Travel |Update|
Issue 244
The
Air Force and civil aviation authorities will have joint surveillance to secure
the Indian skies, Parliament was informed today. To a question whether the
Government has decided on a joint surveillance mechanism by the Air Force and
the Civil Aviation authorities, the Civil Aviation Minister, Mr Praful Patel,
replied in the affirmative. He, however, declined to give details as ‘‘it would
not be proper to divulge (them) on the floor of the House’’. In a high-level
meeting, attended by all central intelligence agencies, National Security Guards
and Central Industrial Security Force, various measures were decided upon, such
as checking vehicles and people approaching airports at random, and unattended
articles, and introducing secondary security checks at ladder points of
aircraft, Mr Patel said. In reply to a question on setting up a body for air
security, the Minister said no such proposals were considered, but ‘‘it has been
decided to move in the direction of’’ separating the investigation wing from the
regulatory wing as ‘‘recommended by the International Civil Aviation
Organization (ICAO). The government today said it has instructed the
Airports Authority of India (AAI) to take all possible
steps, including legal action, against defaulting
airlines to recover total dues of Rs 1,101.97 crore.
In a written reply to a question in the Rajya Sabha,
Civil Aviation Minister Praful Patel said some of the
airlines have not been settling their dues in time.
"Government has given instructions to AAI to take all
possible steps, including legal action if warranted,
against the defaulting airlines," Patel said. He said
Air India owed Rs 739.50 crore to AAI, while private
carrier Air Deccan-Kingfisher had dues of Rs 286.62,
Jet Airways/Jetlite Rs 32.78 crore, Spicejet Rs 15.76
crore, Paramount Airways Rs 12.5 crore, Interglobe
Aviation Rs 6 crore and Go Air Rs 8.81 crore. The
minister said several airlines, including
international carriers, had outstanding to privatized
airports Delhi International Airport Ltd (DIAL) Rs
84.50 crore as on December 15, 2008; Mumbai
International Airport Ltd (MIAL) Rs 86.54 crore;
Hyderabad International Airport Ltd (HIAL) Rs 48.75
crore and Bangalore International Airport Ltd (BIAL)
Rs 41 crore. Patel said due to a cut in flights and
passenger flow, there has been a reduction in the
revenue from airport charges for AAI and other private
airport operators. "AAI has a decrease in revenue to
the tune of Rs 228 crore during April to September
2008 compared to the corresponding period in 2007," he
added. Granted, the environmental credentials of a
man whose airline features in-flight showers
are subject to question. Nevertheless, Sheik
Ahmed bin Saeed al-Maktoum, the chairman of
Emirates Airline, said his airline had
demonstrated that smarter preparation and
flight-routing could help reduce carbon
emissions in air travel. ‘‘The whole world
is going in this direction’’ in at least
giving consideration to the effects of air
travel on the environment, Ahmed said last
week as Emirates introduced nonstop service
between Dubai and San Francisco. ‘‘And
everybody should be doing more.’’ The first
Emirates airplane flying the route to San
Francisco from Dubai was a Boeing 777200LR,
which landed after an 8,100-mile flight that
took 15 hours and 20 minutes. Emirates said
it was the ‘‘world’s first cross-polar green
flight.’’ By that, Emirates meant that the
aircraft, already known for having better
fuel efficiency than older long-range
planes, had been routed near the North Pole
to save about 2,000 gallons, or 7,500
liters, of carbon emitting fuel. Making the
trip required special clearances from
Canada, Iceland, Russia and the United
States and from the Emirates home state of
Dubai, where the plane received priority
clearance for departure. There is nothing
particularly innovative about airlines
tracking near the North Pole to save time
and fuel on long haul flights, though the
routes can be tricky because communications
and navigation technology are not yet as
extensive as they are for standard
transoceanic flights. For decades, the North
Pole routes were scarcely used, partly
because of the Cold War, when the Soviet
Union was suspicious about aircraft of any
type that flew over its far northern
airspace. With the end of the Cold War,
tension abated just as long haul aircraft
became available to serve the growing demand
for nonstop travel between cities half a
world apart. United Airlines, for example,
had more than 1,400 flights on the polar
route last year, up from a dozen in 1999.
