Jet plans joint venture with Air France-KLM

Jet Airways isn't a member of any airline alliance but has code share agreements with several airlines including Air France-KLM

Jet Airways is negotiating a joint venture (JV) agreement with Air France-KLM to expand its commercial co-operation with the European airline network.

Jet Airways, which is co-owned by Etihad Airways, is not a member of any aviation alliance but it has code share agreements with several airlines, including Air France-KLM.

If the deal fructifies, it would be Jet Airways’ first large-scale commercial agreement outside of Etihad and Etihad-owned airlines. Etihad also has strong commercial and technical support agreements with Air France-KLM.

According to airline sources, Jet signed a memorandum of understanding with Air France-KLM about two weeks ago to form a JV. The proposed JV will cover routes in India, Europe and North America but finer details are still to be worked out, sources added.

In March, Jet shifted its European gateway from Brussels to Amsterdam (which is KLM’s hub), indicating its closeness with the two European airlines. And last week, Jet changed its schedule of Mumbai-Paris flight to provide more onward connections over Paris.

A JV mostly involves a far greater cooperation between airlines and participating airlines usually share costs, revenue and profits on routes.  Air France-KLM, Delta and Alitalia have an extensive JV, covering routes between Europe and North America and offering about 25 per cent of capacity on transatlantic routes.

On Monday, French and Dutch media reported about the signing of an in-principle agreement between Jet Airways and Air France-KLM for a JV. French newspaper La Tribune went on to say after the Rafale fighter deal, Air France is making a big impact in India. Responding to a query on proposed JV, a Jet spokesperson said “As a policy, Jet doesn’t comment on speculations.”

At present, Jet flies to Paris and Amsterdam and is now planning to resume its US service. Air France flies to three cities in India (Delhi, Mumbai and Bengaluru) and KLM flies to Delhi. The French and Dutch media reports said  network in India would be expanded next year with plans to connect Hyderabad, Chennai or Bengaluru with Amsterdam and Paris.

NORMS OF JV BETWEEN AIRLINES

• It is an advanced commercial deal between airlines
• Under the deal, airlines collaborate on network, schedules, sales and pricing, and also share costs, revenue or profits on routes
• It requires anti-trust approvals from regulators
• The logic behind a JV is normally referred to as “metal neutrality” achieved via close co-operation in capacity and pricing as well as revenue management
• Northwest & KLM signed first JV amongst airlines in 1997
• Important JVs include Air France-KLM,  Delta and Alitalia JV; and Lufthansa group, Air Canada and United pacts
• Last week, Lufthansa signed a JV with Air China and the former has similar deals with SIA & Nippon Airways

“A JV agreement could help Jet deploy its wide-body planes profitably on Europe or North America routes. At the same time, this would help Air France-KLM expand its presence in India and counter Lufthansa-led Star alliance,” said an industry observer.

“Amsterdam Airport Schiphol was very pleased to see Mumbai being reconnected to our network with Jet arriving to Amsterdam. We have understood that the performance of the operation is going very well and as proof for that Jet will operate a B777-300ER on the Mumbai-Amsterdam route, instead of the A330 aircraft. Next year, the B777 aircraft could also be used on the Delhi-Amsterdam-Toronto route,” a spokesperson of the Amsterdam airport said.

“With the arrival of Jet Airways to Amsterdam, there is also a close cooperation between KLM and Delta Air Lines. The flights of Jet Airways to Amsterdam connect to 30 European destinations and 11 North American destinations. Of course, the vast network of Jet Airways in India is used to feed passengers to each other’s flights,” the spokesperson added.