Jet Airways, Kingfisher Airlines alliance to reduce costs

Tuesday, October 14, 2008, 18:15 by Aviation Correspondent

Jet Airways and Kingfisher Airlines, India’s biggest airlines in the private sector, have reached an agreement to share certain facilities with a view to cutting costs.

In a joint press release, Jet Airways (India) Limited and Kingfisher Airlines Limited said: “The two airlines will jointly manage fuel expenses and share some pilots and allow cross-selling of tickets on each other’s networks. The companies will not take stakes in each other, and some of the agreements need the regulator’s approval.”

“Sharing training facilities and accepting each other’s frequent-flier miles will give the two carriers substantial savings,” the pres release added, but did not elaborate.

“In the current environment of high costs and declining growth, this alliance has potential for substantial savings.”

“Alliances and mergers will speed up in India, the world’s second-fastest growing major airline market, as the industry may have $2 billion of losses in 2008,” a statement from the Centre for Asia Pacific Aviation, a specialist consultancy group focusing on the aviation industry in the Asia Pacific region, said.

Kapil Kaul, chief executive officer of the New Delhi center of the Centre for Asia Pacific Aviation, was quoted as commenting on the Jet Airways-Kingfisher Airlines tie-up: “The airline industry is going through such a negative environment that it needs such unusual moves. Two competitors becoming collaborators gives out a big message about this. It is an admission of the current financial reality of the industry.”

It may be noted that India’s airline industry is heading for its worst loss on record.

The joint press release from Jet Airways and Kingfisher Airlines Limited listed as following the “scope of the alliance”:

  • Code-shares on both domestic and international flights subject to approval by the Directorate-General of Civil Aviation (DGCA).
  • Interline/special prorate agreements to leverage the joint network deploying 189 aircraft offering 927 domestic and 82 international flights daily.
  • Joint fuel management to reduce fuel expenses.
  • Common ground handling of the highest quality.
  • Cross-selling of flight inventories using the common Global Distribution system platform.
  • Joint Network rationalisation and synergies.
  • Cross-utilisation of crew on similar aircraft types and commonality of training as also of the technical resources, subject to DGCA approval.
  • Reciprocity in Jet Privilege and King Club frequent-flier programmes.

The Jet Airways-Kingfisher alliance is the latest in a series of consolidations in India’s aviation sector: Jet Airways, India’s biggest domestic carrier, had bought Sahara Airlines Limited in 2007 for 14.5 billion rupees ($300 million); the government of India had merged Air-India and Indian Airlines; and Kingfisher Airlines, run by UB Group, had bought the low-fare carrier Deccan Aviation Limited.

The International Air Transport Association had said in September 2008 that higher prices of aviation turbine fuel and cut-rate fares would result in India-based airlines posting the second-biggest combined loss worldwide in 2008, behind the United States.

The launching of about 6 new carriers in India in the past five years has increased capacity, compelling carriers to cut fares to below-cost levels.

India’s Ministry of Civil Aviation had said in a statement in September 2008 that the country’s domestic passenger traffic had dropped by 5.3% in August 2008 to 2.92 million from 3.1 million in July 2008.

One Comment

  1. Jet Airways layoffs begin post Kingfisher Jet alliance, job cuts and cost cutting | DWS Aviation said on Wednesday, October 15, 2008, 11:41

    [...] is in fact the largest for India’s aviation industry. The deadly blow came about soon after the Jet Airways – Kingfisher alliance was struck and it has been reported that even staffers in uniform who had been waiting to be picked [...]

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