Kingfisher to join oneworld in Feb-2012 becoming first alliance-affiliated carrier in India/SAARC


Kingfisher Airlines will become part of oneworld from 10-Feb-2012, becoming the first carrier from the Indian subcontinent to join any of the global airline alliances. Air India's application to become a member of the Star Alliance was rejected at the end of Jul-2011 while Jet Airways is yet to announce its alliance plans but is said to be in discussions with both Star Alliance and SkyTeam (SkyTeam is reportedly in discussions with a number of Indian airlines, including LCCs). Kingfisher Airlines will also be the first of three airlines to join oneworld in 2012, in its largest membership expansion drive for five years, with airberlin set to follow shortly after Kingfisher and Malaysia Airlines joining later in the year.

Joining oneworld will give Kingfisher Airlines, currently facing considering financial pressures, global visibility, brand awareness and scope to improve revenue. According to reports in The Business Standard, Kingfisher is expecting at least a 5% increase in revenue through codeshare agreements with partner airlines. There will also be cost savings through common use of inventories and joint purchases. oneworld's continued confidence in the struggling carrier is also a positive boost for the carrier, which has significantly reduced capacity and is currently seeking INR6.7 billion (USD127 million) in short-term working loans.

  • Kingfisher Airlines becomes the first carrier from the Indian subcontinent to join a global airline alliance, oneworld.
  • Joining oneworld will provide Kingfisher Airlines with global visibility, brand awareness, and revenue improvement opportunities.
  • Kingfisher Airlines' network will add over 40 Indian destinations to the oneworld alliance network.
  • The addition of Kingfisher Airlines will increase oneworld's presence in India, making it the dominant alliance in the country.
  • Kingfisher Airlines' financial challenges, including mounting debts and cashflow issues, have prompted the carrier to seek additional working capital from lenders.
  • Joining oneworld will allow Kingfisher Airlines to expand its international network through codeshare agreements, reducing costs and risks.

Commenting on the alliance entry, Kingfisher Airlines chairman Vijay Mallya noted that "becoming part of oneworld will be one of the most significant steps in Kingfisher Airlines' history". He continued: "It will enable us to offer our customers a truly global network served by partners who include some of the best known and most admired airlines in the world, while our King Club frequent flyers will have more opportunities to earn and redeem mileage rewards and enjoy all their other benefits. It will also strengthen us financially, through revenues from passengers transferring to our network from our oneworld partners and the cost reduction opportunities the alliance offers."

Kingfisher network to add more than 40 Indian destinations to oneworld alliance network

Kingfisher's network, currently covering 54 destinations across nine countries, will add more than 40 destinations to the oneworld alliance network, all of them in India, which is the world's second most populous market and forecast to be the world's third largest economy within two decades. Its middle class population is expected to grow tenfold by 2025 to nearly 600 million.

Kingfisher Airlines is currently the fifth largest carrier in the Indian market by system and domestic seats following considerable capacity reductions in the domestic market. The carrier is the ninth largest operating to/from India. Kingfisher Airlines has a very limited international network, comprised of only six Asian destinations - Bangkok Suvarnabhumi, Colombo, Dhaka, Hong Kong, Kathmandu and Singapore Changi; one European destination - London Heathrow; and one Middle Eastern destination - Dubai. Comparatively, Air India operates to 27 international destinations (12 in Asia Pacific, three in Europe, eight in the Middle East and four in North America) with 13 international destinations (four Asia Pacific and nine in the Middle East) served by Air India Express. Jet Airways operates to 24 international destinations (one in Africa, seven in the Asia Pacific plus one through JetLite, three in Europe, 10 in the Middle East and three in North America) while IndiGo operates to five international destinations (three in Asia Pacific and two in the Middle East) and SpiceJet operates to two international destinations (both in the Asia Pacific).

India capacity (seats per week): 19-Dec-2011 to 25-Dec-2011

India capacity (domestic seats per week): 19-Dec-2011 to 25-Dec-2011

India capacity (international seats per week): 19-Dec-2011 to 25-Dec-2011

Kingfisher, which has never reported an annual profit, has seen its market share (by domestic passengers) shrink to third place after it enacted considerable capacity reductions across its network last month. According to former Civil Aviation Minister Vayalar Ravi, 175 of the 418 allotted services approved for Kingfisher Airlines for winter 2011/12 have been cancelled by the carrier.

Seven oneworld carriers serve five Indian gateways

Currently seven of oneworld's established airlines - American Airlines, British Airways, Cathay Pacific, Finnair, Japan Airlines, Qantas and Royal Jordanian - serve five Indian gateways in Delhi, Mumbai, Bangalore, Chennai and Hyderabad. These carriers currently operate around 53,000 weekly seats to/from India, which, based on current Innovata data, will increase to almost 98,000 with the addition of Kingfisher Airlines and Malaysia Airlines to oneworld in 2012, marking an 83% year-on-year increase in weekly capacity (seats).

