Issue 263

1. Kingfisher, Jet to soon launch domestic code-share flights
Six months after entering into a strategic alliance, Jet Airways and Kingfisher Airlines will soon launch code-share flights on select routes. "We are in discussions with Jet Airways on code-sharing on certain routes," a Kingfisher Airlines told on Wednesday. Both the private air-carriers, afflicted by mounting losses, had inked an agreement last October to work together on certain business aspects to minimise losses. Kingfisher and Jet would soon launch such flights (code-share) shortly," the spokesperson said, without, however, disclosing any further details. While initially the agreement would be limited to domestic routes, it would later be extended to international routes as well. Code-sharing is an agreement between two airlines by which both can sell seats to customers.
Source: May 28, 2009, The Free Press Journal

2. SpiceJet bucks the trend, to hire 500 this fiscal
These could be turbulent times for the Indian aviation industry but that has not stopped SpiceJet from hiring people. The New Delhi-based low-cost carrier plans to recruit 400-500 people this fiscal.

BACKFILL ATTRITION
“This is to backfill attrition and support growth. In the last three months, several senior positions have been filled that include Ms Shilpa Bhatia, Vice-President, Sales Strategy and Corporate; Mr Anish Srikrishna, Senior Vice-President and Head of Marketing, and Ms Sarabjeet Kaur, who joined us as Head of Customer Service,” Mr Sanjay Aggarwal, Chief Executive Officer, SpiceJet, told Business Line in an email response. The airline already has some 2,500 employees. The 500 new recruitments will include 40 pilots and 60 cabin crew besides those in security reservations/ ticketing and customer care. Asked if SpiceJet would consider pay cuts in the backdrop of the recession, Mr Aggarwal said, “We pay our team-members competitive wages based on their background and experience and expect them to participate in the long-term success of SpiceJet. Hence, our intent is not to take ad vantage of the economic climate.” Last month, he had said the company evaluated two plans.

PLANS ON CARDS
One, to launch international services when it gets the go-ahead in May 2010, and the other to tap the potential in tier-II and tier-III cities. He had then indicated that it would take three months to gauge the situation.

PERFORMANCE
According to the data released by the Director General of Civil Aviation for April, SpiceJet carried 3.87 lakh passengers and had an 11.7 per cent market share, up from 10.1 per cent in the same period last year. The airline operates 125 flights everyday to 18 cities. It has a fleet of 19 Boeing 737-800/737-900ER aircraft. It also announced a new set of connections on Wednesday within its existing network of departures. SpiceJet now offers 11 unique city pairs connectivity.
Source: May 28, 2009, The Hindu Business Line 

3. Chinese Airline delays plans for initial Public Offering
Spring Air, the largest private carrier in China, has delayed plans for an initial public offering as the global economic slowdown has hurt stock markets and air travel. The Shanghai and Hong Kong share sale will not happen until September 2010 at the earliest, said Wang Zhenghua, its chairman. The airline had previously planned to raise more than 1 billion yuan, or $146 million, through a sale of shares this October.

Source: May 28, 2009, Financial Chronicle

4. Model concession agreement for greenfield airports soon
Paving the way for expeditious growth of aviation infrastructure in the country, the Planning Commission would soon come out with a model concession agreement (MCA) for greenfield airports. The agreement will provide a framework for establishment of greenfield airports by state governments through private participation. The Union civil aviation ministry has already approved two greenfield aerotropolises at Ludhiana and Durgapur while it is working on the Itanagar project. "The Planning Commission is preparing a model concession agreement for greenfield airports for use by the state governments," Planning Commission sources said. The Union Cabinet in April 2008 had approved a proposal for setting up of greenfield airports as well as private airports, airstrips and helipads. For the purpose, it came out with a greenfield airports policy that dispensed with mandatory financial approvals for setting up new airports. While giving approval, it was decided that no greenfield airport will be allowed within an aerial distance of 150 km of an existing civilian airport, official sources said, adding that in case its is proposed to be set up in the vicinity, its impact on the existing airport would be examined. However, the government is yet to dispense with the aerial distance requirement for creation of new airports close to an existing one, the sources said. In case, the 150 km requirement is dispensed with, it would substantially liberalize the procedure for construction of private airports, airstrips and helipads thereby reducing the burden on other operational airports, they said. The Planning Commission sources further said that the civil aviation ministry had informed the plan Panel that the aerotropolis projects for Ludhiana and Durgapur had been approved. Both the projects are being developed by the Bengal Aerotropolis Projects Ltd (BAPL). "The Expenditure Finance Committee would consider approval of Itanagar Airport after environmental clearance has been obtained," the sources said.

Source: May 25, 2009, Daily News & Analysis

5. We are open to acquisition opportunities: SpiceJet
It may be troubled times for the airlines business, but low-cost carrier SpiceJet sees an opportunity in this and is keeping its antenna up to see if some worthwhile carrier comes its way at 'right price'. Predicting a shakeout in the industry, SpiceJet, which recorded a passenger growth of 12% in the first quarter of 2009 when others were struggling to beat the downtrend, CEO Sanjay Aggarwal said an acquisition could be possible in about 10 months. "We are keeping our eyes and ears open," Aggarwal told PTI when asked if his airline is on a look out for suitable acquisition opportunity. Asked about the finances and war chest for such an acquisition, Aggarwal said that SpiceJet was a debt-free company and not short on funds. On the kind of carrier SpiceJet would want, he said, "It will depend on the synergy and the price the business will bring." Aggarwal, however, added that such inorganic growth could only take place after 9-10 months, possibly by the time when the carrier completes its fifth anniversary in May next year.
Source: May 25, 2009, The Financial Express

6. AI Plans to hire laid off Jet employees
Air India is believed to be toying with the idea of hiring some of the laid-off Jet employees, as it would save time and cost on training. "Air India has plans to hire cabin-crew. However, instead of recruiting freshers and then spending time and money on training them, we are mulling recruiting some of those laid-off by Jet," a source closely connected to the development said.

