DECEMBER 12: One winner from the Air-India-Virgin At-lantic deal is likely to be the air traveller who can look forward to lower fares on direct flights from Mumbai and Delhi to London, thanks to the competition provided by the aggressive new entrant in that sector. In addition to lower fares there is the promise of better and more frequent services. If Virgin's colourful chief Richard Branson sticks to his plans the dominance of Air-India and British Airways on this route could be broken as early as July when Virgin starts three direct flights from India to Heathrow.Beyond the good news for the air traveller, there is little else that is clear about the deal. After the hoopla and a procession down Janpath on a caparisoned elephant Branson and A-I's chief Michael Masca-renhas had surprisingly few details to reveal about the business end of the relationship. What is known is that Virgin pays an undisclosed amount as royalty for using Air-India's flying rights on the route. Training arrangements have beenmade for Air-India cabin crew.This marriage of convenience does very different things for each partner. That is inevitable when one partner is in the ascendant, expanding its businesses and exploring new territories; and the ot-her's business is contracting and it is, or should be, in the process of trying to reinvent itself and meanwhile to cut its losses as far as possible. For Virgin the deal opens doors into the airline business, to-urism and entertainment in this country. Virgin is interested in all these fields but the priority is evidently passenger flights on the India-Heathrow sector where Branson sees enormous opportunities.He probably would not have had the chance to exploit them without the A-I relationship. As he tells it, Virgin is no threat to A-I. He is looking at the 3,00,000 or so passengers who, he says, have to fly to India via the Middle East or other places because of the shortage of seats on direct flights. If true passengers want more direct flights (rather than low fares) itmust come as news to Air-India which has not been able to tap that market satisfactorily and utilise its full quota of ten direct flights a week.More to the point is, will Virgin cut into Air-In-dia's market and British Airways' by fare-cutting and better services or will an expanding passenger market benefit all three? BA is already preparing to position itself as an upmarket airline and may more easily be able to live with a newcomer bidding essentially for the economy and group fare end of the market. For Air-India a realistic answer would be that, until a major overhaul of fleet and operations, it is going to have to try a lot harder simply to hold on to its present position. So why take the serpent into its bosom? A handsome royalty? Certainly cutting some of its losses is important as also reducing its wage bill (50 per cent of cabin crew on Virgin will be from A-I). Introduci-ng competition as a spur to better performance makes sense but it is not competition A-I lacks. What it needs isdownsizing, fresh investment and an outward-looking aggressive management free of bureaucratic interference.
