AI wants Lufthansa punished over Star Alliance

Air India has asked the ministry of civil aviation to adopt a tough stance against German airline Lufthansa for breaking their understanding over the national carrier's entry into Star Alliance.

Star is a network of airlines around the world, with various benefits for its members.

Earlier this week, Air India's membership application was formally put on hold.

Lufthansa is a founder member of Star Alliance and was the mentor airline for facilitating Air India's entry.

The national carrier has requested the ministry facilitate compensation from Star Alliance.

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A top official in the ministry said: "Air India has raised issues about Lufthansa and Star Alliance. We are considering the issues raised, and appropriate action will be taken."

Air India has informed the ministry that Lufthansa had suggested in a meeting in December the process of Jet Airways' integration with the alliance begin immediately after Air India's entry.

However, Air India objected to the proposal, saying Jet had not even sought government permission to join the alliance.

Any Indian carrier that plans to join an alliance has to take prior permission from the government.

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In an official reply, Lufthansa said it shared Star Alliance's long-standing position that more than one airline could join the alliance from important markets such as the US, China or India.

"Lufthansa and Air India entered a bilateral partnership in 2002. Today, Lufthansa operates more than 300 joint code-share flights globally with Air India, including all flights to and from India. This successful bilateral partnership continues," it said.

Air India has said the enhanced bilateral opportunities extended to the German airline should be reviewed by the government.

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It has communicated to the ministry it had supported the exchange of additional traffic rights for Lufthansa as part of an understanding that included the German airline's support to its entry into Star Alliance.

The state-owned carrier said Air Swiss was allowed to continue operations by the government after it was bought over by Lufthansa (which is the majority owner now) only because of Lufthansa's support to Air India.

Air India has asked the ministry to facilitate compensation from Star Alliance for the amount it spent to get membership (it paid the alliance euro 610 million) and also its opportunity cost.

Air India says it spent $5-10 million to meet the minimum requirement for joining the alliance.

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It told the government an exit fee of $25 million had to be paid by an airline expelled from the alliance, so it feared Star Alliance might seek its expulsion.

Star Alliance on Monday announced, after a board meeting on Sunday, that it was "suspending" the national carrier's integration into its network.

It said Air India had not fulfilled the criteria it had agreed to.

However, the airline claims it met all the 87 criteria for joining the alliance. Civil aviation ministry officials have also said they would be tough on Star Alliance.

Formed in 1997, Star Alliance is a consortium of 27 airlines, including Lufthansa, Air Canada, Singapore Airlines, Thai Airways and Swiss.

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Being the largest alliance, its members have more than 4,000 aircraft that connect 1,160 airports in 181 countries through more than 21,200 daily flights.

Jet Airways did not comment on this story. Star Alliance, while reiterating India had the capacity to support more than one member airline, said joining an alliance required preparation and investment on all sides.

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"We have not been made aware of any compensation claims made by Air India. The joining fee levied is not a windfall profit flowing into the member carriers' bank accounts, but is needed to cover the necessary investment undertaken by existing members and the Star Alliance central organisation in order to ensure all the alliance customer benefits can be provided together with the new member carrier," said an email reply from Star Alliance.

The reply said certain investments made by Air India, like the new SITA passenger service system, would have had to be made as part of its merger with Indian Airlines, irrespective of alliance membership.