Source: May 25, 2009, Hindustan Times

7. Aviation FDI: Expecting to take off
The civil aviation ministry has revived a proposal to allow foreign carriers to invest in domestic airlines by putting it on its new list of reforms. The proposal is viewed by the ministry, as one way to improve the bottom lines of cash strapped domestic airlines. Last year, when the country’s second largest low-cost airline SpiceJet was starving for cash, foreign investor Wilbur Ross had come to its rescue. Most other Indian airlines are now caught in the same situation. The three major carriers — Air India, Jet Airways and Kingfisher — are estimated to have combined cumulative losses of Rs 8,000 crore in 2008-09.Currently, non-aviation companies can buy up to 49% stake in a local airline. But a foreign airline cannot invest at all. While Kingfisher and Jet Airways are trying to raise funds through various routes, state-owned Air India is seeking around Rs 4,000 crore through soft loan and fresh equity infusion from the government. Liquor baron and promoter of Kingfisher Airlines Vijay Mallya has advocated foreign direct investment (FDI) by global airlines into domestic airlines. Aviation consultancy Centre for Asia-Pacific Aviation (CAPA) head Kapil Kaul believes it will improve investors’ confidence in the industry. “Opening FDI route for foreign airlines would embolden private equity players and hedge funds to invest in the industry, following the entry of bigger airlines as strategic investors,” he said.

Source: May 25, 2009, The Economic Times

8. Qantas axes first class on some routes
Qantas Airways has scrapped first class on some routes, as the global economic downturn grounds many travelers and makes others think twice about paying for a little in-flight luxury. Qantas said it had temporarily taken first class off the San Francisco, Buenos Aires and Melbourne-Hong Kong- London routes, offering business, premium economy and economy classes only.

Source: May 26, 2009, Financial Chronicle

9. Safety concerns put spotlight on US commuter airlines
Commuter airlines which operate just over half of all US domestic flights are under pressure as business travellers weigh safety problems arising from a crash in February. A federal investigation into the crash of a Colgan Air commuter plane that killed 50 people in New York state has put the focus on regional airlines at a particularly vulnerable time for a business travel industry coping with recession. Colgan, a unit of Pinnacle Airlines Corp, operates under the names of Continental Connection for Continental Airlines, as United Express for UAL Corp, and as US Airways Express for US Airways Group. Colgan was flying Continental Connection Flight 3407 on Feb 12 when it crashed near Buffalo. Hearings by the National Transportation Safety Board (NTSB) this month exposed issues of pilot fatigue, lack of experience and inadequate training. The poorly paid flight crew of the late-night commuter flight had arrived at work early the day of the crash and had commuted long distances to reach Newark, NJ where the flight originated. The pilot flew in from Florida and may have napped in a crew lounge to save money on a hotel; the 24-year-old co-pilot who earned only $24,000 a year spent the previous two nights to get from her home in Seattle to Newark. The two, their voices captured on inflight recorders, discussed their inexperience with aircraft icing as the flight descended in wintry conditions. The captain ignored warning system and crew members broke cockpit rules by chatting about things not connected to the flight as the plane entered the crucial landing phase. "This hearing... has initiated an important discussion on new measures that could be taken industry-wide to improve safety for everyone, "Colgan said in a statement on May 14. "We want to know what happened as much as anyone else does." Congress also is looking into the safety of regional airlines that fly the 30- to 90-seat planes.

"Drastic changes"
Some business travellers are not waiting. "Since February, there's been drastic changes in the way the corporations are looking at their responsibility to their employees," said Jean Covelli, president of The Travel Team Inc., which books travel for companies around the world. "They've done many independent studies into the situation and also are putting tremendous pressure on the government to permanently fix a very broken system," she said. Covelli declined to identify any clients specifically concerned about air safety. But she said many were choosing to travel by car or train rather than regional airline. "Many people are electing to drive when it used to be a four-hour radius. Now they'll drive up to a 10-hour radius without thinking twice about it," she said. "People are getting creative. Trains are again a focus for a lot of corporate travellers," she said. Even if safety probes do not frighten passengers away, regional airlines could face lawmakers' demands for costly operational changes — especially as the last three commercial flights to crash were operated by commuter carriers. "There will be some increased costs at regionals," said airline industry consultant Robert Mann. "It'll be associated with enhanced training requirements, maybe some different crew scheduling requirements."

Just over half
In the United States, regional carriers operate just over half of all domestic flights. More than 160 million passengers flew on regional airlines in 2007, up 40 percent from 2003, according to data from the RAA. Regional carriers — Air Wisconsin, Mesa Air Group and Pinnacle Airlines Corp are examples — typically lease small planes of 90 seats or less from major "mainline" airlines and fly connecting routes between less-travelled cites under the names of the larger partners. Reduced service would have an impact on the towns served. About 75 percent of US airports — 240 cities — are served exclusively by regional airlines. Cities like Toledo, Ohio; Tupelo, Mississippi; and Aspen, Colorado, have airports served only by regional airlines, according to the Regional Airline Association (RAA). "Every one of those communities has come to depend on our service," said RAA president Roger Cohen.
Source: May 26, 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