International traffic capacity (seats) to/from India by oneworld alliance existing
and future members: 19-Dec-2011 to 25-Dec-2011



Total seats


Kingfisher Airlines



British Airways



Cathay Pacific



Malaysia Airlines



American Airlines



Japan Airlines



Royal Jordanian






Qantas Airways


The addition of Kingfisher will extend oneworld's global coverage to nearly 800 destinations in almost 150 countries, served by a total of almost 8500 departures per day operated by a combined fleet of more than 2250 aircraft, carrying 305 million passengers per year, with annual revenues of USD94 billion. With the future additions of airberlin and Malaysia Airlines, the oneworld network will expand to more than 850 destinations.

Kingfisher Airlines completed 'extensive' readiness programme to join alliance

Kingfisher Airlines was invited to join oneworld in June 2010 after gaining approval from India's Civil Aviation Ministry to become part of the alliance. British Airways sponsored Kingfisher's entry into the alliance.

Kingfisher Airlines received its green light to board oneworld this week after successfully completing a thorough review of its readiness conducted by British Airways with the oneworld central team. Kingfisher Airlines stated its alliance implementation programme has represented "one of the most extensive projects in its history", with working groups covering around 35 streams of activity. Projects are nearing completion to bring Kingfisher Airlines' various internal processes and procedures into line with the alliance's requirements, and extensive employee training and communications programmes are now underway at Kingfisher Airlines and the alliance's existing members.

When Kingfisher Airlines joins, members of its King Club frequent flyer programme (FFP) will be able to earn and redeem mileage awards on all oneworld partners - American Airlines, British Airways, Cathay Pacific Airways, Finnair, Iberia, Japan Airlines, LAN Airlines, Malév Hungarian Airlines, Qantas, Royal Jordanian, S7 Airlines and almost 20 affiliated airlines. FFP reciprocity between Kingfisher Airlines and LAN will be implemented shortly after Kingfisher Airlines joins oneworld due to LAN's impending migration of its main information technology platform.

oneworld to become only alliance with considerable presence in India market

By joining the oneworld alliance, Kingfisher Airlines will significantly increase the alliance's presence in India, where capacity is largely operated by unaligned carriers at present. oneworld will have a 10.7% presence in the market, based on current capacity figures, from Feb-2012. At present, Star Alliance has a 4.9% capacity share, with oneworld having a smaller 2.0% capacity share and SkyTeam having a 1.5% capacity share.

India total capacity (seats) share (%) by alliance: 19-Dec-2011 to 25-Dec-2011



With Kingfisher joining the alliance, oneworld will gain a major boost in its presence at India's major airports. Over 90% of total capacity at India's five largest airports (by seats) - Delhi, Mumbai, Chennai, Bengaluru and Kolkata international airports - is deployed by carriers which are not aligned to any alliances at present.

Kingfisher is currently the fifth largest carrier at Delhi, with a 9.7% capacity share behind Air India (22.6%), IndiGo (14.0%), Jet Airways (12.5%) and SpiceJet (12.1%). Kingfisher operates 15.8% of the peak time aircraft movements at the nation's largest airport behind Air India (18.6%). Kingfisher's entry into oneworld will boost oneworld's presence at Delhi from 2.2% to 13.0% of total capacity, based on Innovata capacity data for the current week.

Delhi Indira Gandhi International Airport total capacity (seats) share (%) by alliance: 19-Dec-2011 to 25-Dec-2011



In Mumbai, India's second largest airport, Kingfisher Airlines is the third largest carrier with a 10.9% capacity share, behind Jet Airways (24.3%) and Air India (18.6%). It operates 14.1% of the peak time aircraft movements. oneworld will hold a 13.5% capacity share at the airport upon the entry of Kingfisher Airlines into the alliance, up from only 2.0% at present.

Mumbai International total capacity (seats) share (%) by alliance: 19-Dec-2011 to 25-Dec-2011



At Chennai Airport, Kingfisher Airlines is the fifth largest carrier by system capacity, with an 8.5% capacity share and 10.4% of total peak slots. Only two alliances have a presence in Chennai at present, with Star Alliance holding a 3.6% capacity share and oneworld holding a 1.4% capacity. With new alliance entrants in 2012, oneworld will hold a 10.8% capacity share, with Star's presence increasing to 3.6%.

Chennai International Airport total capacity (seats) share (%) by alliance: Sep-2011



At Bengaluru International Airport, Kingfisher holds a 14.4% capacity share, making it the third largest operator at the airport behind IndiGo (17.2%) and Jet Airways (15.9%). Kingfisher Airlines has a 14.3% share of peak time aircraft movements at the airport. Following new alliance entries in 2012, oneworld will hold a 16.4% capacity share at Bengaluru next year, up from 4.0% at present, with Star to have the next largest presence, with a 4.0% capacity share.

Bengaluru International Airport total capacity (seats) share (%) by alliance: Sep-2011



At Kolkata, Kingfisher Airlines is the sixth largest carrier, with a 4.1% capacity share and 11.5% of peak time aircraft movements. oneworld will hold a 9.1% capacity presence at the airport with its membership additions in 2012.

