Travel
|Update|
Issue 223
1. Short-haul travelers back in train
The euphoria over traveling low-cost airlines seems to be over. Indian consumers
have started reverting to good old railways for short-haul distances. While
railways have seen a 24% rise in AC coach traffic, air traffic growth has come
down to 9.01% from 25% between January 2007 and May 2008. The reason is that
Indian Railways has been able to absorb fuel price hike due to more favorable
spending ratio. Airlines spend 12 times more on energy bills to transport a
single passenger as against railways. The growth has mainly been in
short-distance routes such as Mumbai-Pune, Delhi-Jaipur, Delhi-Chandigarh, etc.
The reason is that air ticket prices have almost doubled on these routes, but
rail fare has been declining. Railways are also becoming an option for travelers
as airlines are cutting down frequency on short-haul routes. Low-cost carrier
SpiceJet has decided to cut its flights to 97 next week from current 117. Other
carriers Jet Airways, Kingfisher and JetLite have said they would cut flights by
up to 15%. Even outstation students, who have been till recently using lowcost
airlines, have reverted to trains. Professionals who have to make frequent
business visits in short-distance sectors are also taking the rail route. For
instance, a train ticket between Delhi and Hyderabad in AC3 costs about Rs 2,200
while an air ticket is roughly Rs 8,000-10,000 depending on base fare. Between
Delhi and Chandigarh the one way airfare is about Rs3,700-4,900 as compared to
Shatabdi fare of Rs 650. Despite the inflation the railways have not withdrawn
frequent traveller and lean route discounts. Airlines have, on the other hand,
resorted to price increase of over 50% on certain routes such as Delhi-Mumbai in
the last one year. In the last six months, while rail charges remained
unchanged, airlines increased airfare by about 40% (by hiking fuel surcharge).
Compounding to the problem of declining air traffic is another hike in airfare,
which is in the offing as crude price has reached $142 per barrel. Oil
marketing companies such as IOCL, BPCL, and HPCL
are expected to increase ATF price in the next few days.
Source: Monday, June
30, 2008, The Economic Times
2. Airlines stuck with idle planes
Having cut down on flights, Indian carriers are now faced with a new problem:
What to do with the idle aircraft? The worldwide softness in the sector has
ensured there are few takers for these aircraft; those who had leased the
aircraft to Indian carriers will invoke a hefty penalty if the machines are sent
back to them. Reeling under record jet fuel prices and rock-bottom fares, this
is the latest thorn in the side of Indian airlines. None is yet to arrive at a
solution. The problem, to be sure, is not small. Out of the 300 odd aircraft
with these airlines, there is an excess capacity of 15 per cent, or roughly 45,
experts reckon. Given that two out of three planes are on lease, the obvious
thing to do would be to return the extra planes. But experts said such a move
will attract penalties. "If you return a plane to a leasing firm before the
lease term, it attracts penalties of liquidated damages or loss of rentals to
the leasing firm, which can also forfeit the security deposit you have paid on
the aircraft," said a former CFO with a budget carrier. Lease rentals on
aircraft are currently at around $350,000 per month (Rs 1.5 crore, almost) and
airlines need to give rentals for 3-4 months as deposits. In the last few years,
the market for narrow-body jets like A320 and Boeing 737 was tight, and
airlines in India were able to monetize their aircraft orders by selling their
delivery rights or doing a sale-and-lease back deal. Sources said a leading
airline group earned as much as $250 million (Rs 1,050 crore) from such deals in
the last two years. A number of fast-growing Asian carriers were taking these
planes. "Now, with every passing month, this market is softening. If fuel
prices remain high, the Asian carriers wanting to take deliveries will
disappear. Indian carriers have little time to extricate themselves or they will
be stuck with deliveries," said an expert. Aircraft leasing firms like AirCap
say that the market for new narrow-body planes like A320s or Boeing 737 (new
generation) is still strong but some of the older fuel-thirsty aircraft, MD80's
and 737-200/300's, are being phased out. Analysts said this market is down as
airlines try to cut back flights and return planes. "The major aircraft leasing
firms are in a real jam with many American airlines returning aircraft by the
dozens," said an industry expert. Meanwhile, the idle capacity is adding up.
Spicejet, for instance, has two planes idle after it cut 20 flights. Kingfisher
Airlines and Deccan have cut back 17 and 20 flights, respectively, mostly in
the South, which may result in 3-4 planes idling, though this figure could not
be confirmed. Air-India has withdrawn frequencies on routes like
Mumbai-Chennai-Mumbai and could curtail some international flights.
