Issue 254

 

1. Aviation demand in India to fall by 6.8 %
India's aviation industry is likely to see a 6.8 percent fall in demand and 4 percent drop in capacity in 2009 due to the "rapid deterioration of the global economic conditions," an international air travel lobby said Tuesday. "Overall, India is expected to see a 6.8 percent fall in demand but only a 4 percent drop in capacity," Giovanni Bisignani, the director general of the International Air Transport Association (IATA), said. India's international air services, which have grown three-fold between 2000-08, will see demand fall by 2-3 percent, while capacity may increase 0.7 percent this year, he added. Speaking of the global aviation industry, Bisignani said the prospects remained "grim" as demand had deteriorated rapidly. "Our loss forecast for 2009 (for the global aviation industry) is now Rs.23,500 crore ($4.7 billion)," he said. "This is significantly worse than our December forecast of Rs.12,500-crore ($2.5 billion) loss in 2009, reflecting the rapid deterioration of the global economic conditions," Bisignani added. Passenger traffic is expected to contract by 5.7 percent globally in the next one year, while cargo demand will likely decline 13 %, the IATA said. Airlines operating in the Asia Pacific countries including India would be hit hard by the slowdown and would post losses to the tune of Rs.8,500 crore, worse than the previous estimate of Rs.550 crore.
Source: March 25, 2009, The Free Press Journal

2. ‘Asian airlines to be worst hit by slowdown’
The International Air Transport Association (IATA) said on Tuesday that the airline industry in Asia will be the ‘worst’ hit by the current global economic turmoil. Of the $4.7-billion (Rs 23,500 crore) loss to be posted by the industry in 2009, Asia losses are pegged at $1.7 billion (Rs 8,500 crore), IATA said in its revised financial forecast. Naming three key markets in the region Japan, China and India, the IATA’s Director- General, Mr Giovanni Bisignani, said, “The largest market, Japan, is in deep recession with an expected 5.5 per cent drop in GDP. China is recovering domestically but international business is being held back by falling trade volumes. And India is suffering from slowing demand, high costs and poor infrastructure.” He was addressing a teleconference from Geneva.

ISSUES ON HAND
In some strong words specifically on Indian market, Mr Bisignani said though the aviation market had great growth prospects and a lot had changed under the country’s current leadership, but (now) “we are going in the wrong direction”. He said delay and high costs involved in infrastructure development are “unacceptable”. The air traffic control is still “weak”. If these issues are not fixed, it will become a “boomerang story”. IATA had recently criticized a move by the private airport developers to levy airport development fees in Delhi and Mumbai. IATA chief called 2009 as one of the “toughest years” for the global airline industry. A dramatic fall in revenues and demand for air travel-led IATA to revise its financial outlook for 2009. In its latest forecast, the losses for the industry have almost doubled from the industry body’s earlier forecast of $2.5 billion made in December last. While the loss in revenues for the full year is pegged at $62 billion (Rs 3.10 lakh crore), it has projected 5.7 per cent drop in passenger traffic and a 13 per cent fall in cargo for the corresponding period. Mr Bisignani said that carriers are not able to take capacity out fast enough to match demand. Overall the mismatch of demand and capacity will lead to yields falling by 4.3 per cent. At $50 a barrel level, the industry’s fuel bill will be $116 billion. “The industry is in intensive care,” he said, with its size shrinking to $467 billion in 2009 against $530 billion in 2008. IATA represents about 230 airlines comprising 93 per cent of scheduled international air traffic.
Source: March 25, 2009, The Hindu Business Line 

3. Sri Lankan Airlines embark on green flight programme
A staggering 9.11 million liters of fuel was saved by Sri Lankan Airlines in a Span of 7 months when the aviation company implemented the fuel efficiency measures during last July, said Manoj Gunawardena, CEO of the airlines. In percentage terms the fuel efficiency earlier maintained at an average of 3.91% till last year rose to 5.93% in terms of savings during January, he added. The company embarked ensures under the aegis of Environmental Strategy Unit (ESU) that plans and executes the conservation measures, he pointed out. The company has come out with a green flight programme across its aircraft fleet involving a comprehensive range of measures to make each flight as environmentally-friendly by undertaking measures like minimizing fuel consumption, reducing noise and carbon emissions etc, he said. On the passenger front, green counter and paperless-ticketing services were introduced, he added. Under the green flight programme, the airline operating in 41 destinations in 25 countries across Europe, the Middle East, sub-continent and Far East is incorporating con-by adopting recyclable wares within flight management system to apparently conform to the Sri Lanka's civil aviation authority on aviation environment standards in Sri Lanka, Gunawardene said.
Source: March 25, 2009, The Financial Express

