Experts see fare hikes, job cuts with Jet, Kingfisher pact

October 14th, 2008 - 6:11 pm ICT by IANS  

KPMGNew Delhi/Mumbai, Oct 14 (IANS) The strategic alliance Monday between two major players in Indian aviation - Jet Airways and Kingfisher Airlines - may neither mean lower fares for passengers nor bring cheer to their 19,000 employees, experts have warned.What is more, the alliance that mainly seeks to bring greater synergies in their operations to cut costs, may actually result in the pruning of staff, especially in the area of logistics, and an upward revision of fares, they added.

“This will certainly result in fare hikes,” said Marc Martin, senior advisor on aviation for global consultancy KPMG. “It is a definite case of cartelisation,” Martin told IANS.

But both Vijay Mallya, chairman of Kingfisher, and London-based Naresh Goyal, founder of Jet Airways, refuted comments that their agreement would lead to cartelisation and work at cross-purposes with the interests of passengers.

“This alliance will benefit customers as it will deliver the most-comprehensive integration in the industry,” Mallya told reporters, soon after inking what is a rather unique alliance in the Indian aviation industry.

“It is not a cartel but essentially meant to save costs as airlines are losing money,” Goyal said, adding: “Such alliances are taking place all over the globe such as the one between United and British Airways.”

The two airlines, which have a collective staff strength of around 19,000, after trimming the force by around 2,000 employees, may also bring down the number of people on rolls further, experts said.

They said common ground handling and interline agreements to leverage the joint network that deploys 189 aircraft for 927 domestic and 82 international flights was a step in that direction.

“The alliance between the Jet and Kingfishers means they would share work and need less employees. This could lead to retrenchment,” said Gurcharan Bhatura, director general, Foundation for Aviation and Sustainable Tourism.

“Every organisation looks at keeping less number of employees to cut operational costs and so is the airline industry,” Bhatura told IANS, adding the same could be the strategy for the two carriers.

Jet Airways had recently scrapped its Mumbai-San Francisco flight, just seven months after its launch, while Kingfisher has postponed the launch of services on several international routes even after securing permission to fly.

Most Indian carriers including Jet Airways and Kingfisher have also been trying to raise money the past few months, but without much success.

Kingfisher had acquired low-cost Air Deccan last December, while Jet had taken over Air Sahara in April 2007. The two carriers that were acquired have since been renamed Kingfisher Red and JetLite, respectively.

As per official data available with the aviation ministry, the market share of the four entities amounted to 58.5 percent in July, compared with 18.3 percent for state-run Air India, into which the erstwhile Indian Airlines was merged.

The other scheduled players, with percentage share in brackets, are SpiceJet (8.4 percent), Paramount (1.6 percent), GoAir (2.5 percent), IndiGo (10.5 percent) and MDLR (0.22 percent).

The consolidation in the Indian aviation space was triggered with the cabinet’s nod in March last year for a merger between Air India and Indian Airlines under a new company - National Aviation Company of India Ltd.

Following that, Jet Airways announced April 12, 2007, that it had inked a deal to take over Air Sahara for $338 million. And Dec 19 last year, Kingfisher also said it was acquiring controlling stake in Air Deccan.

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