Issue 250

1. Jet Airways to lease aircraft to Gulf Air
Hit by economic slowdown, private air-carrier Jet Airways will be leasing out four of its wide-bodied Boeing 777 aircraft to Gulf Air. "We are leasing out four of our Boeing 777-300(ER) aircraft to Gulf Air for three-and-half-year period," Jet Airways executive director Saroj Datta said. A lease agreement has been signed for this.
Source: February 24, 2009, The Financial Express

2. Malaysia scraps AirAsia airport plan

Malaysia’s government has confirmed it has vetoed an ambitious plan by budget carrier AirAsia to build a $460- million airport outside the capital Kuala Lumpur. The Deputy Prime Minister, Mr Najib Razak, said the proposal was scrapped because the airline’s partner in the project, Malaysian conglomerate Sime Darby, refused to contribute 800 million ringgit ($218 million) in construction costs. “If they did not contribute, there is no basis for the project to be considered,” he said, according to state news agency Bernama.
Source: February 24, 2009, The Hindu Business Line

3. Singapore Airlines offers freebies, discounts; struggles with demand

With nearly two months of boycott by travel agents in India, Singapore Airlines Ltd and the island nation are directly approaching passengers and tourists with promotional fares and freebies. To counter the boycott, Singapore Airlines, the world’s largest carrier by market value, is offering discounts on tickets booked online. The Singapore Tourism Board (STB) has announced an India-specific promotional scheme. “STB has dedicated up to S$500,000 (Rs1.65 crore) worth of free air tickets to be won before the closing date of 31st May,” the board said in a statement on Wednesday. SOTC, a unit of travel firm Kuoni Travel (India) Pvt. Ltd, has announced packages starting at Rs22,950 for a three-night stay at Singapore. This includes return airfare and city tours, as well as free tickets to tourist spots for the first 100 customers. Travel agents started the boycott late last year after several airlines, led by the National Aviation Co. of India Ltd, which runs Air India, stopped paying them a 5% commission on tickets sold. Reeling under the impact, many retracted their earlier stance, except Singapore Airlines and some other foreign carriers. The agents then intensified protests and stopped selling Singapore as a tourist destination. India ranks as the fourth largest tourist source for Singapore, with 770,000 visitors in 2008, or 7.6% of the visitors to the island last year. Singapore Airlines executives were unwilling to go on record, but an executive said on condition of anonymity that the carrier would not roll back its decision to do away the commission to travel agents. But the impact is showing already. Singapore Airlines has already reduced operations out of India. Since we are switching passengers to other carriers, its load factor has declined, said Biji Eapen, president of the IATA Agents Association of India. Load factor is a measure of passenger occupancy. IATA is short for International Air Transport Association. A 17 February report by brokerage firm CLSA quotes Singapore Airlines as saying India was among the airline firm’s worst performing markets with load factors on its India routes declining by 10% to 66% in the past two months. Singapore Airlines is already struggling with falling demand, as reflected in advanced bookings, and reducing its capacity by 11% for fiscal 2010. On Friday, the airline also said it may postpone deliveries of new aircraft because of poor demand. Other Asian countries are cashing in on Singapore’s lost opportunity. The Malaysia Tourism Promotion Board, better known as Tourism Malaysia, is aiming for at least 600,000 Indian visitors in 2009. “We are increasing our presence in India. This has nothing do with the boycott of Singapore Airlines, or political instability in Thailand,” said P. Manoharan, director at Tourism Malaysia. “For January 2009, the destination has received 41,859 Indian arrivals, a 9% increase over the same period last year.” SriLankan Holidays, the leisure arm of SriLankan Airlines Ltd, has also launched a scheme targeting Indian tourists. It is offering a ticket for the second passenger at Re1 for a three-night-two-day tour of the country, from 1 February to 30 April. Meanwhile, Australian carrier Qantas Airways Ltd has decided to include a stop at Singapore for flights headed to Sydney, starting May. The airline flies three times a week from Mumbai to Sydney. “The move will offer connections from India to Sydney, Melbourne, Brisbane, Perth, Adelaide, Cairns and Darwin,” Rob Gurney, Qantas Group’s general manager of sales and distribution, said in a statement. “In light of the recent economic downturn, we have reviewed our Mumbai services and determined the best option is to operate them via our core hub in Singapore.”
Source: February 24, 2009, Mint

