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"You Matter" from Kingfisher Airlines

2011-11-12T15:32:00.003+05:30

I received below email from Kingfisher Airlines last night.

Dear Mr. Chauhan,

Membership No. *********

On behalf of Kingfisher Airlines, I am grateful to you for your support and patronage of our services. I would like to take this opportunity to update you on recent developments at Kingfisher Airlines vis-a-vis media reports on our performance.

As you are aware, the Indian Aviation Industry has been faced with the difficult task of coping with high costs and lower yields. Post considerable thought and deliberation, Kingfisher Airlines has rolled out initiatives that aim to drive the long-term profitability in our efforts to meet these challenges.

As announced earlier, we have decided to focus on the full-service market; to this end Kingfisher Airlines has initiated reconfiguration of its aircraft. This exercise will require few of our aircraft to be out of service for the next few weeks. Ergo and in line with maximizing productivity we have rationalized our network, resulting in a temporary discontinuation of approximately 50 flights out of our current operating schedule of approximately 350 departures per day. Once the reconfiguration is complete, these aircraft will be pressed back into service immediately. Clearly the report about our flights being cancelled owing to the supposed exodus of pilots appears to be falsified.

Our service commitment to you remains sacrosanct, and we have taken every measure to reduce any inconvenience caused due to the temporary changes in schedule. Please accept my sincere apologies in case you have been inconvenienced on this account; I truly appreciate your support, and thank you for your understanding.

I look forward to your continued patronage and remain,

Yours sincerely

One of my reader (I would call him "V") owes this mess on the Merger of Air Deccan & Kingfisher Airlines, he has following interesting points. He was with Air Deccan at that point -

In Kingfisher - Deccan merger there was no exact plan of merger at all. All the plans were by the junior level staff (DGM and below) to kick out efficient and better staff Deccan. The loss of Kingfisher is mainly because of un necessary expenses and un controlled number of Managers with heavy pay.

For ex -In Deccan Flt Ops was running with 10 staff with a Single Manager. Manager can contact any department directly and report to Chief pilot/VP.

I agree the number of Dispatchers are less than required, since the self briefing system is introduced, all the related issues where addressed to HQ dispatcher and effectively very less problem observed.

In Kingfisher a normal base dispatch was with 9 Dispatchers 14-16 Ops officers, 5-6 peons, 1 Manager or 2-3 Asst managers, On SM+ Base vise roaster 7-8 people .SM will report to DGM then to GM Then to chief pilot. This is regarding staffing.

If you look into the flight planning there is no effective tankering was there more over too many pilots used to take additional fuel saying some reasons.

Layover was another issue. Without lay over or with reduced lay over company can use 9 to 9.5 crew ratio effectively and the usage will be more.

Well, these are some points to consider, V also says that one can make a PhD Thesis itself why the merger was a failure.

I feel its a very tragic end to a well nourished Brand (Its brand is more powerful than the company).

How Kingfisher, Jet made a hash of their business models

2011-09-15T17:56:00.003+05:30

Via - Firstpost.com

Running an airline in India is a mugs’ game. Once defined as the simple business of “getting bums on seats”—more “bums” means better bottomline—the way the Indian industry is being run, one wonders if the “bums” are paying enough for the seats they sit on.

Thursday’s newspapers said Kingfisher’s auditor was tut-tutting about the poor state of its balance-sheet. Without owner Vijay Mallya putting in more equity, the airline is on a crash course, with accumulated losses eroding more than “50 percent of its net worth.”

Look at the carnage. Kingfisher hasn’t seen black since 2005. Market leader Jet Airways hasn’t sniffed profits since 2007-08. SpiceJet has got a whiff, but has accumulated sackfuls of losses (Rs 720 crore) in the past. In the first quarter of 2011-12, Jetmade a loss of Rs 123 crore after many accounting adjustments, Kingfisher lost a whopping Rs 264 crore, and SpiceJet Rs 72 crore.

A Jet Airways aircraft (R) and Kingfisher Airlines (L) are seen on the tarmac at the airport in Mumbai. Punit Paranjpe/Reuters

One figure tells it all. Between last year and now, the three listed companies – Jet, Kingfisher and SpiceJet – destroyed Rs 6,600 crore of shareholder wealth, a drop of 59 percent when the overall market (as measured by the Nifty index) fell only 13.48 percent.

As for Air India, the less said the better. When last heard of, it had racked up losses of Rs 22,000 crore against a shrinking market share – and its management is accumulating frequent flier miles to-ing and fro-ing between Delhi and Mumbai, trying to wangle thousands of crores in equity infusion. What it needs is an infusion of cyanide.

The airline business is clearly a value destroyer. And it’s doing it all by itself, without help from Praful Patel.

Or is it? In India, there is clear line dividing successful (or near successful) airlines from the rest. And that line is drawn in sand. It divides the pure low-cost carriers (LCCs) with a clear business model (SpiceJet, Indigo) from the ones who operate both full-service and low-cost carriers (Jet, Kingfisher, Air India).

It’s the full-service carriers (FSCs) that are bleeding profusely for they have a confused business model. They have fallen between two stools.

The world over, there are five keys to airline success: costs, costs, costs, costs, costs. This is where the LCCs score over the FSCs.

The first cost in this bums-on-seats business is a four-letter word – CASK, or the cost per available seat kilometre. It helps to have more bums on seats, but the critical thing is to have the lowest possible seat cost per possible bum. CASK is a metric that measures what it costs to fly every seat for each km of distance.

Indigo and SpiceJet are the industry champs in CASK, though clearly comparable figures are not available. A Forbes India report quotes

Citibank’s airline industry analysts Jamshed Dadabhoy and Arvind Sharma as saying that “the capital costs per passenger for full service airlines have jumped several fold over the last few years, while those of budget airlines have remained stable or moved up very little. SpiceJet, for instance, has a CASK of between Rs 2.30-2.40 while the number for Jet Airways is around Rs 3.60.”

The second cost to control is debt. Debt brought Air India down, with some help from Praful Patel, who was the Civil Aviation Minister when the airline suddenly ordered 50 medium and long-range aircraft for $7.2 billion when the management thought 18 would do. The resulting debt laid the airline low. It current debt: a crippling Rs 42,570 crore.

Contrast that with what Indigo and SpiceJet have cannily done. Both take aircraft only on lease. Even if they buy them, the aircraft are resold to financiers and leased back. Says Antique Stock Broking, which put a buy on SpiceJet in July: “The company has used an asset light model for business growth with sale and leaseback strategy. Its entire fleet is currently leased and the strategy has helped the airline to keep its debt levels to minimum, avoiding debt burden. This strategy has paid off SpiceJet very well and it stands out distinctly amongst its competitors. The company has managed to survive the downturn and grow, while competing players are finding it difficult to expand the fleet due to heavy debt burden.”

Jet is better off compared to Air India, but it is still tottering under debt. In a recent interview, Jet’s Senior Vice-President (Finance) Mahalingam Shivkumar agreed that debt exceeded its airline assets. He said: “We have a debt of about Rs 13,400 crore, out of which Rs 9,000 crore is our acquired aircraft. Against that, we have an asset worth Rs 9,000 crore and we have a balance of Rs 4,000 crore.”

The market agrees. Rs 4,300 crore is the value of Jet’s drop in market capitalisation over the last one year.

The third cost is fuel. Thanks to rising fuel prices over the last one year, SpiceJet’s fuel costs as a percentage of sales have moved up from 37 percent to 56 percent of sales, but if its balance-sheet is looking prettier than its competitors’, its not because it is able to drive better bargains with the oil companies. Aviation fuel costs the same for everybody. So what makes the difference?

Aircraft age. Keep your aircraft fleet young, and you get fuel savings. Says the Forbes article on Indigo: “Indigo has six-year sale and leaseback agreements for most of its planes. The lessor takes the planes back after this and the airline can induct a brand new one in its place. Though at a cost, this is effectively like a perpetual elixir of youth. The most important financial implication is that it never has to undertake the ‘D’ check, where the aircraft is completely stripped down and airlines often discover the need to spend on major repairs. This check is usually done when the plane is about eight years old.”

The average age of Indigo’s fleet, as indicated by aviation website www.airfleets.net is 2.4 years. It’s a fleet-footed toddler in Indian airspace. Go Air’s average fleet age is also a stripling 2.5 years. SpiceJet’s birds are a bit older at an average of 4.7 years.

