2-Aug-2011 9:58 AM

Air India's suspended membership of Star could relate to Jet Airways

Air India's suspended integration into the Star Alliance reportedly came after the Indian Civil Aviation Ministry reportedly refused to sign a no-objection certificate enabling Jet Airways to join the alliance (Live Mint/The Telegraph/Economic Times/PTI/Business Today/The Hindu Business Line/International Herald Tribune/IANS/Wall Street Journal/AFP/Dow Jones, 01/02-Aug-2011). This marks the first time in 14 years that an airline previously extended an invitation has been denied permission to join the alliance. The Civil Aviation Ministry is reportedly planning to write to Star Alliance requesting they reconsider the "unexpected and disappointing" decision. Following the notice of the suspended integration, the following has been said and speculated:

  • Air India response: Air India spokesman Kamaljeet Rattan stated: "They (Star Alliance) just conveyed that our candidature has been put on hold following a meeting of the chief executive's board on Sunday. We have in our possession a letter from the project manager at Star Alliance confirming that we have met all the minimum joining requirements, so we don't know why this decision has been taken." The airline had met the stipulated criteria, barring "a few components" that would be implemented before it joined the alliance, he added;
  • Conditions: Air India has reportedly denied that the airline had not met the conditions prescribed for joining Star Alliance. In the Star Alliance official release, it was stated the suspended integration was due to the fact that Air India has not met the minimum joining conditions that were contractually agreed in Dec-2007. There were at least 87 requirements that Air India needed to meet to join the alliance. Star Alliance chief project Gerhard Girkinger, who has been supervising the integration process with Air India, reportedly wrote to the carrier on 30-Jul-2011 and said that much of the work was “done”. “I can confirm the status of the integration based on the attached spreadsheets. From my perspective, this means we are basically done although I need formal sign-off. All the other components depend on a joining date,” Mr Girkinger reportedly wrote. He has subsequently stated: “Notwithstanding the fact that Air India must have breached our confidentiality agreement with such information, I can confirm the following: The decision to accept compliance to the full set of minimum joining conditions as contractually agreed to in 2007 is not taken/confirmed by a project manager in the Star Alliance Service GmbH responsible for the implementation of a certain set of so-called components";
  • Future chances of joining the alliance: Star Alliance, in its official release, stated there is "room to discuss a potential Alliance membership at a future stage, if deemed appropriate by both parties". However, Star Alliance VP Christian Klick stated "no" extension will be given to the airline to join the grouping;
  • Star Alliance in the Indian market: Star Alliance has reiterated comments that it has "always, in public and in conversations with the government, made it very clear that we believe that because of the importance of the Indian market, it requires more than one local carrier to satisfy the travel demand of the alliance customers. We have the same situation in China or in the US";
  • Jet Airways: Last month, Jet Airways chairman Naresh Goyal​ stated the airline was evaluating both Star Alliance and SkyTeam. Mr Klick stated the alliance has not received a request from Jet Airways but noted: "Because of the importance of the Indian market, we will maintain our options open";
  • Joining fee: It is not immediately clear whether Air India would get back the INR620 million (USD14.1 million) it paid as a joining fee to the alliance;
  • Lufthansa response: Lufthansa, which was mentoring Air India to complete the essential requirements for joining the alliance, stated it "regretted" the decision but stated Lufthansa and Air India will continue to operate more than 300 joint codeshare flights globally;
  • Airline vote: The decision to suspend Air India's formal entry into the Alliance was said to be “jointly” taken by the 27 member airlines. There have been unconfirmed reports that 10 of the 28 member airlines had indicated their opposition to Air India's entry into the alliance prior to the vote on 24-Jul-2011;
  • Importance of alliance for Air India: The alliance membership was a key part to struggling Air India's turnaround plans. The carrier had previously estimated that joining the Star Alliance could add USD335,000 to USD450,000 in revenue per day for the carrier.

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