyond that,” he said.

Ernst & Young’s Malladi says, once domestic carriers become part of global alliances such as Star Alliance, OneWorld and Sky Team, they would gain from strategic relationship with not just overseas carriers but even the local airlines.

State-owned National Aviation Company of India Ltd (Nacil) has been invited to Star Alliance while Jet has evinced interest in being a member of the Sky Team. Kingfisher is also vying to be part of the OneWorld.

“It (global alliances) has helped airlines around the world to turnaround as it pushed up their revenues with widening reach,” said Malladi.