Source: Monday, June
30, 2008, Business Standard
3. Wild chase at airport
A
Nigerian on a confidence trick mission in the country gave airport security
staff a run for their money on Saturday Chased all around the air- . port,
disappearing behind every convenient structure on the vast premises, he was
caught only after 40 minutes when he had a fall while crossing a wall. A Central
Industrial Security Force team had laid a trap for Michael alias Kigshlee
Gochuku Ibo (29) after a com- plaint by an Ahmedabad-based businessman, who the
Nigerian had e- mailed with the intention of taking him into his confidence and
making him fly to the city to hand over Rs 1.2 lakh at the airport. But just
before he could be caught, the Nigerian sensed trouble and slipped away with
four men in hot pursuit. "The accused made four officials run around for 30 to
40 minutes and was finally captured," Police Sub-Inspector Dharma Rathod said.
Himanshu Shukal (28), the Ahmedabad businessman was suspicious after receiving
several e-mails beginning June 21 from the accused, who said his brother had
cancer, but which an astrologer had told him would go away upon giving away
$5,00,000 (Rs 2 crore) by way of charity or donation. He said he wanted to give
Shukal the money, but first the businessman should bear the transaction cost and
give him Rs 1.2 lakh. Besides Ibo, an accomplice called Philip also talked to
Shukal on the telephone. The police believe Ibo and Philip both were in the
country and were on the lookout for the second man. Shukal got in touch with the
air port authorities after Ibo refused to fly to Ahmedabad, and the trap was
laid. Ibo met Shukal at 6.45 pm at the Balaji restaurant opposite domestic
terminal 1 B. At 7 pm Ibo saw two Central Industrial Security Force men
approach, but before the men in khaki could handcuff him he leaped out of the
restaurant and ran all across the airport area outside the terminal building.
For the next 40 minutes two Central Industrial Security Force men and two
private guards hired by the Mumbai International Airport Limited were panting
hard trying to keep up with him. Around 7.40 pm Ibo slipped while jumping off an
airport periphery wall, and the chasers had their man. He was handed over to the
airport police station. "The accused found Shukal's contact details from the
Internet," Rathod said. The officer said Ibo had been charged with cheating and
deception under the Indian Penal Code and remanded in police custody till July
5.
Source: Monday, June
30, 2008, Hindustan Times
4. Cathay flies slow to save cost
As
airlines worldwide start rationalizing routes, axing staff, or grounding
flights, Cathay Pacific Airways is working on a unique strategy to combat the
rising aviation turbine fuel (ATF) cost. The Hong Kong-based Cathay Pacific
Airways, which has bigger presence in India, Middle East and Australia will
“slow down flying speed” of its long distance routes where travel time is more
than 15 hours. In that way, it will reduce 10% of fuel consumption compared to
normal flying speed. The pilots will also decrease speed while flying against
the wind and vice versa to save fuel. The airline already instructed its pilots
to fly long distance following the new strategy in its Hong Kong-Vancouver, Hong
Kong-Toronto, Hong Kong-San Francisco and New York routes. If required, the same
will be implemented in the Mumbai-Hong Kong routes as well. An aviation expert
said that fuel consumption will be minimized by flying at different patterns as
wind pressure changes from one zone to another. A plane can save fuel upto 8-
10% in the long routes, the expert said. In a free wheeling interview with ET,
Tom Wright, general manager (India, Middle East, Africa & Pakistan), Cathay
Pacific said, “As the crude hits all-time high of $141.71 per bbl, difficult
times are ahead for aviation industry.” “We are analysing different strategies
to overcome this serious problem. We are banking more on new fuel efficient
aircraft rather the old one to save cost.” ATF makes up about 45% of an
airline’s operating costs, and the benchmark domestic price of ATF has risen
nearly 46% since January to above Rs 68,000 a kilolitre as crude surged to
record highs. A litre of ATF hovers around the Rs 70 mark (Rs 69.27 for a litre
in Delhi and Rs 71.75 in Mumbai) whereas it was Rs 21 in 2004. Surprisingly,
when domestic airlines like Jet, Kingfisher, SpiceJet, GoAir, are making huge
losses, Cathay Pacific is augmenting its positioning in India. It is increasing
its flight capacity to destinations across India. Meanwhile, Cathay Pacific’s
subsidiary Dragon Air is working on its Bangalore launch which will take place
on July 1, 2008. With an increase to 35 flights from the existing 12 flights,
Cathay Pacific has witnessed a 250% growth last year. Once Dragonair was
operational, the total number of flights would increase to 35.