Emirates is not alone among the world’s
airlines in promoting better environmental
thinking. Continental Airlines, for example,
plans a demonstration flight in Houston on
Jan. 7 using a 737-800 equipped with engines
designed to be powered by a special fuel
blend that includes some components derived
from plants. (The flight will not carry
passengers.) Emirates, which depends on
long-haul Boeing and Airbus jets and heavily
promotes its luxurious business-class and
first-class cabins on the 12- to 16-hour
flights it is known for, clearly wants to
position itself as a leader in the
industry’s incipient environmental
initiatives. But what about those showers?
I’m referring to the latest over-the-top
innovation, the recent introduction of two
showers for use by first-class passengers on
Emirates A380 superjumbo jets. The showers
are obviously not an environmental step
forward, given the additional fuel needed to
carry enough water to let all 14 first-class
passengers have two showers, if they want.
In fact, said Andrew Parker, an Emirates
senior vice president whose duties include
the carrier’s environmental affairs,
first-class passengers have not been using
the showers to the extent Emirates
originally anticipated when it allotted 500
kilograms (more than half a ton) of weight
for the additional water. Usually, he said,
the first class cabins have been full. But
passengers ‘‘are using half the allotment’’
of water. Emirates still carries the full
load, but Parker said that the airline was
re-evaluating the requirements and looking
into ways to ‘‘reprocess water’’ on board to
cut down on the weight and the extra fuel
required. Emirates has three A380s in
service and another 55 on order from Airbus.
Ahmed said that the airline intended to fly
them configured into three classes, with no
more than 500 passengers. (The A380 is
certified to carry almost 900 passengers in
an all-coach configuration, but none of the
airlines that have ordered the plane have
indicated they were considering doing that.)
Meanwhile, it isn’t clear whether the
first-class A380 passengers have cut back on
showers because of environmental concerns,
or merely because they don’t want to take
themselves out of their private compartments
and away from the free Champagne. Nor is it
clear whether they might object to showering
in the future with recycled water on that
long flight to the other side of the world.
But hey, everybody has to sacrifice. National carrier
Air India has
agreed to pay a 3
per cent
commission to
travel agents on
ticket sales
following the
footsteps of
private airlines
Jet Airways and
Kingfisher. “We
have agreed to pay
a 3 per cent
commission to
travel agents,” an
Air India
spokesperson told PTI here today.
The commission
would be effective
from tomorrow.
“The decision to
pay a 3 per cent
commission to
travel agents is
likely to put an
additional burden
of Rs 450 crore
annually on the
airline,” an
official said. Air
India was the
first domestic
air-carrier to
announce
withdrawal of the
earlier 5 per cent
agency commission
from October 1.
Source: December 24, 2008, The
Hindu Business Line
2. Govt clamps down on defaulting airlines
Source:December 24, 2008, The
Free Press Journal
3. Emirates stakes a green claim on polar route
Source: December 24, 2008, Financial
Chronicle
4. AI agrees to pay 3% commission to
travel agents
Source: December 24, 2008, Business
Standard
5. Srilankan Air suspends four Indian routes
SriLankan Airlines
has suspended
services to four
less popular
routes Calicut,
Cochin, Coimbatore
and Hyderabad as
the airline is
facing aircraft
shortage. The
airline is phasing
out four older
narrow-body
aircrafts and
inducting two new
Airbus A320.
However, until two
more aircrafts
join the fleet,
which is expected
by May 2009, the
airline will be
suspending
services on these
four routes and
re-routing
passengers via
other closer
connections like
Chennai, Bangalore
and Trichy.