Kolkata International Airport total capacity (seats) share (%) by alliance: Sep-2011



oneworld will take over from Star Alliance as dominant alliance in South Asia but will remain smaller alliance in Asia Pacific market

In the wider South Asia region, oneworld will take over from Star Alliance as the dominant alliance in the region, with a 9.1% capacity share, ahead of Star with a 5.1% capacity share. The region, however, remains largely unaligned, with 84% of total capacity being operated by carriers unaffiliated with any of the major airline alliances.

South Asia total capacity (seats) share (%) by alliance: Sep-2011



In the wider Asia Pacific market, oneworld will remain the smallest of the three major alliances, although its capacity share will increase from 9.2% at present to around 11.8% in the future, based on current capacity data.

Asia Pacific total capacity (seats) share (%) by alliance: Sep-2011



Alliance development good news at a challenging time for Kingfisher Airlines

The alliance membership is a piece of good news in what has been a challenging few months for Kingfisher Airlines. The carrier, in Nov-2011, reported a steep loss in the fiscal second quarter, with the carrier last month forced to dismiss speculation of a potential collapse of the carrier. The problems at Kingfisher Airlines, an airline which has never reported an annual profit, are reflective of the difficulties facing the entire Indian airline industry, with most carriers struggling to operate profitably in the Indian market.

Kingfisher is facing mounting debts of around INR60 billion (USD1.23 billion) maturing over the next nine years and a cashflow crunch which has prompted the Directorate General of Civil Aviation (DGCA) to conduct a financial review of the carrier. Meanwhile, the carrier's share price has slumped 67% since the beginning of 2011, reducing its market value to around USD202 million. The carrier's financial challenges are also impacting its daily operations. Kingfisher has shut down pilot and cabin crew bases in a number of cities, reportedly grounded around 15 aircraft of its 66 aircraft fleet, and has seen 130 pilots leave the airline in the past few months, amid a background of salary payment deferrals.

See related article: Woes continue for Kingfisher Airlines amid steep losses and unviable debt burden

The carrier is currently seeking additional working capital from its lenders. State Bank of India chairman Pratip Chaudhuri this week reiterated the lenders to Kingfisher Airlines are "trying to help Kingfisher" and are open to extending further loans to the carrier. He noted "everything is on the table" regarding options for further lending. Meanwhile, reports have indicated the carrier's lenders are awaiting a report on the airline's viability before they approve a INR6.7 billion (USD127 million) loan. SBI Capital Markets Ltd, a unit of State Bank of India, has been hired by the lenders' consortium to draft a report on the carrier's financial outlook. The banks have reportedly requested SBI Capital to work "expeditiously" on developing the report. A 13-bank consortium has a total exposure of nearly around INR70 billion (USD1.3 billion) in Kingfisher Airlines. Lender-banks include ICICI Bank, Axis Bank, IDBI Bank, Punjab National Bank, Bank of Baroda, Bank of India, UCO Bank, Oriental Bank of Commerce and State Bank of Mysore. Meanwhile, the Times of India last week reported that Indian conglomerate Sahara could provide a loan of more than INR2.5 billion (USD47.4 million) to Kingfisher Airlines.

The carrier earlier this month pledged assets including its brand, a luxury villa in Goa, two helicopters, a building in Mumbai, office furniture and fixtures, and shares as collateral for bank loans of up to INR64.2 billion (USD1.2 billion) as of 30-Nov-2011. Vijay Mallya has provided a personal guarantee for INR2.5 billion (USD47.8 million), and pledged shares as security against loans taken from various lenders. United Breweries Holdings has provided a corporate guarantee of INR16.0 billion (USD308 million).

Meanwhile, the carrier has also been put on a cash and carry basis by Mumbai International Airport Ltd (MIAL) from 03-Dec-2011. Kingfisher Airlines has reportedly defaulted on payments to MIAL for the past six months and owes around INR900 million (USD17.5 million). Airports Authority of India (AAI) has also reportedly issued a notice to Kingfisher Airlines, placing the carrier on a cash and carry basis from 01-Dec-2011 due to its continued non-payment of dues. The carrier's debt to AAI reportedly stands at over INR2.4 billion (USD46.6 million). There have also been reports the carrier had failed to pay its interest dues to lenders by 30-Nov-2011. The carrier also owes money to state-owned fuel suppliers in the three months ended 30-Sep-2011. The carrier's bank accounts were also frozen by the Service Tax Department earlier this month for lack of payment of the service tax for the Apr-2011 to Aug-2011 period, amounting to a combined INR2.2 billion (USD346 million). The bank accounts were subsequently de-freezed following part-payment of their service tax dues.

Kingfisher to give oneworld access to domestic market; oneworld to provide Kingfisher with international network

Joining a global alliance will give struggling Kingfisher the ability to expand its international network - which remains limited to only eight destinations - through codeshare operations, reducing the costs and risk involved in launching new international services with its own metal. This, combined with cost reduction benefits, will help Kingfisher strengthen its competitive offering and its financial position. Simultaneously, oneworld will become the first airline alliance grouping with a presence in the fastest growing domestic aviation market in the world.

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