Source: Monday, June
30, 2008, The Economic Times
5. Kingfisher may scrap deals
According to market sources, the Kingfisher-Deccan combine has decided to cancel
the remaining deliveries in the 61 A32x series orders which Deccan Aviation had
made at the height of its growth. Kingfisher would continue to keep its option
on the 36 aircraft from the same family which it had ordered. The A32x series
includes the A319, A320 as also the A321. According to figures on the Airbus
website, this could mean a cancellation of at least 51 planes as 10 aircraft
have already been delivered to Deccan. It is not clear whether there would be
any payment accompanying the cancellation.
Source: Monday, June
30, 2008, DNA Money
6. Air India flies least passengers per plane
The country's national carrier, Air India, flies less passengers per plane than
any other airline in the country, according to latest government data that
reinforced concerns that the state owned airline slide continues. Data from the
Directorate General of Civil Aviation for the month of May showed Air India's
seat load factor the average number of passengers per flight - was 61.2 per
cent, compared to 73.9 per cent for Jet Airways, Kingfisher Airlines' 70.1 per
cent, Air Deccan's 71.5 per cent and Indigo's 74 per cent. An Air India
official, who spoke on condition of anonymity, the drop in seat load factor was
because of a general slump in air travel in recent months Unlike other airlines,
the official said, Air India is required to deploy its aircraft in the remote
areas of the country . "We are thinly spread across 60 airports in the country
while other carriers deploy bare minimum capacity and achieve optimum commercial
deployment of capacity," he said. Air India's market share has declined to 14.8
per cent in May from 15.1 per cent in the previous month. According to DGCA, Jet
Airways' share fell to 20.5 per cent from 21.6 per cent and that of Go Air has
also gone down to 4.6 per cent from 3.9 per cent. The market share of other
airlines has either marginally increased or remained steady. Passengers carried
by domestic carriers between January-May have grown by 9.01 per cent. The total
number of passengers carried till May this year was 1.92 crores while it was
1.76 crores in the same period last year.
Source: Monday, June
23, 2008, Hindustan Times
7. Hit the road to cut air travel cost
Air travel has become more expensive with prices of aviation turbine fuel (ATF)
hitting the roof and airlines increasing their tariff. This means that those who
frequently travel by air will have to bear additional expenditure. It is
necessary to tackle these expenses by analysing various deals that airlines dole
out and looking for alternatives that may be available for an air traveler. The
impact of the tariff hike is always on an individual because he ends up paying
more for the ticket. There can be rise in different components of the air fair.
For example, some airlines might raise base fares while the others may raise the
fuel surcharge or some other overheads, keeping the basic fare low. The final
fare is what matters because that is the amount an air traveller has to shell
out and it is irrespective if the basic fare is low but the fuel surcharge or
some other overhead is high. Airlines often offer attractive deals to their
customers. But, one should look beyond the deal figure and understand the total
cost he will incur and how it compares with the situation witnessed earlier. It
makes little sense for a person to buy a ticket for Rs 500 and then end up
paying Rs 3,500 because you realize that there are a variety of taxes and other
costs that are added to the initial figure. The result is that the air travel is
as expensive as it would have been without all the attractive schemes the
airline is offering. It is essential to understand these kind of practices so
that you can distinguish whether the offer is real or just another smart
marketing gimmick. There is nothing wrong in paying a slightly higher amount on
travel when necessary. If there is an urgency to get to some place then it makes
sense to travel by air even if the cost has gone up. In other cases, when taking
the rail or road route does not make much difference, abstaining from air travel
will result in significant saving. The use has to be judicious so that
ultimately the person ends up getting good value for the amount that they are
spending and it meets the target in front of them.
Source: Thursday,
June 26, 2008, Hindustan Times
8. LCC share hits air pocket
With ATF prices almost doubling in the past one year, market share of lowcost
airlines—SpiceJet, IndiGo, Go Air and JetLite—is likely to dip compared to
full-service carriers’ share of 51%. Brokerage analysts believe that
balance-sheets of many low carriers have come under pressure and the market
share of LCCs, which has touched 49%, will drop drastically in the next quarter.