4. Deccan Express gets nod

Deccan Express Logistics on Sunday received approvals for the structural design for its aircraft hangar. This marks the first step that Deccan Express Logistics has taken towards creating nation-wide infrastructure to become India’s new distribution and delivery, system said Captain G.R. Gopinath, chairman and managing director, Deccan Express Logistics at Nagpur, at the ceremony held to hand over the Nagpur Airport by the Central government to the Maharashtra government. In addition to this, Deccan Express Logistics has also signed an MoU with GMR Group for setting up express cargo operating facilities at Delhi and Hyderabad airports. Once operational, the express cargo hub spread over a 100 acre campus would form the core of Deccan Express Logistics’ air and ground distribution network at the B.R. Ambedkar Airport in Nagpur.
Source: February 23, 2009, The Asian Age

5. Agent boycott tells on Singapore Air

Singapore Airlines is feeling the heat of the boycott by travel agents, with a sharp dip in its daily business. Travel agents claim the airlines’ bookings dropped by about 60% now, from nearly Rs 25 crore a day till November 2008 At stake is the commission the travel agents have been getting for booking tickets. The commission rates have been progressively whittled down by the airlines from 9% to 7% and finally to 5%, before eliminating them altogether. Singapore Airlines is the first foreign airline from India that has moved to the zero commission format where the agent fees will be shown upfront on the ticket. Over 2,500 accredited IATA (International Air Transport Association) agents have stopped selling Singapore Airlines tickets from December, and they plan to boycott 12 more foreign airlines that have adopted the zero commission rule. Chai Woo Foo, general manager for India at Singapore Airlines, however, says his company’s position is clear on the commission issue; and it wants to work with the travel agents in a viable and positive climate under the zero commission rule. “India is a very important market for Singapore Airlines. We have been here for close to 40 years now. The long-term outlook for India remains optimistic and the airline will continue with its investment and will also expand services in the country.” In the wake of the dispute, the Singapore Tourism Board (STB) has cancelled its road shows scheduled for next week in Indian cities. But the board said the cancellation was on internal reasons and not related to the protests. In a statement, STB said, “It has come to the attention of the board that certain Indian Travel Agents Associations have threatened a boycott of Singapore as a tourist destination resulting from issues relating to Singapore Airline’s policy on travel agency transaction fees. While we understand the concerns raised by these associations, STB does not interfere in the commercial decisions of private enterprises such as Singapore Airlines. We have channeled these concerns to Singapore Airlines and hope this matter can be resolved quickly.” Indian tourists formed 7% of the global visitors to the island in 2008, according to STB figures. That made the Indian contingent the fourth largest amongst all visitor arrivals in Singapore. The Airlines has withdrawn its services to Amritsar from February and clipped the frequency of flights to major destinations in India, including Delhi , Mumbai, Hyderabad and Ahmedabad. But Foo blamed the drop in demand and the withdrawal of services to the global economic slowdown. “Overall, the global slowdown is affecting the traffic demand and the decision of the airline to cut back on routes is in line with this. Other airlines like Jet Airways and Air France have also cut back on routes.” He added that the zero commission issue has nothing to do with the paring of routes. But the Travel Agents Association of India (TAAI) says the boycott of tickets is the sole reason for the squeeze in the airline’s business. “Singapore Airlines is blaming the global recession for the cutback, but it is the boycott that has created this situation for them,” said Rajji Rai, president, TAAI. He claimed the airline now has no option but to revive the commission rule. Travel agents, on condition of anonymity, told FE, “The load factor of Singapore Airlines has plummeted and it was expected, as 95% of the agents are not booking tickets.” In contrast, airlines flying on the Singapore route like Jet Airways, Air India and Thai Airways have benefitted from the boycott with a 5-7% rise in their business. However, aviation analysts like Sandeep Shenoy, strategist, Pioneer Intermediaries, believe that the boycott will not make much of a difference for the airline and that it had been looking at cutting back on the routes. “The overall international traffic has gone down and this (cutback) is nothing unusual,” he said. Singapore Airlines, along with its subsidiary, SilkAir, fly to 10 destinations in India now, from 11 earlier. “The importance of India as a market to Singapore Airlines can be weighed by the fact that it is the only foreign market where we have the maximum touch points (destinations covered) than others,” emphasised Foo. In a media release last week, Singapore Airlines had said that it will be reducing by 11% its total capacity for April 2009–March 2010. This will be through suspensions of flights on a range of routes, and use of smaller aircraft on others. It said that it would cut back routes to various markets, including India, USA, Europe, Japan, Australia and China.
Source: February 23, 2009, The Financial Express

