Aviation Week & Space Technology Mar 01 , 2010 , p. 41
Oneworld makes another strategic gain with Kingfisher signing
Printed headline: Indian Expansion
The Oneworld alliance will fill one of the largest gaps in its network with the addition of India’s Kingfisher Airlines, increasing member carriers’ access to a market with huge growth potential.
The Kingfisher announcement is the latest in a flurry of big wins for Oneworld, helping the alliance emerge from a period of turbulence stronger than ever. In the space of three weeks the alliance has forestalled a defection by Japan Airlines, won initial regulatory approval for closer transatlantic ties, and now unveiled a strategic membership move.
A Kingfisher A321 prepares for takeoff at Mumbai . The carrier is set to join the Oneworld alliance next year. Credit: JOEPRIESAVIATION.NET
Kingfisher is expected to officially join Oneworld next year. The carrier has signed a memorandum of understanding as its first step toward joining the alliance, and a more specific entry date will be confirmed once Kingfisher has gained approval from India’s civil aviation ministry.
Oneworld has made no secret of the fact that it wanted to add an airline in India, and last summer the alliance confirmed it was talking to both Kingfisher and Jet Airways. Discussions with Kingfisher started moving more quickly since then, says Oneworld Managing Partner John McCulloch. Meanwhile, Jet has moved closer to the Star Alliance, which is already in the process of adding Air India as a member.
Kingfisher has an extensive domestic network , with a 21% share of this market. The airline claims to carry more domestic passengers than any other , with the highest number of daily departures.
The Indian carrier has a relatively small international network, so there is little overlap with the other Oneworld airlines. However, it does have two London routes where it competes with British Airways, as well as two Hong Kong routes that are also served by Cathay Pacific. Kingfisher has five Airbus A380s and five A350s on order, but was forced to defer deliveries to 2014. McCulloch says Kingfisher’s plans for new international routes align well with Oneworld’s needs.
The obvious benefit for Oneworld is increased feed to its main Indian gateways, says Craig Jenks, who heads New York-based Airline/Airport Projects. “This is a market of more than one billion people, with far more important regional centers than British Airways can serve non-stop from London—let alone American Airlines from the U.S.” Kingfisher’s long-haul operation is less important to Oneworld as the international connections will be mainly provided by the alliance partners, Jenks says.
Some of the significant markets Kingfisher would provide access to are Kolkata (formerly Calcutta), Ahmedabad and Kochi. Jenks also notes that nearby international markets within range of Kingfisher’s Airbus A320s also fit in this category, such as Dhaka, Kathmandu and Colombo. BA used to serve Kolkata and Dhaka before eliminating those routes last year.
Joining the alliance will also help Kingfisher tap into more international traffic. “Becoming part of Oneworld would be one of our most significant steps so far . . . . It will strengthen us financially through revenues from passengers transferring to our network from our Oneworld partners,” says Kingfisher Chairman and Chief Executive Vijay Mallya. He also stresses the cost-reduction opportunities the alliance offers.
BA will act as Kingfisher’s sponsor during the membership process. The U.K. carrier was one of the main drivers behind the addition , as it sees Kingfisher as an important part of its strategy in that region, says McCulloch.
BA is also believed to be in talks with Kingfisher regarding a code-share agreement. Although BA would not confirm this, an airline official says, “we look forward to welcoming Kingfisher into Oneworld, as India is a key market for us.”
Kingfisher currently does not code-share with any Oneworld members, although some Oneworld carriers do have relationships with Jet Airways. It is not yet clear how many of the Oneworld carriers will seek code-shares with Kingfisher. There is “a lot of sorting out to do” on the code-share issue, McCulloch notes.
Meanwhile, the alliance is still looking to add a member in mainland China, and is still in discussions with China Eastern Airlines. Brazil is the other market Oneworld is interested in, although the situation there is less clear, says McCulloch.
Despite the recent wins on several fronts, Oneworld is far from sitting back. McCulloch says the alliance will still be pushing hard to fill its remaining gaps, and he would not rule out another announcement this year.
Oneworld’s recent battles to keep JAL and to win regulatory approval for a transatlantic joint venture have been a reminder that “alliance relationships are more important than ever,” says McCulloch. Airlines in general are “seeing the value of the whole [alliance network] rather than their individual bit of it.” The recent industry downturn also “brought this [fact] home more strongly than ever,” he says.