But the three airlines with a mix of full-service and low-cost operations—Kingfisher, Jet and Air India—had the oldest fleet mix. Kingfisher and Kingfisher Red had 4.6 years and 5.9 (making for an above 5 average for the company as a whole), Jet had 5.8, and Air India had a gerontocratic 9.8 years.

Age is beginning to tell on the big boys.

The fourth cost relates to aircraft maintenance. Globally, airlines have to maintain and service airlines to strict safety standards. This is why airlines with a diverse mix of aircraft tend to have higher costs, because they need separate staff to maintain Boeings or Airbuses or whatever.

The low-cost carriers (LCCs) have cannily focused on having only one basic aircraft (or sometimes two, with the second one connecting the smaller towns). SpiceJet uses Boeing 737s (NextGen). And Indigo Airbus 320s. But the big boys use several types. Kingfisher uses many different Airbuses (from A319-321 to 330) and ATRs. Jet uses Airbuses, Boeings and ATRs. Air India uses Airbuses, Boeings and even a Lockheed L-101 Tristar (anyone’s heard of them?)

In this business, diversity is weakness.

The fifth cost is the cost of idling. Getting bums on seats is one half of the challenge, but there’s no point getting them seated till you can fly them. In short, you have to fly more bums more often and for longer – and this means airlines which keep their aircraft flying for longer hours get better revenues. The figure to watch here is the aircraft utilisation rate – the time the aircraft spends in the air in a 24-hour cycle.

Indigo tries to keep the idle time between two journeys to 30 minutes and manages an aircraft utilisation rate of 11.5 hours a day. Air India’s? Don’t ask. It’s 9.1 hours.

Apart from costs, the full-service carriers compounded their problems by making fundamental strategic errors in their desire to scale up and raise market share.

Domestic market shares in 2001 stood at 26 percent for Jet (including JetLite), 19 percent for Kingfisher, 18 percent for Indigo, 16 percent for Air India, 14 percent for SpiceJet and 7 percent for Go Air, according to data from the Directorate General of Civil Aviation.

Two areas are worth mentioning. Mergers and branding.

All the full-service boys messed up their mergers. Coincidentally, all three—Jet, Kingfisher and Air India—went in for acquisitions and mergers in 2007-08. While Jet bought Sahara, Kingfisher bought Air Deccan and Air India merged with Indian Airlines. The traditional logic of mergers is cost savings and synergy, where two and two equals five.

But, surprise, two plus two ended up as three for all of them. While some cost rationalisations did come through from route swapping and capacity and code sharing, all three made branding and HR errors.

Air India never fully consummated the marriage with Indian Airlines as its human resources issues did not get sorted out (pay structures, etc). Jet and Kingfisher committed cardinal branding errors by renaming their low-cast carriers in their own image.

While Jet renamed Sahara as Jet Lite, consumers wondered what the difference was. Kingfisher converted Air Deccan into Kingfisher Red – and duly landed deeper in the red.

The issue is simple: when two brands—one full-service with all the frills of flying, and another, with low fares—are given the same or similar names, how is the consumer to know the difference? It is easy to assume that Kingfisher Red’s service is no different from Kingfisher’s, when the fares of the former are far lower. If Rolex were to buy Titan and name the latter Rolex Lite, will Rolex’s sales go up or Titan’s?

It is more than likely that many air passengers downtraded to the LCCs due to this brand confusion.

The full-service carriers have clearly to rethink their business models and branding. Or else, they can kiss goodbye to profits forever.

The Praful Patel Guide to destroying AI – Revised Edition

2011-07-01T10:40:00.003+05:30

Air India, India’s national carrier-turned-cadaver, is waiting for its last rites. When last heard of, the airline had turned in a loss of Rs 7,000 crore in 2010-11, and was investing in an oversized hat to hit the government for yet another bailout masquerading as a turnaround package.

Only, the amounts this time are too staggering for Pranab Mukherjee to agree to without a fight. According to a report in The Times of India, the airline will need equity support of Rs 43,255 crore just to stay afloat over the next 10 years. Mukherjee is hoping to raise that kind of money by selling public sector equity this year. If he agrees to bail out Air India, it’s as good as kissing goodbye to this moolah.

With liabilities of over Rs 47,000 crore, the airline is on the verge of defaulting on its loans.

Mukherjee will thus have to chip in with some money willy-nilly – even if he is not asked for the full sum that SBI Caps has suggested as part of its revival plan for the airline. The newspaper says Air India will require Rs 8,372 crore this year itself – Rs 6,600 crore to pay its bills for 2011-12 and Rs 1,772 crore to keep up with loan payments.

But for all this, the airline still won’t be able to make a profit till 2017-18. Air India, it seems, has been fixed – and fixed for good – by former Civil Aviation Minister Praful Patel, who has been often been accused by the unions of batting for Air India’s rivals till the ministry was prised away from his grip last January.

When Patel took over as Minister of State for Civil Aviation in 2004, the domestic carrier (then Indian Airlines) was market leader with a 42% share, but slipping. Today, it is No 5 – behind Jet, Kingfisher, IndiGo and SpiceJet – fighting extinction.

Here’s how Praful Patel did it – ruin Air India that is – and there’s nothing his successor Vayalar Ravi can do to rescue it.

First, load it with debt so high that it can never raise its head again. It is now clear the Air India’s financial problems began in 2004 when Praful Patel chaired a meeting of the board in which the airline suddenly inflated its order for new aircraft from 28 to 68 without a revenue plan or even a route-map for deploying the aircraft, says an India Today report.

An airline with revenues of Rs 7,000 crore was being asked to take on a debt of Rs 50,000 crore. Today, it’s losses themselves are Rs 7,000 crore. And the bailout it is seeking is as big as the cost of those 68 aircraft. The government might as well have gifted those birds to Air India.

Second, Patel presented a merger of Air India with Indian Airlines as the panacea for all ills. It is surprising how often ministers suggest mergers when public sector companies head for ruin. When telecom company MTNL was sliding, then Communications Minister Dayanidhi Maran was suggesting a merger with Bharat Sanchar Nigam Ltd. That didn’t happen, but both MTNL and BSNL are in the sick bay anyway. Praful Patel used the losses of Air India and Indian Airlines to push for their merger, claiming there would be cost savings from synergies. Worldwide, mergers usually destroy value. The Air India-IA merger has been the biggest man-made disaster in aviation history – thanks to their varying cultures and employee costs.

Says Gustav Baldauf, former COO of Air India who fell foul of Patel’s successor and had to quit: “The management never resolved the pending human resource (HR) issues related to the merger. I had warned the Chairman-cum-Managing Director and the Aviation Ministry of the consequences of introducing a single code without resolving issues first. But they never listened,” he told Mid-Day.

Third, Patel seemed to be batting for Air India’s rivals. He handed over lucrative routes to private players. Though Air India had no birthright to every lucrative route, Patel’s overnight manoeuvres in this regard suggested that he had a clear conflict of interest by being both Aviation Minister and board member in Air India.

A Tehelka report quotes Capt Mohan Ranganathan, an aviation expert, as saying that the airline handed over “flying rights on lucrative sectors in the Gulf to foreign airlines, including Etihad Airways, Qatar Airways, Air Asia, Singapore Airlines and several others…” One glaring instance of a sudden handover could not have come without Patel’s nod. Tehelka says that in October 2009, the airline sent “letters…to its stations in Kozhikode, Doha and Bahrain stating that it was withdrawing operations on the route” – a route in which the airline was making money hand over fist. Very soon, Jet and Etihad stepped in to fill the gaps, and so did Emirates.vate players. Vijay Mathur/ Reuters

Fourth, Praful Patel’s ownairline preferences made it clear who he favoured. According to replies received under the Right to Information Act by one Jagjit Singh, Patel used mostly private airlines. Between June 1, 2009 and July 2, 2010, 26 of the 41 flights he took between Delhi and Mumbai were with Kingfisher. “It is intriguing that the minister who stresses the need for revival of the national carrier himself chooses to ignore it,” said Singh. And this happened just when the Finance Ministry was asking all government employees to use Air India for their official travel to help revive the carrier.

