1. BE Aero to buy Honeywell unit
Be Aerospace Inc., the world's largest maker of aircraft cabin interiors, agreed to buy a fastener distribution unit from Honeywell International Inc. for $1.05 billion, making it Honey well's exclusive parts distributor. The sale consists of at least $800 million in cash and the remainder in BE common stock, the companies said on Monday in separate state-ments. Theunitalsoprovideslo-gistics services to airlines and repair shops and had $524 million in sales last year, Morris Township, New Jersey-based Honey well said. BE Aerospace said the agreement includes a 30-year contract making it the exclusive -licensee for die sale of Honeywell's fasteners, seals, gaskets and electrical components. Honeywell said it is selling the consumables solutions business because it no longer fits with the company's focus on "more advanced technologies for the entire aircraft." The transaction is expected to close in the third quarter. "I don't know of another name in the industry with that kind of visibility," said Alex Hamilton, an analyst with Je-sup &Lamont Securities in New York, referring to BE and its 30-year agreement.
Source: June 10, 2008, The Financial Express

2. E-ticketing saves airliners Rs 15cr
Within a week of shifting from carbonized air-tickets to e-tickets, the Indian air carriers have managed to save estimated Rs 15crore. providing them a way to cut costs after the rise in aviation turbine fuel (ATF) prices. "The airline companies in India have managed to save around Rs 15 crore within a week of shifting from normal paper ticket to e-ticket." claimed Bruce Hanna. India head of Galileo Global Distribution System (GDS). Galileo GDS. the first company to launch e-ticketing in India, provides global distribution services to the travel industry About 71 airlines, operating on 100% e-ticketing. are associated with it. Of Rs 15 crore. Indian airline companies using Galileo GDS managed to save estimated Rs six crore. he claimed. The IATA had asked for mandatory shift over to e-tickets globally by the airlines the world over, including in India from June 1. They were expected to issue only paperless tickets for travel worldwide. According to the IATA. 97% of ticketing in India is done electronically. Some of the top airlines which have achieved total e-ticketing are Air India, Jet Airways, Kingfisher and Jetlite, etc. Also, low cost carriers are taking the e-ticketing route to cut their costs. The airline industry is expected to save $3 billion annually by the switchover, as issuing an e-ticket will cost $1 instead of $10 on an average, and thus help airlines cut costs. They are facing tough times with the rise in ATF prizes due to rise in price of oil to $139 in the international markets. For a passenger, there are many advantages of receiving and printing tickets electronically One of the biggest is the trouble avoided when one is lost. In the era of foil tickets, domestic travelers did not get any refund; instead they had to pay the full amount to carry on with their journey.
Source: June 10, 2008, The Times Of India, Language 

