Travel |Update|
Issue 247
There has been a marginal increase in the price that domestic airlines will have
to pay for lifting aviation turbine fuel from Friday. This is the first time
since August last year that the aviation fuel prices have recorded an increase.
From Friday, airlines in Delhi will pay Rs 31.49 for a litre of aviation fuel,
up from Rs 30.45 for a litre, while in Chennai, airlines will also pay Re 1 more
for every litre of ATF being uplifted. Sources said the domestic price increase
was a result of the global increase in aviation fuel prices. Despite the latest
increase, ATF prices are currently at the levels that they were at in December,
2005.
Source: January
16, 2009, The Hindu Business Line
2. Airlines cut business class fares
Faced with a 10 to 15 per cent fall in passenger traffic, business class travel
is coming down to earth. For the first time, Jet Airways and Paramount are
introducing apex (advance purchase) fares and Kingfisher and state-owned Air
India are offering free travel for spouses to boost bookings for this premium
service. Much of the hit is a result of corporate cost cutting, with senior
executives now increasingly traveling economy class on domestic routes.
Business class tickets are about three times an economy class ticket.“Since the
financial meltdown in the US and Europe, we have seen companies in India
tightening their belts. From September onwards, we have seen a fall in premium
travel within India,” said Raj Sivakumar, vice president, revenue management,
Jet Airways, India’s largest private airline. In response, the airline launched
an apex offer January 5, applicable to 60 flights, that are 30 to 35 per cent
lower than normal business class fares. The three-day apex fares range from Rs
7,900 to Rs 8,100 (one-way), the five-day apex fares range from Rs 6,500 to Rs
11,500 and the seven-day apex fares from Rs 4,500 to Rs 17,500 depending on the
sector. “We are looking to not just pump up the loads, but also to get less
price-sensitive economy passengers to fly business,” says Sivakumar. He claims
the airline has seen a five to 10 percentage point increase in premium traffic
since the scheme began. But even all-business carrier Paramount Airways has
announced apex fares and a scheme under which passengers can get a complimentary
ticket for a companion for Rs 750 in January. “We’ve managed to increase our
market share from 26 to 28 in South India in 2008. After the slowdown, companies
were finding our product even more attractive as ours is a business class
product with high-end economy fares,” said M Thiagarajan, managing director,
Paramount Airways. Air India was among the first off the block, announcing a
spouse-plus offer December 31 for executive class passengers on the domestic
routes. The scheme, on offer between January and February, allows business class
passengers to take spouses along by paying only the passenger service fee (paid
to the airport authority) and airport user development charges on select routes.
The airline has sweetened the deal with a free-stay for the spouse at select Taj
properties. The Indian flag carrier is also looking to aggressively market its
coupon schemes for corporate travelers that offer corporate houses a 15 per cent
discount.
Meanwhile, Kingfisher Airlines, which has seen its passenger load factor in
business class at 35 per cent to 40 per cent in the last few months, is planning
a free-companion offer on domestic routes. It has also introduced a 12-coupon
offer on its domestic business class that comes tied with the possibility of
winning a business class ticket to London and back through a draw of lots.
Business class typically accounts for 50 to 60 per cent of an airline’s revenue.
“The drop in business class passengers is bound to get the airlines worried as
it’s the business class tickets that give them the power to price lower in
economy,” said Kapil Kaul, CEO-India subcontinent & Middle East, Centre for Asia
Pacific Aviation (CAPA). The move to cut fares in business class takes place even
as airlines have cut economy fares. “We have seen about 25 per cent of the
business class traffic shift to economy over the last six months,” said Anoop
Kanuga, chairman western region, Travel Agents Association of India.
Source: January
16, 2009, Business Standard
3. Kingfisher
gets nod to fly to KL, Bangkok & Singapore
Kingfisher Airlines has received the government approval to fly to Kuala Lumpur,
Bangkok and Singapore. The airline, which already operates flights to London,
will start daily services on Bangalore-Colombo and Chennai-Colombo routes,
reports Nirbhay Kumar. “We have granted permission to Kingfisher to operate
daily services on three more international sectors including with immediate
effect,” said an aviation ministry official who did not wish to be named.
