Wednesday , 10 August 2022

Opinion: Air India’s Star alliance membership is a precursor to Tata-SIA entry

During his visit to India, Mark Schwab the CEO of the Star Alliance, the world’s largest airline grouping, announced that national carrier Air India could join the alliance within the next six months.

In a press interaction Schwab said “without giving a specific date, one can say that we will complete all the ground work and formalities of Air India’s entry into the Star Alliance club by this summer” “After that, they will be ready to join straight away.”

Air India first signed up to apply for Star membership back in late 2007. Thanks to various bureaucratic fumbles classic of the airline, the alliance in July 2011, “suspended” the airline’s application.

Schwab said, “We are satisfied with the changes made by Air India in the last year” “Star Alliance has also changed some membership requirements, and all our 28 members have voted unanimously in favour of Air India.”

[bsu_pullquote]“without giving a specific date, one can say that we will complete all the ground work and formalities of Air India’s entry into the Star Alliance club by this summer”
-Mark Schwab, CEO, Star Alliance
[/bsu_pullquote]What has changed in the last two years, when the alliance, bestowed on Air India the ignominy of being the first airline whose membership process in to the alliance had been “suspended”.

Star wants access to the lucrative and fast growing Indian market. Despite leading the other two alliances, oneworld and SkyTeam by over 50%, it is estimated that all Star alliance carriers have only a 13% share of India’s international traffic. In comparison, Dubai-based Emirates, alone, is estimated to carry 14% of India’s international traffic with Qatar at 7%. Etihad which recently bought a 24% stake in India’s Jet Airways along with a sweetheart bi-lateral air services agreement with India which will see the carrier get similar traffic volumes of Emirates in the next three years. Air India and Jet Airways are estimated to have about 30% share.

Yet, while Star wants India, they really do not want Air India. The national carrier is beset with sloth and indifference bought on by years government ownership which guarantees employment for life with no concept of accountability, is bailed out by the Indian tax-payer at a direct cost of over Rs. 1 crore (Rs. 10 million) per employee. Shwab indicated that Air India must still improve over 75 “core values” related to passenger services to bring them up to the alliance’s standards. Keep in mind these standards are the same that tolerate the virtually non-existent customer service of north American carriers like United Airlines, so what does that say about Air India’s customer service?

In 2011, Star even went so far as to put an ultimatum before the government that it would permit Air India’s entry, only if the government also assured its permission for Jet Airways to enter the alliance. The government did not buckle, the issue died down, and Jet sold itself, well at least 24%, to Etihad. With Star vehemently opposed to gulf carriers, and Etihad’s cooperation with SkyTeam founder member Air France-KLM, the topic of Jet becoming a Star alliance member died a swift death.

That still does not justify the entry of Air India.

Enter India’s most respected conglomerate, the Tatas, who coincidentally owned Air India till 1954, and successfully managed it till the 1970s. Reviving its old partnership with Singapore Airlines (SIA), an airline the erstwhile Indian Airlines helped found and train, the 2014 should see the entry of a full service Tata-SIA airline in India.

The lobbying clout of the Tatas is well demonstrated by the commencement of the civil aviation ministry to eliminate the 5-20 rule which requires an Indian airline to operate for five years and have a fleet of 20 aircraft prior to being allowed to fly overseas. A ruling that is expected to directly help the two new incoming airlines, AirAsia India and Tata-SIA both of which in whom the Tatas have a stake.

In 2011, it was rumoured that the South East Asian members of Star voted against Air India. The vote of the 28 members is secret. This time around at least one ASEAN carrier, a very powerful member of the alliance, will stand to benefit.

Yes, I am speculating, but I strongly opine, that the entry of Air India is a calculated move by the Tata-SIA combine to prevent a repeat of 2011, which was a PR disaster for the alliance.

Share your thoughts via a comment.

About Devesh Agarwal

A electronics and automotive product management, marketing and branding expert, he was awarded a silver medal at the Lockheed Martin innovation competition 2010. He is ranked 6th on Mashable's list of aviation pros on Twitter and in addition to Bangalore Aviation, he has contributed to leading publications like Aviation Week, Conde Nast Traveller India, The Economic Times, and The Mint (a Wall Street Journal content partner). He remains a frequent flier and shares the good, the bad, and the ugly about the Indian aviation industry without fear or favour.

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4 comments

  1. Well, you may have a point there….What else are we to assume when Schwab keeps on saying all the time that the alliance still will take one more airline from India! Oh yes, I think he also tells “TATA-SIA is not the obvious choice”!!! Then what else would they do with TATA-SIA? But it is also interesting to note that SIA does not have friendly relationships with UA and codeshares with Virgin America instead…Nor does SIA codeshare with any other airline’s services to SIN airport..

    I think *A already has too many members in their alliance..come to think of it..Asia is too crowded with so many redundant routes that the airlines are just competing vigorously with each other..For e.g. take the example of OZ – Asiana loses out due to LH-ANA JV and so partners with TK on European routes..now TK is LH’s foe! OZ also loses out due to ANA – UA JV on transpacific routes…SQ and TG also have transpacific routes that are not codeshared by UA..Instead UA has many transpacific routes on its own and ends up losing money!

    I hope they try to utilize AI’s full potential by maximizing international and domestic connections..and at the same time AI maximizes *A’s full potential…The only way AI can compete with Gulf carriers is to launch direct routes to US especially the west coast..DEL-SFO or DEL-YVR for e.g. is shoreter thatn going through DXB, AUH or DOH! I hope UA and AC also forge codeshares with AI…But YES! LH has no benefit this way..So we still need to see how the dynamics changes!! And yes you are perfectly right….if UA meets *A standards, I can’t think of any reason why AI does not :P…

  2. If this is true, with elections around the corner and government almost certain to change, don’t you think *A should wait instead of making this disastrous move? NDA may not politicize this issue as UPA has done in the past 9 years and may allow TATA-SIA to join *A without any conditions. I don’t want to make this a political discussion, but don’t you think *A should wait till the government changes?

  3. I don’t think the elections changes anything in terms of politicization of the issue. Just see how the opposition and the left reacted to Ajit Singh’s statement of privatizing Air India “if the will is there”. That is the extent to which India’s political class meddles with the airline. My worry with the elections around the corner is that any reforms or changes in policy will get pushed back a year or so. If they happen.

  4. If I follow the logic correctly SIA wants AI inducted in the Star Alliance so TATA-SIA can join as the second Indian airline. *A needs feed from India at Indian hubs and/or feed to their respective hubs. Unless *A airlines can gain additional frequencies to India, similar to what Etihad and Emirates get domestic feed will have a small impact. AI providing feed to *A hubs for onward travel to Europe and North America is also going to have a small impact because of capacity control followed by European and NA carriers.
    Not much changed for the better since *A rejected AI the first time, I am sure that AI will not meet most of the “75 core values” related to passenger services, because if they did we would have seen the impact.

    I guess it is all politics after all.