Patel’s haughty reply when asked about this preference of private airlines: “I am the Union Civil Aviation Minister and not the minister in charge for Air India. As a minister, it is not binding upon me to fly only one particular airline. I fly according to my convenience.” But when he ordered so many places for Air India, was he acting as Minister or superboss of the airline?

Fifth, Patel used his clout with Air India often for personal ends. Another RTI query showed that Patel’s kin used the Air India Managing Director’s office to regularly upgrade from economy to business class. Business class is a cost Patel’s family, which is rolling in wealth, can easily afford. So what does this say about Patel’s attitude to the airline?

But is the new Civil Aviation Minister going to reverse the rot set off by Patel?

According to a Financial Express report, the new turnaround plan does not look any more viable than the deadweight Patel cast on Air India by getting it to buy planes it could not afford. The newspaper quotes a Deloitte review of the SBI Caps revival plan which says it’s simply not viable.

Reason: Air India again wants to buy too many aircraft, just like Patel did. “Aviation consultancy Simat Helliesen & Eichner, which carried out a detailed route planning and capacity exercise, has suggested 87 narrow-body aircraft for Air India by 2015, but the carrier has proposed 143, according to Deloitte’s report dated February 11, 2011,” says the newspaper.

Deloitte’s comment: “The only justification that one can have for going in for such capacity expansion can, therefore, be the adoption of a strategy of buying market share through deploying high capacity into the market (with corresponding lower yields and consequent financial implications).”

This means Air India is planning to sink further into losses for years to come.

Over to you, Mr Ravi. Do you want to go down the same path Praful Patel pushed Air India?

The government’s best bet now is to cut its losses. Air India should be privatised or closed down.

My Opinion -

Is Govt. or say ministers really doing justice to PSU's. Take example of telecom (2G scam), petroleum ministry where just to support Reliance & other companies the PSU's like ONGC, IOCL, BPCL, HPCL has been so much burdened that there market value is peanuts now compared to five years now.

Even look at latest financials of SBI a reduction of 99% in profit in one go. I mean it simply says SCAM...

Air India to take first 787 in October

2011-03-31T13:49:00.003+05:30

Air India is slated to take its first 787 in October, the first of 27 the carrier has on order.The first aircraft, likely Airplane 25, will be registered VT-ANA, and powered with twin General Electric GEnx-1B engines. According to Boeing's latest Z23 schedule planning, the Indian carrier will be among the four asian airlines to receive 20 787s in 2011. Air India said at last month's Aero India in Bangalore it anticipated receiving its first 787 in the fourth quarter, in line with the October target, more than three years after its first was expected in September 2008.

My Views -

Should Air India take these aircrafts when it requires tax payers money for its working capital requirements also. As always poor planning by the concerned ministry.

Mahindra's Five-Seat Aircraft To Launch Soon

2011-01-31T17:33:00.000+05:30

Mahindra Aerospace said this week its new five-seat airplane, which would be India's first indigenous GA aircraft, is expected to fly for the first time next month. According to Indian news sources, the NM5-100 will sell for "20 percent less than a similar aircraft from Cessna." The company has been working for a several years in partnership with India's National Aerospace Laboratories to design the airplane, which is expected to meet FAR Part 23 standards. A larger version of the airplane also is in the works, which would seat 8 to 10. The company has said it plans to become India's first manufacturer serving the GA market, with four to six models for global distribution.The NM5-100 is an all-metal aircraft, with a composite cowling and fairings. It is expected to be used for air taxi, light cargo and medevac, as well as training. Mahindra acquired a majority stake in Australia's Gippsland Aeronautics in 2010.

Low-cost carriers drive Indian revival

2011-01-27T15:06:00.001+05:30

Indian low-cost carrier IndiGo's order for 180 Airbus A320s in January has thrown the spotlight back on the country's airline industry, amid growing confidence that the sector could finally be putting behind its troubles of the last few years.

This time, however, it is the low-cost airlines that are leading the way. Privately held IndiGo's memorandum of understanding was for 150 of the new re-engined A320neo and 30 regular A320s, with the deal likely to be confirmed in the coming months. The aircraft, set for delivery between 2016 and 2025, and the move for the Neo, marked the first public commitment for the airframer's re-engined narrowbody.

Another of the country's low-cost carriers, SpiceJet, the airline taken over last year by Indian media tycoon Kalanithi Maran, firmed up an order for 30 Boeing 737-800s featuring blended winglets in late 2010. These aircraft will be delivered from 2012. The carrier, which already operates 24 737-800s and 737-900ERs, has also ordered up to 30 Bombardier Q400 turboprops that will be delivered from the second quarter of this year.

Both are expanding to take advantage of the growth in the price-sensitive domestic market, to increase their network within the country as the infrastructure catches up with demand, and to begin international operations. Under Indian government regulations, airlines must be in business for five years before starting international services. SpiceJet met that criteria last year, and IndiGo will do so later this year.

The three main full-service carriers - state-owned Air India and the publicly listed Jet Airways and Kingfisher Airlines - are in various stages of recovery. All of them made excessive orders for aircraft in 2005-07, and then dumped capacity in the following years in an attempt to capture market share. But with falling yields, all began to report losses that worsened during the downturn. The capital investments also drained their balance sheets, and all have tried to raise funds through different sources. All three also operate a hybrid business model, with a full service airline supported by a low-cost carrier that they incorporated later partly in response to the emergence of the budget airline market in the country. However, a failure to fully separate the two businesses has meant that the inherent inefficiencies and high costs from the full-service business have seeped into the subsidiaries. They have paid the price.

Air India has been making a loss for years. Beset by internal resistance to change and public objection to the state using tax dollars to bail it out, it is still trying to overcome its many problems. Jet and Kingfisher also reported losses, but appear to be faring better after cutting capacity and costs, and as the recovering economy boosted demand. All of them want to begin new services and say that they are ready to compete once again. But the low-cost carriers, despite their significantly smaller fleets, are holding their own. Indian airlines carried 4.88 million passengers in November, up 5.9% from October. While Jet Airways and its subsidiary JetLite were the domestic market leaders with a 26.2% share, followed by Kingfisher with 19.1%, IndiGo edged ahead of Air India with the third largest share at 17.3%. And IndiGo led the pack with a seat factor of 91%, ahead of SpiceJet with 87.5%, closely followed by Kingfisher.

While infrastructure remains a problem, the Airports Authority of India plans to build and upgrade airports in various secondary cities. It also has plans to build the infrastructure in smaller upcoming cities, citing a growing population and rising demand. That would mean greater demand for new aircraft as airlines renew and add to their fleets.

Boeing said in its 2010 market outlook that India would need 1,150 commercial jets over the next 20 years, while Airbus forecasts demand for 1,032 aircraft over the same time period. Boeing also believes that the airlines are finally getting a handle on the situation after the highs and lows of the recent years.

"Airlines have matched capacity more closely to demand, especially on newly launched international routes," says the airframer in its recent 20-year outlook for India. "Measures like [leasing out] have proved effective in mitigating the near-term effects of the [economic] downturn and will, in the longer term, facilitate the return of leased airplanes to Indian carrier fleets."

Airbus predicts in its latest global forecast that domestic Indian traffic volume is set to soar at 9.2% a year, the overall figure exceeding 250 trillion revenue passenger-kilometres by 2029. It also predicts traffic from India to China, South-East Asia and North America as being among the fastest-growing flows.

Low-cost carriers such as IndiGo and SpiceJet are likely to be the major beneficiaries of this growth, suggests the Centre for Asia Pacific Aviation.

"India will also undoubtedly offer an enormous international short-haul market in its own right. The Indian diaspora has traditionally been underserved and, as new regional centres open up, the opportunities for low priced non-stop travel are magnified," it adds.

Indian Aviation Review 2010

2010-12-27T11:06:00.001+05:30

Air Traffic Growth

The year 2010 has seen a robust growth in terms of aircraft movement and passengers handled. Vis-a-vis 2009 the growth rate has been 3.4% in respect of aircraft movement and 16.2% in respect of passengers handled and 26.9% with respect to cargo.

Passengers carried by domestic airlines from January-November, 2010 were 468.09 lakh as against 393.53 lakh in the corresponding period of the year 2009 thereby registering growth of +18.9%.