Kingfisher spokesperson said that the airline had received communication from
civil aviation ministry for operating services to various foreign destinations.
The ministry has asked the airline to conduct a study on traffic on new routes
before announcing the launch.
Source: January
16, 2009, The Economic Times
4.
Code sharing deal with JetLite to help Jet save Rs 40 crore
Jet
Airways, the country’s largest-private airline, is expected to add around Rs
30-40 crore to its sagging bottom line through the code sharing arrangements
with its subsidiary JetLite. A company official, who did not wish to be named,
confirmed it. He said, the development assumed significance as the amount would
be generated from the initiative which was launched three months ago. “The code
sharing arrangements promise to reap more benefits for both the companies in
coming years,” said the official. It will also scale up Jet Airways’ income,
albeit marginally. Industry experts, however, said this additional income would
not make a huge difference to the bottom line of the loss-making airline. Jet
Airways, which suffered a net loss of Rs 384 crore in the September 2008 quarter
against a net profit of Rs 28 crore in the year-ago period, is likely to
announce its December quarter results on Friday. The Indian aviation industry
incurred losses of Rs 4,000 crore in 2007-08. The number is expected to double
this fiscal. Both the companies initiated the code sharing process in September
and it is expected to be over in a month.
Source: January
16, 2009, The Economic Times
5. Low-cost
airlines may get more peak-time slots in metros
Low-cost carriers may soon pull a large number of corporate customers away from
the full-service carriers. The civil aviation ministry and the Directorate
General of Civil Aviation (DGCA) are planning to award the low-cost carriers
some key morning and evening peak-time slots (a fixed time for departure or
arrival of a particular flight) lying unused with the full-service carriers at
metro airports like Delhi and Mumbai. DGCA officials and airline officials
confirm that airlines like Jet and Kingfisher are not using around 10 per cent
of their slots during the peak periods are given to airlines for all airports
collectively and on a six-month basis (summer and winter schedules). Each
airline puts in its request for slots, which are then decided by the DGCA, civil
aviation ministry and the airport operator. The award of slots usually follows a
historical trend wherein an airline retains the slots it had operated in the
previous schedule. Both Delhi and Mumbai handle 550 flight movements each daily,
with around 140160 prime-time departure slots and an equal number of arrival
slots. A low-cost airline executive also said that airport executives of both
Mumbai and Delhi airports had unofficially informed them that there were slots
in both airports that were lying unused. Ajay Singh, director in SpiceJet, a
low-cost carrier, said: “We have decided not to downsize and are adding flights.
There are unused slots available in prime time, when corporate travellers go,
which we have asked the government to give.” “This has become a practice of late
when the airlines combine a lot of flights during the day. If an airline has
around five flights in two hours, it usually combines the flights and cut them
to three. Since this is a regular practice, we might give some of the slots to
other deserving airlines like IndiGo and SpiceJet who have asked for them,” said
a civil aviation ministry official. Industry experts say around 80 per cent of
the domestic corporate travellers in the country are mostly carried by
full-service airlines like Jet Airways and Kingfisher or their low-cost
affiliates. For instance, in the Bangalore-Chennai sector, the KFA-KF Red
combine operates six out of the nine flights in the key prime-time slots of 6
am-9 am and 6 pm-9 pm. Similarly, the combine operates around 7 out of around 13
flights in the key morning and evening slots in the Bangalore-Hyderabad sector.
