1. Singapore Airlines cuts fuel surcharge
With international price of fuel dropping, Singapore Airlines is to reduce the fuel surcharge on passengers purchasing their ticket for travel between India and Singapore from September 9 will have to pay on the 63-weekly flights operated by it. From Tuesday, passengers purchasing their tickets on SIA will be charged $100 as the fuel surcharge, instead of $110 being charged at present. In effect what this means is that a passenger booking their tickets from Tuesday will pay $20 or Rs 800 less for a return flight between India and Singapore. The reduced fuel surcharge will also apply on the 14- weekly flights operated by Silk Air, the 100 per cent SIA subsidiary. SIA has, however, not reduced the fuel surcharge on certain routes, including those to the US.

Source: September 09, 2008, The Hindu Business Line

2. Taking off
The setting is almost other-worldly: one moment a jubilant Shah Rukh Khan lies sprawled on a royal bed, and the next, he leaps out of the bed to face his personal wardrobe. Then, even before he can throw on his jacket, he’s bounding to a candlelit dinner for two. On the date, much like reality, the actor feels watched, so he closes the door and announces “privacy is a good idea”. What sounds like a 40-second endorsement for a luxury resort is actually an introduction to Jet Airways’ newly launched first-class suite, full with an 83-inch bed, a wardrobe, a 23inch flat-screen television, and even afoot massage system. The TVC, which broke on September 1, is the first of three campaigns Jet has planned (the ones on economy and premier will follow), and is running across most news channels and some specialised travel channels. Produced by Red Chillies Entertainment and shot by filmmaker Shekhar Kapur, the ad marks the television debut of the airline major, which had previously relied heavily on the print medium. The move is somewhat surprising, given the fact that airlines’ gasoline bills are spiralling out of control, and conventionally, this is a time to cut costs. So is Jet going against the grain to reiterate its leadership? Or is the situation so grim that even such a well-known brand is forced to put itself out there? “Funnily enough, at a time when fuel prices are going up, it is all the more reason to remind people of the brand’s advantages. Moreover, it’s a great way to reach out to a wider audience and consolidate its image as a leader,” says Shamit Sinha, managing partner of Alchemist Brand Consulting. On the other hand, Harish Bijoor of Harish Bijoor Consults thinks that Jet is advertising its offerings to gain some lost ground owing to the growing popularity of Kingfisher. “Typically, the print medium is low-cost and has a functional appeal, while television is more thematic. Besides it’s the holiday season, so what better time to advertise,” adds Bijoor. Perhaps it’s a bit of everything. With Shah Rukh Khan in the lead, Shekhar Kapur behind the camera, and the larger-than-life feel of the ad, which is to be followed by two others, it’s for sure the airline isn’t taking things lying down —be it competition or its losses in the latest quarter. But where Kingfisher’s ads strike a more emotional chord, with customers’ flying experience at the forefront, Jet harps on product superiority. Precisely,  Jet’s point. Says Jet Airways vice president, marketing Gaurang Shetty, “First-class offers luxuries like flat screen, flat bed, aisle access and the premier class has 73-inch flat beds, a 44-inch-high privacy screen and a 15inch TV. Economy will also have a small leg hammock to provide calf support and a reclining option.” He adds, “We’re the first airline to bring out the suite.” The brief given to advertising agency M&C Saatchi was straightforward. “Jet had come out with Boeing 777 last year, which has some superior features, so we had to come up with something that clearly highlighted those,” explains M&C Saatchi executive director Rajiv Sabnis. He says, “We were raising the profile of the brand and surely it deserved a television commercial.” While there was no formal research that backed the campaign, customer feedback did help Jet design the first class suites to meet customer needs and come up with a top-of-the-line product, which it claims is well ahead of its international counterpart Singapore Airlines. But Boeing 777’s induction into Jet’s fleet was announced early last year, so why this delay in the ad? “It took us a while to get Shah Rukh and Shekhar’s dates to coincide,” replies Sabnis. That, or is it also perhaps that both Kingfisher and Jet have now taken their fight to the foreign skies? Kingfisher launched daily flights from Bangalore to London on September 3, and Jet will soon offer Bangalore passengers a direct flight to Brussels. Moreover, the threat from international airlines such as British Airways, Qatar Airways, Singapore Airlines and Emirates who are slowly but surely gaining ground in India looms large. Jet is, however, hoping the move will pay off. “In terms of occupancy, we’re at about 70 per cent, but the endorsement should raise that to 80 per cent,” says Shetty. Regarding the choice of celebrity, Shetty believes he has a winner on his hands. “Nobody can convey the product better. What’s more, here’s a face that’s known globally.” In addition to the TVC, there will be online and print promotions. The ad took about five months to complete and was shot in Mumbai and London

