Have Indian Carriers Missed the Boat on Alliance Membership?

It has been a very turbulent few weeks for oneworld alliance. A few weeks ago, Qantas and Emirates announced a close cooperation agreement for Australia-Europe traffic. Then, earlier this week, it was announced that Etihad, Air Berlin, and Air France-KLM are entering a cooperative agreement. Air Berlin is also a oneworld member, but it appears that it, along with Etihad, are actually lining up more with SkyTeam Alliance members. Then, later on the same day, it was announced that Qatar Airways is joining oneworld alliance, in cooperation with British Airways.

What can clearly be seen from these 3 moves is that oneworld is splintering, with each of the three Gulf carriers pulling their preferred partners in different directions. It is showcasing the new paradigm which will appear over the next few years – individual carriers will closely align with other carriers which suit their needs best, instead of focusing on which carriers will suit the alliance best.

“Oneworld is secondary [for Air Berlin],” Etihad’s CEO James Hogan was quoted as saying recently. Etihad took a ~30% stake in Air Berlin some time back.  Instead, Air Berlin will focus on creating synergies and aligning networks with Etihad, Air France, and KLM, despite the fact that none of the carriers mentioned are fellow oneworld partners.

Similarly, Qantas has aggressively been pursuing a strategy of aligning with partners which are most valuable. With service to Africa, the airline has for years worked with South African Airways, despite the fact that they are in different alliances. With the new agreement with Emirates, oneworld partners will become secondary for services to Europe.

A similar phenomenon can be observed in other alliances as well. Delta Air Lines has aligned with Virgin Australia on USA-Australia sectors, despite not being alliance partners.

In every alliance, the core group of partners has gotten anti-trust immunity and agreed to lucrative joint ventures* on trans-atlantic sectors, pushing the concept of metal-neutrality. Metal neutrality is where carriers find it equally profitable for a passenger to be carried on its aircraft or its competitor’s aircraft, allowing better utilization and fleet planning. Delta Airlines operates a variety of services from the USA to Paris and Amsterdam from non-hub cities because it has a better cost profile and aircraft for those specific missions.

*An interesting read on the advantages of joint-ventures can be found here.

Star Alliance has taken joint ventures even further – United, Lufthansa Group, and All Nippon Airways all have joint ventures with each other, forming a core group of partners which strengthens the alliance and keeps it together.

But the alliance is not an imperative part of any of this – carriers are perfectly capable of creating bilateral partnerships to suit their own needs. Removing alliances is removing an unnecessary middleman which simply adds costs and complications. And as alliances get larger and more unwieldy, they will reduce in importance – carriers will focus more on their individual goals.

This splinter in oneworld is the beginning of the end of alliances as we know them…

***

While these events were happening on the other end of the globe, Civil Aviation Ministry Ajit Singh was busy drafting a letter begging for Air India to be granted entry into Star Alliance. Indeed, there were some decent points about how Lufthansa took advantage of benefits given for being partners with Air India without returning the expected favor, but it is quite honestly irrelevant at this point. The 2000s was the decade of the alliance, and Air India is desperate to get in on that action, just as it is coming to an end. And let’s not discuss Jet Airways, which has sent so many mixed signals that we have to wonder whether they will ever get around to that love affair with Lufthansa which they profess to desire.

Jet, at least, has developed some kind of strategy regarding airline partners. They are willing to partner with practically everybody, from bmi to Barista Lavazza. The carrier has thrived on the business of feeding other carriers’ operations from India, and therefore they are eager to codeshare with every airline possible – it increases the route network and potential market without Jet actually having to fund expansion.

Air India, on the other hand, has relatively few partners. Mileage in Flying Returns, the frequent flyer program, can only be accrued on two partners – Lufthansa and Singapore Airlines. The carrier has blindly pursued Star Alliance membership and all the potential partners without evaluating further possibilities. And indeed, that may be one of the reasons why Air India has such limited support from within Star Alliance – they are only (very loosely) aligned with two carriers out of a group of 28! Then, there was the proposed cooperation with Adria Airways and a scissor hub in Ljubljana which they spent far too much time considering, but I won’t go there…

One has to wonder why Jet Airways and Air India aren’t actively pursuing deeper cooperation with strategically important partners instead of sitting back and waiting for potential alliance membership to solve all their problems. Share your thoughts in the comments below.

