Issue 242

 

1. Jet Airways to pay 3% commission to agents

The country’s largest private carrier Jet Airways, on Monday, agreed to pay 3% commission to agents on the gross fare, which includes basic fare and fuel surcharge, on international and domestic tickets. This follows mounting pressure from the travel agents. The agents, who sell most of the air tickets in India, stopped selling tickets of Jet after the company stopped paying commission to them. Industry sources said Kingfisher Airlines, the country’s second bigger carrier, and state-owned Air India may also follow suit. The agents have threatened to stop selling Kingfisher tickets, if their demand is not met by December 15. Rajji Rai, President Travel Agents’ Association of India (TAAI) told ET, “We have almost reached to a settlement with Kingfisher Airlines when we met the company’s senior officials. Another meeting is lined up on Tuesday. The final decision is expected to be announced by the airline after Mr Mallya returns from the US.” When contacted, the Kingfisher spokesperson said, “No decision has been taken on the issue.” Most of the carriers did away with payment of 5% commission to the agents in November. They forced the agents to shift to a fixed-transaction fee for every ticket purchased. However, the fixed transaction fee, which was in the range of Rs 350 to Rs 2,500 a ticket depending on the class and routes, had also been discontinued from December.

Source: December 09, 2008, The Economic Times

2. Jet Airways to lease out surplus aircraft

The country's largest private carrier, Jet Airways, will lease those aircraft that have been rendered surplus following the route rationalization and cost pruning. The airline recently concluded a Wet Lease agreement with Gulf Air Company G S C, Bahrain, for leasing out two A330-200 aircraft for four months.

Source: December 09, 2008, The Economic Times

3. Plane Stupid eco activists close runway at UK airport
Dozens of environmental activists broke into a secure area of a London airport Monday, chaining themselves to each other and barricading them behind fencing in a protest against air-traffic pollution. The protest is over a government decision to add an extra runway at Stansted. Protest Group Plane Stupid, known for its attention-grabbing stunts, said activists stormed Stansted Airport before dawn and staged their protest near the taxi area where planes travel between takeoff and landing. The activists are opposed to a possible expansion of the airport. Police said that 57 activists were arrested, most on suspicion of trespassing. Dozens of flights at the airport, 60 km from central London, were cancelled as police worked to clear the demonstrators, who had pulled security fencing around them as a barricade.
Source: December 09, 2008, Daily News & Analysis

4. Companies hedge on ATF to tackle price volatility

n a move to curb costs and with oil prices on a decline, oil companies like Tata Petrodyne Ltd have got into hedging of crude oil on the domestic trading platform — Multi Commodities Exchange (MCX). In addition to that, an increasing number of airlines like SpiceJet, national carrier Air India and GoAir are either getting into hedging of aviation turbine fuel (ATF) or increasing the quantum of ATF hedged on the MCX. “We are active on the MCX and hedging activity has paid off pretty well for us,” said an official from Tata Petrodyne. The company is a significant player in the exploration and production of crude oil and natural gas. Last month, state-run Indian Oil Corporation (IOC) approached MCX to provide it with a platform to hedge its refinery margins and end products from crude oil. In a trading activity, when an organization hedges its portfolio, it is primarily taking positions in the future market and operating within a pre-defined band of possible loss or gain. On the one hand, this feature could help the company achieve certainty of future cash flows. On the other hand, it could also eliminate the possibility of gaining from any favorable market movements. While the volumes of how much Tata Petrodyne hedges are not known, sources say the company began hedging on MCX when crude was around $122 per barrel. Today, the crude is around $45 per barrel. “The company would have benefited well from the fall in crude prices. If an exploration and production company enters into a long-term supply contract with a buyer to sell crude at $80 per barrel, it would not be able to benefit if the crude prices increase beyond $80 per barrel,” said a Mumbai-based analyst. Among airline companies, SpiceJet is now planning to hedge a larger chunk of its aviation fuel consumption. “We are currently hedging around 5 per cent of our consumption but it could up to above 25 per cent and much more,” said a company executive. According to sources, national carrier Air India and Mumbai-based low-cost carrier GoAir have firm plans to hedge aviation fuel on the MCX. “There are internal talks going on in this matter and we are definitely looking at it. But no firm decision has been taken yet,” said an Air India spokesperson. According to sources in National Aviation Company of India Ltd (NACIL), which owns Air India, the board had approved hedging of as much as 20 per cent of their aviation fuel consumption last year. GoAir executives were not available for comment but sources in MCX confirmed that they were also mulling the hedging of jet fuel on the domestic platform Hedging of aviation fuel on the MCX was allowed in April last year. However, airlines are only allowed to buy aviation fuel on MCX and not sell the product on the exchange. Industry experts said that hedging jet fuel at this point in time might give them benefits since prices are down by more than 48 per cent since August this year. However, experts also say that given the volatility in prices the carriers might want to wait and watch since the prices might go down further, at least in the coming two months. Aviation fuel, which has a95 per cent correlation with crude oil, accounts for about 40 per cent of an airline’s cost.