Source: September 09, 2008, Business Standard

3. Airlines consider merger
China Eastern Airlines said it was considering a merger with Shanghai Airlines as an option to help cut fuel costs and compete with Air China. ‘‘Shanghai Airlines could be a good partner,’’ Luo Zhuping, board secretary of China Eastern, said by telephone. ‘‘The government will work out the best plan to revive the airlines.’’ The two airlines’ controlling government shareholders are now in talks, The Wall Street Journal reported, citing China Eastern’s president, Cao Jianxiong. The government plans to inject capital into China Eastern and then merge it with Shanghai Air, the report said. The new carrier would then consider selling a stake to Singapore Airlines, it said. Shanghai Airlines’ board secretary, Xu Junmin, said he was unaware of the talks. China Eastern had previously agreed to sell a 24 percent stake to Singapore Airlines and Temasek Holdings, a deal that was later vetoed by China Eastern’s minority shareholders.

Source: September 09, 2008, Financial Chronicle
 

4. It is official: Deccan is now Kingfisher
The BSE-LISTED Deccan Aviation Ltd has changed its name to Kingfisher Airlines Ltd after completion of the merger between the Captain GR Gopinath promoted low-cost carrier and the Vijay Mallya's Kingfisher Airlines. A notification to this effect was issued to the BSE on Monday Deccan Aviation's stock was still traded under the same name, and would be changed to Kingfisher Airlines in a day or two. The scrip, which made its debut on the bourse in mid-2006, was down 1.39 per cent and closed at Rs 88.70. "The name change (of the scrip) will reflect soon and the merger is complete," Ravi Nedungadi, CFO, UB Group told Hindustan Times. Deccan's charter business was previously hived off into a separate company called Deccan Charters, which is owned jointly by Gopinath and the Mallya.

Source: September 09, 2008, Hindustan Times

5. Aviation ministry refuses to let Ross, Nabha board SpiceJet
Budget carrier SpiceJet’s plan to induct American billionaire Wilbur Ross on its board has hit a roadblock. The civil aviation ministry has questioned the plan to revamp the SpiceJet board by including Mr. Ross and Ranjeet Nabha, the India representative of the US investor’s firm Wilbur Ross. While the airline feels that the number of foreigners on its board would not exceed the permitted limit even after these inductions, the ministry feels otherwise. According to ministry officials, the nine-member board of SpiceJet already has four foreign nationals. Therefore, two more foreign nationals cannot be taken on board. SpiceJet, however, has a different account. According to SpiceJet spokesperson, there are only two foreigners on its seven member board. Osman Qureshi and Khaled Mohammad Ali Al Kamda (both foreign nationals) are no longer on the board, she said. However, according to information available with the ministry, both Qureshi and Kamda are still on the airline’s board. An approval from the government, including security clearance from the home ministry, is required every time an airline reconstitutes its board. Under Civil Aviation Requirements issued under Aircraft Rules, Indian citizens should comprise two-thirds of the directors on board of domestic airlines. The chairman has to be an Indian citizen and substantial ownership as well as effective control have to be vested in Indian nationals. The ministry has sought clarification from SpiceJet since officials feel the board revamp could violate the Aircraft Act. In a letter shot off to the company last week, the ministry has questioned the proposed induction of Mr. Ross and the Indian head of his firm who also happens to be an American citizen. “Currently, there are seven directors on the company’s board, out of which two (Bhulo Kansagra and Tom Ronell) are foreign nationals. Hence, even if we induct two more non-Indians on the board we would meet the mandatory requirements,” the spokesperson said. “There is enough room to bring two foreigners on the board while complying the guidelines,” she added. The civil aviation ministry said in its letter that there are nine directors on the airline’s board of which four are foreign nationals and if their proposal two induct two more foreigners is accepted, it would violate the rule. “We have sent a letter to SpiceJet seeking clarification on the induction of two more foreigners on its board as it would violate the mandatory civil aviation requirements,” a civil aviation ministry official said. In its proposal to the ministry last month, SpiceJet sought permission to induct Mr Ross and Mr Nabha to its board, subject to clearance by the security agencies. SpiceJet had announced last month that Goldman Sachs and WL Ross have agreed to invest $100 million in the company. WL Ross will invest $80 million, in the company while the remaining $20 million will be brought in by Goldman Sachs.

