Issue 251

1. AirIndia re-maps flight schedules of foreign routes
Air India, the national carrier, is re­structuring the US and Europe flight schedules and will also commences the Kolkata-London route from March 29. The airline is changing the sched­ules of its international flights origi­nating from cities including Chennai, Bangalore, Hyderabad and Cochin. As part of the restructuring, Mumbai and Delhi will become the hubs for international destinations. This would mean passengers can fly into Mumbai or Delhi from smaller centers on Air India flights. As a result, there will be considerable reduction in transit time for passengers who will fly out to des­tinations in US and Europe. "The restructuring by Air India is to provide seamless and fast connectivi­ty without any hassle of baggage checking and other clearances at Mumbai and Delhi airports. A pas­senger can now directly check-in from the city of origin," said the Air India spokesperson. Air India will also start services on the Kolkata-London routes from March 29. This is at a time when British Airways is pulling out its flights on this route. Air India's spokesperson said that Air In­dia is implementing these new sched­ules to increase load factors. This comes after Air India had said it will not be able to break even at the current load factor. 'Corporate trav­ellers, who account for about 60% of airline traffic, have reduced their trav­el budgets," said Daljeet Kohli, re­search head of Emkay Global. The restructuring will help Air In­dia's overseas operations as its flights will travel with more than 65% load factor. Over the past two quarters, costs like parking fees, navigation charges, employees' costs and lease rental have increased manifold. Air In­dia is inducting seven Boeing aircraft this year to increase its fleet to 154. It also has plans to start flights using Frankfurt airport as its European hub.
Source: Wednesday, March 04, 2009, The Economic Times

2. Premium play: Agents on notice
March is a decisive month for insurance agents, and some of them do not hesitate to cut corners to achieve targets. This time IRDA has decided to get vigilant. In a workshop on ensuring a fair deal for consumers, the regulator told insurance companies that they would have to claw back commissions paid to agents if policies are not renewed in the second year. This is to prevent agents from passing off regular premium policies as onetime investments. Agents resort to such mis-selling as commissions on regular premium policies are up to 35%, while for one-time payments; the commission is only 2%. Clawback of commission would be a sure solution to this problem faced by the industry. The regulator has also indicated that companies will have to withdraw zero-allocation policies — schemes where the entire first year premium is adjusted against charges.
 

LIFE’S A BLACK BOX?
At the aforesaid workshop, some insurance companies raised the issue of transparency in traditional policies. One CEO pointed out that the life fund was a black box as there was no mark-to-market and no disclosures on provisioning for bad loans. Investments made by new private life insurance companies under various unit schemes have taken a hit following the crash in equity markets. However, private companies pointed out that in a downturn no fund could be immune to bad loans and losses on investments. There has been a demand for more disclosures on the life fund of traditional policies.

LONG & SHORT OF IT
Promoters of life insurance companies are quick to point out that theirs is a long-term business. Ironically, the tenure of most CEOs has been anything but long term. Several life companies are into their third CEO in seven years. This is perhaps the reason why most chief executives continue to be in expansion mood, although the business is contracting. Many CEOs believe they do not have to turn in a profit during their tenure and the focus should therefore be on top line. According to industry sources, this year is likely to see yet another churn at the top.

CLIPPED WINGS
The government has asked some top public sector banks to come to the aid of troubled carrier Kingfisher Airlines. Insiders from the banking sector say the finance ministry proposes to fix a flash meeting with CEOs of some large PSU banks to rework the liabilities of Kingfisher and extend additional lines of credit to the airline. However, the meeting could not be arranged because the CEOs of big banks were out of the country. The move comes after existing bankers of the airline expressed reluctance to cut further lines of credit for it.

TAIL PIECE
The lateral recruitment by IDBI Bank of senior executives from State Bank of India does not seem like to end soon. After Nagendra Bhatnagar and CS Jain, a few more officials from SBI have joined IDBI Bank. Insiders say that Ashutosh Khajuria and Gyan Mohan, both ex-SBI, have followed in the footsteps of Mr Jain and Mr Bhatnagar. Mr Khajuria now heads IDBI’s treasury, having filled in the slot created by U Ventakraman switching over to currency bourse MCXSX, while Gyan Mohan has joined IDBI Capital.
Source: March 04, 2009, The Economic Times 