3. Airlines trip up on payments to oil cos
Indian airline companies are delaying payments to oil companies for fuel purchase as a soaring crude and an intense fight for passengers sap cash flows needed for core operations. Top oil company officials told that Kingfisher Airlines, run by Vijay Mallya, and Naresh Goyal-promoted Jet Airways are among those running late on payments for aviation turbine fuel (ATF) purchase. Carriers such as Indigo, SpiceJet, Go Air also face similar problems but the extent of arrears is not large. “Airline companies are delaying payments in spite of seeking a very comfortable line of credit and huge discounts. We have to service them because of competition among the PSU oil companies to sell ATF,” said the executive director, aviation business, of a state-owned oil company. ATF constitutes 40% of the operational cost of an airline and its prices have soared in recent months in line with surging crude. Airlines have different arrangements in place for making such payments. Some provide bank guarantees while others have line of credits. These typically last for about a week. At the end of the period, the company either pays up or requests an extension. In the past few months, the airline companies had to seek several extension resulting in accumulation of arrears. Kingfisher had sought extensions from Indian Oil Corp (IOC) this year and had run up arrears of an unspecified amount. IOC asked them to clear it and threatened to stop giving them more credit. The oil firm also told Kingfisher to switch to a cash-and-carry model, under which they pay immediately for the quantity they lift from IOC. KINGFISHER cleared all its arrears and then moved its business to other oil firms. In airports where other firms don’t operate, Kingfisher buys from IOC under the cashand- carry model. Rival Jet Airways is believed to have an outstanding of over Rs 450 crore with IOC. In an e-mailed response to ET, Kingfisher official spokesperson said, “We have arrangements with all these companies with regard to settlement of liability and we are in compliance of the same.” A Jet Airways spokesperson declined comment anything over the issue saying that the company is under a silent period. A mail sent to the company also did not evoke any response. Naresh Goyal, chairman, Jet Airways could not be reached for his comments despite several attempts made by this paper. Top industry executives said IOC has also told other airline companies to opt for the cash-and carry model, following which some like Paramount moved to other companies. Deccan is in talks with IOC to extend its line of credit with IOC. “All IOC airline customers, including Kingfisher, Jet and Deccan, are making prompt payment for fuel. There is absolutely no delay in payment and no concern at all on this account. All our airline customers are strictly adhering to the mutually agreed commercial and payment terms fully,” said N Srikumar ED corporate communications, IOC. One senior oil company official said the situation was not so bad. “We give discounts and have also extended the line of credit from a week to a month for various airlines on case to case basis. The situation has not become so grave that it should be an area of concern for us. In many cases, we have bank guarantees,” he added. Everybody doesn’t agree. “This is actually expected. They will delay, extend line of credit and even default payments. Airlines are not able to make up for their operational cost. Airlines, on an average, are losing over Rs 20 crore per day,” says Kapil Kaul CEO India, Centre for Asia Pacific Aviation (CAPA). India’s airlines are losing an average $40 a passenger they fly. Indian carriers posted a combined loss of close to $1 billion in the fiscal year to March 2008 and aviation secretary Ashok Chawla says the figure could double this year if oil prices remain at current levels. The forecast represents nearly a third of total global losses of $6.1 billion projected by the International Air Transport Association last week if oil stays around $135 until year end. Even globally, a significant decline in global airline profitability, or even losses, look inevitable this year as the industry struggles with skyhigh fuel prices, the International Air Transport Association (IATA) said early this week.
Source: June 10, 2008, The Economic Times, 

4. Flying Kingfisher? Check in at Egmore
In a bid to provide another option to lessen preboarding formalities, Kingfisher Airlines has opened a city check-in facility at Egmore. This will enable passengers flying with only hand baggage to check-in, pick a seat of their choice and collect their boarding card before going to the airport. The service will be available from 9 am to 6.30 pm from Monday to Friday and on Saturdays from 9 am to 2.30 pm. Passengers can check-in 24 hours before their flight and no later than three hours prior to the scheduled departure of the flight by showing their photo identity like PAN card, credit cards with photo, passport or voters identity cards. The service will be available only for passengers with confirmed seats. Those who have done the check-in at the city office should reach the departure terminal in time to complete security checks and report at the boarding gate 15 minutes before departure. According to V Raja, regional vice president, South India and Southeast Asia, of Kingfisher Airlines, “The facility will suit day return passengers more, but others can also avail it. There is good response for city check-in in Mumbai and Bangalore. We plan to introduce the facility in Delhi and Kolkata also.” The airline gets 27% of its revenue from the southern cities. “We are gearing up for the launch of international service from Bangalore to San Francisco by the end of the year. After that we will look at starting international services from other airports including Chennai,” Raja said. The city check-in will be an addition to the already available online check-in. “If I have an early morning flight, I always prefer to go for web check-in so that I can avoid one queue at the airport. City check-in will also be useful. Many passengers like to use these facilities to avoid congestion at terminals,” said R Prakash a traveller. Air Passengers Association of India (APAI) president D Sudhakara Reddy suggested that airlines should also checkin baggages at the city check in counters. It would also help in decongestion of traffic at airports, he said.
Source: June 10, 2008, The Times Of India