Source: September 09, 2008, The Economic Times
 

6. Kingfisher Airlines may delay flight to Newark
Even as Kingfisher Airlines has announced plans of launching non-stop flights to San Francisco before the year ends, it might not be able to connect to Newark anytime soon. The airline had initially planned to connect Bangalore and Mumbai to Newark, in New Jersey in the first phase of its international expansion plans. “There is a blood-bath happening on Mumbai- Newark and Delhi-Newark sector. Therefore we are relooking at our plans of launching non-stop daily flights from Bangalore and Mumbai to Newark in the near future,” an official from Kingfisher Airlines said. Overcapacity has lead to this blood-bath. In addition, there is not just over capacity on the Mumbai-Newark and Delhi- Newark routes, but most carriers are bleeding by offering unsustainably low fares. For instance, Virgin Atlantic is offering a return fare of about Rs 41,000 including taxes on the Mumbai- Newark route via London. “There is serious amount of over-capacity on this route. We have our domestic carriers such as Jet Airways and Air India, international carriers such as Continental Airlines, American Airlines, Delta and Gulf carriers such as Emirates and Qatar Airways among other airlines offering connectivity to the Newark region. To compete with global carriers and domestic carriers, we need to provide onward connectivity beyond India. With that the Indian customer base also becomes bigger,” says Keyur Joshi, co-founder and chief operating officer of makemytrip.com. In addition, Kingfisher Airlines is also reviewing it plans of launching non-stop daily flights from Bangalore to San Francisco in November. Instead, it could look at operating three or four flights a week. However the airline hopes to offer connectivity to 17 international destinations within the next one year. It has got the government's nod to operate to 13 countries. Meanwhile, Kingfisher Airlines is gearing up to face the fare war once it launches Mumbai-London flights soon. Virgin Atlantic, British Airways, Jet Airways and Air India slashed their fares on this route after Kingfisher launched Bangalore- London flights on September 3. The return fare on Virgin Atlantic is as low as Rs 28,543 including all taxes on Delhi-London route. Kingfisher Airlines economy-class fare on the Bangalore-London sector is about Rs 44,000 including taxes. Kingfisher Airlines is betting on corporate traffic to boost its load factor on the Bangalore-London route.
Source: September 09, 2008, Financial Chronicle

7. Course to teach high net worth individuals fly own aircraft
High net worth individuals who have a passion for flying but are unable to take time out from running their business to get a pilot licence still have a chance of taking to the skies. A newly set up aviation academy in Madhya Pradesh is to launch an executive Private Pilot Licence (PPL) plan, which requires the applicant to spend 14 weekends at the academy, clear a test of the Director General of Civil Aviation (DGCA) and get ready to fly their own aircraft. “The executive programme will be launched in October and requires them to report to the academy on Friday morning and return to their business on Sunday, for 14 weeks. If a person is to start the course on October 1 and end it by March 31 there will be 36 weekends, of which they will need to be away from family and business for just 14 weeks,” said Mr. Uday Punj, Managing Director, Chimes Aviation Academy. The programme will be priced at Rs 14 lakh and will be first such venture academy officials said.
Source: September 11, 2008, The Hindu Business Line