There are, at present, 16 Scheduled (11 scheduled passenger airlines, 02 scheduled regional airlines and 03 scheduled cargo airlines) and 121 Non-scheduled Operators. At present there are 419 aircraft with the scheduled operators. The total aircraft in the Non Scheduled category are 360.

This year saw the Ministry of Civil aviation take several initiatives to facilitate the passengers to undertake hassle free and convenient air travel by the issue of CARs through the Directorate General of Civil Aviation (DGCA).

A state of the art new integrated Terminal-3 has been operationalized at the Delhi Airport in July this year creating a new beginning in world class infrastructure, with public-private participation in the aviation sector.

The much awaited environmental clearance has also come through for construction of a New Green Field airport at Navi Mumbai.

Following are some of the important issues taken up by the Ministry of Civil Aviation during the year 2010:

Initiatives of the Ministry in the field of Economic Regulation

To elicit the views of stakeholders, to gain expertise from the concerned experts and to augment capacity to address issues that are predominantly economic in content, the Civil Aviation Economic Advisory Council was established on 9 December, 2010 under the Chairmanship of Secretary Civil Aviation and with members drawn from different fields of expertise that are directly and indirectly connected to Civil aviation sector. The first meeting of the Council took place on 13 December 2010.

Consumer protection measures

(i) On 6 of August, 2010 a Civil Aviation Rule (CAR) has been issued which provides for compensation and facilities to the passengers in case of denied boarding, cancellations and delays. The violation of this CAR is punishable under the provisions of scheduled VI to the Aircraft Rules, 1937. This will be a category III offence attracting a maximum penalty of 6 months in prison or Rs. 2 lac fine or both

(ii) On 31 July, 2010 CAR has been issued in order to promote fair competition in the airline sector and to ensure that consumers do not receive inaccurate or misleading information on airline services, by strengthening the computer reservation system/global distribution system

(iii On 3 September, 2010 the relevant Rule has been amended and circular issued to provide that the Pilot-In-Command may permit the use of cellular/mobile phones after the aircraft has landed and cleared active runway. However, this facility will not be available during low visibility conditions.

Connectivity in North Eastern Region

At present, there are 11 operational airports served by the Scheduled airlines in the North-East region viz. Dibrugarh, Guwahati, North Lakhimpur, Imphal, Dimapur, Agartala, Shillong, Jorhat, Silchar, Tezpur & Lengpui. 348 flights per week are being operated by NACIL, Alliance Air, Jet Airways, JetLite, Kingfisher Airlines, Spicejet and IndiGo to/from these airports.

The no. of flights in the NER has been increased from 286/week in Summer Schedule 2010 which is an increase of 21.67%. In addition, Pawan Hans Helicopters Ltd. (PHHL) is providing helicopter services under the aegis of the State Governments of Arunachal Pradesh, Nagaland, Meghalaya, Sikkim, Tripura.

Further, the DGCA has commissioned a comprehensive study to evolve a roadmap for air connectivity to the North-eastern region.

Bilateral Agreements

Election in the Council of ICAO

In the 37th Assembly session of the International Civil Aviation Organisation (ICAO) held at ICAO Headquarters at Montreal in Canada on 28 September – 08 October, 2010, elections were held for the representation of the Member State countries in the Part I, Part II and Part III of the Council of ICAO. India has contested for continuance of its representation in the Part II.

The total number of seats was 12, equaling the number of contestants. 163 countries cast their votes. India secured 148 votes out of 162 votes and was at number 2 position in the group in terms of number of votes secured.

Amendments of Air Services Agreements (ASAs) with foreign countries

Keeping in view the recent developments in the civil aviation sector, and with a view to modernize and update the existing ASAs with foreign countries as per the ICAO templates, bilateral air services consultations were held in 2010 with foreign countries viz. Zimbabwe, Indonesia, Ireland, Brazil, UK and Iran and the respective ASAs have been amended and finalized.

Bilateral Air Services Agreements were formally signed with Bhutan, Iceland, Nepal, Bosnia & Herzegovina, South Africa and Iran. Apart from these, new Air Services Agreements have been initialed with Senegal, Barbados and Rwanda.

Technical co-operation agreements with Nepal and Afghanistan

Technical co-operation agreements were signed by the Director General of Civil Aviation (DGCA) and Airports Authority of India (AAI) with the Nepalese and Afghan civil aviation authorities in order to provide active technical support including training of personnel to these countries by India to promote and develop civil aviation sector.

India – EU civil aviation co-operation programme

Under the Joint Action Plan, a Civil Aviation Co-operation Project - II has been agreed to. Its Terms of Reference (TOR) have been finalized. The project called “Institutional Capacity Building in the Civil Aviation sector in India (ICAA)” has been started under India – EU civil aviation co-operation.

India – US Aviation Joint Working Group on Security

The India – US Aviation Joint Group Meeting on Security was held in New Delhi on 20 – 21 January, 2010. During this meeting two MoUs on deployment of Air Marshals and Co-operation in Airport Technical Visits were signed between the Government of India and the Government of United States of America. The two MoUs mark the beginning of an ongoing co-operation between the two countries in matters of security.

Equity Induction by the Government in Air India

Air India is expected to incur a loss of Rs. 5,656.52 crores during the year 2009-10, mainly due to the prevalent economic recession, low yields and load factors coupled with higher fuel costs, higher interest payment on working capital loans and aircraft loans.

The present paid up equity capital of NACIL is Rs. 145 crores which is not sufficient for an aviation company of its size. Therefore, the Government has approved the release of funds to the extent of Rs. 800 crores in tranches of Rs. 400 crores in a month in the form of equity.

Accordingly, an amount of Rs. 800 crores has been released in February and March, 2010. A provision of Rs. 1200 crores has been made in the current financial year, the release of which is expected to happen this year. The equity induction would ease the cash flow situation of the company and preclude borrowing from the markets at high costs to this extent.

Meanwhile the company has seen an increase in load factor from 62% to 67% and also passenger yield from Rs. 2.92 to Rs. 3.30 RPKM.This has resulted in an increased Passenger and cargo revenue of Rs. 1,189 crores.

The company has undertaken several cost reduction measures with active support from the Government.

Security Measures

Keeping in view the security scenario and enhanced civil aviation activities, four regional offices of the Bureau of Civil Aviation Security (BCAS) has been created at Guwahati, Amritsar, Hyderabad and Ahmedabad airport in addition to the existing Regional offices at Delhi, Mumbai, Chennai and Kolkata.

The Anti-Hijacking (Amendment) Bill, 2010

With a view to enhance the punishment, for the offences of hijack of aircrafts and also for the conspirators, to death penalty, the amendment is proposed in the Anti-Hijacking Act, 1982. The final Bill has been introduced in the Rajya Sabha on 19 August, 2010. The Bill has now been referred to the Ministry of Law.

Mangalore Crash - IX 812 of Air India Express operating from Dubai to Mangalore was involved in an unfortunate accident on 22nd May 2010. There were 160 passengers and 6 crew members on Board. There were only 8 survivors. A Court of Enquiry headed by Air Marshal (Retd.) B.N. Gokhale was set up. The Court has submitted its report which is under examination.

Airports

Phase-I of the Modernization of Delhi Airport was completed on 31 March 2010, at an estimated project cost of Rs. 12258 crores. A new integrated Terminal-3 has become operational which has 34 million passengers handling capacity per annum.

The major development works completed Modernization of Mumbai Airport during 201010 are South-West pier, integrated processor terminal, Baggage Handling System (BHS) in the new domestic terminal, six Passenger Boarding Bridges (PBBs) in the new domestic terminal.

Under the Policy for Greenfield Airports the Government, during the year had accorded “in-principle” approval for setting up of a Greenfield airport at Dabra (Madhya Pradesh), Palladi (Rajasthan), Itanagar (Arunachal Pradesh), Kushi Nager (Uttar Pradesh).

Airports Authority of India (AAI) Airports Authority of India registered an all time high revenues of Rs. 4,615 Crores, which was 10% more than the previous year. Similarly, capital expenditure incurred on infrastructure works at various airports rose from Rs. 2547.52 crores to Rs. 2,742.54 crores.

New Terminal Buildings have been commissioned at Varanasi, Barapani (Shillong), Madurai, Mysore and Ahmedabad airports.Existing terminal buildings have been upgraded/ modernized at Pune, airport. Runways/ Taxiways have been extended / expanded at Varanasi, Ranchi, Guwahati, Bhopal, Gondia, Ludhiana, Cuddappah and Coimbatore airports.

