Never say never? Skyteam turns to hybrids and budget carriers- IndiGo a target

Neelam Mathews

Oct 2, 2012

Once considered a slow mover, Sky Team is going places and finding ways to face challenges of how to increase value since major world carriers are already aligned to alliances. SkyTeam hopes to have a platform finalised in early 2013 and to conduct a trial with a hybrid carrier or LCC, although it is not naming potential partners, says CAPA.

SkyTeam is upfront in saying it is targeting airlines in Brazil and India with this new partnership platform. (This does not come as a surprise as the alliance previously indicated it was looking to expand in Latin America and India), says the report.

In India, IndiGo is the largest domestic carrier and, unlike many others, is healthy. It is not only an obvious target but there have been discussions between IndigGo and SkyTeam, says CAPA. This was ofcourse, till just a couple of years ago, unthinkable!

Top Indian domestic airlines ranked on seat capacity: 24-Sep-2012 to 30-Sep-2012

Rank	Airline		Total seats
1	6E	IndiGo	424,083
2	AI	Air India	311,916
3	SG	SpiceJet	302,454
4	9W	Jet Airways	297,237
5	G8	GoAir	127,260
6	S2	JetLite	103,502
7	IT	Kingfisher Airlines	64,770
8	IX	Air India Express	11,340

Source: CAPA 

IndiGo, however, exhibits towards alliance membership the very concerns SkyTeam hopes to overcome with its new platform. Cost and complexity of alliance membership are key concerns for IndiGo. Some 93% of IndiGo's seats are in the domestic Indian market, which is the attraction for SkyTeam…..IndiGo will be careful to ensure SkyTeam affiliation is not limiting. With an approximately 7% share of the Indian market, SkyTeam is the smallest of the alliances in India. Before any affiliation is reached, IndiGo will want to ensure the standing of SkyTeam's willingness for it to partner with non-SkyTeam carriers in order to gain greater international access, says CAPA.

International scheduled capacity share (% of seats) to India by alliance affiliation: 24-Sep-2012 to 30-Sep-2012

Depending on the outcome of the trial, SkyTeam would consider expanding the platform. The cornerstone of the platform will be IT integration, the backbone of an alliance. SkyTeam is not restricting partners to certain booking systems but the potential partner must be able to establish an interface with SkyTeam.

In India, where 75% of domestic seats are sold by hybrid and budget  carriers, this totally makes sense.

“The hybrid option would allow carriers the benefits of alignment without full membership costs, which the lean carriers may be unwilling to invest in, or rules, which could limit partnerships with outside carriers, many of whom will be targeting the LCCs and hybrids for their often powerful domestic market share. For SkyTeam, giving flexibility allows affiliation with carriers that would otherwise shy away from marketing alliances, increasing value at SkyTeam in a very quickly changing world, says CAPA.

Unaligned carriers in the top 50 based on seat capacity: 24-Sep-2012 to 30-Sep-2012- Note-Indigo (45)and Air India (48)

Rank in Top 50	Airline		Total seats
3	WN	Southwest Airlines	2,963,545
5	FR	Ryanair	2,170,854
11	U2	easyJet	1,420,842
17	EK	Emirates	991,494
18	G3	Gol	981,695
22	JT	Lion Air	792,018
26	B6	JetBlue Airways	635,600
30	AS	Alaska Airlines	602,804
34	HU	Hainan Airlines	543,167
35	DY	Norwegian Air Shuttle	528,506
37	DJ	Virgin Australia	498,950
39	FL	AirTran	486,210
42	AK	AirAsia	474,840
43	QR	Qatar Airways	470,796
45	6E	IndiGo	455,939
46	VY	Vueling Airlines	455,616
47	JQ	Jetstar Airways	447,462
48	AI	Air India	429,660

SkyTeam members- Video