6. Kingfisher Airlines promotes 21 in reshuffle

In a large-scale reshuffle of management, Vijay Mallya-promoted air carrier Kingfisher Airlines Ltd has elevated 21 officials in the rank of vice president (V-P), assistant vice-president (AV-P), general manager and sales head. “Of the 21 officials promoted, nine have been made V-Ps, six officials have been promoted to AV-P rank and three as GM,” a Kingfisher Airlines official said. Two other officials have been promoted as sales heads. In an internal circular, while Mallya claimed that the promotions had been necessitated by the Kingfisher Airlines and Deccan Aviation merger, only one person from the erstwhile Deccan figured in the list. Though the promotions were effective retrospectively from 1 February, the announcement was made only on 19 February, the official said. Those who have been promoted include Ajit Bhagchandani (V-P, in-flight services), Capt. N.N. Puri (V-P, flights operation training), group Capt. Pankaj Chopra (V-P, flight safety), Vikram Malhotra (V-P, marketing) and Prakash Mirpuri (V-P, corporate communication), the official said, adding that Vijay K. Arora would be head of sales for northern and eastern zone and Bhanu Kaila would head the sales team in western and southern zone.
Source: February 23, 2009, Mint

7. DGCA will set up unit to keep tabs on air-space

The constant terror threats to the Mumbai airport in particular and to the Indian air-space in general has hastened the process of setting up a unit of the Joint Command and Analysis Centre (JCAC) in the city. The unit, which was proposed for all metros way back in 2003, is being perceived as essential by the Directorate General of Civil Aviation Officials (DGCA) after the 26/11 terror attacks in the city. A JCAC is a command centre with a separate radar screen to monitor aircraft movement within a city’s air-space. Headed by an air marshal level official from the Indian Air Force (IAF), it also comprises members from the Air Traffic Control (ATC) to co-ordinate and keep surveillance over both defence and civil aircraft movement. From flight plans to actual aircraft operation, all details are tallied, logged and scrutinised by a JCAC.“At a time when terror threats to the air-space are recurrent, the need for this unit is felt much more. The unit would be dedicated to keep surveillance and to notify any suspicious movement in the sky to ensure safety,’’ said a traffic controller. According to officials, the DGCA has already asked the Airport Authority of India (AAI) and Mumbai International Airport Pvt Ltd (MIAL) to create space to accommodate the unit within the ATC tower. “The demand to chalk out a space has been made. However, since the ATC tower, too, has to be shifted according to the new airport master plan, the allocation may take a little longer than usual. The process to set it up has been quickened after the attacks, said a DGCA official. “Though the purpose of its existence is purely national security, it might also prove handy in avoiding clash situations or preventing aircraft from deviating from the stipulated flight path,’’ he added. The JCAC unit was first set up at Delhi airport in 2004 to deal with a situation like the 9/11 US attacks.
Source: February 23, 2009, The Times Of India