Upto November 2010 progress of work for modernization and development at Chennai and Kolkata Airports has been 66% and 46%.Work on the construction of new Greenfield Airports at Pakyong in Sikkim is in progress.

For the implementation of the GAGAN project of satellite based navigation, site acceptance test for Indian reference stations has been completed at Goa, Jaiselmer, Porbander and work is in progress at Dibrugarh, Nagpur and Bhubaneswar.

A dedicated Air Cargo Complex facility at Veer Savarkar Airport, Port Blair has been operationalised.

A new Joint Venture Company under the name “Chandigarh International Airport Limited” has been set up to undertake the construction of a new International Terminal Building at Chandigarh Airport.

Setting up of International airport at Navi Mumbai: After getting the environmental clearance in November this year, the development of the Greenfield airport at Navi Mumbai will get underway. It is projected to have sufficient capacity to handle the additional traffic around Mumbai, which is expected to go upto about 80 mppa by 2031-32

Helicopters

Pawan Hans Helicopters Ltd. (PHHL) In 2009-10 the Company achieved record revenue hours of 29,890 as compared to 27,050 in 2008-09. During 2009-10 the net profit after tax was Rs.35.59 crores as against Rs.25.12 crores in 2008-09.An MOU has been signed with Andaman & Nicobar Administration for introduction of Sea Plane Operation in Andaman & Nicobar Islands. The Sea Plane operation for the first time in India will commence from 27 December, 2010. PHHL has completed and operationalised two projects of heliport /helipad in October, 2010 – one at Akshardham and the other at Rohini, both in Delhi. DGCA has also allowed PHHL to utilize the facilities at Gliding Center at Hadapsar to set up a Heliport and helicopter training institute.

Training and development

Indira Gandhi Rashtriya Uran Akademi (IGRUA): - The Akademi this year, has inducted 14 Single engine DA 40 Aircraft and one twin engine DA 42 aircraft and installed two Flight Simulators. The Akademi has 14 flying instructors and has flown 14934 hrs during 2010. So far this year, 62 cadets have completed their flying and 114 trainees have been inducted. Campus selection team from Air India and Jet Airways visited Akademi in Aug/Sept. and December, 2010 for induction of trainee pilots.

Events and Accolades

India Aviation 2010 - a Civil Aviation air show, was held for the second time at Begampet Airport, Hyderabad in March 2010. The next edition would be held from 14-18, March 2012.

An independent audit by FAA under IASA program confirmed India to be a role model in the Asia Region in the Civil Aviation. The Ministry of Civil Aviation was awarded on 1 December, 2010 the “KPMG – Infrastructure Today Award” for being the most admired Central Entity in the transport sector.

Aviation sector has grown due to low fares

2010-12-18T14:24:00.000+05:30

Expressing concern over exorbitant fares charged by airlines, Civil Aviation Minister Praful Patel today said the aviation industry should keep in mind that the phenomenal growth in the sector has been due to the low fares offered earlier.

"For five years, the aviation sector has grown on the back of low fares. We can''t ignore this fact. The benefits of low fares have gone to the travelling public," he told PTI days after warning the airlines that the government "cannot be a mute spectator" to the exorbitant last-minute fares they were charging.

He said the government wanted to be "open and transparent, but not interfering. It does not want to see either inconvenience to passengers or an unhealthy industry. It has to be a judicious mix of the two."

Patel''s comments came days after the Ministry and the Directorate General of Civil Aviation (DGCA) asked domestic carriers to reduce spot fares (last-minute fares) and maintain transparency so that passengers were aware of the price they would pay if they travel on a route on a given date.

"Our concern is two-fold -- one that the fare structure is transparent and simple so that one knows what is the cost when one buys a ticket, and there are no hidden costs. The other concern is that the absolutely exorbitant spot fares, ... are not acceptable to the government," he said answering questions.

He, however, made it clear that "we are not fixing the fares. We cannot decide airfares in a de-regulated sector. We don''t wish to get into this area as airfares are driven by competition."

Patel said the spot fares were substantially hiked by airlines during and after Diwali as there was "a temporary mismatch between demand and supply."

Maintaining that the new Tariff Monitoring Unit (TMU) set up in the DGCA would not intervene in fare fixing, he said it would examine the fares and advise the government especially when the fares are very high.

"We also do not encourage predatory fares that encourage unhealthy competition and jeopardise the prospects of the industry," the Minister said, making it clear that the TMU would only guide the DGCA and the government when fares are very high or low.

Budget airlines are the real culprits in fleecing

2010-12-17T17:26:00.002+05:30

AIR TRAVELLERS, accustomed to paying low fares since the advent of low-cost airlines, have been up in arms at being ‘fleeced’ by airlines during the recent weeks. High fares on certain sectors for last-minute ticketing has compelled the DGCA and the civil aviation ministry to intervene and reportedly force the airlines to roll back the fares.

As all of us would naturally be interested in low fares, the justification of supply-demand determining fare levels advanced by the airlines hasn’t found acceptance. They have been described as greedy and engaged in exploitation. As the dust on the issue settles with fares returning to almost normal levels, it’s time to take a dispassionate look at the issue. Which of the two sides has been right and to what extent?

It needs to be understood that the airline industry is in the unregulated sector and market forces should therefore logically determine the are levels, like in other sectors of the industry. It also needs to be appreciated that the airlines are here for business, not charity. The industry is seasonal in character and passenger loads are not uniformly even year round. India has witnessed low fares not because they are economical and give adequate returns on investment to the airlines, but because the new players, who entered the market in the 2004-06 period, first offered low fares to garner marketshare. The subsequent years of economic downturn compelled the airlines to keep fares at low levels — thus making them, though uneconomical from the airlines’ point of view, look like ‘realistic’ fares.

All airlines, irrespective of their geographical location, follow a revenue management system like the Indian carriers. Seats on a flight are segmented in various sub-classes at different fare levels. If you buy the initial few seats you pay less. By the same logic, if you buy close to the flight’s departure time, you pay more and this fare is at the core of the controversy. Airlines have worsened their case by listing fares at Rs. 30,000-Rs. 40,000 at the upper end of the price band. The media has largely focussed on these ridiculous fares rather than presenting the realistic scenario of fares being high only during peak periods when flights operate with high occupancy and last-minute travellers are buying the last few seats. Fewer the number of seats available, higher the value of tickets. Nothing unique about this principle.

If a section of the media and some passengers had been unreasonable in accusing the airlines of charging exorbitant fares during peak periods, airlines recovering from the losses incurred during the economic downturn of 2008 apparently began feeling that these happier days may not last very long and hence should boost their bottom line by charging whatever they can get a passenger to pay. This action is clearly indefensible. As passengers are the bread and butter for an airline, the latter need to maintain long-term relationships rather than enhance revenue manifold by taking a myopic view. What’s been surprising is that it has been the low-cost airlines that have jacked up their fares to astronomical levels, giving the entire industry a bad name.

Considering that the number of passengers has been growing and the augmentation of capacity in the domestic market hasn’t been keeping pace, airlines are expected to continue recording high load factors and therefore be in a position to manipulate the market. The ministry should logically monitor capacity and not fares. Induction of capacity periodically by either the existing airlines or new airlines will be the safest guarantee against exorbitant fares.

My Views -

Its unfair to blame low cost airlines for this fair, each airline is equally important in this. I my self has paid around Rs. 8000/- for a Bangalore-Delhi (via-Ahmadabad) flight 3 years back when I bought it directly from the airport with luggage in my hand.

Though last moment fares can be higher if Airlines are selling with deep discounts for initial tickets, but those should not create a hole in passengers purse.

