Issue 260


1. Jet Airways to lunch no-frills service
In a bid to cash in on summer vacation rush, Jet Airways will launch new no-frills service from Friday. Called Jet Airways Konnect, the domestic private airline will provide 10-15 % cheaper airfare, connecting Mumbai with Bhopal, Udaipur and Ahmedabad. The airline will also connect Chennai with Coimbatore, Madurai and Kochi and Bangalore with Pune and Mangalore. "We are beginning operations of Jet Airways Konnect, our new all-economy, no-frills service, from Friday. The airfare will be 10-15 % lower on the new service compared with fares charged for our economy class," said Jet Airways chief commercial officer Sudhir Raghavan. "There will be 58 flights on a daily basis across 19 routes," he said. The airline will connect Mumbai with Bhopal, Udaipur and Ahmedabad, Chennai with Coimbatore, Madurai and Kochi and Bangalore with Pune and Mangalore.
Source: May 08, 2009, The Economic Times

2. SilkAir to replace Singapore Air in Hyderabad
SilkAir, the regional arm of Singapore Airlines, will begin services to Hyderabad from June 15. It would take over the route from Singapore Airlines, which flies three times a week to Hyderabad. “The transfer of operations will present customers with a wider choice of flight times as SilkAir will offer five times weekly services to Hyderabad to begin with,” Mr Huang Cheng Eng, Singapore Airlines’ Executive Vice-President, Marketing and The Regions, said here in a press release here. “This will be made a daily service on October 26.” Hyderabad would be the fourth destination in India after Kochi, Thiruvananthapuram and Coimbatore.
Source: May 08, 2009, The Hindu Business Line

3. Paramount Airways to fly to 35 more cities by 2010
Ahead of its plans to fly to international locales, Paramount Airways, the Chennai-based premium service carrier, is launching services to various other destinations in the country. The fully business-class airline is to commence services to 35 more cities, increasing its domestic routes to 50 by the end of 2010. It is to launch services to the northern region, including Delhi, and to the western and eastern parts, too. “We are looking at having a strong domestic network, prior to starting our international operations. We are looking at connecting to every major airport in the country in a phased manner,” Paramount’s managing director, M Thiagarajan, told Business Standard here today. Delhi is one of the new planned destinations and so are Imphal, Bhubaneswar, Ranchi, Bhopal, Nagpur, Porbander and other places in Gujarat. This is in addition to the earlier announced plans of launching services to Kolkata, Guwahati and Agartala, connecting the south Indian cities of Chennai, Coimbatore and Kochi. Paramount will also add another 10 aircraft to its existing fleet of six planes, and is currently doing a technical evaluation of aircraft. It is looking at acquiring either from Airbus Industry or Boeing, under a Rs 4,000-crore deal, on an operational lease.
Source: May 04, 2009, Business Standard

4. Finnair to restart Mumbai ops
Nordic carrier Finnair has decided to restart its Mumbai operations from October even as it has inducted a new fleet of Airbus aircraft to operate on the Delhi-Helsinki-New York sector, said Kari Stolbow, director — Indian subcontinent.
Source: May 04, 2009, Daily News & Analysis

5. 7 more Thai flights to India
Thai Airways plans to add seven more flights to India by October this year from existing number of 53 flights. “We plan to add flights from Bangalore. Flights to Varanasi and Bodh Gaya would also be resumed from this winter,” a Thai Airways official said. The airline has managed to fill 80% of their seats in the last few months, he said. The Thai airline has a fleet of 85 aircraft and covers a network reaching out from Bangkok to over 70 destinations across four continents with almost 200 million passengers annually.
Source: May 04, 2009, The Economic Times

