Air India - The Virgin Airways Saga

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The End of the Honeymoon?

By October 2000, VA was to start its third code share flight as per the agreement with A-I. In addition to the Rs 100 million per flight per annum that A-I got from VA, the third flight would fetch A-I Rs 300 million per annum. However, till late 2001, VA was flying only two flights a week. Also, there was no progress on the remaining three flights that VA was entitled to fly from 2001.

This seemed to the bone of contention between VA and A-I. VA officials were particularly unhappy that BA was granted rights to fly three additional flights per week from Kolkata to London against the prevailing norms. What seemed particularly strange was that there was no commercial agreement or code share for any of these additional frequencies. Commenting on the GoI's interest in BA, a leading business magazine in India wrote, "The needle of suspicion automatically points to vested interests in the ministry and their sudden penchant for BA."5 By December 2000, it became clear that VA would have to wait a bit longer for final clearance from A-I to commence the third code-share flight on the India-London sector. While VA officials claimed that they would start the third code-share flight within a reasonable period of time following clearances from Indian authorities, A-I officials said that nothing was in the offing as yet.

Said a VA official, "The ball is in the court of A-I and the Indian Government. The day we get the permission, we will start the service in a reasonable time period, which will allow us to relocate aircraft and crew to commence the third flight. Further, the airline will be only too happy to serve other destinations in India."

Some analysts said that while VA was keen to operate the third flight on Sundays from London with a Monday departure from Delhi, A-I was opposed to as the Indian carrier also had a Delhi to London flight on Monday morning. VA was willing to schedule its flight at 2 p.m. in the afternoon, ensuring a gap of more than 6 hours between its flight and A-I's London flight.

But this was not acceptable to A-I, which pointed out that according to the agreement signed between VA, and A-I, VA was to operate flights only on those days when A-I did not operate services to London. A VA official said that the delay in granting permission to VA to operate the third flight on the sector was proving to be financially disastrous for A-I.

However, despite these problems, VA said it was interested in code sharing with A-I to other cities such as Chennai, Bangalore, Hyderabad and Ahmedabad.

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5] Business India, September 4-17, 2000.