Booster shot: Air India joins Star Alliance; eyes 5% revenue growth from premium passengers

Written by fe Bureau | New Delhi | Updated: Jun 25 2014, 02:31am hrs
Air-IndiaThe member airlines of Star Alliance together own a total of 4,338 aircraft and fly over 640 million passengers a year.
In a move that is expected to speed up Air India's (AI) drive towards profitability, the state-run carrier has formally joined the world's largest airline partnership, Star Alliance. A culmination of seven years of talks, the decision to include Air India into the exclusive Star Alliance network was taken after 26 Star member carriers voted in favour of Air India at a meeting of its Chief Executive Board held in London late on Monday.

Air India now expects 4-5% revenue growth on the back of passenger additions from partner airlines especially in the premium 'business' and 'first class' categories. The benefits will start pouring in from July 11th when both AI and Star member passengers will be able to book tickets through an integrated systems and avail frequent flyer miles across the common network. With a fleet of 4,338 aircraft across its members, Star Alliance offers more than 18,000 daily flights to 1,293 airports in 193 countries.

Aviation as a sector is nowhere near its potential, so we are working on measures to improve the industry's financials and guarantee better services for passengers, union civil aviation minister Ashok Gajapathi Raju Pusapathi said.

Asked if a decision on AI's privatisation has been taken, the minister added, There is no decision yet, but we have discussed the condition of the airline with the Prime Minister.

Rohit Nandan, Air India's CMD said that the integration of frequent flyer programmes and booking systems with Star member carriers has already been done, and the next step is to take it further with code-share and interline agreements. As part of our marketing exercise, we will paint an Airbus A320 aircraft in the Star Alliance logo and livery. By October-November, we will also paint a Boeing B787 Dreamliner in the same livery, he said.

Established by five carriers, US-based United, Lufthansa, Air Canada, Scandinavian and Thai in 1997, Star Alliance today also includes other major carriers like Singapore, Swiss, Austrian, All Nippon Airways, Air China and Turkish Airlines. Currently 13 Star members operate to 10 destinations in India, accounting for a 13% market share of international traffic, which with AI will increase to 30%.

Air India, which recorded a loss of over Rs 5,000 crore in FY14 and has liabilities of about Rs 40,000 crore, expects major cost savings from the Star Alliance integration like common fuel purchases and sharing ground handling staff at certain airports. Brand association with a premium alliance is expected to have its own rub-off benefits, while addition of new destinations and passengers from Star partners will help revenue growth and improve load factors. Members of AI's 'Flying Returns' frequent flyer programme will now be able to earn and burn miles across Star member's network, while all passengers will face reduced waiting time at airports and get connections to far more destinations than previously possible.

We will restructure our operations to match the members' networks. In certain international routes we may look to only complement our members' flights by providing onwards connections, in others we may chose to keep our flights alongside, another AI official said.

Air India, which connect 33 international and 50 domestic destinations, operates a fleet of Boeing B777, B747, B787 and Airbus A330 wide-body aircraft, besides Airbus A321, A320 and A319 narrow-body aircraft.

For Passengers

* New destinations on single ticket; 1,293 airports in 193 countries with alliance partners

* Access to over 1,000 Star partner lounges for premium AI passengers

* Frequent Flyer Programme integration with Star members

* Optimised connections lead to lower waiting time

For Air India

* Target revenue growth of 4-5% largely from partner airlines' business travellers

* Cost savings on bulk fuel buys, common ground handling, cheaper seats etc

* Star brand association to have rub-off benefits

* Upcoming code share pacts with Star members will lead to passenger growth