6.Kingfisher Airlines continues to default on payment of dues
India’s top ranked carrier by passengers flown in the March quarter, Kingfisher Airlines Ltd, continues to default on payments. In the latest instance, Indian Oil Corp. Ltd (IOC) has encashed bank guarantees of around Rs65 crore provided by the airline, after a cheque for some Rs50 crore issued to the oil firm by the airline bounced last week, people familiar with the development said. It wasn’t immediately clear if the guarantee had been encashed in full or in part. A Kingfisher spokesman declined to comment on the matter, saying it does not “discuss its relationships with suppliers in the public domain”. A spokesperson for IOC also declined comment. “We don’t comment on the commercial dealing with our clients,” the spokesperson said. This is the first time that bank guarantees given by the airline, founded by billionaire businessman and liquor tycoon Vijay Mallya, have been encashed. In November, state-run Airports Authority of India (AAI) which runs most of the country’s airports, had threatened to en cash bank guarantees of Rs100 crore after Kingfisher fell behind on a payment of at least Rs256 crore. After cheques given to the authority bounced last fortnight, the carrier transferred some Rs77 crore electronically to AAI. After this payment, said an AAI board member who did not want to be named, Kingfisher’s dues for now are within the bank guarantee furnished by the carrier. Dues to three state-run oil companies totalling to at least Rs1,000 crore, however, still remain to be paid, forcing IOC’s hand. “The bank guarantee has been encashed,” said a person familiar with the development, declining to be identified. A second person aware of the process confirmed the move. IOC encashed the bank guarantee after Kingfisher had sought a second 10-day extension of the deadline to pay state-run IOC after missing a 10 April deadline to settle the tab for jet fuel supplied by the refiner. A first deadline of 31 March, too, was missed by the firm, as reported by Mint last month. In October, the Union government allowed the country’s three largest carriers—National Aviation Co. of India Ltd (Nacil)-run Air India, Jet Airways (India) Ltd and Kingfisher— a period of six months to pay dues amounting to Rs2,962 crore to oil marketing firms. Oil companies say the airlines have not met that commitment. “When one particular (oil) company asks for payment, they (Kingfisher) shift the business to the other,” said the second person quoted above. He was referring to the fact that the airline had moved most of its fuel purchases to Hindustan Petroleum Corp. Ltd (HPCL) where the airline can still buy jet fuel on credit. The same person said the overall overdue payments of the carrier amount to about Rs129 crore for IOC, Rs488 crore for HPCL and Rs326 crore to Bharat Petroleum Corp. Ltd (BPCL). Both IOC and BPCL have discontinued fuel sales to the airline on credit and insist on cash-and-carry purchases. Since October, Jet Airways (India) Ltd and state-run Nacil have made part payment and owe relatively small amounts to the oil firms. India’s airlines are struggling with declining passenger traffic in the face of an economic downturn, overcapacity and intense competition. They are estimated to have posted a combined loss of over $2 billion (Rs9,980 crore now) in the year ended 31 March. Shares of Kingfisher fell 0.52% to Rs38.25 at close of trading on the Bombay Stock Exchange on Monday. The benchmark index rose 6.41%.
Source: May 05, 2009, Mint

7. Flu makes airlines slash flights, but is this an excuse?
The swine flu scare is gradually starting to take a toll on the ailing airline industry across the globe, but some believe this could be the chance for Indian carriers to seize the opportunity for new routes. Even as Indian airlines are struggling to stay afloat and have adopted a wait-and watch policy, several airlines across the world are thinning operations not only to Mexico but other parts of the world, fearing that it could lead to further spread of the disease. US Airways has reduced 38 per cent of its scheduled flights to 12 cities in Mexico between May 10 and July 1. Continental Airlines is also planning to cut flight departures by about 40 per cent and also halve its capacity on flights. Reductions in flights to Mexico by Continental Airlines and United Airlines will come into effect on Monday . Delta Air Lines, based in Atlanta in southern US, said it was cancelling some flights and downsizing to smaller aircraft on certain routes to Mexico later in May . “This is the time Indian’s international carrier can make best use of the opportunity by deploying capacities to several international locations where other international carriers have opted out,” said Mark Martin, senior advisor at consulting firm KPMG. Some expert say the flu is an excuse for airlines to cut costs. “Airlines are facing the heat of recession. They are using the flu as an excuse to bring down the non-operating costs,” said an industry analyst who asked not to be identified. More than the flu, the sector’s recovery could be a key issue. “The A (H1N1) virus would not affect the domestic carriers directly but because of low passenger volumes, the recovery would take even take longer,” said Ankur Bhatia, managing director of travel advisory firm Bird Group.
Source: May 05, 2009, Hindustan Times

