BA’s Kingfisher deal ups pressure on India’s airline regulators

September 6, 2010

Willie Walsh, Chief Executive of British Airways, is not afraid of conflict. Having tackled investors who have seen the airline struggle through two years of substantial losses and stared down continued industrial action from his cabin crew, he’s now set his sights on India’s civil aviation regulators.

A British Airways passenger jet taxis past parked BA jets at Heathrow airport in London July 30, 2010. REUTERS/Luke MacGregorWith the ink barely dry on BA’s merger with Spain’s Iberia, the recently-announced code-share agreement with India’s Kingfisher Airlines marks the UK flagship carrier’s first tentative step into the Indian aviation market. While current rules do not permit any foreign ownership of Indian carriers, he has made it clear that reforms are needed.

“If the rules change, not just British Airways, all airlines around the world will look at the possibility to invest in Indian carriers. I have no doubt Indian carriers would welcome such foreign investment because airlines are looking at strengthening their financial position. Also, consolidation will help. We will be looking at opportunities in the future. We are sponsoring Kingfisher Airlines into Oneworld (a global grouping of airlines) because India is such an important growth market and we want to participate in this growth,” Walsh told India‚Äôs Mint newspaper in an interview.

His sentiment is clear. The code-share agreement, which begins on 15 September and will allow customers to book journeys encompassing both airlines’ networks on each other’s websites, and BA’s sponsoring of Kingfisher to join the Oneworld global airline alliance, are tentative steps in the British airline’s desired move into the Indian market.

And Kingfisher isn’t the only airline in Walsh’s targets. As the Financial Times reports, BA executives have drawn up a list of 12 carriers across the globe that they are interested in buying or merging with.

For these grand dreams of acquisition to take flight, however, Walsh knows that government regulations forbidding foreign ownership of airlines across the globe will need to be relaxed.

Next Tuesday, India’s government will study a proposal to do just that. Current indications suggest a long-standing demand to allow stakes of at least 26 percent may be considered.

BA’s Kingfisher connection and its chief executive’s timely comments may have upped the ante for next week’s meeting, but unless India’s government also straps in for take-off, Walsh’s dreams may stay grounded for now.

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Hmmm, I think Willie Walsh may have bitten off more than he can chew. We’ll have to wait and see how it plays out.

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