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Virgin, Air-India yet to reach a settlement

Virgin Airways, whose flights to the sub-continent are due to start in July, still has not reached an agreement with Air-India to allow its service to begin, according to a Virgin Airways spokeswoman.

Despite this, Virgin has already launched a big-spending ad campaign for its three-flight-a-week service between Britain and India. It has snapped up some of the most expensive hoarding space in London to publicise the service.

A final round of negotiations between Virgin Airways and Air-India is tentatively set to be held in Bombay starting on June 19 to conclude an accord.

"Air-India has not confirmed that we can fly yet," the Virgin spokeswoman said.

The two carriers have been at loggerheads over a range of major issues such as flight timings and fare. These issues still remain outstanding six months after the initial agreement on 'code-sharing' flights was reached.

That 'code-sharing' deal would allow Virgin Airways planes to journey to the sub-continent on quotas assigned to Air-India. A specified number of Air-India passengers would travel on Virgin flights. Ticket pricing and seasonal fares have to be settled beforehand between the two carriers.

However, the two airlines cannot agree on how the arrangement will work with Air-India fearing that Virgin will go after its customers and that a price war could ensue.

The two airlines have already held one round of talks at which they failed to reach an accord.

Air-India had agreed in December to allow Virgin to start three flights a week between India and Heathrow. Because Air-India is short of planes it is unable to fully utilise its quotas between the two countries. Virgin has lobbied intensely since early '99 to be allowed to fly to India.

The British government just recently awarded Virgin 'designated carrier' status between India and Heathrow, giving it landing rights in India. Only designated carriers enjoy landing rights in India.

There is also some dispute over whether Air-India could conclude a code-sharing accord with a carrier that did not benefit from 'designated carrier' status when the agreement was signed.

Sir Richard Branson, the founder and chairman of Virgin, signed the deal when he made a high profile visit to India. The Virgin-Air-India linkup was regarded as a good move for both airlines. British Airways, which was the lone UK carrier flying to India, had been seeking to be able to operate 22 flights weekly compared to its current 16.

Branson has recently sold a 49 per cent stake in Virgin to Singapore Airlines.

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