Praful Patel worked more as a minister for Naresh Goyal (owner of Jet Airways)

2010-12-13T11:38:00.000+05:30

Well this is latest on Praful episode on Air India. So sad for a minister to work for one or two company... for the sake of kickbacks... www.outlookindia.com | 11-188819-0-28-20090529-125818

the Niira Radia tapes regarding Air India

2010-12-02T15:35:00.000+05:30

Surojit: Praful Patel 'screwed up the airline' and now wants to bring in Ratan Tata to tell the PM that he would do something. 'It was Sharad Pawar who wrote to Vajpayee to allow Naresh Goel to bid for Air India' and these are the people who are now trying to say that they are trying to revive the airline... www.outlookindia.com | #126 Surojit: Jul 08, 2009 09:46:37

www.outlookindia.com | #118 Jaideep Bose, ET: Jul 07, 2009 20:44:12

2010-12-02T15:32:00.000+05:30

This is I got from Outlook Magazine - With Jaideep Bose, ET: "The whole intention of Praful Patel was to strip the airline... huge amounts of kickbacks have taken place in various aircraft purchases... but he's raped it, asset-strip so that he could give it away to Vijay Mallya and Naresh Goyal... Praful's a silent partner in Indigo..he's made at least in the vicinity of 15,000 crores.. and they removed Sunil Arora because he had sent a whole dossier to PM and Sonia Gandhi... Praful wanted him out because he wouldn't cut deals". www.outlookindia.com | #118 Jaideep Bose, ET: Jul 07, 2009 20:44:12

Fatal India Crash Pilot Had "Sleep Inertia"

2010-11-23T16:29:00.000+05:30

Snoring was picked up by the cockpit voice recorders of an Air India Express 737-800 not long before it ran off the runway at Mangalore Airport in May, killing 158 of 164 aboard, according to a Court of Inquiry probe. The flight's captain had more than 10,200 hours and reportedly slept for much of the roughly three hour flight out of Dubai. He reportedly awoke shortly before attempting to land in heavy rain. Investigators found the captain was likely disoriented due to "sleep inertia" and flew the approach right through warnings from his 3,600 hour copilot "to abort" and "go around." The aircraft touched down roughly 1,500 meters down the 2,400-meter table-top runway at Mangalore and the co-pilot said "we don't have runway left." Investigators believe that had emergency braking been applied, the crew could have stopped the aircraft on the wet runway before sliding off the steep terrain at the runway's end, but concluded the crew attempted to return to the air. The aircraft slid down a steep embankment and exploded in the jungle below.

India's Civil Aviation Minister received the report on Tuesday and told reporters he would study it before taking any action. The civil aviation ministry has asked the Airports Authority of India to extend the runway by another 1,000 feet as a separate issue. Experts are in agreement that the crash had nothing to do with the length of the runway. Work and rest rules, however, are a concern. In June 2008, an Air India plane flew 200 miles past its destination while both pilots slept. Evidence has not yet been provided to support or dispel concerns that the pilot's schedule lacked ample opportunity for sleep prior to the flight.

Indian PM orders Air India to resume Gulf flights...

2010-09-09T16:56:00.002+05:30

The Indian government has overturned Air India’s decision to cancel some of its flights to the Gulf.

Indian Prime Minister has directly intervened to reverse the Air Indian decision and assure cabinet members from Kerala that the airline would continue to operate flights to the Gulf.

However, Air India has not yet been made aware of the government intervention. On Saturday, Air India Express announced that it would be canceling 75 flights from Kerala to the Gulf, including those to Muscat, Sharjah, Abu Dhabi and Dubai. Air India was also set to cancel 203 flights to the region from India. The airline blamed the decision on a lack of cabin crew to operate the flights.

My Views -

Should Govt. intervene in any of the PSU's operations directly overturning their decision.
Even so when the Airline is making huge losses in thousand's of crores which is being covered from the tax payer's pocket.
Also, the Govt. is not willing to bail off the Airline so easily & paying off its debt. Then, why intervening in its operational decisions.
What a mockery Air India has. On one hand it says its highly overstaff (32,000) people which is nearly 200+ people per aircraft & on the other hand its canceling flights due to lack of cabin crew.
Even if the Airline is short staff in one particular department how will Govt. make sure that they will operate flights without putting passengers life at stake.

Is the Govt./Airline listening?

Air India Express cancels 203 flights to Gulf...

2010-09-08T12:42:00.002+05:30

A shortage of cabin crew is forcing Air India’s budget carrier, Air India Express, to suspend 203 flights between the sub-continent and the Gulf region, a senior official from the airline has warned.

The cancellations would last from next week until the end of October 2010, and would affect flights to Abu Dhabi, Dubai, Sharjah, Muscat and Kuwait.

"No passengers will be affected because of the cancellation, there is a rule that cabin crew should not exceed more than 1,000 hours of flying in a year. There is no way we will be able to meet this target unless we cancel some of the services."

Reports from India suggested that the cancellation had also been caused by the lean season following Ramadan holidays.

"Around 203 (73 from Kozhikode, 74 from Thiruvananthapuram and 56 from Kochi) flights stand cancelled. Some of these flights which originate from here, touch Kochi and then fly to the Middle East. Hence this is taken as two flights and hence the number looks so large," an IANS report claimed, quoting an airline spokesperson.

The flight numbers had been exaggerated, with the airline cancelling only one or two flights per destination.New recruitment policies were under way and that personnel were currently being trained up to solve the cabin crew shortage.

The Mangalore Air Crash

2010-06-02T10:35:00.003+05:30

The fatal accident of the Air India Express plane is one of the deadliest in Indian Aviation history. I received this email as attachment from one of my close friends, which I thought to share with you :

SpiceJet aims international flights

2010-04-30T10:25:00.000+05:30

Indian low-cost carrier SpiceJet has received in-principle approval from India's government to operate international flights, and plans to do so from June. It has applied to begin services to Colombo, Dhaka and Kathmandu. The applications are being processed, and it may start the new routes in our summer schedule. SpiceJet is likely to operate between Chennai and Colombo, Kolkata and Dhaka, and New Delhi and Kathmandu, says Sridharan, adding that Colombo will likely be the airline's first international destination. SpiceJet operates a fleet of 20 Boeing 737 aircraft, and expects to receive five more by next April. The carrier will focus on the three cities in its first year of international operations, and evaluate new destinations after that.

Air India may lose 'national carrier' tag

2010-03-23T12:53:00.003+05:30

The Union Cabinet is set to meet soon to decide if beleaguered state-owned carrier Air India should retain its 'national' character at all. It will also debate if strategic disinvestment is the best way forward for the airline, which is estimated to have accumulated Rs 7,200 crore in losses in 2009-10. With most of Air India's woes emanating from its international operations - where it loses around Rs 3,000 crore a year on 30 routes - a group of ministers (GoM), chaired by finance minister Pranab Mukherjee, has recommended that the airline stop flying to these routes. "This will change the character of Air India," this would turn Air India into a regional airline. The civil aviation ministry is preparing a detailed note for the Cabinet on the carrier's financial health and turnaround measures recommended by the GoM. "Cutting down loss-making international routes will have serious implications. Basically, the government has to decide if Air India continues to fly abroad or within India alone". At the same time, the Cabinet may also debate the issue of strategic disinvestment as a long-term viable option for the carrier. "The government cannot pump money into the National Aviation Company of India Ltd (Nacil) forever". But, it is likely that the Cabinet refers back some of these issues to the GoM for its detailed and considered. A major blow to Nacil's finances comes from prestigious but loss-making daily non-stop flights to New York from Delhi and Mumbai on the latest long-range fleet of Boeing, accounting for losses to the tune of Rs 750 crore a year. The GoM, set up to monitor Air India's turnaround plan, was also to decide on the politically sensitive matter of wage cuts of Air India's 31,000 employees. But it has now left the decision for the Cabinet. To avail government bailout, the carrier was asked to undertake cost-cutting measures that would help it save around Rs 2,000 crore by March 2010. Air India was able to cut costs to the tune of Rs 700-800 crore till December last year. As part of its turnaround strategy, the carrier has shortlisted five candidates for the post of chief commercial.

The carrier recently received a shot in the arm with the government releasing Rs 400 crore as a first tranche towards equity infusion. Air India had asked for Rs 5,000 crore as equity infusion and a letter of comfort from the government to convert its high-cost debt into low-cost ones.