Source: December 24, 2008, Daily
News & Analysis
6. Aviation Ministry plans ad campaign to get flyers back
The Ministry of Civil Aviation is keen to
get you back in the air, even if it means
spending several crores in the process.
Hence, on the anvil is a multi- crore
advertising campaign that will hopefully
bring back the 46.5 per cent and 32.5 per
cent growth that the sector witnessed during
2006 and 2007. The advertising campaign is
being planned in the backdrop of a global
meltdown and a general downturn in the
aviation industry. According to some
estimates, it is likely to cost as much as
Rs 20 crore. But unlike in the past, this
time the cost of the campaign is likely to
be borne by both public and private sector
players in the airline and airport
industries. Incidentally, Air India alone
has reported a loss of more than Rs 2,200
crore for 2007-08. The advertisements will
be released through the Directorate of
Advertising and Visual Publicity, another
arm of the Government, so that the publicity
costs will be lower.
Source: December 22,2008, The
Hindu Business Line
7. Why airlines lack appeal
Investing in airlines has long been a good
way to turn a large fortune into a small
one. The Aerolineas Argentinas saga shows
that emerging market airlines are among the
least attractive assets for foreign
investors. Aerolineas was nationalized
Wednesday. Senator Ariel Basteiro, of the
Popular and Social Encounter, proclaimed
that ‘‘Aerolineas once again belongs to all
Argentineans, and is on the road to resuming
its place as the nation’s pride.’’ His
comment encapsulates the Argentine
government’s motives for expropriating a
company that has made a profit only three
times in 31 years. It is also a reminder
that symbolic national airlines are obvious
targets during bouts of nationalism.
Generally speaking, national airlines are
unexciting investments. In good times, their
profits on international routes are squeezed
by competition, while their tariffs on
domestic routes are so politically sensitive
that profits are almost impossible. And in
bad times, they can lose lots of money.
Neither Iberia, which led a consortium that
bought Aerolineas in 1991, nor Grupo Marsans,
which bought it from the Spanish government
in 2001, enjoyed decent returns on their
investment. Aerolineas lost money in every
year of the 1990s, a period of low fuel
costs and Argentine prosperity. And with its
aircraft averaging 19 years old, Aerolineas
will soon need to borrow heavily to renew
them. Rather than airlines, the ideal
foreign investments in economically and
politically turbulent countries are
breweries and banks. In both sectors,
cutting-edge techniques of production,
marketing, debt management and technology
can help make so much money in good times
that the inevitable hiccups don’t matter
much. Airlines work the other way around,
scraping a profit in only the best years,
while also being asset heavy and politically
vulnerable. In an extraordinary 2008,
Aerolineas might not qualify as dumb
investment of the year. But in 1991 and
2001, when first Iberia and then Marsans
bought the airline, there was less
competition for the title.
Source: December 22,
2008, Financial
Chronicle
8. GoAir to expand fleet size to 35 by
March 2011
Wadia Group’s
no-frills airline
GoAir is expanding
its operations and
increasing fleet.
The airline has
decided to scale
up its fleet size
to 35 by March
2011 from the
existing six in
two tranches. It
will add 20
aircraft by this
year and later
bring in another
nine in the next
two years. The
proposed expansion
coupled with the
tumbling crude and
ATF prices will
help the business
breakeven faster,
said a GoAir
executive. He,
however, did not
disclose the
investment
required for the
expansion. The
exact financial
performance of the
company is not in
the public domain.
Industry experts
say that the
company incurred
“substantial loss”
last year. In
fact, the domestic
aviation sector
has been bleeding.
It lost nearly Rs
4,000 crore during
2007-08, and the
accumulated loss
is expected to
double in the
current fiscal.
The company source
said GoAir is
looking at an
alliance with
foreign carriers
to expand services
and increase its
market share to
more than 10% from
the existing 2.3%.
“The alliance
would be for code
sharing with
Middle-East and
Europe-based
carriers,” the
company executive
added. The
country’s smallest
carrier has
increased the
number of flights
to over 900 in the
winter season and
operates across 11
destinations.
