The agreement between the two Indian airlines could improve load factors and give each company stronger bargaining power with suppliers
The new alliance between Jet Airways and Kingfisher Airlines is expected to mark a new era of co-operation in the airline services industry especially when it is facing tough time, believes CRISIL.
The alliance seeks to jointly deploy 189 aircraft owned by both carriers on domestic and international routes and cross-sell flight inventories—a move aimed at improving load factors and increasing aircraft utilisation for both the airlines. Further, the alliance would have superior bargaining power with suppliers of fuel, aircrafts, catering services etc. providing benefits of scale leading to cost savings.
Also, measures like common ground handling, cross utilization of flight crew and commonality of training of crew and other technical resources are expected to support operating margins of both carriers.
Ajay D'Souza, Head, CRISIL Research said, "The airlines have taken a co-operative route towards profitability though this innovative alliance in order to optimise the use of each others resources aimed at cost reduction and increased asset utilization without any equity sharing. These extraordinary measures have been necessitated by the current economic environment and stressed financial position of the airlines."