Air India Sets Sights on Star

At their board meeting held in Vienna on December 13, 2013, the Chief Executives of the Star Alliance member airlines decided unanimously to recommence the integration process with Air India. The announcement follows over two years since the Indian flag carrier was jilted at the altar following discussions over an arranged Star marriage.

The member airlines of the Star Alliance network and Air India jointly concluded on July 31, 2011 that the integration of Air India into the global airline alliance would be suspended. This was due, it claimed, to the fact that the Indian carrier has not met the minimum joining conditions that were contractually agreed in December 2007. Air India was expected to take up its position as a full member of the airline grouping on August 1, 2011.

Although this brought the future relationship between the alliance and airline into doubt, Star Alliance’s then Chief Executive Officer, Jaan Albrecht, said at the time that Air India’s membership had just been placed on hold to provide the carrier with the flexibility to concentrate on its ongoing reorientation, a process its member carriers “will continue to assist” if required, and that existing bilateral relationships “will remain in place”.

With the Indian market set to continue its rapid growth in the coming years it is an important future playground for the global alliances and Star now feels that now the merger of Air India and Indian Airlines has been completed and now that the carrier is expanding into new long-haul markets, the time is right to resume discussions on alliance entry.

“Star Alliance has long held the opinion that India is such an important aviation market that it should be fully represented in the Alliance,” said Mark Schwab, chief executive officer, Star Alliance. “However the level of change in the domestic market in recent years did not make it easy for an airline to become an alliance member.”

“The market in India is now showing signs of stabilisation. Today we see an Air India which has successfully completed its merger with Indian Airlines and is building up a new fleet that forms the basis for a much improved level of service. This is why we believe the time is now right to recommence the integration process,” he added.

With most international operators only having limited connections to India’s largest cities, domestic links to provincial and regional cities will help alliances to develop connectivity across global markets. There are currently around 1.72 million seats available in the domestic market every week and as the table below shows, IndiGo Airlines is now the largest carrier in this market. Air India is ranked third, behind Jet Airways, while Spicejet and Go Air come third and fourth when ranked by annual seat capacity. However, when you also include the operations of Air India’s low-cost division, Air India Express, its annual domestic capacity rises to 17.24 million seats and share to 19.2 per cent

But, international connectivity is still important and this is where Air India leads the way. As the national carrier of the country it has enjoyed access to all the main markets from the country and currently offers around 90,000 seats per week from India. The transfer of traffic rights on many of its flights into ethnic markets to Air India Express has also boosted its market position. However, Jet Airways, the first of the new breed of independent operators now offers more flights and seats than the mainline Air India business.

A look in more detail at the international market from India shows just how important Air India will be to Star Alliance. Jet Airways, the largest single operator in this market has recently become part of the non-alliance aligned equity partnership of Etihad Airways; number three carrier Emirates Airline currently has no alliance intentions, while number five carrier Qatar Airways has recently joined the rival oneworld grouping.