5. Jet puts off flights to HK
Jet Airways has delayed the start of its New Delhi-Hong Kong flights by a few months, a senior official said, signalling deepening gloom in an industry buffetted by high oil prices. There are no plans ‘‘at the moment’’ to rationalise other routes, the Executive Director, Mr Saroj Datta, said on Monday. ‘‘We are deferring New Delhi-Hong Kong flights to the winter, taking into account the requirements of the market, and redeploying the capacity,’’ he said. The flights had been scheduled to start in June.
Source: June 10, 2008, The Hindu Business Line

6. Praful may pitch for relief
Heads of various airlines are scheduled to “join in” in the presentation that civil aviation minister Praful Patel will make to Prime Minister Manmohan Singh on Wednesday evening on the precarious state of the airline industry, where the civil aviation ministry will pitch for “relief” for the aviation sector in the form of subsidies on aviation turbine fuel (ATF). The ministry is likely to state in its presentation to the Prime Minister that there should be subsidies on ATF on the pattern of the discounts offered on diesel to the Indian Railways by staterun oil firms. The airline heads are likely to join the discussions and presentation half-an hour after the civil aviation minister begins his meeting with the Prime Minister. The airline heads are likely to comprise Jet Airways chairman Naresh Goyal, Kingfisher Airlines chief Vijay Mallya, IndiGo Airlines chief Rahul Bhatia and Paramount Airways managing director M. Thiagarajan. “The airline heads will not accompany the civil aviation minister when he calls on the Prime Minister at 4.30 pm. But they will ‘join in’ at about 5 pm where they will apprise the Prime Minister (in the presence of Mr Patel) about the difficulties that airlines are facing,” said a civil aviation ministry source. Mr Patel will also meet the airline chiefs at 2.30 pm in another meeting, a couple of hours before the scheduled meeting with the Prime Minister. “We will press for relief in the form of subsidies on ATF. We will point out in our presentation that ATF is the only hydrocarbon on which there is no subsidy. Even Indian Railways is getting diesel at a discount from staterun oil firms,” said a ministry source.
Source: The Asian Age, June 11, 2008

7. Jet in code share with UAE's Etihad
Against the backdrop of rising jet fuel prices threatening the existence of the global aviation industry India's largest private sector airline Jet Airways is exploring alliances with United Arab Emirate's (UAE)'s national carrier Etihad Airways to leverage value and synergy between the two carriers. On Tuesday both airlines entered a code-sharing agreement, thereby giving their passengers a better deal and to improve bottom lines. They announced a networkwide reciprocal frequent flyer partnership effective July 1, 2008, subject to regulatory approval. The code share will provide passengers greater access to the ever expanding global networks of Jet and Etihad. This partnership will deliver several benefits to passengers such as multiple choice of flights, convenient onward connections, frequent flyer benefits and seamless transfer with through check-in and interline e-ticketing. Code sharing is a practice where a flight operated by an airline is jointly marketed as a flight for one or more other airlines. The term ‘code' refers to the identifier used in flight schedule (which is 9w for Jet and ET for Etihad), generally the 2-character airline designator code and flight number. Under a code sharing agreement participating airlines can present a common flight number or sell tickets on another's flights with tickets bearing its own code.
Source: June 11, 2008, Hindustan Times

8. Deccan considering route-rationalization
Low-cost carrier Dec can Aviation is considering rationalization of some of its routes as a cost-cutting measure in the backdrop of a hike in aviation turbine fuel (ATF) prices, a top company official said. "We are looking at different cost-cutting measures. We are considering rationalization of routes since many of them were on a gross negative margin," Deccan Aviation's Officiating CEO and CFO Ramki Sundaram said.
Source: June 11, 2008, Hindustan Times

