Air India’s induction into Star Alliance a big boost; but airline not out of the woods 29 Jun, 2014, 1200 hrs IST, Binoy Prabhakar, ET BureauAirline coalitions such as Star Alliance, Oneworld, and SkyTeam enable members to hook up each other with passengers looking for connecting flights and help them fill their planes. Air India is used to floggings by the press. Its communications officers usually call reporters to clarify or deny and, if those tactics dont work, request them to take a lenient view of flight delays, poor service and close shaves by planes. Last week was different.Turns out there was good news: Air India was set to join Star Alliance, the worlds largest partnership of airlines, on July 11. Airline coalitions such as Star Alliance,Oneworld, and SkyTeam enable members to hook up each other with passengers looking for connecting flights and help them fill their planes.Such passengers are typically frequent fliers and business travellers — the moneybags of air travel — who fancy more destinations, faster boarding, access to lounges at more airports and the like.By becoming the 27th member of Star Alliance, which includes carriers such as Lufthansa, Singapore Airlines,Air Canada and United, Air India is looking to coax such passengers to its planes.Given a choice, a passenger would select an airline that has the most codeshares [a seat bought on one airline but operated by a partner airline under a different flight number or code], frequent flyer programmes and destinations. Thanks to Star [Alliance], we will be able to connect to 1,300 destinations around the world. Our passengers can use nearly 1,000 lounges. And miles earned from us can be spent with member airlines, said Rohit Nandan, chairman and managing director, Air India.Sans Star, Air Indias overseas network had ground to a halt. The airline currently flies to 37 overseas destinations. A new flight to Moscow is due to launch on July 18. Zilch, after that. Improved occupancy levels would translate into more revenues, about 5% in the near term and substantial in the long term.Air India can also access combined or common procurement of fuel and ground handling services at airports abroad. Thats not all. Star Alliance rules mandate potential members to attain a certain level of service, improved safety standards and so on — 64 joining requirements — clubbed under the banner of core values.Air India was admitted after it fulfilled these conditions. Of course, passengers used to the service standards ofLufthansa or Singapore Airlines will want the same in Air India.The airline has developed a customer service improvement plan to be implemented over the next six months. This includes an upgrade of the website, call cent re services, groundhandling and inflight and post-flight services. A threecourse meal will be introduced in the business class. For these reasons, the best fit for Air India, or for that matter any airline, is a global alliance, according to Nandan.Win-win Deal Jeffrey Goh, COO, Star Alliance, said Air India is now a totally different airline. It has made significant improvements in fleet renewal, customer initiatives and is free from industrial strife. Goh was referring to the state of the airline three years ago.On July 11, 2011, Star Alliance suspended Air Indias admission, saying it had not met the minimum joining conditions agreed in December 2007. No one could have faulted Star. Air India was then beset with financial losses, frequent strikes and a half-baked merger with Indian Airlines. Eleven days after the setback, Nandan, a 1982 batch IAS officer, took over.One of his first tasks was to request Star Alliance not to shut the door on induction. He received a favourable response. Nandan then turned his attention to operations. To apprise about Air Indias progress, he invited the then Star Alliance CEO to Mumbai who returned with the promise that the induction would be examined by the networks chief executive board (CEB).In May 2012, when things — including passenger loads and on-time performance — were looking up, Air India faced a pilot strike. It went on for two months, the longest in the airlines history. Star officials were concerned. Backed by the government, the management did not yield to the pilots demands.The pilots flinched. Air India hasnt had a strike since. There were other bright spots. The government announced a Rs 30,000-crore turnaround package around the same time. That restored confidence among management and employees. In June 2012, the government accepted the Dharmadhikari Committee report, which contained recommendations on HR integration. The process of merger finally took a sense of urgency.Air India also migrated to a revenue management system to make fares attractive. Deploying the Boeing Dreamliners on foreign routes was also paying off. During this time, Air India remained in touch with Star. We kept the pressure on them, said Nandan.Executives of Star too were at work. They took stock of Air Indias performance through independent sources. In October 2013, the Star management began sending positive vibes to its counterpart in Air India. The matter of induction was taken up by the CEB in December 2013. It unanimously decided that the suspension of Air India would be revoked.On June 15, the airline completed all the formalities of admission. It was then Stars turn to conduct checks, including safety and tech audits, on Air India. On June 23, the CEB decided in a meeting in London to approve Air Indias admission.Flight Path The Air India that is joining Star Alliance is in a far better shape than the one that tried to join the network in 2011. Financial performance is improving: revenues have risen to Rs 19,000 crore in 2013-14 from Rs 11,000 cr in 2011.Ebitda has improved to Rs 770 crore from (-) Rs 2,500 crore in the same period. Operating losses in 2013-14 have dropped to Rs 3,000 crore. Managerial costs are falling — salary outgo reduced by Rs 300 crore whileproductivity of employees has increased by 29% in 2013-14. Thats not to say the airline is out of the woods.Debt stands at Rs 40,000 crore — Rs 22,000 crore it owes banks and Rs 18,000 crore as aircraft loan. Net loss has reduced to Rs 5,000 crore in 2013-14, but that too is not kosher.Still, the improving finances and the entry into Star Alliance might avert talk of privatization of the airline — many believe that is the only way forward for the airline — for some time.Nandan refused to be drawn into a discussion on the topic, saying it is for the government to decide. He preferred to bask in the glow of a milestone. The acceptance by Star is a measure of the quality and stability of Air India, he said.
Posted on: Tue, 01 Jul 2014 01:01:24 +0000
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