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The agreement, which has been struck 20 months after Jet Airways shifted its European hub from Brussels to Amsterdam, signals its alignment with Air France-KLM and their partner airlines, Delta and Virgin Atlantic.
The agreement, referred to as a joint venture, involves the airlines sharing passenger traffic revenue on the India-Amsterdam and India-Paris routes. Cargo revenue will not be shared.
Unlike interline or codeshare agreements, a joint venture follows the principle of metal neutrality. Revenue or profit is shared on a pre-determined basis on select routes and it does not matter which airline flies a passenger.
The agreement will help Jet Airways to effectively deploy its wide-body Boeing 777 aircraft and improve its profitability. It will also help the combine to challenge Gulf carriers and expand its market share in India’s international traffic. “In a joint venture, airlines have an incentive to sell each other’s flights. Essentially, it is the sharing of risks and rewards on particular routes that helps improve profitability,” said an aviation analyst. Jet Airways’ agreement with Air France-KLM is exclusive and both sides are barred from having similar arrangements with other carriers on the routes selected, a source said.
Jet Airways in October introduced flights between Bengaluru and Amsterdam and Chennai and Paris while KLM launched a thrice-weekly flight from Amsterdam to Mumbai. The airlines operate 64 weekly flights from India to Amsterdam and Paris.
A joint group of executives from the airlines will look at various aspects of co-operation. The airlines will explore closer tie-ups in sales and marketing, including common corporate and travel agency contracts.
Lufthansa, United and Air Canada, which have a transatlantic joint venture agreement, have similar common contracts and their executives conduct joint sales campaigns in India. Jet Airways and Air France-KLM did not respond to an email query on the topic.
Joint venture agreements are common among airlines —the first pact was signed between KLM and Northwest Airlines in 1997 — but this will be the first such arrangement for Jet Airways. This will also be its second deep co-operation agreement with an airline after Etihad Airways.
Etihad Airways owns 24 per cent in Jet Airways and the two airlines had entered into a commercial cooperation agreement at the time of the stake purchase in 2013.
Etihad Airways has expressed its displeasure over Jet Airways’ agreement with Air France-KLM as this will result in higher traffic flowing through European airports at the expense of Abu Dhabi.
Etihad Airways declined to comment on the topic.