A blockbuster battle of global airline alliances is playing out in India

Mint

21 hours ago

Early this month, on the sidelines of IATA's 81st AGM, which was held in India after a gap of four decades, IndiGo signed a Memorandum of Understanding (MoU) with Delta Air Lines, Virgin Atlantic, KLM and Air France. The MoU, when firmed, will see IndiGo being able to offer its passengers flights to 30 points in Europe beyond Amsterdam on KLM, points beyond Paris, Amsterdam and London to North America with Delta Air Lines, KLM and Air France, and to North America from Manchester with Virgin Atlantic.
One would wonder why these airlines would want to partner with IndiGo, which has a vastly different experience on offer and has had an LCC DNA for years. The answer to this lies in how the alliance wars are playing out in India.
Data obtained from Cirium, an aviation analytics company, exclusively for this article, shows that amongst the three large airline alliances in the world, SkyTeam, which counts Air France, KLM, Virgin Atlantic and Delta Air Lines as its members, has the lowest percentage of seats.
Star Alliance, with a member airline in India in the form of Air India, has the highest capacity on international routes out of India. A total of 2.3 lakh seats are on offer each week out of India to destinations outside India, and a staggering 62.2% of the seats on offer are flown by low-cost carriers or carriers that are not affiliated with any of the alliances, like IndiGo. 19.9% of all seats, or 45,994 seats, are flown by Star Alliance carriers, 12 of whom, including Air India, operate to and from India. This is followed by OneWorld, which sees 10 carriers operate to India and offers 26,601 seats per week or 11.5% of the total. The last is SkyTeam with eight carriers and 5.9% of total international seats, or 13,720 weekly seats.
The spread is thinner for SkyTeam, with the member airlines operating to six airports in the country, while Star Alliance members fly to eight, and OneWorld carriers fly to 16 airports in India. Star Alliance, with Air India being part of it, has the advantage of routing traffic via Delhi, Air India's hub.
India is the third-largest domestic aviation market in the world and is growing rapidly. The country has climbed ranks and is now the third-largest economy in the world. With business, trade, diaspora and tourism the main drivers for Indians, airlines across the world are betting on the world's most populous country to be their carrier of choice. This is being led by Air India and now IndiGo, with the likes of Emirates and Etihad pouncing on the traffic.
European carriers have a smaller presence than Middle Eastern carriers due to how the Bilateral Air Services Agreement (BASA) has been structured over the years. The growth of traffic in mature markets remains muted and ranges between 1% - 3%, while India recovered much earlier than global estimates post-pandemic, making the market lucrative.
There is a thin line between who is more important to whom. Is IndiGo more important to the SkyTeam carriers, or are these four airlines important partners for IndiGo? This thin line is what makes this a match made in heaven. IndiGo, for its expansion, cannot rely on destination-centric traffic alone, which is seasonal at best. It has to find ways to cater to transatlantic as well as European traffic, for which it requires a strong partnership.
While IndiGo may be a strong airline in India and the neighbourhood, intercontinental is a different ball game. On the other hand, the likes of KLM, Virgin Atlantic, and Air France have not had an opportunity to cater to more Indians after the fall of Jet Airways, with whom they had a strong partnership.
Within Europe, these airlines are locking horns with the Lufthansa group, comprising Lufthansa, Swiss, Austrian, among others, and the IAG group led by British Airways. International, unlike domestic, is dependent on BASA, and while Lufthansa has two hubs, KLM and Air France largely have a single hub, thus limiting the scope for expansion.
This 'win-win' is what will bring these airlines closer in the future. Air India could well be stronger at Frankfurt, while IndiGo focuses on Paris, with Amsterdam slots being the thorn.