NEWSLINKS
INDIA & THE WTO
NEW GOVERNMENT
COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES
SEARCH REDIFF

Air-India, Virgin Atlantic forge compete-and-cooperate deal

Neena Haridas in New Delhi

December 9, 1 PM: After shaking up the domestic aviation sector Down Under, Virgin Atlantic Airways' Richard Branson flies northward, and lands in Delhi.

5 PM: The chief of the second biggest UK-based airline completes meetings with "all those who matter"
-- External Affairs Minister Jaswant Singh, Minister of State for Civil Aviation C L Gupta, Minister of State for Tourism Uma Bharati, Civil Aviation Secretary R Gupta and, of course, Air-India managing director M Mascarenhas.

6 PM: He clinches a deal with Air-India to fly India three services a week on a "code share basis" between Delhi and London from July 2000.

December 10: Completes the formality of signing on the dotted line.

That’s Richard Branson, the majority stake-holder in the $4 billion Virgin Group. Charmer, lady-killer, playboy, adventure freak, whacko, narcissist... And, above all, the shrewd businessman.

He came, he saw and he wooed the Indian bureaucracy and government.

Especially Mascarehnas who signed the "code sharing agreement" with Branson today which will allow Virgin Atlantic to start flying the India-UK route. Under the agreement, Virgin and A-I will share seats on each other’s routes and Virgin will operate flights to the UK on routes not covered by A-I. From July 2000, Virgin will fly three services a week between London and Delhi on days that are not flown by A-I.

Sure enough, Branson knew how to make this otherwise routine agreement -- A-I has such agreements with nine other airlines -- into an “historic event”.

Branson, wearing a black sherwani, strolled into the venue for the media conference perched on an caparisoned elephant, like a Maharaja, amid much fanfare as men and women sporting red raincoats (Virgin’s theme colour) waved tiny Virgin flags. His seat atop the elephant was a red-coloured aircraft model, forcing a cheerleader to pip: “Hey here comes the flying elephant.” So what if the jumbo refused to sit down for Branson to alight, he was just making sure he looked tempting enough for the photo journos. That’s Branson the showman.

Now for Branson the businessman. What makes India irresistible for him? “Launching flights between the UK and India has always been an ambition of mine. It is a very potent route and currently I see a lack of capacity on this route which has decreased tourist flow between the two countries. I think between the two airlines -- Air-India and Virgin -- we will be able to improve the route.”

However, according to insiders, what really clinched the deal besides Branson’s flamboyance is the carrot that he dangled. Since the Virgin Group has business interests in entertainment, music, telecom, insurance and financial services, Branson has raised hopes of further investments in publishing, holiday homes, telecom et al. Besides, he also gave the polite sound-bytes by praising India for ducking the Asian flu and stating that India is priority sector.

“This is just the beginning. We will study the Indian market and see what business is best suited for the market and for us and proceed accordingly. We will see where we can make a difference,” he says.

Little wonder that Branson believes that he is now “in a position to change things”. Understandably, Air-India would like Branson to change its position. The public sector airline has been in the red for a long time now and is hoping that the Virgin venture will perk up its bottomline.

How exactly will A-I benefit? Says Branson, “We are paying a significant amount to A-I under the code-sharing agreement, though I would not like to reveal the amount. Let me assure you: Air-India can make a few millions.” However, Mascarehnas believes that more than the financial gains, it is the partnership that matters and the fact that the move will bring in fresh traffic to the country.

Besides traffic, Virgin’s arrival could also mean reduction in air fares. Says Branson, “Our upper class and premium class as we call them are as competitively priced as the first class and business class fares of other airlines respectively. Except, of course, we give more services such as limousines, manicure, beauty treatment, etc, to every passenger on board. As for our economy class, our priority is to fly it houseful and hence the pricing is whatever it takes to get the customer. Hence, since we will be competing with Air-India too despite this agreement, the pricing and services will be competitive.”

Mascarenhas too believes Virgin’s arrival will improve its services and might even cause fare reduction depending on the market conditions.

Says Mascarenhas: “We will have to compete and hence we will have to perform, even if it means fare reduction.” Asked whether a possible fare reduction would cause further dent on the bottomline, the A-I MD said, “I don’t think it would because it would increase traffic and improve the overall situation. You see, now, between the two airlines, there will be services all days of the week.”

Branson is not entirely happy with just three services a week, and hopes to make it a daily affair as soon as possible. With UK-India bilateral talks due this January, what does Branson think will be in store for him? “If there is an agreement to increase services on the route, I think the decision will be in favour of Virgin and not British Airways. And in any case, we are going to give British Airways a run for its money.”

