Kingfisher’s Entry into Oneworld is Delayed

Posted 09/02/2012

Independent Indian carrier Kingfisher Airlines will not join the oneworld global airline alliance this week as originally planned it has confirmed in a statement.  The news followed shortly after it emerged that the company had been suspended from the International Air Transport Association's Clearing House (ICH) payment system.  The airline is likely to be reinstated once an issue over the settlement of payments is concluded but it highlights the troubled financial situation the airline.

Kingfisher was due to be formally accepted into the oneworld global airline grouping on February 10, 2012 but the alliance’s Chief Executive, Bruce Ashby confirmed that over the past months and it has become “increasingly clear” that the airline “needs more time to resolve the financial issues”.  The company was due to become the first carrier from the Indian Subcontinent to join one of the global airline groupings and has ironically faced the same fate as the country’s national carrier ahead of its own proposed alliance entry.

Air India was due to join Star Alliance last year but just days ahead of its proposed entry the member airlines voted to cancel the arrangement due to the state-owned airline’s financial predicament and concerns over its business strategy.

 “These are turbulent times for the airline industry in India and many other parts of the world,” said Bruce Ashby.  “We wish it well during this process and will work with Kingfisher Airlines with the aim of setting a new joining date once it is through this current period of turbulence.”

Kingfisher currently serves a network of 54 locations in nine countries and would have brought an additional 40 destinations to the alliance’s network, all of them in its India home.  This is a key growth market for oneworld as India is the world’s second most populous country and forecasted to be the world’s second biggest economy within two decades.  Its middle class population is expected to grow tenfold by 2025 – to nearly 600 million, according to analysts.  Currently seven of oneworld’s established airlines – American Airlines, British Airways, Cathay Pacific, Finnair, Japan Airlines, Qantas and Royal Jordanian - serve five Indian gateways, in Delhi, Mumbai, Bangalore, Chennai and Hyderabad. 

Over the past few months Kingfisher has been forced to restructure its operations and cut its network, in the process slipping from being the second to third largest operator in the country by seat capacity.  Like many airlines in the business it has been hit hard by economic instability and fuel price volatility, but its flamboyant founder and Chairman, Vijay Mallya, the liquor tycoon, has said the company has no major liquidity concerns, although additional investment is being sought.

"In light of the many priorities centred around Kingfisher Airlines' recapitalisation efforts, we felt it prudent to defer our entry into the alliance for a little while. This will allow us the opportunity to focus on the issues at hand and we look forward to being part of the oneworld alliance very shortly," said Vijay Mallya.

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