Issue 241


1. Merger with BA unlikely, says industry body
Merger between British Airways Plc and Qantas Airways Ltd may not happen due to possible government interference and the complexities of cross-border aviation mergers, an airline lobby group said on Wednesday. Qantas and BA are in talks to form a dual-listed airline in the latest move in an industry desperate to cut costs as recession-hit businesses and tourists curb travel, but Australia’s government has threatened to veto the deal. “It’s governments, and not the market, that make the decision on what the outcome will be,” Association of Asia Pacific Airlines (AAPA) Director-General Andrew Herdman said in an interview. “Aviation is governed by a set of national and inter-government regulations. National and international traffic rights for any airline are based on the fact that it must be controlled by nationals of a state,” Herdman told Reuters. He noted merger talks between BA and Spain’s Iberia had been taking place for months without any outcome. The Air France-KLM combination took place within Europe, but still required a complex dual-listing structure.
Source: December 04, 2008, The Economic Times

2. Govt issues aviation warning
The Bureau of Civil Aviation Security has issued warning about terrorists planning to strike at the airports at New Delhi, Bangalore and Chennai. A note prepared by the agency says it has received information that terrorists, belonging either to Pakistan or Afghanistan, had the three airports on their hit list. The note was reviewed at a meeting convened on Tuesday by the civil aviation ministry to discuss the security mechanism at the various airports dotting the country. Following the alert sounded out by the bureau, the security cover at the three airports has been enhanced.
Source: December 04, 2008, The Economic Times

3. Gopinath’s ex-allies return for new ventures
Captain GR Gopinath, the pioneer of low-cost aviation in India, may have moved on to fresh entrepreneurial pastures, but the core team for his new venture is not very different from the previous one. As the serial entrepreneur embarks on his new projects, his men in blue (budget carrier Air Deccan’s colour) are right behind him. Many of the former Deccan Aviation Ltd senior executives have joined Gopinath in realising his new dream of setting up a logistics firm and keeping his charter business airborne. Among those who are back with him is John Kuruvilla, who was the chief revenue officer in Deccan Aviation in its heydays. He quit the budget airline to join Oberoi Hotel as executive vice president. Two years on, Kuruvilla is back with the Captain as a chief commercial officer at Deccan Charters. Captain P B Devayya, Deccan Aviation’s chief business co-ordinator, has also chosen to follow Gopinath. He is now the chief operating officer (COO) of Deccan Charters. Captain Pritam Phillip, who was Deccan Aviation’s deputy COO, has taken charge of the aviation business of Deccan Express Logistics (DEL). “He has returned as the COO of (Deccan Express Logistics),” said a company source. The corporate communications department of both Deccan Express Logistics and Deccan Charters is being headed by a former Deccan Aviation executive - Vijaya Menon. Gopinath has even retained his former colleague Mohan Kumar, who managed the finances of his no-frills airline, as director (finance). “Mohan Kumar is consulting us on financial aspects,” said the source. What has pulled these ex-colleagues back to Gopinath is the thrill of working with the aviation visionary. That’s why Kuruvilla has taken a 70% cut in the salary he was earning at Oberoi Hotel. “He (Gopinath) lets you fly and become the master of your destiny. Yet, when you make a mistake he clears obstacles in your path and sets you in the right direction,” says Kuruvilla. Gopinath sold Deccan Aviation to liquor baron Vijay Mallya, who operates full-services carrier Kingfisher Airlines, for Rs 550 crore in June last year.
Source: December 04, 2008, Daily News & Analysis