Phew, the Virgin boy has acknowledged the existence of BA! A story goes that any question about BA will evoke a stock reply from Branson: “BA who?” It is reported that Branson has all his aircraft tails painted with Japanese words to mean: "Don’t fly shitty BA and American Airlines."

Talk of gumption. But Branson did go red (redder than Virgin’s tail!) in the face earlier in the day at a massively-attended media conference where the deal was signed. A journo asked him: “Mr Branson, you are trying to increase tourists' flow to India. But it is feared that your move may lead to more cases of AIDS in India, thanks to your own image of a playboy. What do you have to say?”

Branson retorted: “Well, one, we've a condoms company; two, I enjoy life.”

UNI adds:

Branson calls Air-India 'brave' for tying up with an airline known for inflight beauty therapists, manicurists and masseurs

''After 70 years, beginning in the new millennium, a third airline will fly between India and Britain'', Branson said at the crowded conference.

Virgin, which has set new trends in aviation the world over by offering attractively priced tickets and perks on its flights, will operate three of Air-India's currently unused frequencies between the United Kingdom and India on Boeing 747. They will be operated on Wednesdays, Fridays and Sundays from Heathrow and from Delhi on Thursdays, Saturdays and Mondays.

Branson said he hoped that virgin would be able to operate a daily flight as soon as possible. The Briton who runs 100 companies, said now that he has ''a foot in the door in India'' he would look at other sectors too to get involved in.

Mascarenhas, A-I chief, said, ''We have not yet bothered to calculate the financial gains ...We wanted a partnership which would assist Air-India, increase capacity and help its product.''

There was a huge and growing demand for services between the two countries which Air-India's current frequencies simply could not service.

The code share would require approval from the British and Indian governments. Britain's Deputy Prime Minister John Prescott had done the spadework for Virgin during his recent visit, Branson admitted.

Under the terms of agreement, these London-Delhi flights will carry both Virgin Atlantic and Air-India flight numbers and both airlines will sell seats on those services in competition with one another.

The agreement also involves commercial cooperation between the two airlines in the area of cargo, yield management, special pro-rata agreements, product development and cabin crew training.

''It's an interesting situation where we will work together and compete,'' Branson said, adding that his airline was pleased in the efforts to bring back the glory that Air-India witnessed when it was world famous many years back.

The 49-year-old Branson, who created Virgin Atlantic in 1984 after becoming famous with flourishing music record and mail order businesses, said the fact that there had been only two airlines between the two countries had resulted in lack of capacity, lack of choice and higher fares. It had held back tourism and travel between relatives in the two countries.

He said he hoped with his Virgin Holiday Company he would be able to bring tens of thousands of tourists to India.

Asked whether he would be looking at a strategic partnership with Air-India, now that a code share agreement had been worked out, Branson said, ''This is our first relationship. We are still a 'virgin' company happy to have a courtship. We have to get to know each other well. Then we'll see what the future brings.''

Remarking that Air-India was 'brave' in working alongside Virgin, which has quite a reputation in the aviation business, Branson said this kind of a partnership would be very beneficial for the travelling public.

Currently, over 300,000 passengers every year fly to and from India, via third countries extending their journeys by many hours.

Virgin Atlantic carried 3.5 million passengers this year. The company with an annual turnover of one billion pounds, travels to 30 ports in the world including nine of the top ten long-haul destinations.

Branson said the reason why Virgin was waiting till July 2000 to start its flights was because new equipment had to be acquired and put in place in India so that every service that is given to the airline's passengers around the world will be available here.

The airline broke new grounds by offering a first class at business class fares. It was the first airline to have sleeper service with inflight beauty therapists, manicurists and masseurs.

Branson said his airline's philosophy was that it should be the best quality airline in the world. ''Those who fly with us know the difference. The economy class passengers are also looked after in a different way. We have a delightful staff and we'll bring all this to India''.

He said 50 per cent of the staff on the Delhi-London flight will be Indians. The Indian crew will be taken to England for training. ''We'll be approaching Miss World to work with us,'' he joked.

He said the fares were bound to come down if there was a capacity increase. There was need for far more capacity between India and the UK, he said. Empty economy seats on Virgin will be sold at any price, he added.

He was hopeful that if the bilateral air talks between India and Britain scheduled for January yielded more flights, the British government will give the additional services to Virgin.

The British government was keen on competition between its airlines, explained Branson. Recently, Virgin had been chosen over British Airways to fly to Shanghai and Cape Town, he said.

''Today it is confined to England, tomorrow we will see,'' Branson said when asked if the code share agreement with Air-India was only limited to the UK.

British Airways is playing dirty, it's cancelled my ticket, claims Branson

Business