4. Satyam among 4 cos to bag Airbus’ IT deal
European aircraft giant Airbus on Tuesday said India will witness the highest domestic air traffic growth globally even during this slowdown. Airbus has also selected Satyam Computer, along with four other Indian IT giants, for software support to aircraft like A-380 and A-350. Five companies – Infosys, HCL, CADES, Satyam and Quest have been selected to provide engineering support services to various aircraft programmes like the A-380 and A-350. Four companies – Infosys, Satyam, Tata and Wipro – will be providing information system services, including IT, to Airbus. The European major has reaffirmed its faith in Satyam. “We are going to stand by them despite what has happened in the past three months. We have a very good relationship with Satyam. The IT company’s board chief Kiran Karnik has explained the overall process and things will become clear by April-end,” said S Dwarkanath, Airbus’ director (international cooperation). Airbus, which will invest close to $1 billion here over the next decade in six major activities, including aircraft design, said India will have the highest air traffic growth during 2007-11, and also over the next two decades. “India leads the pack of emerging markets in terms of aviation growth. Even in the slowdown affected period of 2007-11, India will grow at 11.3%,” said Christian Scherer, head of strategy. Only China is expected to post a double digit growth of 11.1% during this period. All other areas, mature markets like west Europe, Japan, Australia and US and emerging areas are forecast to post a single digit growth. India’s impressive figure also stems from the fact that the base of air traffic was very low till five years ago when low cost carriers first appeared here and since then there has been tremendous growth.Airbus has forecast that India will require 992 more aircraft in the 2007-26 period. The maximum demand will be in single-aisle family like A-320 or Boeing 737, whose demand has been put at 670. The demand for twin aisle, very large (like A-380) and freighter has been put at 227, 60 and 35, respectively. The aircraft manufacturer will now step up industrial cooperation with India in six key areas of engineering, pilot training, maintenance, aircraft design and component building, engineering, IT, research and services.
Source: March 25, 2009, The Times Of India

5. Jet offers variety of fares to woo passengers
Jet Airways, the country’s second largest private carrier, has structured airfares into five different categories depending on time of flights as it looks at propping up its falling passengers load factor. A senior Jet Airways official said, “Passengers are slowly returning to air travel. Different fares structure will give different flying experience in terms of comfort to our passengers.” This is the first instance of a full-service carrier offering such a wide-variety of fares. For example, one can buy a ticket from a bouquet of Rs 3,078 to Rs 20,343 (all inclusive) for flying in the Mumbai-Delhi sector. The special fare category is the cheapest segment which offers no refund. The other categories are check fares (restricted), check fares (normal), economy fares and première fares. Interestingly, a special fare Jet ticket sometimes costs lower than a regular ticket of its low-cost subsidiary, JetLite. For example, the special fare ticket for April 25 from Mumbai to Delhi is available for Rs 3,078 against in Jetlite’s Rs 4229.
Source: March 25, 2009, The Economic Times

6. Deccan Cargo, AI tie up

Captain Gopinath-led cargo and logistics company Deccan Cargo & Express Logistics (DCEL) has announced a tie-up with Air India to provide engineering support for its fleet. As part of the pact, Air India will provide line maintenance and technical handling support to Deccan Cargo’s aircraft fleet and operations. “We are getting ready to take delivery of three Airbus A-310 freighter aircraft and have roped in Air India to provide end-to-end engineering support,” Deccan Cargo CMD Captain Gopinath said in a company release.
Source: March 25, 2009, The Economic Times

