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Full-service airlines' alliance woos Indian low-cost carriers

Source : BUSINESS_STANDARD
Last Updated: Sat, Dec 29, 2012 05:42 hrs
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With low-cost and hybrid air carriers having 70 per cent of the market, SkyTeam, the second biggest global airline alliance, with only full service carriers as members, is trying to woo some Indian low-cost carriers (LCCs) to join. The target it particularly favours is IndiGo.

SkyTeam is a 19-member airline alliance, with 17 per cent of the world's airline capacity. It has only seven per cent of the Indian market but hopes to change this, with a platform for LCCs to be finalised in early 2013.

The Centre for Asia Pacific Aviation (CAPA) says there has been discussion between IndiGo and SkyTeam. The latter's spokesperson did not deny it and the IndiGo leadership team was not available to comment on this.

"We will not make them members of the alliance. They will be only partners, not members," SkyTeam chairman Leo van Wijk had said at the annual general meeting in Beijing of the International Air Transport Association. Not being a member of the alliance would mean the hybrids and LCCs would not have to spend the time and resources involved in alliance management, which can include meetings and working groups.

Marisca Kensenhuis, public relations manager of Skyteam, said, "There is room to expand the SkyTeam network, as there are still target areas for growth, for example in India and Brazil. As there are not that many unaligned and eligible carriers left, we will look for new opportunities. Interfacing with hybrid LCCs could be a solution."

Conceding the growing influence and network of LCCs, she said, "These airlines offer a network in addition to point-to-point services serving primary airports and have strong domestic and regional networks. They target a mix of business and leisure travelers."

Experts believe IndiGo is an attractive option since 93 per cent of its capacity is deployed in the Indian market. The partnership with SkyTeam members will give them the benefit of a domestic feed without creating competition on the long-haul flights that are lucrative to existing alliance members.

With the global partnerships of Emirates-Qantas and Etihad-Air France-KLM, there was a lot of churn in aviation markets across the world. There is growing importance in strategic partnerships, rather than being a member of an alliance. According to a CAPA report, "Now, the primary association is often to key members, with the alliance alignment secondary. The global marketing alliances - Oneworld, SkyTeam and Star – have found themselves facing large dilemmas."

First, almost all of the world's major airlines have become aligned to a global alliance, making it difficult to increase value. The standouts are largely LCCs and West Asia/North Africa network carriers. Second, internal segmentation has occurred as member-carriers, under pressure to be smarter and more strategic, form tight relationships outside of alliance lines, it added.

However, the biggest challenge that LCC entry in an alliance can pose will be the information technology integration in ticket selling and pro rata distribution of ticket costs among airlines, as the flyer will be goingg through many carriers.

Jay Bhatia, chairman, western region, of the Travel Agents Association of India, said: "It's a great plan but I wonder how the inventory levels will be shared across various internet platforms of the LCCs and Global Distribution System (GDS) of the networks of the partner airlines. The best way is the GDS and in India, the LCC's are not on the GDS."

As the technology is evolving on a day to day basis, when the software and linkage will be in place, the LCC and the partner will be able to manage inventory control, baggage handling and connectivity of flight schedules.

The LCCs will have to come on the GDS so that their inventory can be shared, as over 80 per cent of airline reservations are on the GDS. LCC airlines have instant rates and bookings, whereas the full service carriers on the GDS do give time to hold and issue the tickets, he added.


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