FAA Downgrade May Hurt Air India, Jet Airways Alliances

Jan. 14, 2014
Airlines would have to snap ties with American counterparts, a move that may have an impact on Air India's entry into the prestigious Star Alliance.

Jan. 14--NEW DELHI -- India's two biggest airlines, state-run Air India Ltd and Jet Airways (India) Ltd, could be worse hit than previously thought and may lose their code-sharing privilege on US routes if the US aviation regulator downgrades India's air safety ranking over the coming fortnight.

The airlines will have to snap ties with American counterparts -- a move that may have an impact on Air India's entry into the prestigious Star Alliance and Jet Airways' plan to integrate its network with that of Abu Dhabi-based Etihad Airways PJSC, which has bought a stake in it.

As known earlier, Air India and Jet Airways would be barred from increasing flights to the US if the Federal Aviation Administration (FAA) downgrades India's air safety ranking to so-called Category II. The FAA in December inspected the Directorate General of Civil Aviation (DGCA) to determine if it had taken action to correct 33 deficiencies that came to light in a September audit.

The two airlines' existing flights would also be subjected to additional checks at American airports.

Air India announced last year that it would be joining Star Alliance, the biggest club of world airlines. Jet, which sold a 24% stake to Etihad Airways for $379 million, plans to align its network with that of Etihad, especially for passenger traffic to the US and Europe.

While a downgrade, if at all it happens, does not reflect on the safety of India's airlines -- the rankings measure the ability of the Indian regulator to follow safety procedures and not that of the airlines -- India risks being perceived in a negative light.

A Category II safety rating means the civil aviation authority does not comply with International Civil Aviation Organization standards and is deficient in one or more areas, such as technical expertise, trained personnel and record-keeping or inspection procedures, according to FAA.

"It is true that US airlines can't have code share with Category 2 country," John Goglia, a former member of the US' accident investigation board, the National Transportation Safety Board (NTSB), said in an email. Goglia said he wasn't aware of the most recent views of the FAA on the audit.

Code-sharing is an agreement between two airlines by which both can sell seats to customers on the same flight.

Air India does not have a code-share agreement with any US carrier. It flies non-stop to New York and Chicago but places its code on Deutsche Lufthansa AG flights to US cities like Detroit.

Star Alliance has United Airlines as a member and airlines in the grouping have to typically sign code share agreements with fellow members. Jet Airways already has a code share agreement with United Airlines for flights to many US cities.

Air India said it had not received any information on the subject and therefore cannot make any comments.

Jet and United Airlines declined to comment for this story.

Star Alliance said code-share agreements can only be allowed between two airlines when the respective governments approve them.

"Whilst code-sharing is one of the benefits provided through Alliance membership, entering into such code-share relationships is always subject to the necessary government approval. Hence the Air India integration process can proceed even if in some cases code-sharing is not possible due to government restrictions," Star Alliance spokesman Markus Ruediger said in an email from Frankfurt, Germany.

German airline Lufthansa is the mentor for Air India's induction into Star Alliance, which has to be completed in 2014.

"We have no comment at this time," an FAA spokeswoman said in an email from Washington. In November, the Prime Minister's Office intervened in the matter with the Prime Minister's principal secretary Pulok Chatterji, foreign secretary Sujatha Singh and then aviation secretary K.N. Srivastava and other top civil servants reviewing the issue.

The Indian government expects a communication from the FAA within a fortnight.

"We are expecting the communication within this week or fortnight. Meanwhile we continue to supply updates to FAA on whatever improvements we are doing on some of the points they made," said a government official who declined to be named

Jet Airways' former chief executive Steve Forte, who is based in New York, said FAA needs to stop short of a downgrade, given India's safety record.

"If there are still unresolved issues (I believe there are) I would prefer to see a "non-downgrade" decision..," said Forte, "in other words recognition on the part of the FAA that work is being done towards the satisfactory resolution of outstanding issues and, as such, a mutual agreement between the local DGCA and the FAA with an official timeline to complete the work within reasonable parameters."

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