3. S'pore Airlines offers 25-50% discounts
While international air carriers are struggling with the traffic slowdown, thanks to the global economic crisis, Singapore Airlines has announced 25 to 50 per cent discounts for advance bookings. The airline is offering all-inclusive economy class return tickets from seven Indian cities (Ahmadabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai and Delhi) to Singapore for Rs 21,005. All-inclusive return tickets to Kuala Lumpur, Bangkok or Hong Kong will cost Rs 22,005. Return tickets to Australian cities are in a price range of Rs 42,750 to Rs 43,460. "These (offers) are important given the current challenging economic climate, when customers are looking for value-for-money deals," said C.W. Foo, general manager (India), Singapore Airlines.
Source: March 04, 2009, Hindustan Times 

4. SpiceJet plans to buy low-cost carrier
Spicejet is looking at acquiring a domestic low-cost carrier (LCC) and diluting minority stake to a foreign carrier, according to its chief executive officer. Talking to ET, SpiceJet CEO Sanjay Aggarwal said: “We would like to buy a low fare domestic carrier, as the company is expected to break even next fiscal. SpiceJet is also open to equity dilution to a foreign strategic player.” Equity dilution to a foreign carrier is aimed at achieving a global footprint, he insisted. SpiceJet will sell its stake after controlling at least one-fifth of the domestic market. Its share in the domestic market rose sharply from around 9% to 11.8% in three months. “Consolidation is on the cards in the Indian aviation space and one can seal a deal when the going is tough. I am a hunter and will go ahead and do it at the right time,” Mr Aggarwal added. Analysts are, however, uncertain about the company’s financial strength. SpiceJet incurred a net loss of Rs 18 crore in the October-December quarter and is expected to be breakeven in the June quarter. WL Ross invested $80 million in SpiceJet last year. The foreign company sent its representative Ranjeet Nabha to the SpiceJet board last week and is set to nominate three more directors. Seven airlines were started in India in the past six years and passenger numbers doubled between 2004 and 2007 as economic growth boosted incomes and drove the demand for air travel. But the sector was hit badly by the rise in aviation turbine fuel (ATF) prices last year and may suffer losses of Rs 10,000 crore in this fiscal.
Source: March 03, 2009, The Economic Times 

5. Air India to resume Kolkata-London service
Air India is set to unveil initiatives that would help it garner better passenger loads this summer. The airline will resume its Kolkata-London flight from the summer schedule beginning March 29. On Monday, the carrier had said it would double capacity on the Amritsar-London-Toronto route, as well. To reduce the transit time for those flying from Chennai, Bangalore and Hyderabad, the carrier is revising the departure time of its West-bound flights out of Mumbai from March 29. This would mean a passenger from Chennai headed for Chicago would spend lesser transit time in Mumbai. Same would be the case when flying back to India, said a spokesperson of NACIL, formed after the merger of Air India and Indian Airlines. The revised timings is applicable for flights to London, New York, Chicago, Frankfurt and Newark. These flights would depart between 0045 hrs and 0220 hrs from Mumbai. Passengers will be able to complete their baggage clearance, immigration process and get their boarding passes at the originating point itself.
Source: March 04, 2009, The Hindu Business Line

6. Air India to make Frankfurt hub for European ops
National carrier Air India has zeroed in on Frankfurt as its European hub to provide seamless ‘scissor’ connections between India, Europe and US. From March 29, AI will change the time of flights from India so that they reach Frankfurt almost simultaneously at about 6 am. Then passengers would be able to cross over to AI flights to Chicago or Newark or take a connection to anywhere in Europe. This scissor operation would be in addition to the daily non-stop Delhi-New York and Mumbai-New York routes it operates. “AI is addressing factors like low occupancy (due to economic slowdown) by focussing on passenger convenience. Earlier we had a flight to Chicago from Mumbai and that left north out. Now with Frankfurt as our base, passengers can seamlessly travel from anywhere between India and the west,’’ said AI executive director Jitendra Bhargava. Flights from India will take off about 1 am for Frankfurt, giving non-metro travellers adequate time to take the last flight from their city to Delhi or Mumbai and then fly to the west via Frankfurt. Now all the one-stop flights between India and US will be via Frankfurt.
Source: March 02, 2009, The Times Of India
 

7. Airlines unlikely to reduce fares despite ATF price cut
Indian airline operators are unlikely to reduce fares immediately following another cut in jet fuel prices announced on Saturday, with the industry saying the earlier price reductions have failed to push up the demand for air travel. State-run oil marketing companies have slashed air turbine fuel (ATF) rates by a further 7% with effect from Sunday midnight , the 11th cut since last September. But officials of most of the airlines said there is no decision as yet on lowering air fares. According to estimates, fuel cost makes for 40% of an airline’s operating costs. Oil companies have cut ATF prices by Rs 2,052 per kilolitre (kl) to Rs 27,106 per kl in New Delhi and to Rs 27,861 per kl from the earlier levels of Rs 29,985.19 per kl in Mumbai. ATF prices had peaked to Rs 71,028.26 per kl (in Delhi) in August last year on international crude prices touching historic highs of Rs 147 per barrel.

