The Hindu Business Line : Kingfisher, Jet hold talks, may forge operational alliance

Mumbai, Oct. 13 Aviation majors Kingfisher Airlines and Jet Airways seem poised to forge an operational alliance to fly through turbulent times, caused by rising crude prices, input costs and declining passenger numbers.

A meeting between top-brass of Jet Airways and Kingfisher’s Mr Vijay Mallya and his team, at Kingfisher’s office here late Monday, ostensibly to iron out operational synergies, took the aviation circles by surprise.

The airlines are reportedly hit by losses of up to Rs 10 crore a day, besides facing pressure from oil companies to clear their dues. Though no official confirmation was forthcoming yet, on what the operational strategies entail, media reports quoting sources suggested the alliance could be on code share, ground handling, sales, frequent flier programmes and rationalisation of domestic and international routes.

Mr Naresh Goyal

The two private airlines were hoping that the synergies would help increase air fares by about 15 per cent, in the face of difficult market conditions. And industry sources indicate that attempts had been made to get Air India also on board such an alliance.

Kingfisher and Jet together have a combined market share of about 60 per cent and the two have been undertaking efforts to cut losses, through the rationalisation of routes and staff and putting off some overseas flight schedules.

An alliance would enable the two players to save costs and thereby help optimise the load factor (for both Jet and Kingfisher) especially on non viable routes, an aviation analyst said. However, this tie-up could lead to an increase in airfares as the two companies have a combined market share of 60 per cent in India, the analyst added.

A merger, however, was not quite on the radar just yet, say aviation experts. The announcement could be related to code sharing and infrastructure sharing, the analyst said.

The meeting today between the two leading private airlines is in itself the culmination of an idea mooted by Jet’s promoter Mr Naresh Goyal last year. In July last year while in the US, Mr Goyal had proposed an alliance with the state-owned Air India to enhance the market share of Indian carriers from about 20 per cent then to 50 per cent in the next few years.

Airline industry experts say that the talks between the two airlines could mean more such alliances in future. They say that this could be a good way of controlling costs at a time when most airlines are bleeding.

Jet Airways shares were up over 11 per cent on the BSE, at Rs 291 and Kingfisher’s shares rose 32 per cent, at Rs 51 on the BSE.