8. Jet Airways, Air India sign deals with foreign carriers
India’s two biggest airlines, National Aviation Co. of India Ltd run Air India and Jet Airways (India) Ltd, are entering into agreements with foreign carriers to carry passengers, especially on the busy Mumbai London leg that has seen a big churn in airlines operating on the sector in the past year. Virgin Atlantic Airways Ltd pulled out its nonstop flight earlier this month on the Mumbai London route while Air India last year cancelled the London New York leg of a Mumbai flight to the US through London. Jet Airways is now entering into a so called code sharing alliance with Virgin Atlantic on the Mumbai London sector for the two daily flights it runs from Mumbai, according to a senior government official who asked not to be named. Code sharing refers to a ticket marketing practice among airlines that allows carriers to share two characters in codes on airline reservation systems. For instance, such a partnership between Jet Airways and Air Canada allows a passenger to fly between Mumbai and London on a flight run by the Indian carrier and then on to various Canadian destinations such as Toronto, Vancouver, Calgary, Montreal and Edmonton on Air Canada flights. Passengers benefit by checking in baggage to their final destination and earn air miles on one or both carriers. The code sharing alliance with Virgin Atlantic will allow Jet Airways to partly capture the space left over by the pullout of its Mumbai London service. Virgin Atlantic now connects just New Delhi and London. Financial terms of the arrangement were not immediately available. Air India, on the other hand, has got a clearance for a codes haring agreement with Kuwait Airways from the civil aviation ministry, said a company executive, who, too, requested anonymity because he is not authorized to speak with the media. This agreement will allow Air India’s passengers to fly from London on a Kuwait Airways flight to NewYork. Last year, the airline had terminated the London New York leg of its Mumbai London New York flight as it was focusing on the nonstop services it offers into the US. Also, the airline has started flying to the US from its hub in Frankfurt. An analyst said code sharing made sense given the glut in airline seat capacity on European routes, especially as premium traffic is not reviving. “It’s sensible because you are not adding or affecting frequencies. Virgin has customers with strong loyalty, which can now get on to Jet,” said Centre for Asia Pacific Aviation India chief executive officer Kapil Kaul. He added that a further capacity cut to London will likely depend on how much Jet Airways and Kingfisher are willing to give space to each other in an alliance announced last year. “The international operations will be part of that (alliance). Kingfisher might temporarily suspend its international operations and resume focus post2010. It needs to cuts its cash losses and conserve cash,” he said of the carrier that started flights nonstop to London from Mumbai and Bangalore in the past few months.
Source: May 05, 2009, Mint

9. BAA passenger outlook cautious after Ql fall
British airports operator BAA said the downturn weighed on passenger numbers in the first quarter as building costs at Heathrow contributed to a steep loss, though its air-side stores did good business. The operator of Heathrow and Gatwick airports said numbers fell a greater-than-expected 10% and it now had a "slightly more cautious" outlook on passenger traffic than previously. But it reiterated hopes for a rise in underlying profit this year, underpinned by a strong performance by its retail operations. The company, owned by Spain's Grupo Ferrovial SA, said its planned sale of Gatwick - ordered by regulators to meet competition concerns and where passenger numbers fell more than the average - was due to be announced within weeks. BAA's pretax loss reached 316.2 million pounds ($469.8 million) after one-off costs from building Heathrow's Terminal 5 and from losses on derivatives contracts, compared with a loss of 55.6 million in the same period last year. Revenue rose 15.5%, and adjusted earnings before interest, tax, depreciation and amortization (EBFTDA) rose 27.9% due to higher tariffs, a Strong retail performance and cost controls. Passenger numbers at BAA's airports fell to 24.8 million, with Gatwick and Stansted airports falling the most at 14.6% each. Chief Executive Colin Matthews said that the fact that the overall quarterly de-dine was similar to the fourth quarter could indicate the fall in traffic had flattened out, though that remained to be seen. "(But) one of things that these results really underline is how different the business model is at Heathrow. What Heathrow can do as a hub is compensate with more transfer traffic," he said. Gatwick airport was put up for sale last year to meet competition concerns and BAA was subsequently also ordered to sell London's Stansted and either Edinburgh or Glasgow airports.
Source: May 06, 2009, The Financial 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