Jet Airways Moves Closer Yet to Star Alliance

Yesterday, airlineroute announced that from mid-November, Jet Airways will not be serving Chennai-Brussels anymore. It appears that this reduction is moving towards a hub in Munich instead, so that Jet can be integrated closely into Star Alliance.

The first sign of this was also yesterday, when Munich Airport posted a schedule for Jet Airways’ operation of Munich – Bangalore! This is the largest Indian destination which is still unserved from Munich by Lufthansa.

The tentative schedule is set to begin in mid-March, and is as follows:

Flight No. Departure Arrival
9W 154 BLR 04:05 MUC 08:35
9W 153 MUC 12:00 BLR 02:40

A 4AM departure isn’t so nice, but this flight connects perfectly with Lufthansa’s bank from Munich. More importantly, the flight will operate out of Lufthansa’s Terminal 2, presumably to facilitate convenient connections.

Jet Airways has been sending lots of mixed signals regarding alliances, but it looks like they’re moving closer to Star in earnest now.

Jet Airways May Not Join Star Alliance After All

 

The alliance saga of the carriers of India continues…

After Star Alliance formally invited Jet Airways, and Air India got out of the way, it seemed like Jet Airways joining Star was just a matter of time.

But, this morning, a major Indian newspaper published an article titled “Jet Airways may not join Star Alliance” –

Star Alliance, the world’s largest airline alliance, may not get any member airline from India — one of the world’s largest growing aviation market.

After the 27-strong member alliance rejected Air India’s application for a membership, Jet Airways, who is in talks with the alliance, may decide against joining the group.

“We are talking to all three alliances and may not join Star Alliance because they already have a strong member in this side of the world,” said a senior Jet executive on condition of anonymity.

The Naresh Goyal-promoted airline is also in talks with global alliances Oneworld and SkyTeam.

“We do not know how much will we benefit by joining the alliance with Singapore already a member. There is a thinking that the benefits will not be much from Star Alliance and our talks with the other two airline alliances is also on,” he said.

Now, I’m not exactly sure what Jet Airways is trying to accomplish with this. Are they trying to get a better deal from Star? Are they actually choosing a different alliance? Are they totally confused, just like we are?

It is no secret that Singapore Airlines is a member of Star Alliance. They joined over a decade ago – not yesterday. And on the other hand, what is so special about Singapore? Thai and Lufthansa also have comprehensive Indian networks… And in other alliances, Cathay, SriLankan, and Malaysia Airlines (oneworld) also serve many Indian gateways. And SkyTeam has lots of Asian carriers as well.

There’s no doubt that Jet should look at all its options, but this is getting ridiculous. At this rate, there won’t be any Indian carriers in alliances even a decade from now.

First class is disappearing, and that’s a good thing!

I’m out of town for the next few weeks, so I’ve lined up some great guest posts. Today’s guest post comes from The Wandering Aramean, a/k/a Seth Miller. Seth is an aerophile and travel addict based in New York City. Seth writes his own travel blog, The Wandering Aramean, is a part of the PointsHoarder podcast focused on maximizing the value of loyalty points and is also a contributor for Fodors.com. He can be reached at @WanderngAramean on Twitter.

First class flying: the ultimate luxury experience in the air. Right? Everyone wants that opportunity and experience and yet the airlines are cutting back on first class services. Why? It turns out that, for many, business class is good enough. In fact, many carriers today are offering a business class product better than the first class of yore.

The Wall Street Journal had a piece out last week discussing the ever shrinking number of first class seats flying around the world. They’re calling it a “long, slow death” and focus on the change from a First/Business/Economy model to a Business/Premium Economy/Economy model among a number of carriers.