Source: December 09, 2008, Business Standard

5. Kingfisher vevives overseas ambitions
The baron is spreading his wings again. The cooling of oil prices to around $40 a barrel from $147 a barrel in July has spurred Vijay Mallya to start Kingfisher Airlines' International flights which were put on the backburner five months ago when fuel prices peaked. Mallya has outlined an aggressive plan to launch international flights to London, Hong Kong, Singapore and Colombo from Mumbai, Bangalore and Chennai, beginning January. The airline has officially announced the introduction of Mumbai-London flight starting January 5 and details for other flights have been put up on Kingfisher’s Internet site. The Mumbai-Hong Kong will start on January 12 while the Mumbai-Singapore sector will open on January 16. Wide-body A330-200 aircraft will be de­ployed on the London, Hong Kong and Singapore routes, company officials say. Kingfisher has also finalized plans to launch flights from Bangalore and Chennai to Colombo from January 19. Currently, Kingfisher has only one international flight, which links Bangalore and London. The A330 flight started last September. Planes were idling as the market turned adverse
Source: December 09, 2008, Hindustan Times

6. Talks on with US & UK for commandos on intl flights
Alarmed by terror attacks on Mumbai, India is in talks with some western countries for deployment of sky marshals commandos trained to prevent hijacks on flights connecting India with some key international destinations. While officials are tightlipped due to obvious security implications, highly placed government sources said that talks are on with the US, Germany and the UK to beef up aircraft safety through random use of sky marshals. While sky marshals were pressed into service soon after the 1999 hijack of an Indian Airlines aircraft which took off from Kathmandu, detailed guidelines have not been laid down for use of these commandos on international flights. Therefore, the purpose of the current discussions is to put in place clear-cut guidelines for use of sky marshals on international routes and co-ordination between the security apparatus of the countries concerned. Indian civil aviation authorities are now considering if the enabling provisions can be incorporated in the bilateral air service agreements (ASA) with these nations. While deployment of commandos was resorted to in recent years to spruce up security of Indian flights connecting Kathmandu, Dubai and Bangkok, there is no clear set of guidelines to be followed in such situations. “We are in touch with the US, the UK and Germany for formalizing an agreement to put air commandos on flights. Though the existing ASA with these countries does not prohibit deployment of sky marshals, clarity on the issue is required. We are considering their proposals positively,” a government official told on the condition of anonymity. However, there are several issues that have to be dealt with before such measures are implemented. For one, there are certain reservations over presence of armed commandos on board a civilian aircraft. The US, for example, toyed with the idea of arming pilots after 9-11, but the plan did not find much acceptance. In the case of an international flight, there could be issues like visa and landing of an armed commando in another country which may not find acceptance with the security forces of the nation concerned. The current talks are to sort out the differences over such issues. “These countries have not specified any time frame to conclude the agreement. But certainly they want it to done as soon as possible,” the official added.
Source: December 08, 2008, The Economic Times

