Air India's application for membership in the Star Alliance group of international airlines has been rejected after the existing 27 members failed to reach a unanimous decision on the matter.
It comes despite India's national carrier announcing on Sunday it would resume most of its international flights by the end of the month. The airline had been forced to scale back its international timetable in reaction to a two-month strike by some of its pilots.
"To be part of the alliance, every member has to agree and that has not happened, especially after the pilots' strike, when we lost a lot of credibility," said Ajit Singh, India's minister for civil aviation. "They have said no. We have asked Air India to look for other options and alliances."
Air India will now hold talks with the rival airline alliances Sky Team and One World.
Membership in the Star Alliance, which includes airlines such as Lufthansa, Singapore Airlines, Air China and United, would have given Air India a major boost, offering codesharing and through-ticketing to its customers to destinations in more than 190 countries. It would also have offered the chance for customers to build up frequent-flier points redeemable with any member airline.
Instead, Star Alliance chose the independent Indian airline Jet Airways as its next member.
Air India has been in financial trouble for years. An interim report by India's aviation ministry showed that, of Air India's 300 routes, only three were making money. More recently, the airline has struggled to make its merger with Indian Airlines work.
Repeated reports revealed the two airlines continued to work as separate entities despite the merger deal and, on May 7, about 400 Air India pilots, members of the now-unrecognised Indian Pilots Guild, went on strike to protest the decision to allow their Indian Airlines colleagues to train on the Boeing 787 Dreamliner.
The 58-day work stoppage forced Air India to cancel several profit-making as well as loss-making routes, inflicting losses of more than US$108 million (Dh396.6m) on the cash-strapped airline, which was already sitting on a debt of $12.15 billion.
The airline is also about to come under additional competitive pressure following a decision by India's aviation ministry to end Air India's traditional right of refusal on new international routes.
As a result, private Indian carriers, such as Jet Airways, SpiceJet and IndiGo, will begin operating flights to the Arabian Gulf and South East Asia, two key markets for Air India. IndiGo has received approval to operate more than 60 new international flights every week, of which nearly 30 are to Dubai and seven for Jeddah, while SpiceJet can now operate nearly 50 new overseas flights a week, including seven each to Dubai and Riyadh.
The market leader, Jet Airways, has had nearly 60 additional flights a week approved, including 14 to Kuwait.
Meanwhile, the Indian government is looking to offset Air India's debts by selling off its assets. A committee has been set up to value the assets and is due to report in two months.
Initial estimates of assets include a collection of paintings valued at $63.4m and property valued at up to $1.8bn.
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