Similarly, in the Mumbai Delhi sector, which is the single largest revenue
generating sector in the country, the Jet-JetLite combine controls almost 35-40
per cent of the prime-time slots. “This move will add significant amounts to the
corporate traveler base of the low-cost carriers. And this in turn will enable
them to raise their ticket prices and not pull them back for the leisure
traveler,” said Keyur Joshi, COO of travel portal Makemytrip. While corporate
travellers account for around 30 to 40 per cent of a low-cost carrier’s total
customer base, they account for around 60 per cent of the total customer base of
a full-service carrier. The revenue chunk from corporate travellers would be
more than 75 per cent for full service carriers since that includes business and
first-class fares as well as corporate travel contracts with companies. The
award of unused or under-used slots will be a boon for the low-cost carriers
especially in an airport like Mumbai which has paucity of slots. “While getting
additional slots is easier at the Delhi airport now with the opening of the
third runway, it is impossible at the Mumbai airport. If we get some existing
unused slots at the Mumbai airport, it would mean much higher loads for us,”
said a low-cost carrier executive. The Mumbai airport did not allot any
additional slot last year. Sources said that with the land constraint which the
airport is facing, no airline should expect additional slots for the coming
summer schedule either. Jet Airways already has more than 80 daily departures
out of Mumbai while Kingfisher has more than 60.Giving away unused slots to more
deserving carriers would also be good news for airport developers at a time when
their passenger and airport charges have taken a hit due to declining air
passenger traffic. “Unused flight slots lead to lower revenue for us. We would
want flight slots to be operated by an airline that can make more efficient use
of them through better capacity management. We would also prefer more slots
operated by regular narrow bodied aircraft like the A320 rather than
turboprops,” said a spokesperson of Mumbai International Airport Ltd (MIAL), the
GVK-led consortium that currently operates the Mumbai airport. DGCA officials
and airline officials confirm that airlines like Jet and Kingfisher are not
using around 10 per cent of their slots during the peak periods.
Source: January
12, 2009, Business Standard
6. No progress in airport handover, Aviation Ministry urged again
The mihan project continues to wait for the most crucial and controversial handover of 'Nagpur airport to M ADC When contacted. Civil Aviation Minister Praful Patel said: "My officers arc looking into the matter. From my side, there is no hurdle. You ask my officers". The Secretary and Joint Secretary of the Ministry, however, could not be reached despite repeated attempts. But, vice-chairman and managing director of MADC R C Sinha is hopeful. "I have again written to the ministry recently. Even the chief minister has spoken with the Minister about it. I hope to get possession of the airport by month-end, he said. He informed that Governor SC Jamir will lay the foundation stone for Duke Aviation's MRO project on February 5. The Rs 750-crore project is the first MRO to start work in MIHAN and will employ 1,000 people, Boeing, however, is yet to start work.
Source: January
12, 2009, The Indian Express
7. IATA looks at ‘one-stop security
The
Geneva-based International Air Transport Association (IATA) is keen to ensure
that air travellers have a hassle-free journey when they are passing through an
airport in another country to take a connecting flight. With this aim in mind,
IATA is now pushing the concept of “one-stop security”. Explaining the concept,
IATA’s Director, Security and Facilitation, Ms Georgina Graham, told Business
Line that if a passenger is taking a journey that involves going through
airports in different countries without a break in journey, what generally
happens currently is that a passenger is screened again in country B, because
the airport in that country does not necessarily understand that the passenger
was screened adequately in country A, from where he arrived. “As a passenger you
probably think that you got on a flight where you were screened, and now you are
being screened again before getting on to another flight. But with the concept
of one stop security, you will not be screened at the second airport. This,
however, does not mean that security is being downgraded because, in fact, you
were screened adequately at the point of origin and within that time-frame you
have had no opportunity to take on board or get rid of anything that you had,”
explained Ms Graham.
SEPARATE CONCOURSES
Airports around the globe will, however, have to make some changes to implement
one-stop security, like finding a way to keep passengers who are coming from an
agreed one-stop security originating point separate from those passengers who
are not. Effectively, it will mean the same thing as keeping arriving and
departing passengers separate from one another, as is being done now.
“Infrastructure-wise, it could mean that one concourse at an airport is
dedicated to flights arriving from one-stop security destinations. Bear in mind
that these destinations will have been agreed upon, either bilaterally or
multilaterally. You have to have the understanding and trust that Country A has
done the screening to adequate levels and then all the flights from Country A
will arrive at this particular concourse at the airport,” explained Ms Graham.
