Jet Airways says Air France-KLM pact won't impact ties with Etihad

Jet Airways has tied up with Air France-KLM (AF-KLM) to capture a larger pie of India's international traffic but will not divorce its ties with equity partner Etihad.

On Wednesday, Jet Airways Chairman Naresh Goyal and AF-KLM group Chief Executive Officer (CEO) Jean-Marc Janaillac signed an enhanced co-operation agreement on routes between India and Europe that will result in cost savings and revenue growth for airlines.

This is the first such extensive revenue share agreement by Jet Airways, and indeed, by any Indian carrier. The agreement involves sharing revenue on India-Europe routes on metal neutrality basis. Revenue is shared among partners and it does not matter who has flown a passenger.

In 12 months until September, over 58 million passengers flew to and from India, and nearly half of them travelled via hubs outside India. Airports in the Gulf, including Dubai and Abu Dhabi, are the biggest hubs for Indian passengers. In Europe, London and Frankfurt take the top positions.

Jet's alliance with AF-KLM and addition of new flights to Amsterdam and Paris will lead to increased traffic flows via these two airports and is thus seen as detrimental to Abu Dhabi.

Jet Airways said that air traffic from India is growing and there is an opportunity for all the carriers to grow their share. Goyal said he is committed to the relationship with Etihad, making a reference to the Hindu marriage tradition of 'saat phere' where a couple takes a vow in presence of a sacred fire. 

“We have a great a relation with Etihad, which will continue and that (relations) will not be disturbed,” Goyal said.

At the same time, the enhanced co-operation with AF-KLM will result in cost synergies and improved revenue for Jet. Customers, too, will benefit from multiple travel options and seamless service throughout the three partner networks spanning 44 cities in India and 106 destinations in Europe. The agreement will complement with AF-KLM's and Delta's partnership giving access to 200 destinations in North America.

At the moment, AF-KLM is not planning an equity investment in Jet Airways. “What is important is that we take right steps at the right time,” KLM CEO Pieter Elbers said.

Jet's CEO Vinay Dube said the partnership with two European airlines will result in increased sales in Europe without having to depute its own sales force. With the addition of new flights in winter schedule, the combined revenue of Jet-AF-KLM on India-Europe routes will grow to $1 billion. 

“Our revenue base will grow faster than the market but it is difficult to give a projection,” Dube said. The combine expects 40 per cent increase in passenger traffic to 1.7 million between India-France-Netherlands in 2018.

Goyal said the airlines will also explore the joint purchase of aviation turbine fuel and co-operation in engineering and maintenance. The two airlines also signed a memorandum of understanding to further tie up in cargo.