For decades, international first class was a symbol of self-indulgence in the sky, several rungs above its domestic cousin, which tends to be closer to economy class, but with free alcohol and bigger, cushier seats.

The top-drawer service, however, has been disappearing from U.S. airlines for decades. Of the more than 500 aircraft U.S. airlines regularly fly to Europe, Asia and South America, just 27% offer first class.

And there is plenty of truth in the story. The number of seats marketed as First Class is definitely decreasing. But from the perspective of “self-indulgence in the sky” things would seem to be a bit different. Business Class today is, by most measures, a more comfortable in-flight experience than First Class was 10 years ago. From that perspective First Class isn’t really dead; it just has a different name.

Within the Indian long-haul market there are still options for first class service. Air India, Jet Airways and Emirates all offer first class cabins. But not all routes offer the first class option on every flight. And tracking that down can create a challenge for passengers. Even more complicated, however, is figuring out if the value of flying in first class is worth it or not.

All three carriers have at least part of their fleet configured with a fully flat bed in their business class cabins, for example. And the multi-course meals are premium beverage options are also available, though not necessarily quite as premium.

Fewer and fewer companies pay for first class, owing in large part to the fact that business class is generally good enough for traveling employees to sleep well and show up ready to work. First class is no longer a necessity to be well-rested and comfortable; it is now an over-the-top luxury. More and more of the customers up front are getting there by redeeming miles rather than paying the cash fare. And while that’s useful to the airlines in reducing their liabilities, it doesn’t really make sense to keep the seats around, especially if they can sell more business class seats instead.

In other words, is there really value to the 3-cabin first class product? Or is the 2-cabin business class product good enough for most folks? First class is very, very nice when it is available. Taking a shower in the Emirates A380 first class lav was a wonderful experience. But business class lets you eat and sleep quite well. Is first worth paying extra for? Or even redeeming points? The answer is generally “no” for me.

Video: Jet Airways Special Livery Time Lapse

Last week, we posted about Jet Airways’ new Disney-themed aircraft:

The aircraft, VT-JBC, is a 5 year old 737-800.

This promotional livery looks much better than the disastrous Nokia Lumia livery which Jet tried out a few months ago. Daisy, Goofy, Mickey Mouse, Minnie Mouse, Donald Duck, and Pluto grace the aircraft, which was used today to take 37 families to Hong Kong’s Disneyland.

Here is a time-lapse video of the livery being painted on:

Jet Airways Unveils Disney Themed Aircraft, 787 Delivery Schedule

Jet Airways has unveiled a few things of note this week – its Disney-themed aircraft, and its 787 delivery schedule.

The Disney-themed aircraft can be seen below:

The aircraft, VT-JBC, is a 5 year old 737-800.

This promotional livery looks much better than the disastrous Nokia Lumia livery which Jet tried out a few months ago. Daisy, Goofy, Mickey Mouse, Minnie Mouse, Donald Duck, and Pluto grace the aircraft, which was used today to take 37 families to Hong Kong’s Disneyland.

Jet Airways also announced that the first of its 10 Boeing 787s on order will tentatively arrive in 2015.

Jet Airways Cancels Brussels-New York JFK Service From September

From 11th September 2012, inventory is zeroed out for Jet Airways’ Brussels-New York JFK service, indicating that this route is likely to be suspended or cancelled then. This is not really a surprise after SN Brussels Airlines recently launched service on this route. It was already a relatively low-yielding route for Jet, and the new competition pushed it over the edge.

The SN Brussels service fits very nicely into Jet Airways’ bank of flights. Jet already codeshares with SN Brussels for intra-Europe feed, and it would not surprise me at all for Jet Airways to continue serving JFK through an SN Brussels codeshare.

Jet recently gained rights to serve Chicago, San Fransisco, and Washington DC. Replacing JFK with one of these destinations seems likely. Chicago is the most likely choice, although Washington DC is also a possibility.

More Airlines Introduce ₹50 Charge For E-Ticket Printout

A few weeks ago, Jet Airways introduced a ₹50 charge for getting an e-ticket printout at the airport.