TIE-UP WITH EU
Initially, the routes being looked at for introducing one-stop security are
between the European Union (EU) and the US. “They are moving in that direction,”
Ms Graham said. “We looked at the top 10 airports in Europe and North America.
That will be the nucleus, the first part of this phased approach.” The next
country where one-stop security could be introduced is Singapore, as the island
nation already has an agreement with the EU on liquid aerosols and gels, and
then possibly Australia. “If Singapore can have the agreement with the EU then
potentially it means that Singapore might be able to have this agreement with
North America also, if North America has an agreement with the EU. And then, it
is sort of concentric circles going out from there,” said Ms Graham.
It could, however, still be some time before the concept hits Indian airports as
talks have not been initiated with any airport here, IATA officials said. “We
have not gone as far as looking at India at the moment. It will certainly be on
the map because when you look at the connecting traffic, you look at the
airports that the people are connecting from and India is one such market,” she
Ms Graham said.
Source: January
12, 2009, The Hindu Business Line
8. Vibrant Gujarat off with a bang
When the going gets tough, the tough get going. On
Monday, business biggies from across the world trooped
to the two-day Vibrant Gujarat Global Investors’
Summit 2009, perhaps seeking the silver lining in the
darkening clouds of global gloom. After investment
commitments of Rs 2.87 lakh crore during the
three-hour inaugural ceremony, the first day of the
summit saw 444 MoUs worth Rs 7,48,970 crore being
signed. In addition, investment worth Rs 32,923 crore
for 12 projects was pledged on the first day. However,
formal agreements would be signed on the final day of
the summit—taking the total pledged investment to Rs
7,81,893 crore. Put together these projects would
generate employment for 8.28 lakh people. To put
things in perspective, the total investment pledged
during the previous biennial summit held in January
2007 was around Rs 4.50 lakh crore. Sectors that saw
maximum investments were energy (61 MoUs worth Rs
1,02,722 crore), ports (Rs 70,310 crore), tourism and
civil aviation (Rs 42,942 crore). Investments to the
tune of Rs Rs 1 lakh crore were pledged in the Dholera
special economic region. “We believe in turning
difficulties into opportunities. We will turn the
global meltdown into an opportunity too,’’ said chief
minister Narendra Modi. While small and medium
enterprises are the focus of the summit, large
corporate like RIL, Adani, L&T, Suzlon among others
signed committed huge investments. Mukesh Ambani’s
Reliance, for instance, committed Rs 35,000 crore in
projects like city gas distribution network, oil and
gas exploration and solar power plant. “Expansion of
our aromatics manufacturing facilities in Gujarat is
also under active consideration,” said a Reliance
source. High profile delegates from nearly 40
countries and the Who’s Who of India Inc raised a
toast to the spirit of Gujarat and its emerging
prowess as a global investment destination. Right from
Kenyan PM Raila Amolo Odinga, Japan’s former minister
of fiscal policy Hizo Takenaka, British MP Barry
Gardiner, Italy’s agriculture minister Paolo Pertini
to Singapore’s foreign affairs minister Zainul Abidin
Rashid of Singapore to Hotmail founder Sabeer Bhatia,
they were all there. The top guns of India Inc right
from Reliance’s Mukesh Ambani to Essar’s Shashi Ruia,
HCC’s Ajit Gulabchand, Aditya Birla group’s Kumar
Mangalam Birla, Videocon’s R N Dhoot, SBI’s O P Bhatt,
Sterling group’s Nitin Sandesara and USEL’s Prasoon
Mukherjee stood up one after the other to endorse the
Gujarat success story. Air Deccan founder Captain
Gopinath announced his intent to make Ahmedabad the
gateway to India by transforming it into a cargo and
logistics supply hub with a Rs 40,000 crore
investment. As India’s first ISO certified CM, Modi
gave the secret formula of Gujarat’s position at the
top of the investment race—low risk, high alertness,
low cost and high efficiency. ICICI chairman and CII
president K V Kamath said Gujarat’s success was
because of “the vision of its CM and the hard work of
its people”.