India will need
1,001 new aircraft
worth $105 billion
in the next two
decades, as demand
for air travel in
Asia’s
fourth-biggest
economy will grow
in the coming
years. According
to Boeing
estimates, air
travel may grow at
an average of 8%
over the next 20
years, fastest in
the world and more
than twice the
global average. A
KPMG report says
that India’s air
traffic may rise
to as many as 313
million people by
2012 from the
present level of
100 million.
Analysts said that
ATF accounts for
nearly 45% of the
operational costs
of airlines and
substantial drop
in jet fuel prices
will help domestic
carriers to be in
black. Since
September, crude
prices have
tumbled from $147
a barrel to $33 a
barrel and ATF
prices fell by
50%. Aviation fuel
in India is the
most expensive in
the world. If the
government puts
ATF under
“declared goods”
category then
sales tax rate
would be 4% across
the country, which
would provide
relief to the
bleeding industry.
The declining ATF
price has given
some momentum to
aviation stocks
last week. Shares
of Jet Airways,
the country’s
largest private
carrier, grew by
10.13% to Rs
183.80 while
Kingfisher stock
rose 8.84% to Rs
33.25 and SpiceJet
stock gained 4.99%
to Rs 16.20 on
Friday on BSE.
Source:
December 22, 2008, The
Economic Times
9. GMR’s fund gap could hit Delhi
airport
Delhi
International
Airport Pvt. Ltd
(DIAL), the
operator of
India’s flagship
airport, New
Delhi’s Indira
Gandhi
International
Airport, has
quietly warned the
civil aviation
ministry that work
on the
modernization of
the country’s
second-busiest
airport may come
to a halt in the
next 45 days if
the consortium is
unable to raise
funds, according
to a senior
ministry official.
This is the first
time that DIAL, a
GMR Infrastructure
Ltd-led consortium
managing the
airport
modernization
since the summer
of 2006, has
warned of a
financial crunch
that could affect
the Rs8,890 crore
project. GMR group
chairman G.
Mallikarjuna Rao
told the ministry
at a meeting last
fortnight that
DIAL has not been
able to raise the
required funds
that it had
expected to by
leveraging real
estate, and the
problem has
worsened with
banks backing off
from releasing
agreed-to amounts
as indicators such
as passenger
traffic, on which
the loan was
based, have
changed
drastically. Amid
a significant
economic downturn,
between July and
November alone,
the Delhi airport
has seen a drop of
16% in domestic
passenger traffic
coupled with a 2%
drop in
international
traffic. Detailed
questions sent on
Friday to DIAL
remained
unanswered until
late Sunday even
though a spokesman
had said Mint will
get a reply on
Saturday. “It’s in
a bad shape,” the
same aviation
ministry official
said of the
project, asking
not to be named
because he is not
authorized to
discuss internal
matters with the
media. This
official added
that GMR has told
the ministry that
the firm has some
Rs200 crore for
the project that
“will last about
45 days”. The
worst-case
scenario GMR laid
out, this official
said, was that the
project may come
to a halt if
government support
doesn’t come
through. Kapil
Kaul, India chief
executive for
aviation
consultant, the
Centre for Asia
Pacific Aviation,
now predicts
DIAL’s financing
troubles will see
it miss a critical
31 March 2010
deadline for
completion of the
first phase of
modernization and
expansion of the
New Delhi airport,
ahead of the high
profile
Commonwealth Games
in the capital
later that year. A
key part of the
project’s first
phase is
completion of a
new terminal
building, work on
which is under way
even as a new
runway, also part
of the first
phase, is already
complete and
operational. “I am
certain they are
not going to meet
the 2010 deadline
and the phase II
will get affected
at all these
airports,”
predicts Kaul. The
apparent funding
gaps at DIAL are
the result of a
series of
proposals that
have not taken
off.