8. Vijay Mallya may have to settle for structured finance
Vijay Mallya-owned Kingfisher Airlines, which plans to raise $400 million from private equity investors, may have to settle for structured finance such as sale and leaseback or securitisation of receivables, say private equity experts in Mumbai. “I am not very sure if Mallya will go for equity, but it’s likely to be structured finance. He will not raise money at such cheap valuations. For equity, the markets need to pick up more. He has fought hard to get to that number (stake),’’ said a senior executive with a private equity player, which has invested in an airline. The Deccan Aviation stock closed at Rs 88.25 on Wednesday on the Bombay Stock Exchange, down 74 per cent from its all-time high of Rs 335 touched on December 19, 2007. Mallya is merging his unlisted airline firm Kingfisher Airlines into Deccan Aviation after he acquired it in 2007.UB Group officials were not available for comments but Mallya said in Bangalore that the UB Group is talking to private equity players to raise about $400 million for the airline. With crude oil prices falling and Indian carriers cutting capacity and costs, investors may be keen to come on board.“We are in discussion with many people as we speak. Many people wrote off the airline industry in India. Suddenly Wilbur Ross appeared and put $80 million into SpiceJet. Kingfisher is a far more compelling proposition than SpiceJet,” Mallya told reporters in Bangalore, after an AGM of group firm United Spirits. Earlier in August, low-cost carrier SpiceJet announced an investment of $100 million from the US-based private equity firm WL Ross & Co LLC and Goldman Sachs Group Inc, with WL Ross investing over $80 million. Investment bankers in Mumbai said that Mallya may find it difficult to rope in investors. “The outlook has improved with crude falling but it needs to stabilize. Investors are willing to fund a cash burn of $30-40 million a year but not $400-500 million,’’ said an investment banker. Passenger loads fell as airlines raised fares to cope with high jet fuel prices. Short-haul routes served by ATRs have been hit hard as travelers switched back to cheaper modes such as rail and road. In December 2007, United Breweries (Holdings), Mallya’s holding company, raised Rs 600 crore through a qualified institutional placement at Rs 1,110 per share. The airline has also been funding itself with sale and leaseback deals, cashing in on attractive aircraft deals it had entered into with Airbus.A few specialised airlines investors such as Texas Pacific Group, Indigo Partners and Capital International are still keen on investing in India. Capital had invested in Deccan Aviation, which ran budget carrier Air Deccan before Mallya bought it.“Investors will come in once the outlook becomes more stable. Private equity people like to think they are in control,’’ added a private equity manager. Mallya will have to wait for “good times” to return to take investors on board.
Source: September 11, 2008, Business Standard

9. Festive bonanza for Air India fliers
As the festive season draws near, Air India has announced that it will resume operations to Yangon from the first week of October. The flights had been suspended from May owing to bad weather and scarcity of passengers. The services will be reinstated from October 3. Two flights will operate every week, one on Monday and another on Friday," Air India Corporate Communications Manager Sameek Bhattacharya said. On Mondays, the flight will reach Yangon directly and on Fridays it will take a route via Gaya. "Air India will also operate an additional flight on September 29 on the Kolkata-Yangon-Kolkata sector keeping in mind the rush of pilgrims during this time of the year," Bhattacharya said.
Source: September 11, 2008, Business Standard

10. Take wings in 14 weekends
For professionals to executives, flying seems to have become a matter of hobby. Enthused by the overwhelming response across the country, the Chimes Aviation Academy (CAA) is planning to roll out a 14weekend course for everyone for private flying. “We are working on this course and will introduce it post Diwali. At the moment, we are finalizing the design of the programme,” Uday Punj, the managing director of the CAA said. Under the programme, anyone can enroll himself for the course to get a private pilot licence (PPL). The training will be done on the weekends. “There are many people who want to fly just for hobby or passion. The course is designed specifically for them,” Punj said. “We had conducted a survey across six Indian cities including Bangalore, Chennai, Pune, Lucknow, asking people from corporate houses, other professions, whether they would like to fly their own jets. And their response was overwhelming. This gave us an idea to design such a course,” Punj added. The idea seems to be a win-win situation for both students and trainer. “While we smell a big business opportunity here, for all those people who could not fulfill their dreams to fly due to various reasons, this is an opportunity to spread their wings,” Punj said. The course offers a 35-hour flying package at a cost of Rs 14 lakh. Each batch will have around 25 students. “The survey was done in the age group of 35-50. Though, around 40 per cent of the respondents said they would like to sign for the programme, we purposely have not signed anyone as there are things to be finalised,” Punj said. CAA on Wednesday launched its first pilot training academy in Dhana (Madhya Pradesh). The aviation academy is planning to open two more academies by the end of the fiscal year 2009. “We have not decided on the locations yet, but one of the two facilities in the pipeline, one will be set up in foreign country,” Punj said.
Source: September 11, 2008, Financial Chronicle

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