Indian Aviation 2010 Snapshot

2010-03-05T12:15:00.003+05:30

The Indian aviation industry is one of the fastest growing aviation industries in the world (& incurring maximum losses) with private airlines accounting for more than 75 per cent of the sector. With a CAGR at 18 per cent and 454 airports and airstrips in place in India, of which 16 are designated as international airports, Union Civil Aviation Minister Praful Patel has stated that aviation sector will witness revival by 2011. With an increase in traffic movement during December 2009 and increase in revenues by almost US$ 21.4 million, the Airports Authority of India seems set to accrue better margins this fiscal, as per the latest estimates released by the Ministry of Civil Aviation. This is being primarily attributed to increase in the share of revenue from Delhi International Airport Limited (DIAL) and Mumbai International Airport Limited (MIAL) along with increase in airport charges. The Hyderabad International Airport has been ranked amongst the world's top five in the annual Airport Service Quality (ASQ) passenger survey along with airports at Seoul, Singapore, Hong Kong and Beijing. The Hyderabad International Airport is managed by a public-private joint venture consisting of the GMR Group, Malaysia Airports Holdings Berhad and both the State Government of Andhra Pradesh and Airports Authority of India (AAI). Airports Authority of India (AAI) is also spending US$ 427.5 million on developing the airports in Kolkata and another US$ 384.7 million on Chennai airport. The AAI is also looking at upgrading and modernising 35 non-metro airports. Both Chennai and Calcutta airports will be completed by next year. In addition to actual airport infrastructure, the government is also looking at building infrastructure in the air in terms of air traffic control (ATC) and CNS systems. Safety and surveillance is another huge area being worked upon. The civil aviation ministry has prepared a blueprint to convert Delhi airport into an international hub for passenger airlines with effect from August 2010 to help the airport, which is being expanded by a GMR-led consortium, utilise large amounts of additional capacity that will be ready by July 2010. Under the plan, NACIL will set up its hub in Delhi (Delhi currently serves as the hub for domestic operations and Mumbai for international operations).The government is also planning to make Delhi a regional hub to connect south-east Asia to Europe by capitalising on the capital’s strategic mid-point location, according to ministry sources. State governments too are taking interest in setting up special economic zones (SEZs) for the aerospace industry.

Investment Policy With the draft FDI compendium being finalised in end of March 2010, changes are expected in the aviation policy too. Currently, Foreign equity participation in airport infrastructure is permitted upto 74 per cent with automatic approvals and upto 100 per cent in special permission. FDI upto 40 per cent is permitted in domestic air-transport services. Foreign investors are allowed to have representation (upto 33 per cent in domestic airline companies).
The Road Ahead Investment opportunities of US$ 110 billion are being envisaged up to 2020 with US$ 80 billion in new aircraft and US$ 30 billion in development of airport infrastructure, according to the Investment Commission of India.
Indian aerospace companies are growing too. Hindustan Aeronautics Limited (HAL) was ranked 40th in Flight International's list of the top 100 aerospace companies last year.
Aircraft manufacturing major, Boeing is in the process of setting up the US$ 100 million proposed Maintenance Repair Overhaul (MRO) facilities in Delhi. Air India is also in the process of launching Cargo Hub in Nagpur while Deccan Aviation has already started one from the city.
North India's first private sector greenfield international airport, Aerotropolis, will soon come up near the industrial hub of Ludhiana in Punjab. Aerotropolis will be built with an allocation of almost US$ 3.77 billion covering an area of 3000 acres by Messrs Bengal Aerotropolis which has partnered Changi International Airport of Singapore.
Punjab will also become the first state in the country to set up a Maintenance, Repair and Overhaul (MRO) hub at Ropar, 45 km from Chandigarh, for the civil aviation sector at a cost of US$ 6.4 million
The country's first SEZ dedicated to the Aerospace Hattaragi, 37 km from Belgaum, in Karnataka was also inaugurated. The SEZ is spread over 300 acres of land and will come up with an investment of US$ 32.06 million.
An Aerospace and Precision Engineering Special Economic Zone with a proposed investment of US$ 641.2 million has also come up at Adibatla, Ranga Reddy district, Andhra Pradesh.

Aged jets to be trashed

2010-02-10T13:42:00.001+05:30

Domestic carriers operating jets that are more than 15 years old will have to look for replacement soon, as the civil aviation ministry has decided to gradually phase out older aircraft to check noise level around airports. The development follows complaints from people living around the country’s busiest Delhi airport about the rising noise levels. The new rules are likely to affect foreign airlines more as they would be also be barred from flying aged jets. Most of India’s domestic carriers have relatively new fleet, including air India. “We would have almost a brand new fleet by March this year as we would have either phased out or sold our old aircraft by then,” an Air India official said adding once all the new aircraft is inducted the average fleet age would be 2-2.5 years. The government has in the past received complaints from the passengers who have alleged that some foreign carriers deploy older aircraft on India-bound flights. “Some airlines especially from Asian countries operate with older aircraft. While it is advised that air-carriers to not operate with aged jets, we are examining the legal aspect of barring such airlines from flying such aircraft to India,” a senior civil aviation ministry official. The ministry would also ask the Central Pollution Control Board (CPCB) to specify the permissible noise level separately in the vicinity of airports in line with international norms. As per the globally accepted norms, the permissible noise is higher level in the vicinity of airports than other locations. India, however, does not differentiate between the noise level around the airport and other areas. In the last few years aircraft movement in the country has multiplied with more and more people flying on the back of growing economy and increasing incomes. The Capital’s Indira Gandhi International airport (IGI) now handles as many as 650 aircraft a day. The GMR-led consortium that is handling the Delhi airport has already introduced 24-hour aircraft noise and track monitoring system (ANTMS) to penalise erring aircraft on exceeding noise threshold values. The country’s largest airport operator Airports Authority of India (AAI) has also implemented mix mode operation to spread out the aircraft movement resulting into reduction in noise level.

Airlines fly to smaller cities for growth in passenger traffic

2010-01-12T17:06:00.002+05:30

India’s airlines are charting new routes to connect neglected, smaller cities that have some tourist or business potential, as the economy brightens and passenger numbers rise. Airlines saw a spurt in passenger traffic, growing by 5.45% to 39.96 million between January and November, according to the regulator Directorate General of Civil Aviation (DGCA). The figure for December is not yet available. The number had contracted as much as 4.84% to 42.85 million in 2008. Kingfisher Airlines Ltd and regional airline Jagson Airlines Ltd are among those planning to harness the potential of smaller airports. “The bigger airlines have a focus on category I (metro) routes by default, but category II routes like smaller capital cities make a lot of sense,” said Jagson CEO Koustav M. Dhar. Jagson plans to take to the skies from February with a 88-seater aircraft and subsequently increase its fleet to four by the end of the year. It will connect Srinagar to Leh with a daily flight starting April. So far, only Air India has a weekly flight between the two cities. “Those (connecting state capitals and smaller cities) are the sectors to be in and they are consistent all year around at Rs4,000-4,500 (average fare),” said Dhar, comparing the average fare on the Delhi-Mumbai route, which can drop below Rs3,000 due to competition. “(However), if you put 180 seats on category II, they are not viable.” Jagson will also connect New Delhi to Shimla and Dharamshala, and operate flights to Ranchi and Patna in summer on alternate days. Kingfisher Airlines, India’s second largest carrier by market share, has started flights between Chennai and the industrial town of Salem in Tamil Nadu, and Jharkhand’s capital Ranchi and Chhattisgarh’s capital Raipur recently. It has also received permission to start services to Uttarakhand’s Pantnagar from New Delhi. Also on the cards are flights to the hosiery and garments hub of Ludhiana in Punjab from New Delhi. A Kingfisher official said the airline is waiting for regulatory clearances before it can take off to Pantnagar and Ludhiana. “Since these are new airfields, DGCA is still to clear them,” he said.National carrier Air India already flies between several small towns in the country.