8. AI floats tenders for Rs 5k-cr loan

National air-carrier Air India has floated tenders for long-term loans to raise around Rs 5,000-crore from domestic and global banking or financial institutions to fund acquisition of seven aircraft. For the US Exim guaranteed facility, the term would be 12 years while for commercial; it would be five years, the National Aviation Company of India Limited (NACIL) tender document said. NACIL is the holding company formed after the merger of Air India and Indian (erstwhile Indian Airlines) into a single entity. The funds may be raised either in national or foreign currency or in a mix of both, the document said. Air India plans to acquire these aircraft over the next eight months, with the first delivery expected around June this year. Of the seven aircraft proposed to be acquired, three would be Boeing 777-200 (Long Range) and four Boeing 777-300 (extended range). The national air-carrier plans to acquire 50 new aircraft over the next few years. Air India is understood to have posted losses of around Rs 2,500-crore in FY 08 and is presently seeking additional equity infusion from the Government to help it tide over the financial crisis. A proposal providing Air India an additional equity of Rs 1,250-crore and long-term soft-loans worth Rs 2,750-crore is currently pending with the Government for its approval. The air-carrier presently has a paid-up capital of Rs 145-crore and an authorized capital of Rs 1,500-crore.
Source: February 23, 2009, The Financial Express

9. Who Will Be India’s Aviation Regulator?

Now that the Aviation Economic Regulatory Authority (Aera) is finally threatening to start functioning, the race to be the Aera chairman has intensified. But the final candidate is only likely to be announced by end-March, since the government has recently advertised the post in the hope of attracting private sector candidates. Several people had applied for the post prior to the new advertisement. The final choice will be made by a committee headed by Cabinet Secretary K.M. Chandrasekhar. The frontrunner for the post at the moment — if senior officials involved in the exercise have their way — is Consumer Affairs Secretary Yashwant Bhave, who is due to retire this year. Many of those earlier in the fray have now been left out after the government has now introduced an age limit to 62 years (there was no age bar earlier) for chairman and 59 years for members (this means that those who are 60 or 61 can apply for post of chairman but not for the post of members). Two members are to be selected. As a result, some of the earlier contenders like former aviation secretary Ajay Prasad, Aviation Minister Praful Patel’s favorite for the position and Brajesh Kumar, former managing director of Air India, are now out of the reckoning for the chairman’s post. Then, former Air India chairman V. Thulasidas’s chances also appear dim as his handling of Air India was considered less than efficient. Neither are former AAI chairman K. Ramalingam’s prospects too bright, according to sources in the know. Air India’s current Chairman Raghu Menon — who has expressed interest in moving on — has been asked to hold fort at the airline. Barring Bhave, only two old names remain in the running: B.N. Puri, principal advisor, Planning Commission, and V. Subramaniam, former secretary in the Ministry of New and Renewable Energy and financial advisor in the aviation ministry. Regulation of airports — especially with the new private airports now functioning — has become critical. Typically, landing, parking and take off, route navigation charges for airport operators and charges levied on airport passengers are set by the airport operator, an area where a private operator could abuse its monopoly power. Another important area for regulation will be allotment of time slots and parking bays. “At present, AAI arbitrarily allots time slots,” says an aviation industry source. Finally, many countries’ anti-trust laws prevent anti-competitive practices by their airlines. In the absence of such laws in India, it remains to be seen whether the regulator will look into such areas.
Source: February 24, 2009, Business World

10. New Revenue Streams

Chennai-based Paramount Airways has a novel plan to increase revenues. It is launching an all-encompassing cargo division. “It will be for door-to-door cargo service and will be introduced under the brand name ‘Paramount’,” says Chairman M. Thiagarajan. The airline transports 100 tonnes of cargo every day from one airport to another.
Source: February 24, 2009, Business World

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