7. After Jet, agents set to take on Kingfisher

This winter may see a battle of nerves between the travel agents and Indian carriers. After boycotting the country’s largest-private carrier, Jet Airways, the agents are gearing up to stop selling tickets of the second biggest-Kingfisher Airlines. They may stop selling Kingfisher Airlines tickets from December 15. Travel Agents’ Association of India (TAAI) president Rajji Rai told ET, “The six major bodies of travel agents will meet Monday to take the final decision. We will subsequently inform our members.” The agents account for 85% of tickets sold in India. The remaining 15% are sold directly by the carriers. There are around one crore travel agents in India. Most airlines did away with the 5% commission on November 1, forcing agents to shift to a fixed-transaction fee for every ticket purchased. However, the fixed transaction fee, which was in the range of Rs 350 to Rs 2,500 a ticket depending on the class and routes, had also been discontinued from December. The agents had stopped selling Jet Airways’ tickets from December 4 in a bid to mount pressure on the airline to reintroduce 5% commission the ticket sale. “Resultantly, Jet Airways’ tickets sale drop by 70% in the past one week and its business will see a bigger impact during the peak season,” Mr Rai added. However, airlines are in no mood to succumb to the pressure. A senior Jet Airways official said that the company is working on to sell tickets on its own. It is widening its network of call centers and also analyzing the option of putting booking tables in big corporate houses. There will be no problem in selling tickets without agents as airlines in more than 21 countries operates without sharing commission, a senior Kingfisher Airlines official said. “There is no transaction fee on tickets purchased directly from our city ticketing offices, web site and call centers. However, we will reimburse the amount of agreed transaction fees to the travel trade partners with whom we have entered agreements into, said the Kingfisher spokesperson. “We are in dialogue with the association to find out a solution. Meanwhile, customers can book tickets through internet at our selected outlets,” said the Jet Airways spokesperson. An industry source said the company has failed to resolve the issue through a teleconferencing with the agents on Saturday. Some analysts feel that the travel agents are useful in our country. “Corporates and bulk customers still continue to visit agents for comfort and hassle-free ticket booking. They don’t mind offering a premium for this service”, said Akbar Travels chief executive officer Vijay Kesavan said. An analyst with a domestic brokerage firm said large players may survive, but small and individual agents will be hit hard if the impasse is not resolved soon.

Source: December 08, 2008, The Economic Times

8. Flights from Bangalore to Chennai restart
Short haul flights from Bangalore are back. With concerns surrounding connectivity to the Bengaluru International Airport being laid to rest, Air India, Jet Airways and Paramount have re-introduced flights to Chennai and Mangalore. Techies are getting back to flying again between the two IT centers, Chennai and Bangalore. When Bengaluru International Airport was opened in May, carriers such as Air India, SpiceJet and Paramount Airways had withdrawn their flights from Bangalore to Chennai, Mangalore and Kochi. Over six flights were cancelled on the Bangalore-Chennai route as traffic dipped with passengers preferring a five hour journey by train rather than spending three hours on the road to reach the airport and two hours for check-in. Bengaluru International Airport is about 35 km from the Central Business District.
“We had pulled out three flights on the Bangalore- Chennai route as our timing was not convenient for passengers when the airport shifted from HAL to BIAL. Also, the time taken to reach the airport was largely a perception issue," said M Thiagarajan, CEO of Paramount Airways.

Source: December 08, 2008, Financial Chronicle

9. BA starts London-Hyd direct flights
UK's flagship carrier British Airways  commences its flight sorties to Hyderabad. The new route provides a direct flight from Hyderabad to London Heathrow Terminal 5 and offers convenient connections to 22 destinations in North America. British Airways will operate five weekly non-stop flights between Hyderabad and London and is the only airline to offer direct flights between the two cities.

Source: December 08, 2008, Hindustan Times

10. Jetlite's Q2 loss at Rs 273cr
Jet Airways' unlisted subsidiary, low-cost airline JetLite, had incurred a loss after tax of Rs 273 crore for the second quarter ended September 30, which made the accumulated losses of the erstwhile Sahara Airlines exceed its net worth. While declaring its results of the second quarter ended September 30, Jet Airways had said the subsidiary had "accumulated losses exceeding its net worth and its financial statements have been prepared on going concern basis". According to reliable sources, JetLite's revenues for the said quarter were at Rs 429.3 crore against Rs 366.2 crore in the corresponding period last fiscal. Jetlite's loss after tax increased over three-fold for the second quarter to Rs 273 crore from Rs 86.27 crore in the year-ago period. Jet Airways had also said in October that the parent company planned to support the growth plans of the said subsidiary based on its assets, growth model and other factors. During the quarter under review, Jetlite had a seat factor of 61.2 per cent against 68 per cent in the corresponding quarter last fiscal.
Source: December 08, 2008, The Free Press Journal

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