British Airways' strategy for expanding in India has been dealt a potential blow after its commercial partner received a takeover bid from one of its main rivals.
Willie Walsh, BA's newly installed chief executive, and the group's commercial director, Martin George, met with senior executives of the Indian domestic airline Air Sahara in Bangalore last month to try to hammer out a wide-ranging co-operation agreement.
The two airlines already have a memorandum of understanding that allows some co-operation, but BA wants to expand this to include ticketing and scheduling, as well as involving Air Sahara in its frequent-flyer programme.
However, last week Air Sahara received a $750m (£430m) takeover offer from UB Group, the Indian brewer which also owns the rapidly expanding airline Kingfisher.
Though Air Sahara has rejected the bid, saying it undervalues the group, it is expected that UB's chief executive, Vijay Mallya, will up his offer and pressurise Air Sahara's shareholders into accepting.
Air Sahara had hired Ernst & Young to try to find a strategic partner to take a minority stake in the airline so that it could buy more aircraft.
BA had said there was no chance of its buying a holding in Air Sahara as part of its expansion into India. The UK's national carrier has upped the number of flights to the sub-continent to take advantage of the liberalisation of aviation pushed through by the Indian government. India is already BA's second-largest long-haul destination, after the US, and the airline will expand its operations further next year, taking its total number of weekly flights to 45.
Last month BA launched direct flights to Bangalore, a move aimed at capitalising on the growth of the hi-tech capital of southern India. This takes the number of cities BA serves in India to five, and it hopes to add two more next year.
Linking with Air Sahara would give BA extra through traffic from regional airports. However, if Air Sahara were to be taken over by Kingfisher, which has its own ambitions to expand its already-thriving transcontinental traffic.
BA said it would review the situation if and when Air Sahara accepted any offer from Kingfisher. Speaking last month, Mr Walsh said that even if Kingfisher took only a minority stake in Air Sahara, BA would have to look again at its relationship.
Last week BA announced 597 management jobs were to go as part of a cost-cutting programme.Reuse content