Logistics

Jet Airways in ‘metal-neutral’ pact with Air France-KLM

Tanya Thomas Mumbai | Updated on January 09, 2018 Published on November 29, 2017
Jean Marc Janaillac, Chairman and CEO. Air France-KLM, and Naresh Goyal, Chairman, Jet Airways, at a press conference to announce the signing of an enhanced cooperation agreement, in Mumbai on November 29, 2017.

New agreement has an annual incremental revenue potential of over $1 b for Indian airline

Jet Airways has deepened its partnership with Air France-KLM beyond codeshare to create a “metal-neutral” agreement between the three airlines. The new agreement, which will effectively connect 44 destinations in India with 106 destinations in Europe, has an annual incremental revenue potential of over $1 billion (roughly ₹6,400 crore) for the Indian airline, Naresh Goyal, Chairman, Jet Airways, said, announcing the partnership here.

Jet’s FY-17 gross revenue was ₹23,670 crore.

For the current winter schedule, Air France-KLM and Jet will operate 64 weekly flights between Paris, Amsterdam, Delhi, Mumbai, Bengaluru and Chennai.

The “metal-neutral” agreement means the airlines share revenues on these routes, regardless of which airline’s plane a passenger ultimately flies with – Jet, Air France or KLM. In essence, this immediately boosts the sales and distribution capability of the European carriers in India, while giving Jet access to a much larger passenger market in Europe.

Goyal alluded to this when he said, “the cost savings will be significant. We are offering over a 100-destinations in Europe now. We will save in the sales and distribution costs by offering each other’s destinations.”

Air France-KLM’s two European gateways at Amsterdam and Paris are well-connected across the Atlantic through a similar partnership it has with Delta Air Lines, offering access to over 200 destinations in North America.

Jet and Air France-KLM also announced a Memorandum of Understanding to strengthen joint cargo operations and expand capabilities in high-value cargo services, particularly in pharmaceuticals and e-commerce.

Aviation analyst Kapil Kaul at CAPA, Centre for Aviation, said the agreement is a “positive strategic development for Jet; it gives Jet access to capacity and multiple gateways, enhances market power and customer value significantly to Europe and the US. This is revenue-positive for Jet, provides them very effective competitive strength and reduces economic risks.”

Speaking to journalists, Goyal insisted that Jet’s existing partnership with the Gulf carrier Etihad, which competes with Air France-KLM, will continue. Etihad holds a 24 per cent equity stake in Jet and is also part of Etihad Airways Partners, a collection of airlines in which Etihad holds minority equity investments. “Today, Jet is the leading airline between India and the Gulf region, so the partnership with Etihad will continue and we will increase capacity up to as much the bilaterals permit.”

However, analysts believe that Jet is expanding its European network to lower its dependence on the Gulf carrier. Etihad and Air France-KLM compete for traffic from India.

Jet operates a fleet of 115 aircraft and flies to 64 destinations in India and abroad. Air France-KLM and its partner brands operate 534 aircraft and 2,300 daily flights.

Published on November 29, 2017
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