Star Alliance has lifted the suspension on Air India’s entry into the global airline body, the national carrier said on Friday, bringing hopes for the loss-making airline to expand its global presence even as its margins are getting squeezed in the domestic market.
“With this decision, final process for eventual entry of Air India has begun. Once the airline becomes a member, Air India passengers will enjoy enormous benefits, including seamless transfers while travelling across the world, more frequent flyer mileage points, code sharing leading to a wider choice of flights and access to facilities at over 1,000 lounges worldwide,” said the carrier in a statement.
“The market in India is now showing signs of stabilisation. Today we see an Air India which has successfully completed its merger with Indian Airlines and is building up a new fleet that forms the basis for a much improved level of service. This is why we believe the time is now right to recommence the integration process,” said Mark Schwab, CEO of Star Alliance, after the board meeting.
“The re-integration process will begin now. There have been some fresh requirements brought into the structure since 2011. We will have to do a gap analysis to integrate with the system,” said Pankaj Srivastava, director commercial at Air India.
The 28-member alliance’s network offers 21,900 daily flights to 1,328 airports in 195 countries. It is the world’s biggest airline alliance with a 12.9% share of the global airline market, according to data from Sydney-based CAPA-Centre for Aviation.
Air India’s entry into the alliance is crucial for the airline to take on the massive competition from international carriers such as Etihad Airways which recently announced a doubling of its flights to India, under enhanced bilateral rights between India and Abu Dhabi.
Etihad has bought a 24% stake in Jet Airways, India’s second-largest carrier by market share. Jet Airways too plans to connect 23 cities to Abu Dhabi.
The country is also set to enhance bilateral rights with Qatar, which means Qatar Airways too will significantly enhance capacity to India gaining a large share of its international traffic.
China, Dubai and Bahrain, too, have sought an increase in bilateral seat entitlements.
Moreover Singapore Airlines and AirAsia are also setting local carriers in India and may seek international flying rights.
The government is looking at relaxing its current rule under which a domestic carrier has to complete five years of domestic operations and have a fleet of 20 planes in order to be eligible for flying overseas.
Back home, Air India’s margins have been hit by high input costs, slow traffic growth, cutthroat competition and its own problems of an inflated salary bill and the interest burden of an earlier plane purchase worth $15 billion.
The carrier has been making losses since 2007 after it was merged with erstwhile state-run domestic carrier Indian Airlines and has been over the last few years surviving largely on cash handouts from the government.
The airline recently gave an extension to its former director Deepak Brara to spearhead the airline’s pitch to become a member of the alliance.