9. Patel to seek tax sop for airline fuel
In a bid to bail out the various airlines operating in the state, Union civil aviation minister Praful Patel will meet the Prime Minister on Wednesday to seek a reduction in the tax on aviation turbine fuel (ATF). Patel shall be accompanied by airlines officials to New Delhi. Meanwhile, the airlines, which have been complaining of losses ever since the new tax on aviation fuel was announced last budget, are keeping their fingers crossed. "The situation has become more pathetic ever since the new tax was announced in the budget," said Jitendra Bhargava, spokesperson, Air India. Which is why after three months of the tax, the aviation minister is throwing his weight behind a reduction of tax on ATF to ensure that airlines do not suffer any further loss. According to reports, airlines are suffering loss of Rs 400 crore a year. As of today, a big portion of ticket money air passengers are made to shell out go towards fuel surcharge. A passenger flying for a distance of 750 kilometres must shell out fuel surcharge of Rs 2,250 while for any distance above 750 kilometres, they must pay Rs 2,900 as fuel surcharge. In effect, a passenger traveling to Nagpur pays Rs 3,500 for airline fair. Of this, Rs 2,900 is deducted as fuel surcharge, leaving the airlines with a paltry Rs 600. Following the central hike in the ATF costs by 18.5%, state-run oil retailers did offer a 4.3% slash, but the airlines refused to pass on the benefits to the customers citing an already high tax scheme. Though following the 4.3% cut in ATF costs by state retailers, the effective ATF price in Mumbai fell to Rs 68,626.87 from Rs 71,759.06 a kilolitre, airlines did not pass on the benefit to the fliers as they say the fuel price has shot up by 50% in last three months and a reduction of 3-4 per cent would not make much difference. However, ATF prices are not the only concern for the airlines companies. As the airlines cannot further cut prices, in view of the high competition in the Indian skies, high ATF costs has led to fewer passengers for airlines. A decline in air passengers is also a cause for their concern. "There is a decline of 10-15% air passengers in domestic airlines, which must face stiff competition from the railways," said Bhargava.
Source: June 11, 2008, Yuva

10. Flying to smaller cities costs more than metros
Flying to a smaller city closer to Mumbai is now more expensive than going to a metro city - thanks to the fuel surcharge hike. Bandra businessman Mahesh Khemka, who is a frequent flyer to Mangalore, was recently charged Rs 5,635 as against his regular Rs 2,800-Rs 3,225 for the round trip. And this, when an air journey to Chennai will cost around Rs 4,000. "The only explanation I got from the travel agent was that aviation turbine fuel is now expensive," said Khemka. Added Kapil Kaul, CEO (India) of Centre for Asia Pacific Aviation (CAPA), said, "For the first time, non-metro fares have become higher than those on the metro routes." Divide and travel. The reason for this, say travel agents, is that passengers have now started dividing their journey into air and train travel. So, if a passenger is not in a hurry to reach Mangalore, he will first fly to Goa and then switch over to a train journey to save the costs. So, to make up for the loss of passengers on non-metro routes, airlines have increased their fares. Similarly, data available with CAPA shows that while the Mumbai-Delhi fare on SpiceJet is Rs 4,000, the same airline charges around Rs 5,500 for a Delhi-Jammu fare. An AC train journey from Delhi to Jammu costs approximately Rs 800. A business minded person would prefer to switch between flights and fast trains. This is a new phenomenon and applicable to many airlines. A section of passengers, who were flying for less than Rs 2,000, have gone away due to the rise in fares. They are no longer frequent flyers," said Air Deccan marketing head Nalin Gagrani.Fliying to a smaller city closer to Mumbai is now more expensive than going to a metro city - thanks to the fuel surcharge hike. Bandra businessman Mahesh Khemka, who is a frequent flyer to Mangalore, was recently charged Rs 5,635 as against his regular Rs 2,800-Rs 3,225 for the round trip. And this, when an air journey to Chennai will cost around Rs 4,000. "The only explanation I got from the travel agent was that aviation turbine fuel is now expensive," said Khemka. Added Kapil Kaul, CEO (India) of Centre for Asia Pacific Aviation (CAPA), said, "For the first time, non-metro fares have become higher than those on the metro routes."
Source: June 11, 2008, Mid-Day

Prepared by
Jennifer Kumar, BBA (NAU) Alumni
Skyline Business School
Hauz Khas Enclave, New Delhi 110 016
Tel: 2686 4848, 2652 4399
http://www.skylinecollege.com