October 13, 2008
Jet and Kingfisher Form Alliance
Kingfisher Airlines Limited
The fundamentals for air transport in India remain sound. Our economic growth at a rate of more than 7.5 %, bears testimony to the fact that the prospect for air transport will also grow in the future.
However, over the past six months, the Indian Aviation Industry has suffered due to high fuel prices, back-breaking taxation, excessive airport charges and over-capacity.
Acquisitions, mergers and alliances are common world-wide which lead to consolidation and significant improvement in financial performances.
Recognizing the benefits that strong alliances bring, I am delighted to announce our partnership with Jet Airways thus bringing together two of India's largest carriers with innumerable benefits in terms of cost savings, revenue improvement and an unprecedented network.
I am pleased to attach the joint press statement issued by Mr. Naresh Goyal and myself.
I look forward to your continued support and co-operation.
Chairman & CEO
Kingfisher Airlines Limited
JET AND KINGFISHER FORM ALLIANCE
Jet Airways and Kingfisher Airlines are pleased to announce an agreement to the formation of an alliance of wide-ranging proportions that will help both carriers to significantly rationalize and reduce costs and provide improved standards of service and a wider choice of air travel options to consumers with immediate effect. The two airlines will be able to rationalize their operations and derive the maximum synergies and thereby offer the best possible fares for the benefit of the consumers. However, there will not be any mutual equity investments between the two companies.
The downturn in the world economy has severely impacted the world aviation industry. The rapid increases in and the volatility in the crude oil prices and that of aviation turbine fuel and the slowdown in economic activity has resulted in a decline in air travel both on international and domestic segments of the air travel market.
Worldwide the airline industry has sought to tackle the difficult environment through alliances and joint provision of the best possible standards of service and connectivity to the travelling public by achieving cost and operational synergies and providing extensive connectivity and by offering economical fares. Civil aviation is the keystone of infrastructure development and a key priority of the Indian Government for the development of the economy. The proposed alliance between Jet Airways and Kingfisher is in the national interest by incorporating the international best practice to strengthen the Indian aviation industry.
The alliance will also enable a stabilization of the Indian aviation industry in the larger public interest for the benefit of the customer during the current downturn of the world economies.
The Scope of the alliance will include the following areas:
-- Code-shares on both domestic and international flights subject to DGCA approval.
-- Interline/Special Prorate agreements to leverage the joint network deploying 189 aircraft offering 927 domestic and 82 International flights daily.
-- Joint fuel management to reduce fuel expenses.
-- Common ground handling of the highest quality.
-- Cross selling of flight inventories using the common Global Distribution system platform.
-- Joint Network rationalization and synergies.
-- Cross utilization of crew on similar aircraft types and commonality of training as also of the technical resources, subject to DGCA approval.
-- Reciprocity in Jet Privilege and King Club frequent flier programmes.
In the current environment of high costs and declining growth this alliance has potential for substantial savings resulting in a benefit to the consumer.
Commenting upon this path breaking alliance, Naresh Goyal, Chairman of Jet Airways said:
"All over the world Airlines have formed alliances in order to become more efficient, improve revenues and provide seamless travel opportunities for their customers. India has witnessed tremendous growth in the past which has slowed down considerably. In this environment the Jet Airways - Kingfisher alliance represents a completely new industrial model for aviation in India which would be based on an unprecedented depth of cooperation between the two companies. There will be huge cost savings and revenue enhancement opportunities arising from this alliance."
Dr. Vijay Mallya, Chairman, Kingfisher Airlines said:
"This is a quantum leap forward in the evolution of Indian aviation which will benefit customers by delivering the most comprehensive integration in the industry. Both Jet and Kingfisher fully realize that better understanding of supply and demand in this capital and labour intensive industry is the key to profitability and enhancement of shareholder value. I look forward to this alliance delivering superior quality, cost savings, flexibility and enhanced consumer value which is the hallmark of all successful alliances."
While maintaining their separate legal entities and brand entities both Jet and Kingfisher will examine co-branding opportunities and have formed a core committee of senior management personnel from both companies who will drive the various identified initiatives forward with immediate effect under the overall direction of Mr. Naresh Goyal and Dr. Vijay Mallya.
VIJAY MALLYA NARESH GOYAL Chairman & CEO Chairman Kingfisher Airlines Limited Jet Airways (India) Ltd.