Source: March 02, 2009, The Financial Express
 

8. Paramount Airways to expand in east, N-E
Coimbatore-based Paramount Airways is planning to spread its wings to the eastern and northeastern states after starting three destinations in the western region. Earlier, the airlines had planned to connect Kolkata and the other north-eastern destinations with its southern hub Chennai towards the end of 2010. However, it could alter its plan by starting two-three daily flights to Kolkata from June 2009 after its Managing Director M Thiagarajan met West Bengal Chief Minister Buddhadeb Bhattachar.
Source: March 02, 2009, Business Standard

9. Foreign airlines offer spl schemes to woo Indian travellers
International carriers have once again launched special schemes to lure Indian travellers, in what is a clear indicator that the aviation sector is facing hard times. The reasons for international carriers looking at India at a time when global air travel has dipped by 5.6% according IATA (International Air transport Association) in January 2009 are many. First, India is still a promising destination for international carriers since Indian arrivals in their countries have increased in 2008, despite a downturn. Second, by introducing low fares, yields per passenger help in improving their bottom lines. SriLankan Airlines have announced attractive fares from Rs 13,500 onwards for a return fare (excluding taxes) and a two day, three nights and every accompanying passenger has to pay only Re one for identical holiday in Sri Lanka.  Similarly, Singapore Tourism Board (STB) has launched ‘Fly on US’ initiative which offers visitors the chance to win a pair of air tickets to Singapore. As part of the scheme, online viewers need to only fill up seats on STB’s virtual uniquely Singapore aircraft with their own names and email addresses as well as those of their friends and family. STB has dedicated up to S$500,000 worth of free air tickets to be won globally before the closing date of 31st May 2009. Australia-based Qantas Airways will also enhance its presence in India by introducing Singapore on its Australia-India services in May. According to a data released by Tourism Australia a total of 1,16,000 Indians visited Australia. Industry insiders term it as international carriers trying to make headway into the Indian market at a time when back home carriers have hiked their fares. “Instead of paying Rs 10,000 for a Mumbai-Delhi round trip this vacation, a holidaymaker can very well go to Sri Lanka by paying 10% more,” said an analyst tracking the aviation sector. Industry observers say international carriers have opted for aggressive pricing currently because October-December, which is considered the busiest season for corporate and leisure travel, did not materialize last year due to record high fuel prices and slowdown in travel as fallout of the global financial meltdown. But according to a data released by Tourism Australia 1,16,000 Indians visited Australia in 2008 as against 95,200 in 2007. Maggie White, general manager, south, south East Asia and Gulf Countries, Tourism Australia said, “The visitor arrival figures for 2008 from India are extremely encouraging and rewarding. India continues to be one of the largest markets for Australia and has consistently moved up in the global rankings of our target markets. We are confident about continued growth from this region and look forward to another great year ahead.”
Source: March 02, 2009, The Financial Express

10. Cookie Man eyes airport retailing
Cookie Man India is looking to ramp up operation from 45 stores to 250 in five years. The company, which has been expanding in malls, said it is eyeing airport retailing to scale up presence. “Airports in India are expanding and this represents a tremendous opportunity for us to scale up our operations. Currently, we are present in eight airports across the country. This will be scaled to 28 in next two to three years,” Mr Pattabhi Rama Rao, President, Cookie Man India said. Currently, 25 per cent of its turnover is accrued from the airport retailing business. He said the company is currently not focusing much on tier-2 and tier-3 cities as mall development has taken a hit following the slowdown. “The malls, which were supposed to have come up, are yet to take shape. This is making it difficult for us to expand in the current scenario. We will be investing Rs 25 crore on our expansions”. Mr Rao said the company has developed a robust franchising business model that has helped it to rapidly expand pan-India. Cookie Man has also broken into the institutional space by establishing relationships with airlines (Jet Airways, Kingfisher Airlines) and hotel chains across the country. Noting that a lack of any recognized player in the premium baked segment has helped the company gain a significant foothold in the market, he said the company retails over 50 varieties of freshly baked cookies besides a range of freshly baked products. The company is also looking to tap into the corporate gifting segment to boost its top line. “We have graduated from tin package to ceramic packaging. Through continuous menu engineering, we will also constantly innovate our product range,” he added.
Source: March 03, 2009, The Hindu Business Line

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