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Air India joins Star Alliance
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by: Spas
Air India (AI) has been invited to join the Star Alliance and has signed the Agreement, which, inter alia, details the terms and conditions of its entry and membership. AI is currently in the process of integrating into the Star Alliance – a process that generally takes about 12 to 18 months depending upon the airline's state of readiness, particularly in IT related areas.
Prior to its entry into the Star alliance, AI is required to comply with the Minimum Joining Requirements (MJRs) stipulated by the Star Alliance. To achieve compliance with these MJRs, AI would have to raise the standards of its product and service to levels that are comparable with those of the other Star carriers.
Air India is likely to benefit from its participation in the Star Alliance by way of:
(1) Network Expansion and Increased Traffic Feed - through Commercial Cooperation Arrangements (Code Sharing, Network Connectivity, Schedule Coordination, Special Prorate Agreements (SPAs), etc).
Through code sharing, AI will be able to expand its secondary network of code-share services to cover new international destinations. Through schedule-coordination, AI will be able to improve the connectivity between AI/Star Carrier networks and this – along with improved/expanded SPAs – is expected to result in increased traffic/revenue feed on AI’s flights.
(2) Increased Traffic Volumes - through Frequent Flyer Programme (FFP) Cooperation Arrangements.
All the Star carriers are required to conclude FFP Cooperation Arrangements with all the other Star carriers. Under these arrangements, the members of the FFP of one Star carrier can accrue/redeem miles while traveling on flights operated by the other Star carriers. Further, certain additional benefits (lounge access, priority check-in, etc) are provided to FFP members by all the Star carriers. Such arrangements are, therefore, expected to result in increased preference (loyalty) for Star Carrier flights amongst passengers and a consequent increase in revenues.
(3) Increased Revenues - through participation in Star Alliance Joint Products, such as round the world fares, corporate plus, conventions plus, etc.
(4) Improved Product Quality and Image
Compliance of the MJRs - coupled with the brand equity of the Star Alliance – is expected to result an improvement in AI’s product quality and image and, therefore, in increased traffic/revenues, particularly in the high-yield, premium segments.
(5) Cost Reduction – through participation in Star Alliance Initiatives, such as StarNet Data Network, Lounge Sharing Arrangements, Move Under One Roof Projects, Umbrella Agreements with service providers, etc.
The likely financial benefits to AI from its participation in the Star Alliance cannot be quantified at this stage – since these would depend on the terms and conditions of the Commercial Co-operation Arrangements negotiated/concluded by AI with the other Star carriers. However, according to expert opinion, at maturity (i.e. 3 to 4 years after entry), by participating in a global alliance (such as Star Alliance), an airline could expect to generate incremental revenues equivalent to 2-3% of its international passenger revenues.
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