4. Tighter security ordered, but snags at airports
Authorities have started tightening security at airports, another potential terrorist target, but government and airline officials acknowledged that several not being implemented, often because of a shortage of staff. One of them is the directive by the Bureau of Civil Aviation (BCAS) — the body in charge of airport and air traffic security in India — that every passenger be physically frisked by airline staff before boarding a flight. However, airlines are struggling to implement that new rule. "They do not have the manpower to frisk every flier. And these jobs are too sensitive to be outsourced," said Sanjay Prakash, senior commandant with the Central Industrial Security Force. "They have been conducting only random checks. "Denying the claim, Air India spokesperson Jitendra Bhargava said: "We have been frisking every flier on the aircraft ladder, much before the BCAS issued the directive. "Other airlines officials declined to say whether they were frisking every flier. "Airline security is a confidential matter and we comply with all rules," a Jet Airways spokesperson told Hindustan Times, declining to be named in keeping with company policy. The spokesperson did not deny or confirm if they are frisking every flier. A spokesperson for Kingfisher made similar comments. Other airlines did not immediately comment on the issue. A senior airport official at Mumbai said frisking every flier could affect the turnaround time of airlines, causing delays. Another safety buffer — the advanced passenger information system (APIS) — has seen tardy implementation, home ministry officials said, on condition of anonymity. Under the APIS system, air-lines have to provide background information on passengers to the destination country within 15 minutes of take-off. Only Singapore Airlines and state-run Air India have put the system in place, officials said. Even the paramilitary force, which has 2,000 men posted in Mumbai, finds itself too short-staffed to monitor airlines. "A major part of our force has been deployed ... at the entry and exit points of the airport as a fidayeen (suicide bomber) combating strategy," added Prakash. VIPs check-ins are another loophole, experts say "Drivers and secretaries of VIPs checking in for them and the BCAS guard blindly signing the boarding pass must be stopped immediately," said aviation safety expert Captain Mohan Ranganathan.
Source: December 04, 2008, Hindustan Times

5. Kingfisher gets nod for 9 more flights
Kingfisher Airlines on Wednesday said it received approval from the federal government to operate flights on nine international routes, sending its shares up. Kingfisher has received approvals to operate Mumbai-London, Kolkata-Dhaka, Kolkata-Chittagong, Mumbai-Hong Kong, Mumbai-Singapore, Chennai-Colombo, Bangalore-Colombo, Bangalore-Bangkok and Mumbai-Bangkok flights, a spokesman said. He did not specify if the flights would operate on a daily basis.
Source: December 04, 2008, The Indian Express

6. Private airlines unlikely to cut fares during peak season
Air travellers will have to wait till February before private sector carriers cut fares, which could happen earlier only if the government reduces sales tax on jet fuel. Though National Aviation Co. of India Ltd, or Nacil, that runs Air India, has decreased fuel surcharge by Rs400, carriers that include Jet Airways (India) Ltd, Kingfisher Airlines Ltd, Paramount Airways Ltd, Interglobe Aviation Pvt. Ltd, SpiceJet Ltd and GoAirlines (India) Pvt. Ltd are unlikely to follow suit. Interglobe Aviation runs IndiGo and GoAirlines runs low-fare carrier GoAir. This is despite a 6% reduction in prices of jet fuel, which accounts for 45% to 55% of the operating cost of airline firms. “We will continue to stimulate the market with attractive discount schemes and have no immediate plans to reduce fuel surcharge,” said a senior executive with a Mumbai-based private airline on condition of anonymity, considering the sensitivity of the issue. State-owned Air India has reduced fuel surcharge for domestic flights by an average of 14.5%, citing lower fuel prices since September. Kingfisher Airlines’ executive vice-president, Hitesh Patel, declined to comment but said his chairman “has indicated a fare cut following government’s support on ATF (aviation turbine fuel) prices cut.” On 24 November, Kingfisher Airlines chairman and chief executive Vijay Mallya said if the government introduces a Bill in Parliament to bring jet fuel under the declared goods category, thereby attracting a uniform sales tax of 4% across the country, the firm will “immediately reduce air fares across the board”. Wolfgang Prock-Schauer, chief executive of Jet Airways, was unavailable for comment. Four aviation analysts Mint spoke with said Air India cut fuel surcharge under government pressure, while private carriers are not ready to compromise on yields. They are likely to respond to the Air India’s move by offering various incentives or cutting capacity. “As December is a peak sea son for airlines, we expect a price cut after January to stimulate the market. Fuel prices are still volatile. Aviation industry is not still confident oil prices will hover under $55 a barrel. Private airlines cannot frequently change the ticket prices to suit the fuel price movement,” said Vijay Nara, an analyst tracking aviation stocks with domestic brokerage Centrum Broking Pvt. Ltd. Jet Airways has introduced an eight and 15-day apex fares on key domestic routes, and Kingfisher Airlines is offering a free return London-Bangalore ticket for four return flights in first class on domestic routes. GoAir has introduced special offers to corporate travellers and young passengers. The carriers may look at responding to demand slowdown of traffic by either cutting the capacity or through innovative ticket pricing rather than bringing fares down, said Kapil Kaul, CEO, Indian subcontinent and West Asia, Centre for Asia Pacific Aviation, an aviation consultancy.
Source: December 04, 2008, Mint

