Air India may lose additional revenue from Star Alliance if EU downgrades DGCA: Experts

Written by fe Bureau | Mumbai | Updated: Feb 4 2014, 17:56pm hrs
Air IndiaAt present 28 airlines including Air India are part of Star Alliance.
Air India's hope of joining the Star Alliance this summer could get adversely affected if safety regulators in European Union (EASA), Singapore (CAAS), Japan (CAB), UAE (GCAA) and others follow the move of US regulator FAA of downgrading India's safety ranking to category 2 from category 1.

A member with the national carrier's team that pitched for the airline to become a member of the Star Alliance said Air India's entry into the alliance could see additional passenger revenue of anywhere between Rs 150 crore to Rs 400 crore, as per conservative estimates of the airline. An industry expert however said that since the FAA downgrades were done according to the International Civil Aviation Organization (ICAO) Regulations, a specialised agency of the UN, a move by other regulatory bodies especially from European Union could hurt the national carrier's capacity to raise additional revenues by being a member of Star Alliance.

At present 28 airlines are part of Star Alliance. Among these, 11 airlines hail from Europe, 7 from Asia, 6 from North and South America, 3 from Africa and one from New Zealand. After entering the Star Alliance, Air India is set to make money through code share with European airlines. But the moment EASA downgrades DGCA, no European carrier would enter into a code sharing agreement with the national carrier, the expert said.

We will have to wait and see whether the regulators from other countries downgrade DGCA or not. This would be a political move as many of the countries, who could potentially downgrade DGCA for failing to comply by the ICAO regulations, want more market access and bilateral ties with India. So we will be in a bargaining position and decisions by other regulators to downgrade us will be taken after a lot of considerations, he added.

A former executive director with Air India also acknowledged that if the European Union decides to downgrade DGCA, the future plans to code share with European airlines would be affected.

There is no bar of having code sharing agreement with European carriers now. But, if European Union decides to downgrade DGCA, this wouldn't be the case anymore, he added.

Safety regulators in EU (EASA), Singapore (CAAS), Japan (CAB), UAE (GCAA) may follow suit. This puts paid to Air Indias likely membership of the Star Alliance, added Amber Dubey, Partner and Head - Aerospace and Defence at global consultancy KPMG.

The official mentioned above, who's a part Air India's team which pitched for a position in Star Alliance, however, said that currently the national carriers plans to enter Star Alliance, are going according to plan. "Air India is currently working on integrating its processes with those of Star Alliance members. And we are hopeful that this integration should be completed by summer this year, the official added.

An entry into Star Alliance means Air India could capitalize on frequent flyer mileage points, code sharing which would lead to a wider choice of flights and access to facilities at over 1,000 lounges worldwide for its passengers. The Star Alliance network currently offers 21,900 daily flights to 1328 airports in 195 countries.

Four regulators that FE got in touch with EASA(European Union), CAAS (Singapore), CAB(Japan) (CAB), and GCAA (UAE) were not available for comment. Emails sent to them were not answered.

However, The EU Air Safety Committee is set to study the issue (DGCA downgrade) at its next meeting in March, Bloomberg reported on Monday.

Meanwhile, aviation minister Ajit Singh at a recent conference said he is hopeful of DGCA regaining its Category 1 status by March.

"We are hopeful that when we complete the training of the inspection officers by March, the FAA will review this. As soon as it is established that we have met all the requirements, India can regain its position, Singh said at a press conference last Friday.