In May 2007, the
airport operator
had sought a
land-lease
proposal for a
45-acre land
parcel, to raise
at least Rs2,835
crore in
refundable
deposits that
would fund
modernization of
the airport. That
proposal ran into
regulatory hurdles
with the aviation
ministry opposing
the fund-raising
plan as it was
seen as a means to
bypass some nearly
46% revenues that
have to be shared
with state-owned
Airports Authority
of India, or AAI,
which holds 26% in
the Delhi airport
project. GMR
Infrastructure
holds 50.1% of
DIAL’s equity with
Frankfurt airport
operator Fraport
AG and a unit of
Malaysia Airports
Holdings Bhd each
owning 10%.
Private equity
firm, the India
Development Fund,
has a 3.9% stake.
After several
rounds of
discussions, DIAL
was allowed to
partially raise
deposits for the
same land-lease
and it was
believed that DIAL
would be able to
raise Rs1,500
crore, some
Rs1,300 crore less
than the original
estimate. Soon
after, GMR
Infrastructure
told its investors
in August that it
expected to have
the “bidding
process (for
hotels) to be
completed by
end-September 2008
and bids to be
awarded by October
2008”. That plan,
however, has not
taken off with
real estate in a
major slump in
India’s big
cities, especially
in and around
Delhi. “The
response to real
estate (plan) has
been bleak,” said
the same ministry
official. “Real
estate buyers are
inquiring and
seeking more
clarifications
resulting in dates
being extended
again and again.”
DIAL had then
sought relaxations
on taxes from the
Union government
and permission to
levy a so-called
airport
development fee on
passengers, which
taken together,
would have
potentially raised
around Rs2,000
crore. With a
Rs300 fee on each
outbound domestic
passenger from the
Delhi airport,
besides Rs1,000
each on those
flying
international
routes from
January 2009 to
December 2011,
that alone would
have been able to
raise Rs1,400 crore. But last
fortnight, as
reported by Mint
on 16 December,
India’s law
ministry rejected
the suggestion of
a passenger fee,
citing conditions
in the airport
lease agreement
signed in 2006.
DIAL’s plans to
increase airport
charges, such as
landing and
parking fees by
10%, which it can
do from year three
under the same
lease agreement,
hasn’t happened
yet either.
Another civil
aviation ministry
official, who too
asked not to be
named, said DIAL
has been asked to
come back with
other suggestions
to help with the
funding gap.A user-development
fee, or UDF, such
as the one charged
at Hyderabad’s new
airport, also run
by a GMR-led
consortium, could
be one of the
options, this
official added.
But, revenues from
UDF will have to
be shared with the
airports
authority, unlike
the previous fund
suggestion that
was billed as a
way to raise money
for capital
expenditure.
Shares of GMR
Infrastructure
closed at Rs71.50
a share on the
Bombay Stock
Exchange on
Friday.
Source:
December 22, 2008, Mint
10.
Kingfisher rules out fare cut for now
Private air carrier Kingfisher Airlines
today said that there was no case for
reducing its air fares in the immediate
term. However, once the government brought
aviation turbine fuel (ATF) under the
"Declared Goods" category, it would
immediately and significantly reduce fares,
a Kingfisher Airlines spokesperson said.
"The sharp and immediate spike in ATF prices
earlier in the year has left a lasting
impact on the bottom lines of the companies,
leading to an accumulation of huge
outstanding and liabilities with oil
companies and the likes," the spokesperson
said. As such, the cash flow needed to
settle these accumulated liabilities and
there was no case for a reduction in fares,
he said. Earlier, Jet Airways' chairman
Naresh Goyal had also said he was not in
favor of any fare cut as long as ATF was not
classified as `Declared Goods'. Over the
last four months, there has been a sharp
decline in ATF prices. While some air
carriers had earlier this month reduced the
fuel surcharge between Rs 200-400, they have
not effected any fare cuts.
Source: December 23,
2008, The
Tribune
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