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Corporate Oct 9, 2012

Govt may arm twist Lufthansa on AI Star Alliance issue

By Sindhu Bhattacharya

A desperate Civil Aviation Ministry may arm twist German carrier Lufthansa AG into mentoring Air India for its entry into the prestigious global airline grouping called Star Alliance.

Civil Aviation minister Ajit Singh said today that "a lot of facilities have been given to Lufthansa to get AI into Star Alliance, we almost made India an open-sky (operation) for them. Now, we will ask them to facilitate AI's entry into Star Alliance".

Lufthansa was one of the founding airlines of the Alliance. Agencies

Lufthansa was one of the founding airlines of the Alliance. Ministry officials confirmed that a meeting has been sought with Lufthansa officials on the issue while alleging that "benefits and rights" were given to the German carrier and this gesture needs to be reciprocated by Lufthansa.

They also hinted at reassessing the permissions granted to Lufthansa network airlines Swiss and Austrian Airlines, which had been earlier acquired by Lufthansa but continue to function under bilateral agreements signed between India and the two respective countries.

Ministry officials say that bilateral conditions specify that only the official airline of a country with which such an agreement has been signed should be flying into India. Since Swiss is not the national airline of Switzerland, permissions could be withdrawn.

Singh's assertions come at a time when the Alliance is already in talks with Jet Airways for membership. The minister made it clear that he won't object to Jet's entry into the Alliance but from all available indications, this would be subject to AI gaining entry. "Our motto is Air India or none as far as Star Alliance is concerned," senior AI officials said.

Last month, AI wrote to Singh seeking support in dealing with Star Alliance and eventually becoming its part. It has also already written a letter to the Alliance itself, explaining why its membership should be considered.

AI's Chairman and MD Rohit Nandan had told Firstpost earlier: "Air India is still looking to join Star Alliance and we feel that they must take us because our performance is better than ever and better than others......we are ready with all formalities and could join tomorrow. We are not looking at joining any other global airline grouping since Star Alliance suits us best."

Last year, AI completed all requirements by July 31 to join the Alliance but the next day, the Alliance issued a press statement saying AI's entry had been suspended for not meeting minimum joining conditions that were contractually agreed in December 2007.

It did not specify where AI had been negligent. This time, AI is presenting the Alliance with its latest performance parameters: On Time Performance (OTP) has reached 85 percent (perhaps the best ever and among the highest in the industry), its cash losses have come down to Rs 38 crore in the June quarter versus Rs 530 crore in the same quarter last year and it turned in a cash profit for the first time in 60 months (5 years) in the month of June at Rs 48 crore. Besides, it load factors (number of occupied seats versus total seats in an aircraft) has crossed the 80 percent mark.

Besides, both AI and Jet have the same rating as per Skytrax (global airline rating agency) of three stars so there is no reason for Jet to get preference over AI in joining theAlliance. Air India was to join Star Alliance last year, but was denied entry when several Alliance members opposed such a move.

Unconfirmed reports had suggested then that the Alliance was keen on taking Jet and had pushed the Civil Aviation Ministry for permission to also take Jet in its fold. Jet Airways has now formally applied to the government for permission to join this Alliance, which counts United Air Lines, Deutsche Lufthansa AG, Singapore Airlines, SWISS and Air China among its members.

Entry into the alliance, if it happens, would have enabled AI to offer seamless travel to customers, the usage of frequent flier points redeemable with any member airline and connectivity over 193 countries. Star Alliance is the largest such airline grouping in the world.

by Sindhu Bhattacharya

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