7. Travel agents not to sell Jet tickets
In protest over commission cuts, travel agents across the country have decided to boycott selling Jet Airways tickets from Thursday. The decision was taken at a meeting of the six travel agents association, including Travel Agents Federation of India (TAFI), TAAI, IATA Agents Association of India, Indian Association of Tour operators. A Jet Airways official said he called up the travel agents association to sort out the matter and called for meeting. But the association is still firm on its decision to stop selling the airline’s tickets from Thursday. Meanwhile, travel agents have sought the ministry of civil aviation’s help to resolve issues with domestic airlines.
In a meeting with aviation secretary M Nambiar on Wednesday, the Travel Agents Association of India (Taai) asked the government to negotiate with Jet Airways and other carriers to get back to the 5 per cent commission regime. “We told him that we don’t want to go for a confrontation, but if the airlines ignore our worries, we will have no other option,” Rajji Rai, Taai president, said.
Source: December 04, 2008, Financial Chronicle

8. Fly Kingfisher Red, get free meals too
There is no recession for Kingfisher Red airline. The low-cost Kingfisher Red is now serving hot meals and juices to its passengers at no extra cost while full-service airlines like Jet Airways and Air India are cutting corners to stay afloat. Kingfisher Red, the brand operated by Kingfisher Airlines, has recently started serving food & beverages (F&B) on various routes such as Mumbai-Goa sector, Delhi-Ahmedabad sector and Nagpur-Mumbai sector. Other budget carriers such as IndiGo and SpiceJet do not serve on-board meals despite having same fares on these sectors. They ask for extra bucks for providing onboard F&B services. While offering F&B services to customers, Kingfisher Red is maintaining a clear distinction from its big brother Kingfisher Class, the full-service airline which claims to offer a luxurious experience. “Kingfisher Red is a unique concept whereby we offer a compelling value proposition to those flyers who seek value when flying with us. So while the Kingfisher Red experience does not include all the frills normally offered by a full-service carrier, we offer more than what a typical low-fare airline would,” a Kingfisher Airlines spokesperson said. “Besides breakfast, we also offer meals during lunch and dinner. For short-haul flights, where the flying time is very short, we offer a beverage and quick-snack like a cake,” he added. This could change the dynamics of the domestic aviation industry after the Bangalore-based entrepreneur GR Gopinath launched the country’s first no-frills airline Air Deccan in 2003. Vijay Mallya, who took over Air Deccan in April last year, seems to be completely overhauling the business model of the budget carrier. Kingfisher Red has also introduced frequent-flyer programme for its customers besides offering in-flight magazines and other reading materials.
Source: December 01, 2008, The Economic Times

