1. Lower Airline Surcharges
The Hong Kong Civil Aviation Department said it had approved lower fuel surcharges levied by six airlines for the next two months, representing cuts of 10 percent to 15 percent from the existing levels. The six airlines are Cathay Pacific, All Nippon Airways, Thai Air Asia, Saudi Arabian Airlines, Nepal Airlines and Jetstar Asia Airways. Cathay, the Hong Kong flag carrier, said it would reduce surcharges for short-haul by 15 percent to $25 and for long-haul services by 10 percent to $106.7 from Oct. 1 to Nov. 30.
Source: September 26, 2008, Financial Chronicle

2. IGI airport opens its 3rd runway
The newly-built third runway at the New Delhi IGI airport opened for commercial operations on Thursday morning with the arrival of a British Airways flight from London to Delhi at 6.19 am. Officials of the Delhi International Airport Ltd., the operators of the IGI airport, said that more than 100 flights landed on the new runway within a few hours of operationalisation. Senior Air Traffic Control sources told this newspaper that there was no air traffic congestion over Delhi airport at all on Thursday, with no circling or hovering of flights. The new third runway (code named 29-11) which is parallel to the main runway at the IGI airport will largely be used for arrivals while the main runway will be used for departure of aircraft. The British Airways flight from London was greeted with a ceremonial water salute, just like the one given when the runway saw its first test flight touch down last month on August 21. ATC sources said that traffic congestion too had come down over Delhi airport in the past few months due to cutting down of flights by airlines on account of high ATF prices. "But definitely, with two parallel runways now, there will be no air traffic congestion over Delhi airport," said sources. ATC sources also said that the operationalisation had been "smooth". "With the commissioning of the third runway, there should be no air congestion at IGI airport," the government had stated on Wednesday. The "turn-around" time (for aircraft to land and then take-off for another flight) will be one hour now instead of the current 45 minutes due to the additional taxiing time involved. Civil aviation minister Praful Patel had inaugurated the third runway at New Delhi's IGI airport last month. The opening of the new runway for commercial operations could soon see Delhi airport's capacity increase.
Source: September 26, 2008, The Asian Age

3. No fizz, more calm
US Airways Group Inc, the only US carrier to charge for sodas, coffee and tea, said its new policy has cut cabin congestion and the time flight attendants spend serving drinks. The attendants, who initially opposed the programme, would “riot” if the airline tried to return to the old system of free non-alcoholic beverages, President Scott Kirby says. “Logjams in the aisles, significant trash collection, lines at the restrooms — all those things are largely gone on US Airways because fewer people are buying and drinking sodas,” he said. “We spend less money, we generate a little revenue and those problems are largely gone.” The results help validate US Airways’ use of “a la carte” pricing in which fliers pay only for services they select. Fees for drinks and checking bags are part of $500 million in projected new annual revenue. The Tempe, Arizona-based airline began charging $2 for sodas, juice and bottled water and $1 for coffee and tea on August 1. The price of beer, wine and cocktails was increased to $7 from $5. “Kirby’s comment that we would riot is just his way of telling himself they made the right decision,” said Mike Flores, President of the Association of Flight Attendants- CWA at US Airways. Among other improvements, attendants now spend less time on beverage service and collecting trash, Kirby said. “Charging for sodas created a cabin environment that is much calmer and more efficient,” he said. Flores said that while charging for sodas has damped demand and pared attendants’ time with beverage carts, the sales haven’t reduced on-board trash. He also repeated the union’s earlier concern that taking on responsibility for sales would detract from attendants’ ability to ensure cabin safety. “This is the very tip of the iceberg on what they’re going to want us to sell,” Flores said. “It’s going to be everything from pillows and blankets to cell-phone chargers.”
Source: September 26, 2008, The Hindu Business Line

