India’s largest private-sector carriers Jet Airways and Kingfisher Airlines have agreed on a wide-ranging alliance to help them battle slowing growth and high fuel costs, the companies said.
The airlines decided to work together “in [the] larger national interest and [to] help stabilize India’s aviation sector,” a joint statement issued by the two companies said late on Monday.
India’s crowded airline sector has been hit by huge losses on the back of a recent surge in global fuel prices that have forced fare hikes.
PHOTO: AFP
The airlines were pushed to a combined loss of US$938 million in the fiscal year to March this year.
Jet, which bought rival low-cost airline Air Sahara for US$340 million in April last year, has several common routes in India with Kingfisher.
“India has witnessed tremendous growth in the past which has slowed down considerably. In this environment, the alliance is a new industrial model for aviation in India,” Jet Airways chairman Naresh Goyal said.
Both companies said there would be huge cost savings for the airlines, but declined to provide details.
“This is a quantum leap forward in the evolution of Indian aviation which will benefit customers through a comprehensive integration,” said Vijay Mallya, chairman of Kingfisher Airlines.
The Jet-Kingfisher alliance involves joint fuel management, ground handling, network rationalization and crew sharing.
There would be no exchange of equity and both the airlines would maintain independent legal and brand entities, they said.
Analysts expect India’s aviation sector to post a near US$2 billion dollar loss in the financial year to March next year.
Higher domestic fares in India have pushed travelers back to trains and cars or even seen them opt not to travel. Short-haul routes have been particularly hard hit. Yesterday morning Jet shares surged 17 percent to 340 rupees (US$7) and Kingfisher rose 16.9 percent to 60 rupees, but shed gains on profit booking in the early afternoon.
“India’s aviation industry has seen unusual and tough times. They [airlines] needed to do something urgently to stabilize the industry,” said Kapil Kaul, head of the India region at the Centre for Asia-Pacific Aviation. “It is good to see that competitors are talking to be collaborators.”
India’s airline industry has seen consolidation in the past year through the Deccan-Kingfisher merger in December, the state-run Air India and Indian combine and the Jet Airways buyout of loss-making Air Sahara.
But some analysts question whether the new tie-up could reverse overall fortunes.
“We do not see a major cutting of costs. The ground crew staff as a portion of total airline staff is miniscule,” an aviation analyst with a private brokerage firm said.
He said maintenance costs reduction would be “minimal” as Jet has a largely Boeing fleet while Kingfisher has an Airbus fleet.
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