9. New Lufthansa Italia airline launched
Lufthansa is launching its new “Lufthansa Italia” brand in Italy on Monday. The new airline blends traditional Lufthansa values, notably reliability and high quality, with Italian flair. With an initial fleet of six aircraft, Lufthansa will be offering the best of connections from northern Italy to major European destinations from February 2009. Lufthansa will apply for an Italian Air Operator Certificate (AOC). “Lufthansa Italia will position us in an important market characterized by strong demand, which also holds out opportunities for buoyant growth in the future. We will be offering our Italian customers an extensive route network from northern Italy to attractive destinations in Europe,” said Lufthansa’s chief executive officer and chairman Wolfgang Mayrhuber. “Milan and Lombardy rank among Europe's economically most important and strongest regions. A good route network connecting them with Europe's principal cities is essential. Lufthansa Italia is making this a reality and at the same time is demonstrating a clear commitment to the region.” Flights to the first two destinations, Barcelona and Paris (Charles de Gaulle), will be operating from February 2, 2009. Flights to Brussels, Budapest, Bucharest and Madrid will be added to the timetable four weeks later. London (Heathrow) and Lisbon will be brought into the network with the start of the 2009 summer flight schedules at the end of March. The new services will provide Lufthansa customers with fast, nonstop connections. Flight bookings through the usual distribution channels with the new Lufthansa Italia airline began in mid-October. An Airbus A319, seating 138 passengers in business and economy class, will be operating the flights under the Lufthansa Italia brand. The discreet cabin design betrays its Italian origins. The passengers will be served by Italian flight attendants with Italian delicacies adding a note of originality to the in-flight menu. In cooperation with the Milan Airport operator SEA, the infrastructure at Malpensa Airport will be successively upgraded to provide Lufthansa passengers with more service and comfort at the airport. Awaiting them from spring 2009 is an enhanced lounge product and fast-track passage through security.
Source: December 01, 2008, Financial Chronicle

10.Air India to cut fuel surcharge by Rs 400
Air India to cut fuel surcharge by Rs 400 National carrier Air India has cut fuel surcharge by Rs 400 a ticket on domestic sector flights with effect from Tuesday, company spokesperson Jitendra Bhargava said on Monday. A reduction in aviation turbine fuel prices by the state-owned oil companies prompted the move. The company expects the cut to "stimulate demand" in domestic sectors during the winter, which is considered the peak season for airlines.
Source: December 02, 2008, Business Standard

11. Mumbai terror attacks make airlines bleed on int'l routes
High fuel costs, rigid taxation policies and now the terrorist attacks in Mumbai have hit major airlines in India hard. Carriers like the state-run Air India, India's largest private carrier Jet Airways, and Kingfisher Airlines, which has recently launched its international operations to London, are losing nearly Rs 2 crore a day due to poor load factors on their international routes, especially, the US and UK post the November 26 attacks. These airlines have earlier told the media that they enjoy a healthy load f actor of up to 75% on international routes. A source at the Airports Authority of India (AAI) says, "The load factors on international flights have dipped almost 60% on all the airlines after the terror attacks ripped Mumbai due to postponing of travel and cancellations done by the travellers. Poor load factors and high airport usage fee will bum a neat hole in the bottom line of the airlines." He further adds that most of the airlines have yet to pay their airport usage fee to the AAI, which collectively amounts to Rs 2,000 crore till date. Also, AAI charges Rs 22,770 for an aircraft (in case of international flight) weighing above 100 metric tonne. It may be noted that according to the AAI data, nearly 40 million passengers travel to the US and 30 million to the UK annually from lndia. Also, in August 2008, international traffic was 2.67 million as -compared to 2.44 million in the corresponding period last year. But an AAI official predicts a huge dip in international travel in the coming weeks, though considered a peak season for international travel. However, Jitendra Bharghava, director (PR) at Air India says, 'Touristsirom the US and UK have deferred their travel to India. It's a natural transgression after terror struck Mumbai last week." It may be noted thatAirIndiahadspentRs20 crore on publicizing its India-US operations last year. Besides, the route contributes nearly 20% to the revenues of Air India. Air India has nearly 24 weekly flights to the US from various Indian destinations and approximately 24 on the India-London sector. Jet, which also has nearly an equal number of frequencies like Air India to these destinations, will bleed badly in terms of revenue generation from its international network, say analysts. However, the air-line in a press statement has said that its international and domestic operations remain Unaffected by the grim scenario that has gripped Mumbai. An AAI official explains that during a 16-hour flight from India to the US, fuel worth Rs 10 crore is burnt on a non-stop flight. But with poor load factors and high airport usage fee, airlines have already started losing Rs 2 crore a day after the terror attacks and the trend will probably continue." It may also be noted that the Indian consulate in New York has issued more than a lakh visas this year. But the Indian consulates in New York and Chicago have started receiving requests from citizens to hold on to their visa applications, given the changed situation in India after the terrorist attacks.
Source: December 02, 2008, The Financial Express

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