SpiceJet signs on i-Vista to build its brand digitally

2010-01-12T12:54:00.000+05:30

SpiceJet, India’s most preferred low fare airline appoints i-Vista Digital Solutions to handle its online marketing initiatives. i-Vista Digital Solutions is a leading enterprise digital marketing company that has been entrusted with this national mandate. i-Vista Digital Solutions will provide the following solutions for SpiceJet: § Conceptualize, design and develop online collaterals. § Perform off-page and on- page optimization leading to enhanced visibility for the SpiceJet website. § Identify and effectively utilize social media platforms for increased customer- connect to build brand ambassadors. § Online reputation management and tracking of consumer sentiments. § Comprehensive search engine marketing programme to enhance visibility of SpiceJet text ads. According to Anish Srikrishna, Sr. VP and Head of Marketing, SpiceJet Limited, “We at SpiceJet believe that online engagement with our customers is key to our success. Our website continues to be a key channel of distribution and information for our customers. We wish to enhance our online presence to build our brand, understand our customers and drive more traffic to our site. i-Vista Digital Solutions has the relevant expertise in digital brand building and marketing and can offer creative and technology solutions for our current needs. We are happy to have them as our partners.” “We won the SpiceJet business because of our ability to deliver advanced solutions in the internet space. We help our customers leverage the power of the internet and leave an indelible impression through our unique and well-rounded approach to the business. Our solutions for SpiceJet range from a variety of brand building activities, social media strategy and comprehensive analytics to help the airline achieve their mission,” said Narayan Rajan, CEO, i-Vista Digital Solutions.“If you also take into account that 1 out of 3 TV watchers will also be accessing the internet at the same time, you begin to see how effectively combining your offline and online campaigns can ensure your message reaches your customer. i-Vista has been in the digital business for the last 13 years and has built an enviable track record.

Wings on fire

2010-01-04T13:03:00.004+05:30

Paramount Airways is all set to enter the big aviation league. An airline that has been operating what it calls an all-executive-class fleet, is now in final stages of talks with Bombardier and ATR. In not more than two months, by February 2010, Bombardier's Q400s or ATR's turbo props - 10 aircraft in all - will adorn the fleet of the south-Indian carrier. The target for paramount is simple. All ground work is through to operate the turbo props predominantly in Tier II and Tier III cities. Some of the cities that have been shortlisted are Pondicherry, Mysore, Salem, Bellary, Rajamundry etc., all in south India to start with. The number of destinations the airline covers will then increase from the current 17 to 40 by 2011.With a bare minimum fleet of 5 aircraft (all Embraer) the company has maintained the best passenger load factor among all airlines in the country. Paramount is also the only Airline in India that have seen Rs 79 cr profits as of March 2009. Come October 2010, when the airline completes 5 years of its operations, it will spread its wings overseas. Negotiations are already complete with Airbus to buy 10 of their 321 aircraft. The planes are to be acquired at a list price of USD 90 million. The deal is to be funded by the European Central Bank through a 12 year loan.The Airbus 321s will all be used for the company's international flights. Initially, Paramount will fly to South-East Asian destinations like Singapore, Kuala Lumpur, Bangkok, Penang and Middle East designations like Dubai and Abu Dhabi.

Struggling Air India looks to soar again

2010-01-04T12:51:00.003+05:30

Air India, the national flag carrier that has accumulated thousands of crores of rupees in losses, is set to fly over uncharted territory hoping to reverse its fortunes in the new year. Arvind Jadhav, head of the National Aviation Co. of India Ltd (Nacil) that runs Air India, says he will use a combination of cost cuts, outsourcing, restructuring and spinning off under-utilized divisions into separate businesses to rewrite the account books of India’s oldest airline. But aviation experts are sceptical, claiming some of Jadhav’s ideas are unlikely to succeed and others are unlikely to be implemented because of Air India’s state ownership. As chairman and managing director of the beleaguered Nacil, Jadhav has the unenviable task of salvaging an airline that saw losses of Rs7,226 crore in fiscals 2008 and 2009. Air India’s outstanding debt stands at Rs16,000 crore, of which Rs11,000 crore is high-cost. It also runs a monthly cash deficit of Rs400 crore. Nacil has asked the government for a loan and equity infusion of nearly Rs15,000 crore, and is already showing signs of revival. To begin with, Jadhav plans to turn two of Air India’s divisions into independent profit-making ventures: engineering, which will become a full-fledged maintenance, repair and overhaul (MRO) firm; and cargo handling, which will become an integrated end-to-end logistics firm. “By April, we would be spinning off our engineering business unit into a different company,” Jadhav said. “This will straightaway take around 20,000 employees out of Air India’s books and Rs1,200-1,500 crore salary bill (with it).” Air India’s annual wage bill for 31,500 employees stands at Rs3,300 crore. Branching out - The engineering division currently services 100 planes a year, or just half its capacity. It is also unable to attract much business from rival carriers, and earns about Rs100 crore annually. But once turned into a separate business, it could make as much as Rs3,000 crore annually. Air India has already entered a strategic alliance with Sharjah-based Aerostar Asset Management FZC for marketing its aircraft engine overhaul facility. The two have created an engine MRO brand called The A Team, which already provides engine repair and management solutions to West Asian airlines. Air India is also in talks with logistics firms to build the support infrastructure for “door-to-door” logistics. “The idea is (to) spin off our cargo airline division into a separate entity and convert that into a complete logistics company that offers door-to-door services,” said Jadhav. Nacil has also entered into an equal joint venture with Singapore Airport Terminal Services Ltd to handle ground services at various airports in India. “If the subsidiaries are hived off and start earning the projected revenue, we will be getting Rs360 crore a month,” Jadhav predicted. Cutting costs - In a market where airlines are selling tickets below cost, Jadhav agreed it was tough to enhance revenues. “You cannot cut salaries, airport charges or catering charges overnight. So one will have to look at cost savings,” he said. He is already attempting this through network restructuring, rationalizing routes and aircraft deployment, and shifting a good number of employees based in US and European cities to India. “These measures have (also) helped in increasing revenues,” Jadhav said, adding that the company was expecting a net benefit of Rs378 crore in terms of cost reduction during the winter schedule of 2009 and Rs563 crore for the entire year. The merger of Air India with other state-run carriers Indian Airlines, Air India Express and Alliance Air will bring down costs further. The government gave its nod to the merger nearly three years ago, but operational delays have hobbled the move. Air India now runs its aircraft on all four operating licences. Jadhav pointed out a merger of such a large scale was not an overnight process. He was, hence, prioritizing the “front end merger”, which will mean the customers will deal with a single airline for all practical purposes, while the merger of books, workforce and so forth—the back end—would happen over time. In India and abroad, the carrier has combined booking offices of Air India and Indian Airlines to save on establishment costs. The office at the Jeevan Bharti building in central New Delhi, a prime location, has also been surrendered, saving approximately Rs5 crore annually. Air India has also withdrawn from some sectors on India–Gulf routes and has transferred them to Air India Express, as part of route rationalization. Wage worries - One will have to see how much can Jadhav do, considering the constraints of a government-owned airline. In the past, he had to drop several ideas, including wage cut. Slashing the massive wage bill has been the toughest task. Aviation expert and aerospace journalist Hormuz P. Mama is more sanguine. “The fact that Air India is a state-run airline does not mean that nothing can be done about it. There needs to be a compromise from the unions regarding salary cuts, a very inconvenient point that has been put on the backburner,” he said. Unless unions were willing to accept realistic concessions now, they could have to settle for a lot less in the near future. He suggested “manpower rationalization”, saying the biggest single source of expenditure was the “grossly bloated staff strength”. But such a measure is not on Jadhav’s radar, given what he calls are the airline’s “social commitments”. Instead, he is looking to outsource some functions. “Since we are an aviation company, we may not be able to give career progression to IT people. Therefore, we may identify certain services for outsourcing to other company after reaching an agreement on terms and conditions,” Jadhav said. Equity boost - Even if they are not substantial in themselves, the cost cuts have had a ripple effect. The government has agreed to infuse Rs800 crore as equity based on various cost-cutting measures. The airline currently has an equity base of Rs145 crore. “Bankers are confident on Air India but have some pre-conditions for restructuring the loan,” Jadhav said. “If the shareholder, that is the government, is willing to infuse additional equity, I could convince the bankers to restructure my high cost loans.” Air India is also toning up his fleet. Air India has phased out 11 medium-sized and six wide-body planes from its system in the current fiscal while inducting 29 new aircraft. “We have operated winter schedule with 56 planes against 67 aircraft in summer schedule without losing passengers,” Jadhav said, adding that better utilization of aircraft had resulted in substantial savings of Rs200 crore. By March 2010, three more Boeing 777-200s, two Airbus A310s and eight Airbus A320s will be returned or retired from the fleet, allowing Air India to induct brand new aircraft. Airlines worldwide are projected to post $5.6 billion (Rs26,152 crore) in losses in fiscal 2011, according to industry body International Air Transport Association, or Iata. Jadhav said he expected Air India won’t contribute to that figure. He agreed both organizational and financial restructuring was difficult, particularly so for a government-run company. “But we are hopeful of both,” he added.