7. Domestic airlines face a grim year, says IATA
Domestic carriers, like their global peers, will find it hard to get passengers in 2009 despite all their gimmicks to stimulate demand, said International Air Transport Association (IATA) in its revised outlook for the year. IATA said air transport demand will drop between 2% and 3% in India even as airlines increase capacity by 0.7%. The organization sees a 6.8% fall in demand in the Asia-Pacific region and 4% drop in capacity in 2009."The prospects for airlines are dependent on economic recovery. There is little to indicate an early end to the downturn. 2009 will be grim," said Giovanni Bisignani, IATA's director general and CEO. IATA's view of a negative growth was supported by Kapil Kaul, CEO — South Asia, Centre for Asia Pacific Aviation (CAPA), who said demand recovery could be seen only later this year. "We expect under 10% growth in demand in India, most of which will come after the third quarter of 2009, depending on how the market recovers," he said. A recovery in the airline industry is expected only with an upturn in the economy. However, according to the latest report by CAPA, the Indian airline industry is still faced with over-capacity, especially in the full-service category where passenger load factors remain below 65%. India's market for international air services tripled in size between 2000 and 2008. With falling passenger numbers and increasing cost burden, Indian carriers had either cut or rationalized some of their domestic and international capacities in the last few months. This, however, doesn't seem to have helped them in improving load factors (average occupancy) and yield (average fare). Kaul said, "There is still a lot of excess capacity, which should be reduced by 8-10%, especially in the FSS category." The outlook for the global air transport industry looks even grimmer. IATA's revised estimates suggest a $4.7 billion global loss in 2009 as against its December forecast of $2.5 billion loss. As the global economic slowdown hit businesses, it translated into a lower demand for corporate travel. This led to a massive dip in premium travel. Besides, people in the countries facing a recession are having a lower disposable income, which has led to a fall in demand even in the leisure travel segment. While most regions of the world are expected to see a fall in demand and subsequently, rationalization in capacity. Middle East will be the only region where demand will grow 1.2% in 2009. As airlines only in this region are adding capacity ahead of the demand creation, their market is growing, IATA says. Kaul said, "2009-10 is expected to be a pretty uncertain year and recovery is expected only 2010 onwards. Hence, airline losses could eventually be higher than projected." No one knows what the impact of the economic meltdown will be, said another industry expert, on condition of anonymity. According to IATA, only falling fuel prices are helping to curb larger losses. Combined with lower demand, total expenditure on fuel will fall to $116 billion against $168 billion in 2008."But the relief of lower fuel prices is overshadowed by falling demand and plummeting revenues," said Bisignani.
Source: March 25, 2009, Daily News & Analysis

8. Air India plans to introduce more direct flights to US, Europe

Air India plans to introduce more direct flights between destinations in the US and Europe with cities including Chennai, Ahmadabad and Kochi. Direct flights between Chennai and Frankfurt may take off in early 2010.
Source: March 23, 2009, Financial Chronicle

9. Airport runway gets a new safety area
While proximity to the inhabited area is a constant risk during an aircraft’s landing at Mumbai airport, the danger of hitting the nearby slums in case the plane overshoots, might now be mitigated with the addition of a Runway End Safety Area (RESA). Mumbai airport added a 240-m RESA at the 09 end of the main runway (09-27), thereby complying with a Directorate General of Civil Aviation (DGCA) regulation, which had been pending for long. This end of the runway lies close to the Jari Mari slums. RESA is an area located right after the runway to give an extra margin to the aircraft in case it over-runs while taking off, or undershoots while landing. The 27 end of the runway already had a RESA. It is now the secondary runway (14-32) which awaits it. “RESA is essential as it allows aircraft some space beyond the runway, if the plane over-shoots. The idea is to cause the least damage to the aircraft and passengers in such a scenario,’’ said an expert. “It is even more essential for Mumbai airport as the aircraft would have no place but the neighboring slums to run into, if it doesn’t touch down at the right place,’’ he added. While at most airports, RESA is built after the runway ends, Mumbai airport’s case is unique. Being landlocked at both ends, the RESA for the 09 end had to be created by shortening the length of the runway. The runway, which used to be 3,285 m long, would now offer a landing space of 3,045 m. Pilots and airlines officials, however, said that shortening the length of the runway would not affect the space available to them. “The space available after allocating RESA is still more than the space offered by runway 27,which is used for most flight operations,’’ said a pilot. “Not having the RESA was a safety issue. But since there was not much space, we had to take part of the runway to construct it. Work on this had been on since 2007,’’ said a Mumbai International Airport Pvt Ltd official.
Source: March 23, 2009, The Times Of India

10. Airlines told  to show surcharge, airport fees as taxes
Warning airlines not to show fuel surcharge and airport charges as taxes, the government on Monday said it would make it mandatory for them to show components like airfares and charges separately and the tax amount paid as nil. It also warned against any cartelization move in the industry and asked the airlines not to take collective decisions while fixing air fares. At a meeting of top officials of all airlines here today, the Civil Aviation Ministry made it clear that they should distinctly indicate the amount payable to them, to the airport operator and show zero tax. While the airline would get the ticket price and the fuel surcharge, the airport operator has to be paid the Passenger Service Fee and the airport development fee or user development fee, wherever applicable. No taxes are applicable in domestic flights. The Directorate General of Civil Aviation (DGCA) would soon issue a circular to make it mandatory for the airlines to show all these components of a ticket separately on their websites and advertisements, the airlines were told.
Source: March 24, 2009, 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