Crying Foul

Star Members Hobbled By Air India’s Troubles Air Transport

Aviation Week & Space Technology Oct 18 , 2010 , p. 48

Neelam Mathews

Addis Ababa, Ethiopia

Without Air India to help it, Star Alliance loses ground to Middle Eastern carriers in India

Printed headline: Crying Foul

Star Alliance members have been left awaiting the prize of Air India’s entry into their membership and the promise of increased access to the subcontinent that comes with it. The carrier, sponsored by Lufthansa for membership in December 2007, says an ongoing struggle with information technology (IT)-related matters has prompted it to push back its entry into the global airline alliance to summer 2011 instead of the first quarter, as planned. Star’s members want to contain a flood of carriers from the Middle East that already are established in India and have captured traffic bound from there to Europe and the U.S. Air India has been expanding its widebody fleet, including Boeing 777-300ERs, but is stumbling over infotech implementation.Credit: JOEPRIESAVIATION.NET Once devoted only to international services, Air India took on the domestic burdens of Indian Airlines when they merged two years ago. Creating a single IT foundation of the two computer systems has been the main impediment. Without a solid IT infrastructure that can fit seamlessly with Star Alliance’s system, the carrier cannot join its ranks. Meanwhile, Star is seeking a second Indian carrier and has been in discussions with Jet Airways. But this has brought a cold-shoulder response from India’s civil aviation ministry, which made it clear that Air India is to be the first admitted to Star. Presumably, that will assure it first-mover advantage. “We respect the ministry’s decision and have been in conversation with them,” Star Alliance CEO Jaan Albrecht commented here after the airline group announced this month that Ethiopian Airlines will join Star within 12-18 months. That was the kind of schedule Air India was expected to achieve when its invitation to join was proffered nearly three years ago. “We knew this integration of Air India into the Star Alliance network was difficult,” says Albrecht. But in the interim, the alliance is eager to gain another member to seize landing opportunities to tap India’s billion-person market. “We want to offer more destinations,” he says. Jet is not new to European services. It code-shares with Brussels Airlines and uses that airline’s home airport as a hub. “We are looking forward to Jet becoming a Star member,” says Brussels Airlines Co-CEO Bernard Gustin. “We carry 400-500 passengers [from] Jet every day to Europe.” But he notes that his airline does not have an exclusive arrangement with Jet, so it also wants to work with Air India to expand European/African connections. “We believe a code-share can capture some of the market connecting from India via the Middle East to Africa from Brussels,” he says. Jet code-shares with four Star members and plans to use one, United Airlines, to reach the U.S. from two directions. United already provides it with code-shares for transatlantic passengers on flights from London to Chicago, Denver, Los Angeles, San Francisco and Washington. And Jet has plans for United code-shares originating from Hong Kong for Chicago and San Francisco. In return, United puts its code on Jet’s London-Mumbai, Hong Kong-New Delhi and Hong Kong-Mumbai sectors. The U.S. carrier also uses code-shares with Jet to reach five Indian destinations—Ahmadabad, Bangalore, Goa, Hyderabad and Kolkata—via Mumbai. Meanwhile, Lufthansa, which has long pursued the Indian market, views its partnership with Air India as a line of attack against Gulf carriers that are eroding market share in India for European airlines. Its complaint is that these carriers are using bargain-basement prices to lure U.S. and European-bound passengers from India via Dubai. A lot is at stake. Boeing’s regional outlook forecasts a steady 11% annual growth in capacity for India until 2015. In the next 20 years, the company anticipates demand for 1,700 new aircraft—1,000 of them high-profit widebodies. Looking at projected orderbooks, Lufthansa CEO-designate Christoph Franz sees Middle Eastern carriers taking a major share of the existing market in India. “There is no doubt they are hampering our growth. Companies like Emirates have been granted enormous traffic rights” by India, he says. Franz, who will succeed Wolfgang Mayrhuber in January, says it is time for the Indian government to act because Middle Eastern carriers have obtained flight rights from India that distort competition. Franz compares the 290 weekly flights that Air India has from India into the Middle East with the 184 from 10 destinations that Emirates holds and the 84 each of Qatar Airways and Etihad. “It’s no secret that they [Middle East carriers] are looking at replacing Europeans with eastern hubs,” he says, noting that 85% of Dubai’s transfer traffic is to Asia. Passenger traffic between Dubai and India doubled in 2005-09. More than five million Indians traveled through Dubai International Airport last year. Arvind Jadhav, chairman and managing director of the Air India/Indian Airlines holding company Nacil, sees a 15-20% upside in revenues over the next two years from the airline’s decision to make New Delhi a hub. Jadhav is optimistic that India’s flag carrier will see its own fortunes change once it can link up with the Star Alliance’s vast European network. That should happen in March 2011, he says.