4. Allow foreign airlines to invest in domestic carriers: Mallya
Liquor baron Vijay Mallya, promoter of Kingfisher Airlines, has put in a formal request to the civil aviation ministry to permit foreign carriers to invest directly in his airline and other domestic carriers. Mallya has said the government should allow foreign carriers up to 25 per cent equity in domestic airline companies. This is the first time an airline has made such a request to the ministry after the Tata-Singapore Airlines deal fell through in 2001 (Singapore Airlines was to have a 49 per cent share in the joint venture). The Indian government does not allow direct or indirect investments in domestic airlines, a move that was meant to protect domestic carriers. Mallya’s request marks a sharp change from domestic players’ stand. In an exclusive interview to Business Standard, Mallya said, “If foreign companies are allowed to invest directly in other Indian sectors, why should civil aviation not be opened up for such investments? I have requested the government to consider this policy change and allow foreign carriers to have a strategic investment in airlines here.” Investments by foreign carriers would be a boon to domestic players, Mallya said. “All airlines, whether it is Jet Airways, Air India or Kingfisher Airlines, will benefit from such a move. The government should let it happen now,” he added. Mallya’s call for allowing foreign investment in airlines comes as the domestic aviation industry faces a serious financial crisis owing to high fuel prices and an economic slowdown. The industry is projected to lose over $1.5 billion this year. Mallya’s own airline made losses of about Rs 1,000 crore in the last fiscal. Mallya, however, clarified that allowing foreign investment does not imply the unfettered entry of foreign carriers. “In India we do not have dual classes of shares with voting and nonvoting rights as in the US. Shareholders that have, say, 40 per cent ownership in an airline there get 25 per cent of the voting rights. What I am saying is that the government should allow at least 25 per cent direct investment by a foreign carrier here.” Mallya dismissed recent moves by the ministry to allow foreign airlines to have franchise agreements with domestic carriers, saying he would strongly oppose any such move. The civil aviation ministry is studying a proposal from British Airways for a franchise agreement with an Indian carrier. Mark Martin, aviation analyst with KPMG, said India is the only country where the foreign institutional investors are allowed to invest in aviation with a foreign direct investment cap of 49 per cent but a foreign airline cannot invest, directly or indirectly.
Source: September 26, 2008, Business Standard

5. Paramount to launch frequent flier programme
Paramount Airways, the Chennai-based full-service carrier, is launching a frequent flier programme to meet a long pending demand from its customers. “It offers convenience and flexibility. The frequent flier programme mirrors the requirements and aspirations of our fliers, who are corporate travelers and traders from small and medium enterprises,” said M Thiagarajan, chief executive officer, Paramount Airways. Paramount also plans to tie up interline agreements with some foreign airlines, which will enable fliers on these airlines to redeem their miles on Paramount and vice-versa. It also plans tie ups with clubs; all these will roll out in three to four months. Frequent flier programmes are an important driver for corporate travelers who use them to earn miles and redeem them for upgrades, free tickets or other privileges. For an airline, it builds customer loyalty. Jet Airways’ Jet Privilege has over six lakh members and is a key differentiator in its fight with rival Kingfisher Airlines to retain business travelers. Lufthansa’s Miles &More is one of the most successful frequent flier programmes. Paramount, which has confined itself to south India, has been keen to spread its wings and enter other markets progressively. On Monday, it connected Chennai with Ahmedabad, and plans to connect Pune and Goa with cities in southern India. Paramount connects 10 cities in the South with five Embraers and will soon take delivery of two more planes, followed by two more in December.
Source: September 26, 2008, Business Standard

6. IATA chief warns India on bleeding airlines
Warning that some Indian airlines could fold up if structural changes were not carried out immediately, the International Air Transport Association, or IATA, has asked the government to take speedy steps to enable the industry weather the “perfect storm” of high costs and falling demand. “India is among the most expensive places on the planet to buy aviation turbine fuel from. In August, it was 58% more expensive to buy fuel in Mumbai for domestic flights than in Singapore,” Iata managing director and CEO chief Giovanni Bisignani said. Observing that the Indian aviation industry was passing through a “fragile and delicate moment”, he said some airlines could go bust in the coming few months if “structural changes are not carried out expeditiously”. He projected a cumulative loss of $1.5 billion (Rs7,035 crore) for Indian carriers this year, second largest after that in the US.
Source: September 30, 2008, Mint

7. Aviation problems not understood: Patel
Taking a dig at the "other arms" of his own government, civil aviation minister Praful Patel on Monday said his ministry's repeated pleas for cutting taxes on jet fuel had not yielded any result as the problems of the aviation industry were not being understood by them. "It is unfortunate that other arms of the government do not understand the problems of the airline industry... Unfortunately, there are some people in the government who do not understand that civil aviation is as important as any other infrastructure or mode of transport," he told reporters here. Replying to questions on high taxation of aviation turbine fuel (ATF), Patel said the price of fuel at $145 per barrel had created "panic" in the aviation industry, but fortunately there is a downward movement in the prices now. His comments came close on the heels of a warning by the International Air Transport Association (IATA), the global umbrella body of airlines that some Indian carriers could go bust if structural changes were not made immediately. IATA chief Giovanni Bisignani had told PTI that India was "among the most expensive places on the planet to buy aviation turbine fuel from" due to high taxes. Asked whether the airlines would now reduce fares or surcharges, Patel said the industry was yet to recover their losses. However, he asserted that the government did not interfere in the pricing of the airlines, which was determined by market dynamics. "It is not that they are making money" due to a five dollar reduction in the ATF prices, the minister said, adding that while the airlines should cut their fuel costs, the government should consider allowing them to import ATF. The Federation of Indian Airlines, comprising major carriers like Air India, Jet Airways and Kingfisher, has recently sought permission from the government to import ATF so that they could save on the high taxes by paying only a flat 4 per cent customs duty. To a question on the slowdown being faced by the aviation industry, Patel said it was a temporary phenomenon as there was "tremendous growth potential" in the Indian aviation market. Patel said the high-level committee headed by the cabinet secretary K M Chandrasekhar had agreed that there was an urgent need to take certain "corrective measures" and review the jet fuel pricing policy.
Source: September 30, 2008, Financial Chronicle