This, like any other devaluation, caused a lot of cribbing from frequent flyers. And while the arguments were weak, nobody can deny that picking up your e-ticket printout is very convenient. For some people, it’s the only option. As with any other rate increase, I expected this charge to stick if other carriers matched it, but be repealed if nobody else did. India is a unique market where the ancillary fees that work well in other parts of the world (baggage fees most notably) simply kill load factor. So, monitoring the public response was important to ensure that this fee would be accepted.

It appears that IndiGo and SpiceJet have watched that response and decided that this fee is safe to match. Effective today, e-ticket printouts at IndiGo and SpiceJet counters will carry a ₹50 charge.

I expect the other low cost carrier, GoAir, to match this quickly. However, I expect Air India and Kingfisher Airlines to hold out on this fee, to differentiate their products from the LCCs. Overall, this move by Jet just shows that they are turning into more of a high-cost, LCC-service carrier every day.

Air India And Star Alliance Resume Membership Talks

A report from the Economic Times

suggests that Air India and Star Alliance have resumed membership talks. Now people who know me probably expect that I’m thrilled. I always fly Air India on domestic India flights, since they are the best carrier domestically. And I always fly Star Alliance internationally, so that I can avail of my status benefits. If Air India joins Star Alliance, I get those status benefits domestically, my Air India miles become more valuable, and my overall flying experience would be better. So it’s obvious that I should be thrilled about this news, right?

Well people who expect that I’m thrilled are wrong. I am not thrilled in the slightest. In fact, I am furious to hear this. Why? Because Star Alliance decided to play hardball and be downright insulting to Air India and the Government of India, and now it looks like they are going to get away with it. It seems that Air India and the Government of India are just willing to give up and let Star Alliance win. And I don’t like to see my country in this helpless state. I don’t like it at all.

To better understand the Air India/Star Alliance saga, we have to take a trip down memory lane. Star Alliance first announced that they had invited Air India to join back in 2007, almost 5 years ago. As a result of this invitation, many Star Alliance carriers, most notably Lufthansa, expanded Indian operations. More slots were issued to these carriers by the government of India. Bilaterals were improved. There was talk of the Government allowing Lufthansa to bring in the A380 to India once it was introduced to service. Star Alliance knew fully well that by bringing Air India into the fold, they would get preferential treatment in India. They decided that even with all the shortcomings of Air India, these benefits would be worth more to them.

Between 2007 and 2011, a number of delays to Air India’s entry happened. IT issues, general Indian bureaucracy issues, delays in the Air India/Indian Airlines merger, and other such issues delayed Air India’s entry into Star. It’s India – the concept of “on-time” doesn’t exist. This isn’t to excuse the poor form in which Air India was, but other Indian carriers haven’t exactly fared better. Kingfisher was suspended recently from joining oneworld as well.

It’s just the way things are.

As Air India’s entry got delayed more and more, Star Alliance became progressively more fed up. Star decided to get greedy and start courting Jet Airways as well as Air India. Obviously this didn’t fly with Air India or the Indian government. The advantages of alliance membership would be significantly diluted for Air India if another Indian full service carrier were also permitted to join the same alliance. The government of India also was concerned from a competition perspective of allowing 2/3 of the full service carriers to enter a single alliance.

However, by early 2011, Star Alliance was so fed up of the Air India delays that they issued an ultimatum – If AI didn’t fulfill all membership requirements by July 2011, they would be rejected from the alliance. Meanwhile, Star continued to try to get Jet Airways into Star Alliance as well. Early 2011 was a busy time for Air India. The government got them the funds required, and they showed the world that when called upon, Indians can actually get work done. The merger was completed, IT issues ironed out, and joining requirements were met by the deadline. A Star Alliance exec said something to the effect of, “I can’t believe that they actually managed to do it. They’ve probably gotten more done these past few months than the last few years.”