Source:
January 13, 2009, The
Times Of India
9. Air Works to invest $40m in aviation sector
The aviation services provider Air Works will invest
close to $40 million by the end of next fiscal. The
investment will be made to augment aviation facilities
in Bangalore, Mumbai, Goa, Kolkata and Delhi, among
others. The company has tied up with Jet Aviation to
bid for an FBO (fixed base operator) license for Delhi
International Airport. "We have received the
expression of interest and plan to invest about $5
million for the Delhi project," Fredrik Groth, CEO,
Air Works, told Financial Chronicle. FBO provides
services including special lounges and conferencing
facilities, aircraft fueling, de-fueling, aircraft
parking, power plant and accessory service, radio,
avionics and instrument service, air charter or
aircraft rental at an airport. Groth said the company
was also looking at expanding its service capacity in
Mumbai. "We have earmarked $4-5 million for capacity
addition in Mumbai, as well." While airlines such as
Jet Airways, which were planning to set up maintenance
repair and overhaul facilities have put their plans on
backburner, for Air Works, the slowdown in the
industry has come up as an opportunity. "Even as
various airlines were earlier planning to start their
own MRO (maintenance, repair, overhaul) facility, they
are no longer interested in doing so. Aviation
companies will rather outsource their aircraft
maintenance," Groth said, adding that this gives us a
window of growth even in the present times. The
company is also looking at expansion of its offshore
operations for the helicopter division. The company
will expand its maintenance facilities at smaller
stations like Goa and Kolkata, which requires small
investments. He said there is an impact of slowdown on
chopper maintenance business. “The chopper maintenance
has taken a hit by 20 per cent and maintenance of
fixed wing aircrafts has decreased by 50 per cent. In
fact, the hitherto robust growth will not be present,
which is the main reason for a dip in the business,”
he said.
Source: January 13, 2009, Financial
Chronicle
10. Aviation ministry to seek Cabinet nod for FDI
in domestic airlines
In a precursor to clear the decks for divesting slake
in the government-owned National Aviation Company of
India Limited (NACIL), the civil aviation ministry
will soon move a proposal for the consideration of the
Cabinet on allowing foreign airlines to invest in
domestic carriers. Although divestment of government
equity in the state carrier seems a difficult and time
consuming proposition which would need political
consensus and support, the ministry seems to have
moved forward in this direction. The proposal on
Foreign Direct Investment (FDI) to allow foreign
carriers to pick up to 25 per cent in domestic
carriers is being looked at favorably by the ministry.
In fact, a ministry official told The Indian Express
that very soon it would move the cabinet regarding the
proposal. The move is likely to open doors for
loss-ridden NACIL whose last shot at being rescued was
in 2000 when the BJP-led NDA regime had allowed
disinvestment up to 40 per cent of government's stake
in erstwhile Air India to a strategic partner with
foreign equity not exceeding 26 per cent. The foreign
equity holder was to include a foreign airline. An
additional 10 per cent was to be offloaded to domestic
financial institutions and retail investors and
another 10 per cent to employees. A! thai time, the
Tktas had tied up with Singapore Airlines (SIA) to
pick up a slake in the erstwhile AI. However, the
partnership fell apart and the former AI's
disinvestment plans crash-landed. A ministry official
informed The Indian Express that in the current
situation, the FDI by foreign stakeholder could be
limited to 25 per cent. For bringing any change in the
current FDI policy, the Union Cabinet has to give its
assent. Liberalization in FDI norms has been a
longstanding demand of the domestic carriers, which
has gained momentum in the wake of the current
aviation crisis. The present FDI policy in aviation
does not allow foreign airlines to invest in Indian
carriers. However, foreign companies other than
airlines can invest up to 4 per cent under the
automatic route. The sector can also receive up to l00
per cent investment from non-residential Indians.
Globally, countries allow foreign airlines to invest
20-25 per cent equity in domestic carriers due to
security reasons.
Source: January 14, 2009, The
Indian 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