Article Posted on : - Oct 14, 2008

Kingfisher Chairman Vijay Mallya and his Jet Airways counterpart Naresh Goyal. PTI Photo

MUMBAI (BNS): India's leading private airlines, Jet Airways and Kingfisher Airlines, have formed an alliance as they struggle to face up to the economic meltdown and the huge downturn in aviation fortunes.

The alliance of "wide-ranging proportions" will help both carriers to "significantly rationalize and reduce costs and provide improved standards of service and a wider choice of air travel options to consumers with immediate effect," the Jet Airways said in a statement.

Besides a slew of steps for improving their efficiencies and finances in regular operations, the two sides will also explore the possibility of co-branding opportunities, the company said.

"The two airlines will be able to rationalize their operations and derive the maximum synergies and thereby offer the best possible fares for the benefit of the consumers," the statement said. However, the companies clarified that there would be no mutual equity investments between the two companies.

Many observers criticized the Jet-Kingfisher alliance as cartelization that could hem up the flight ticket rates, and deny consumers their rights.

However, the two companies argue that the downturn in the world economy has severely impacted the world aviation industry. The rapid increases in and the volatility in the crude oil prices and that of aviation turbine fuel and the slowdown in economic activity has resulted in a decline in air travel both on international and domestic segments of the air travel market, they said.

"Worldwide the airline industry has sought to tackle the difficult environment through alliances and joint provision of the best possible standards of service and connectivity to the travelling public by achieving cost and operational synergies and providing extensive connectivity and by offering economical fares," the Jet said in a statement. The two sides argued that the proposed alliance between Jet Airways and Kingfisher is in the national interest by incorporating the international best practice to strengthen the Indian aviation industry.

The alliance will include

* Code-shares on both domestic and international flights subject to DGCA approval.
* 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 rationalization and synergies.
* Cross utilization 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.

Announcing the alliance, Naresh Goyal, chairman of Jet Airways said, "All over the world Airlines have formed alliances in order to become more efficient, improve revenues and provide seamless travel opportunities for their customers. India has witnessed tremendous growth in the past, which has slowed down considerably. In this environment the Jet Airways – Kingfisher alliance represents a completely new industrial model for aviation in India, which would be based on an unprecedented depth of cooperation between the two companies. There will be huge cost savings and revenue enhancement opportunities arising from this alliance."

Dr Vijay Mallya, Kingfisher Airlines chairman was quoted by a statement as saying that the alliance is a "quantum leap forward in the evolution of Indian aviation" which will benefit customers by delivering the most comprehensive integration in the industry.

"Both Jet and Kingfisher fully realize that better understanding of supply and demand in this capital and labour intensive industry is the key to profitability and enhancement of shareholder value. I look forward to this alliance delivering superior quality, cost savings, flexibility and enhanced consumer value which is the hallmark of all successful alliances," Mallya said.