Mahindra's Rs 270 cr deal with Orbit raises eyebrows
Record year, but Microsoft stock needs some fresh air

Corporate Jul 18, 2011

Don’t screw up on this one, Air India

By Cuckoo Paul

Even as the Air India top brass is in Delhi making a pitch with the government for a Rs 8,000 crore equity infusion to keep it afloat this year, Chairman Arvind Jadhav's agenda for the day includes another equally critical meeting that could make a huge difference to the airline's cash flows. This one involves a majorly agitated team from Star Alliance, a grouping of 27 carriers, that Air India has been scheduled to join for the past four years.

The Indian carrier is still in the process of fulfilling the conditions needed to join the group. Earlier this year, Star Alliance CEO Jaan Albrecht had set 31 July as the deadline to fulfill these requirements - mainly dealing with IT integration, failing which the invitation to join would be withdrawn.

"We cannot extend this deadline anymore. One day there must be a final point,'' he had said. The Indian sub-continent, one of the fastest growing travel markets in the world, is a big gap for the alliance, which has airline members that cover most of the globe.

Air India

One of the most painful fallouts of the airline's recent stumbles has been a drop in its load factors. The network that carried around 32,000 passengers daily a year ago, now manages to book only about 26,000 - and even those at lower fares. Vivek Prakash/Reuters

Entering the alliance would open up Air India's inventory for sale to 27 airlines around the world. They could book their passengers for travel on the Indian carrier's extensive domestic network, as well as its international connections.

One of the most painful fallouts of the airline's recent stumbles has been a drop in its load factors. The network that carried around 32,000 passengers daily a year ago, now manages to book only about 26,000 - and even those at lower fares. In a meeting with the unions last fortnight, Jadhav focused on the impact of negative publicity on the airline's bookings. Joining Star will boost load factors and would consequently improve the airline's cashflows.

Like for most things to do with Air India, there is a sub-text to the delay in joining the Star Alliance. And this has to do with Jet Airways making a pitch for membership. One theory doing the rounds is that Air India is being deliberately held back and the privately-owned airline will be allowed to get the better of its public sector rival. Jet is in the running for membership into the alliance. But, Star Alliance sources say, it is possible to have two carriers from one country on its network.

In China, Shenzhen Airlines, signed up last week as a future member. The domestic carrier will be the second Chinese airline in the alliance, after Air China.

It is incredible that in an IT-savvy country like India, the flag carrier's entry into a global alliance should be held up because of IT problems. Joining Star Alliance is certainly not the end of Air India's problems. But it could just give the airline and its employees that tiny ray of hope.

by Cuckoo Paul

Related Stories.