Arch Rivals Jet Airways and Kingfisher Airlines, with a collective market share of over 58 per cent, have decided to make a strategic alliance to help each other in reducing cost and enhancing efficiency.
What the alliance saysss:
- The alliance will involve code-sharing on domestic and international flights
- An interline agreement,
- Joint fuel management,
- Common ground-handling services and cross-selling flights through the global ticketing system.
- The two have also agreed to cross-utilise crew on similar aircraft types and use common training facilities.
- Passengers can also use frequent flyer programmes by flying in either of the airlines.
What the alliance will not include?
- There will be no equity investment in each other's company.
- A formal merger of the two airlines would not have been possible because the country's competition laws mandate that airline companies cannot have a market share of over 40 per cent after they merge. .
"Such alliances are taking place all over the globe such as the one with United and British Airways. This is the first such alliance in India," said Naresh Goyal, chairman of Jet Airways.
"This alliance will result in major cost saving, improve efficiencies through network synergies and cross-selling. If the airlines save money they will pass it on to consumers," said Kingfisher Airlines chairman Vijay Mallya.
Why it was required?
- Kingfisher Airlines made a loss of over Rs 1,000 crore and Jet Airways Rs 806 crore in 2007-08.
- The two financially strained companies have also been looking at raising over $1.2 billion (Jet for $800 million and Kingfisher $400 million) to finance expansion plans but have found it difficult to do so, especially after the US financial meltdown.
- Kingfisher was lookin for a foreign investor for 26% but didnt get due to Govt restrictions
- Staff has been trimmed by 2000
The two airlines have had a combined fleet of over 189 aircraft, making it much bigger than state-owned Air India (the entity formed after the merger of Air-India and Indian Airlines with 149 planes).
The combine will fly 927 domestic flights and 82 international flights a day.
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