AI's Star dream ends

Jet Airways' prospects of entering the exclusive alliance brighten

Air India’s dream to be a part of the 27-member Star Alliance is over, paving the way for the entry of Jet Airways in the exclusive club. Member-airlines of the world’s largest airline alliance were not able to come to a unanimous decision to allow Air India, whose application had been put on hold earlier.

Entry into the alliance would have given Air India a major boost, as it could have offered seamless travel to customers, the usage of frequent flier points redeemable with any member airline, and connectivity over 193 countries.

Air India has now decided to open talks with rival alliances Sky Team and One World, which are smaller than Star Alliance. Speaking to Business Standard on a wide range of developments in the aviation sector, Civil Aviation Minister Ajit Singh said, “To be part of the alliance, every member has to agree and that has not happened, especially after the pilots’ strike, when we lost a lot of credibility. They have practically said no and have sent us a letter last week. We have asked Air India to look for other options and alliances.”

SINGH-SPEAK

• On AI’s failure to join Star: Every member has to agree and that has not happened, especially after the pilots’ strike, when we lost a lot of credibility 
• On Jet Airways’ case: I think Jet being a private airline cannot be a cause to stop them. It is also a domestic airline and flies with our national flag 
• On bilateral rights: We are asking them (foreign carriers) for their next three-and-a-half-year projections. Only when we have exhausted our own rights will we start negotiating for more 
• On the value of AI’s assets: We have paintings valued at Rs 350 crore and the real estate value could be Rs 5,000-10,000 crore 
• On investment requirement: We need about Rs 70,000 crore of foreign investment for airport infrastructure in five years. The AAI or domestic investors can’t put in that kind of money 
• On new PPP model for airports: A new PPP model is being considered in which the tariffs will be fixed before the bidding and then companies can compete based on who offers the most revenue share

The move will clear the way for Jet Airways, which has applied for government permission to join Star Alliance. “I think Jet being a private airline cannot be a cause to stop them. It is also a domestic airline and flies with our national flag. It is up to Star Alliance to accept them.”

Earlier, Air India had objected to Jet’s entry despite several alliance members having said there could be two airlines from one country.

Singh also explained the cautious approach towards giving foreign carriers more bilateral rights to fly. “We are asking them (foreign carriers) for their next three-and-a-half-year projections. However, only when we have exhausted our own rights will we start negotiating for more rights.”

As part of his efforts to bolster Air India revenues by monetising assets, Singh has received some estimates as to their value. “We have paintings valued at Rs 350 crore and some rough estimates show the real estate value could be anything between Rs 5,000 crore and Rs 10,000 crore,” he said. A committee has been set up to value these assets and it will come out with a final report in two months.

However, Singh admitted to serious challenges for the ailing airline, as an interim report on route rationalisation showed that of 300 routes only three were making money. The airline clocked a Rs 141-crore hotel bill and Rs 11 crore in taxi bills.

Singh is working with the Planning Commission on a new public-private partnership model to get investments in airport infrastructure. “We need about Rs 70,000 crore of foreign investment in five years if we want to develop new airports and the AAI or domestic investors can’t put in that kind of money. A new PPP model is being considered in which the tariffs will be fixed before the bidding and then companies can compete based on who offers the most revenue share,” he said.