Air India was all ready to join Star Alliance by the deadline. They passed the compliance audit without a problem. And then Star Alliance decided to play hardball. They insisted that Air India and the Government of India agree to an agreement which would allow Jet Airways to also be inducted as a member soon after Air India had joined. Air India and the Government balked. However, Star Alliance backed down and didn’t make a big deal out of their decision.

Or so they thought. Imagine the shock that went through the government and Air India when Star Alliance announced that they had voted to suspend the application, mere days before Air India was preparing to finally join. People were furious. The CMD of Air India was sacked soon after, and not joining Star was one of the main reasons why that happened.

Now, it appears that Air India has gone back begging to Star Alliance to let them in, even if it means that Jet Airways gets let in too. And that’s why I’m not happy. Air India was in an excellent position – With Kingfisher going to oneworld and Jet Airways being courted by SkyTeam, they could have potentially locked Star Alliance out of the Indian market by not accepting Air India.

Air India should not bow to Star Alliance’s demands. After what happened, they are quite frankly insulting. I sincerely hope that some sense gets knocked into the airline before they agree to let Jet Airways in.

DGCA’s Financial Surveillance Report Full Of Controversy

Last Thursday, the DGCA (India’s aviation regulator) finalized their 2011 financial surveillance report. The findings of the report are making waves throughout the industry. The report focused on the financial state of airlines in India, finding that financial issues are endemic in the sector, and that this financial sickness is affecting safety standards.

The most controversial part of the report said: “A reasonable case exists for withdrawal of [Kingfisher Airlines] airline operator permit as their financial stress is likely to impinge on safety.” The report also had similar findings about Air India Express (AIX), a surprise considering that AIX was relatively profitable compared to the rest of Air India and was being hailed as a success story by many aviation analysts. I must admit that I belong to that category myself, considering AIX to be a great step for Air India.

Audits of Jet Airways, JetLite, SpiceJet, and GoAir also yielded poor results. The DGCA found “major financial distress issues” that could lead to safety issues. The reports also talks of “some rapid growth issues” about IndiGo Airlines. The audit of Air India is not yet finished.

 

Source: Kingfisher Airlines

When I look at that list, I’m not really shocked. The report seems to list every single Indian airline as under “financial distress.” It’s great that the DGCA is finally figuring this out. The Indian aviation market is structurally challenged. Despite being one of the fastest growing economies in the world, Indian airlines are unable to make profits. This is due to high fuel prices, extremely high taxes, and poorly negotiated bilateral treaties, among other issues. It is excellent that the DGCA is actually investigating these issues before it becomes too late and safety standards crash.

What may seem really surprising is that the DGCA is considering taking the extreme step of revoking operating permits. However, after looking closely at the financial issues that Kingfisher is facing, it may not seem that drastic of a step at all. A post tomorrow will go into more detail about Kingfisher’s financial woes.

 

Source: Wikimedia

With regards to Air India Express, it is surprising how scathing the report is. 2 years ago, the airline was involved in the Mangalore air crash which claimed 158 lives. However, it wasn’t clear to me how poor the safety culture at the airline is until today when I did some more poking around during research. There is shortage of pilots, check airmen, instructors, examiners and cabin crew… The airline is not able to operate its entire fleet due to shortage of pilots. Flight duty time limitation monitoring is carried out manually (unlike most airlines, including its parent Air India, which use computerized systems). Training of pilots is carried out on Jet Airways’ simulator as AI Express simulator remains unserviceable most of the time.”  This is a bad situation to be in for any airline.

Other airlines have been having similar issues as well. Jet Airways, JetLite, IndiGo, SpiceJet, IndiGo, Air India Regional, and GoAir all were found to be experiencing “financial difficulties” and “growing pains” in their operations. Crew shortages, poor quality training programs for pilots and cabin crew, and a lack of important software that can improve safety were found in some of these airlines, among other problems.

Any safety issues are always extremely worrying. However, despite all these concerns, the airlines of India are still some of the safest in the world. The fact that the regulator is being vigilant enough to ensure that these problems don’t become too severe is an extremely good sign.

Tune in tomorrow for a closer analysis of Kingfisher Airlines’ financial problems.