Air India likely to join Star Alliance within next six months - Livemint

Air India is already aligned to Star Alliance by way of its information technology systems and will need to align nearly 75 "core values" related to passenger services. Photo: Bloomberg

New Delhi: India's flag carrier Air India Ltd, which was stopped from joining the prestigious airline grouping Star Alliance in 2011, was on Friday re-invited and may join it within six months, a top Air India executive said.

Star Alliance's offer to Air India comes at a time when Etihad Airways PJSC of the United Arab Emirates (UAE) is buying a stake in Jet Airways (India) Ltd and Tata Sons Ltd is launching a new airline with Singapore Airlines Ltd.

Star Alliance suspended the invitation for Air India to join it in 2011, claiming the flag carrier was unprepared. Air India denied the charge—in fact, Air India had been merged with Indian Airlines in 2007 and was, therefore, thought to be a better fit to join Star Alliance.

The talks were revived a year back, involving a team led by Air India chairman Rohit Nandan, commercial director Pankaj Srivastava and former commercial director Deepak Brara, who had been given charge as officer on special duty for the Star Alliance project after his retirement in September.

On Friday, the 28-airline board of Star Alliance met in Vienna and voted to re-invite Air India, chairman Nandan said in a phone interview.

"We have been engaged with Star for the last one year. Now it has come to that level when it is a unanimous vote in our favour," Nandan said after the vote, referring to the several one-on-one meetings Air India has had with Star Alliance member airline chief executive officers (CEOs) over the past few months to lobby its case.

"The reception was very nice, very supportive, across the airlines," Nandan added.

Joining Star Alliance means Air India passengers will be able to use Star's facilities like airport lounges, fly on a network of 21,900 daily flights to 1,328 airports in 195 countries and redeem air miles on airlines such as Lufthansa, Singapore Airlines, Air China Ltd, Air Canada, United Airlines Inc., US Airways, TAM Airlines, Turkish Airlines and Thai Airways.

Air India is already aligned to Star Alliance by way of its information technology systems and will need to align nearly 75 "core values" related to passenger services.

"This is a two-stage process," said Nandan. "First is the in-principle approval from the board, which we won today (on Friday), and now we have to complete the joining formalities."

Nandan said he was very "confident" there will be no repeat of the earlier fiasco when Air India took four years to complete the formalities because of the pending merger.

To a question whether it would take six months for Air India to join Star Alliance as the next Star board meeting is expected in June, he said, "We would like to work on a much shorter time frame."

Nandan said the advantages to the passenger will start flowing in immediately after the integration process is over. "The network becomes bigger, passengers would get better facilities through frequent flier programmes as the membership increases. I think it's a win-win for both of us," he added.

Star Alliance spokesman Markus Ruediger said he had "no details on the timelines" at the moment.

"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, Star Alliance CEO, in a statement released from Vienna. "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."

Schwab praised Air India for stabilizing and completing a tough merger process.

"The market in India is now showing signs of stabilization. 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.

Star's worries about India grew after the government allowed foreign airlines to buy stakes in Indian airlines in September last year.

Nearly 37 million international passengers travel to and from India annually. Indian airlines, including Air India and Jet Airways have a 33% share of this international traffic, while 17% is with West Asian airlines such as Emirates, Qatar Airways, Etihad and Air Arabia.

Star Alliance has only a 13% share, while rivals OneWorld and SkyTeam have 8% each. The rest is with other international airlines that are not members of these groupings, Mint had reported on 28 August citing an internal presentation discussed by Star in its June board meeting.

The challenges that were discussed at the June meeting included Jet Airways' closeness to Etihad, which would now route more India traffic through Abu Dhabi, Qatar Airways joining rival alliance OneWorld, and AirAsia Bhd launching an Indian unit.

Since then Tata Sons has announced that it will launch an airline with Singapore Airlines, a move that could divert traffic to the US and South-East Asia through Singapore, posing more challenges for leading Star carrier Lufthansa.

Lufthansa will remain the mentor to Air India's entry into Star Alliance, the airline's commercial director Srivastava said on phone from Vienna.

"Star Alliance and Lufthansa in particular are under tremendous pressure from all sides," said a top Star member-airline executive who declined to be named as he is not authorized to comment publicly.

"There is flat or negative growth in their home market Europe. There is pressure from Ryan Air, EasyJet and Norwegian. And now as Gulf carriers have saturated Europe with more than 86 unique destination cities, they are starting to expand into the US—that is starting to create a lot of pressure now on the legacy carriers like Lufthansa. The Air India deal is a reaction to the Eithad-Jet Airways deal. Also, for years, Indian travellers have had really bad service on European carriers. This will change now," the executive added.

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