8. Jet Airways to dilute 10% equity
Jet Airways chairman Naresh Goyal said at the company AGM on Monday that the company is going to dilute 10 per cent stake. He also said that Jet Airways is going to take delivery of eight new aircraft at a total cost of $1 billion, which will be fully funded through debt.
Source: September 30, 2008, Hindustan Times

9. Get ready to pay 5% more to fly
Get ready to pay more for flying. With airlines like Jet, Kingfisher and Air India going in for zero commissions from November 1 for travel agents to cut costs, the agents are pressing for a transaction fee in air tickets and are likely to get their way. Airlines used to pay about 5% as commission to agents and this might now be passed on to passengers. The figure is expected to range between Rs 300 and Rs 500 for domestic flights and from Rs 1,000 to Rs 10,000 for international flights. Said an executive of the Travel Agents Association of India,  “There was a lot of opposition from the airlines on the transaction fee as a separate head in tickets. But they seem to be finally agreeing. Agents sell 85% of all air tickets. Our commission has fallen from 11% to 5% and now even this would have been taken away.’’ Air fares are set to rise by 5% as airlines are expected to bow before the demand of travel agents for a transaction fee. Airlines say that agents should provide service to passengers and get a fee for that, which is a widely accepted practice globally. The tiff between airlines and agents has been on for a long time. Earlier the issue was that most airlines would charge a low basic fare but top it up with a surcharge, while agents got commission on the basic fares. But the recent move by the big airlines to reduce the commission to zero has put the agents on a warpath. Sources said the transaction fee for international flights would be in three ranges—Rs 1,200 to Rs 2,400 for economy, Rs 2,000 to Rs 5,000 for business and Rs 5,000 to Rs 10,000 for first class. The charge will hit passengers directly as earlier, the agent’s commission used to come as a percentage of the basic fare paid to airlines.
Source: September 30, 2008, The Times Of India

10. India, EU to ink trade pact by 2009
India and the European Union (EU) on Monday agreed to conclude a broad based Trade and Investment Agreement by 2009 and double their trade turnover to 100 billion Euros in the next five years, giving a fresh impetus to their strategic partnership. The decision was taken during the Ninth India European Union (EU) summit which was attended by prime minister Manmohan Singh and French president Nikolas Sarkozy in his capacity as chairman of the rotating presidency of the 27-member EU in this resort town of French Riveira. Addressing a joint press conference with Sarkozy and European commission president Manuel Barrosa at the end of the day-long summit, Singh announced that the world's two largest trading partners are expected to wrap up the ambitious Trade and Investment Agreement by 2009. A joint press communiqué issued at the end of the Summit said EU and India recognized the importance of conclusion of the trade agreement to fulfill the expectations of businesses on both sides and to further strengthen the bilateral economic relationship. Towards this end, the communiqué said they will endeavor to achieve a balanced and ambitious outcome. While welcoming the signing of a landmark horizontal civil aviation agreement which will allow more airlines to operate flights between India and EU countries, the communiqué said they are working on a maritime transport agreement that will be mutually beneficial. Sarkozy at a joint press conference with Singh and European commission president Barrosa said trade expansion and a new trade agreement would be important pillars to give a new dimension to Indo-EU strategic partnership. Both Singh and Sarkozy pushed for a summit of major economic powers this year-end to coordinate a response to the global financial crisis. “The leaders also discussed the pressing needs to address the impact of the ongoing financial difficulties in the international financial sector and to adjust global economic imbalances through concerted action from leaders of the world economy” the joint press communiqué said. Sarkozy said India is clearly conscious that it risks being affected by the financial crisis that began in US. The leaders of both India and EU also discussed about the current state of play of the Doha Development Agenda negotiations.
Source: September 30, 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