The media was abuzz with news of an impending alliance between Jet Airways and Kingfisher Airlines on Monday, as Indian carriers continue to wrestle with mounting losses on account of high fuel costs and dwindling passenger loads, especially on slowdown-hit US and UK routes.
Sources on Monday said both airlines have agreed to complement each other’s services through a code-sharing agreement, shared frequent-flier programme, and ground handling services. However, neither airline would officially confirm Monday?s meeting between Naresh Goyal and Vijay Mallya, promoters of Jet and Kingfisher, respectively, nor any alliance between them at the time this paper went to press.
Kingfisher Airlines shares on Monday rose by 33% to close at Rs 51.35 on the BSE, while Jet Airways shares posted a 11.12% rise to close at Rs 291.80.
Earlier, TV reports said Goyal and Mallya were closeted in a meeting at the Jet Airways headquarters in Mumbai, sparking speculation that an alliance was brewing between them. Some reports even speculated upon a merger between the airlines, given their deep losses on domestic and international routes?a situation that is unlikely to change soon. However, none of these reports could be independently confirmed.
Both airlines are understood to be each incurring an estimated loss of up to Rs 10 crore a day. One analyst from a Mumbai-based brokerage firm said, ?Essentially, the move, if true, would help the airlines bargain better with oil companies. Oil firms have asked airline companies to clear their aviation turbine fuel (ATF) dues by October 22.?
The three public sector oil companies?Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation?previously supplied ATF to airlines on credit. But now, as airlines are unable to clear their outstanding dues, the oil companies may be constrained to supply ATF on a cash-and-carry basis.
Also, both the airlines have not been doing well on international routes due to the global economic slowdown, and are revaluating the launch of new route. Both airlines (the Jet-JetLite and Kingfisher-Deccan combines) together have a fleet of 150 aircraft and 25,000 employees.
?The tie-up will help the airlines trim their operating costs to nearly 40% by sharing ground handling services, and code sharing will bring in more passengers,? the analyst said, adding that the airlines could make a consolidated presence at the Hyderabad Air Show which commences on Wednesday. Also, the tie-up could reposition them better vis-?-vis low-cost carriers like Indigo and SpiceJet.
Meanwhile, according to PTI, sources ruled out a merger possibility between the airlines at this juncture. Such a scenario might be considered at a future time amid speculation that Mallya would merge his company with Jet only if he gets a piece in Jet?s holding company, Tailwind.
The two airlines, which have a combined marketshare of close to 60%, have been doing everything possible to cut their losses. In fact, Kingfisher has already downsized its fleet. Mallya has sought permission to import ATF directly.
