INDIAN AIRLINES|AIR INDIA|KINGFISHER AIRLINES|JET AIRWAYS|GO INDIA

The top privately owned airlines in India, Jet Airways and Kingfisher Red Airlines, have set up an alliance to cut costs through code-sharing and combining ticketing and ground services.

There would be no mutual equity investment between the two airlines, which have a combined fleet size of 189 aircraft and a domestic market share of about 60 percent. Kingfisher Airlines has just started an international route, while Jet Airways has had international operations for several years.

The agreement also covers fuel management, crew training and utilization. The airlines said in a statement late Monday that they would offer customers access to the frequent flier programs of both companies.

There will be huge cost savings and revenue enhancement opportunities arising from this alliance, said Naresh Goyal, the chairman of Jet Airways. Both airlines are mired in losses, with Jet not expecting to break even until 2010. Falling stock prices have prompted the carriers to delay their plans for raising capital.

On Tuesday, Jet’s stock climbed 14.7 rupees, or 5.1 percent, to 303.50, or $,6.30, its highest price since Oct. 8. Kingfisher added 4.15 rupees, or 8 percent, to 56 rupees, its highest level since Oct. 3.

Jet and Kingfisher had bought rivals in 2007 as they fought for the top position in a booming domestic market. Jet bought the smaller Sahara Airlines called Jetlite Flights and Kingfisher acquired Deccan Aviation, the first Indian low-cost carrier,.

But higher ticket prices made to cover rising fuel costs, combined with a slowing economy, have hurt demand and pushed airlines to trim costs, cancel loss-making routes and raise funds to stay afloat.

The start of at least six new carriers in the past five years, however, has increased capacity, making it hard for airlines to raise fares. Jet fuel prices in Mumbai, home of the busiest Indian airport, have risen 24 percent since the beginning of this year, making the biggest single expense for airlines even more expensive.

Domestic air travel increased at an annual rate of 2.3 percent from April to August, compared with growth of 38 percent in the period a year earlier, government data showed. For August, the number of domestic passengers fell 5.3 percent, to 2.92 million, from 3.1 million in July, the civil aviation ministry said.

Jet Airways plans to discontinue some international flights and put its overseas expansion on hold. Kingfisher, operated by Vijay Mallya, the chairman of United Breweries Group, in August deferred delivery of 32 Airbus A320 aircraft because of waning demand for air travel.

“Both Jet and Kingfisher fully realize that better understanding of supply and demand in this capital and labor-intensive industry is the key to profitability,” Mallya said.

Higher fuel prices and cut-rate fares may cause Indian airlines to post the second-biggest combined loss worldwide this year, behind the United States, the International Air Transport Association said last month. Alliances and mergers will speed up in India, one of the fastest growing airline markets, since the industry is forecast to have a $2 billion loss this year, the Center for Asia Pacific Aviation said.

The industry is going through such a negative environment that it needs such unusual moves,” said Kapil Kaul, chief executive of the center’s India unit. Two competitors becoming collaborators gives out a big message about this. It’s an admission of the current financial reality of the industry.