“India’s low-cost aviation industry has seen a transformation over the last few
years from 25% market share two years ago to 49% last month,” Angel Broking
research head Hitesh Agrawal told. “Marketshare of low-cost carriers may drop to
20% in the next few months if ATF prices maintain its pressure,” said an analyst
with a local brokerage. Recently, IndiGo’s market share grew 85% whereas
SpiceJet, JetLite and GoAir grew their share by 40%, 28% and 8%, respectively.
SpiceJet is reducing the number of flights from 117 to 97 from July.
Source: Thursday,
June 26, 2008, The Economic Times
9. Loss-hit airlines won’t pay commission to agents
Faced with the prospects of a staggering Rs 8,000-crore loss this year, Air
India-India, Jet and Kingfisher have, in a bold move, decided to do away with
the 5 per cent commission they pay agents selling their tickets from October 1.
While it is not certain if airlines will pass on the savings to passengers, it
will certainly deal a massive blow to some 4,000-odd travel agents with annual
billings of Rs 36,000 crore. Emboldened by the dramatic rise in Internet
penetration and online bookings, the move by the Big Three will save them about
Rs 1,500 crore a year. Jitendra Bhargava, executive director (corporate
communications), Air India, confirmed that his airline had informed all three
Indian travel agent associations. “Distribution costs account for 4 per cent of
our operating expenses of Rs 16-17,000 crore a year. By eliminating commissions,
we will save Rs 700 crore a year.” Kingfisher Airlines and Jet Airways were not
available for comment. But Travel Agents Federation of India (TAFI) confirmed it
had received a formal letter from both these carriers too on their decision to
eliminate commissions. Agents, on their part, have hit back saying they would
not book international flights for customers through Air India and Jet, which
together have a 40 per cent share of the international market from India.
Instead, they will book flights with international operators who still pay them
the commission. At present, 90 per cent of ticket sales for full-service
carriers such as Air India-Indian come through agents. This is because agents
pass on a part of the commission to customers as discount, making tickets booked
through them cheaper than those booked directly with the airline. With zero
commission, customers will have to book online or directly at the airline’s
office. Of course, they can still tap their travel agent, who may demand a
transaction fee. Predictably, the airlines’ decision has left travel agents
fuming. “In 2001, the commission was 9 per cent. In 2002, it was cut to 7 per
cent and then to 5 per cent in 2005 with a promise that airlines would not touch
commissions for another five years. They have gone back on their word,” said
Praveen Chugh, president of TAFI. Travel Agents Association of India (TAAI),
IATA Agent Association (India) and TAFI together represent the 4,000 travel
agents. “This will wipe out the 3 per cent commission agents make on airline
bookings. We will have to charge a transaction fee from the customer now, but he
won’t be willing to pay much,” Chugh said. Globally, airlines do not pay
commissions, but agents charge a transaction fee from customers. “Agents in
India have been getting handsome fees for doing next to nothing. An executive
who wants to travel first class to New York asks an agent to book his ticket.
The agent pockets Rs 22,500 as commission on the Rs 4 lakh ticket,” an airline
source said, explaining the rationale behind the move.
Source: Thursday,
June 26, 2008, The Indian Express
10. India-Japan weekly flights to be doubled
India and Japan have agreed to double the weekly flights between the two
countries to 42. The move will be effective from March 2010. Under the new
agreement, Japanese carriers will be entitled to operate 14 services each on
Tokyo-Delhi and Tokyo-Mumbai sectors in 2010 from the existing 7 services each
on these routes. The Indian carriers will also be able to operate up to 28
services a week from multiple points in India to Tokyo. Currently, only Air
India offers its services on the India-Japan sector. The public sector airline
operates four flights each to Tokyo and Osaka. Two Japanese carriers — Japan
Airlines and All Nippon Airways — offers its services to India. “The Japanese
government has agreed to allot 20 additional slots effective from March 2010 at
the congested Narita international airport at Tokyo to Indian carriers. They
have also assured that they shall be making sincere efforts to allot 28
additional slots at the Narita or Haneda airport in a timely manner for the
Indian carriers to operate additional 14 services to Tokyo,” a civil aviation
ministry statement said. The fresh round of negotiations would boost air traffic
on the India- Japan sector.
Source: Monday, June
23, 2008, The Economic Times
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