Travel |Update|
Issue 265
Global carrier
Singapore Airlines is looking for "potential opportunities'* in India, which
will help in consolidation of the aviation industry. "Singapore Airlines
remains interested in potential opportunities related to the consolidation of
the industry. As we have said consistently, we remain interested in future
opportunities in India and China, both of which are important markets to us,"
Nicholas Ionides, vice-president, public affairs, Singapore Airlines, told PTI
in an e-mailed statement. Foreign carriers are not allowed to pick up equity
stake in Indian carriers. However, recently Civil Aviation Minister Praful Patel
hinted that the government might allow foreign carriers to buy stake in the
domestic airlines. Meanwhile, when asked whether the company was in discussions
for making investments in the country, Ionides said, "We have friendly
discussions with other airlines on a regular basis but there are no talks at
present on investments in Indian carriers". Singapore Airlines operates
flights to different destinations in the country. Its website says the carrier
has services to Ahmadabad, Amritsar, Bangalore, Chennai, Delhi, Hyderabad,
Kolkata and Mumbai. Regarding reforms in the aviation sector, Patel had
recently said, -WFDI is an ongoing process. I do not think we are averse to
opening up the sector on a gradual or constant basis "...In the previous
regime of ours, we had visualised the situation where foreign carriers could
also invest. It may not happen overnight, but it may happen eventually".
Source: June 11, 2009, Business Standard
2. Jet cut domestic capacity 10%
Under pressure to drastically cut costs, Jet Airways is in the process of
reducing domestic capacity by10%and plans to utilise the aircraft freed from
these cuts on high-density routes of the Gulf and Saudi Arabia. The premier
private carrier, which has already reduced domestic capacity by20%to contain
losses and survive the wrath of the global financial downturn, has also started
the process of reducing it by another 10%. Commenting on the financial crunch
facing the airline and the industry in general, Jet chairman Naresh Goyal said
in Kuala Lumpur on Tuesday that the airline would slash its capacity by an
additional10%after having cut 20%.
Source: June 11, 2009, The Financial Express
3. SpiceJet
lowers fares
Low-cost carrier SpiceJet on Wednesday announced lower fares starting from Rs
1,430, inclusive of all taxes and charges, across its network. The offer is
valid for tickets purchased on its website from June 10-12 for travel between
July 1 and September 15, the carrier said in a statement. Flying to metros like
Mumbai, Kolkata and Chennai from Delhi will cost Rs 1,930.
Source: June 11, 2009, The Financial Express
4. Foreign
airlines say no to Indian carriers, for now
International airlines are not willing to buy stakes in Indi- an carriers at
this point, even as the ministry of civil aviation is considering a proposal to
permit foreign carriers to invest in local airlines While the ministry is
considering a proposal to allow up to 49% investment by foreign carriers in
Indian aviation firms, it may eventually limit this to 26%. Current foreign
investment rules allow foreign companies to take up to a 49% stake in Indian
airlines, but specifically prohibit a foreign airline from doing so. Several
Indian airlines have been asking the government to relax the rule A sharp fall
in passenger demand and high jet fuel prices are estimated to lead to a combined
loss of $2 billion (Rs9,460 crore) for Indian carriers in 2008-09, and all of
them are desperately looking at raising capital to stay afloat. Mint spoke to at
least two dozen global carriers on the sidelines of the 65th annual general
meeting of the International Air Transport Association (IATA) in Kuala Lumpur
earlier this week, and none of them were willing to invest in Indian carriers as
they are busy in putting their own houses in order Iata has doubled its estimate
of losses that global airlines are expected to post in 2009 to $9 billion
Richard Branson’s Virgin Atlantic Airways Ltd, which was interested in the
Indian market till recently, isn’t enthused by the Indian government’s plans.
Its chief executive Steve Ridgway said his airline was once looking at investing
in Indian carriers, but not anymore. “We are not looking at investing at this
point of time. This is the worst time to do that. Forget about making profits,
we are looking at how to conserve cash.” According to rival carrier American
Airlines Inc.’s senior vice-president (planning) Henry C. Joyner, this is the
most difficult environment in terms of operating capital. “It’s better to stay
away from investing now.” Representatives of many European and US carriers said
they are not interested in investing in Indian carriers, though the country
remains an important market for them. Still, while many foreign air- lines
cannot afford to invest in India right now, there are those that might invest in
the country if they are allowed a majority stake in an airline British Airways
Plc. is one such. “India is the second important market after transatlantic
(routes; between the Americas and Europe). But that doesn’t mean we should pick
up a minority investment in an Indian carrier. There is a big difference between
getting a strategic position of Indian market and picking up a minority stake,”
British Airways chief executive (CEO) Willie Walsh said Last year, British
Airways held talks with India’s low-fare carrier GoAir India Pvt. Ltd, that runs
GoAir. “We are in discussion with (a) number of Indian airlines. But that
doesn’t mean we want to invest in those carriers,” Walsh added. Hong Kong-based
Cathay Pacific Airways Ltd’s CEO, Antony Tyler, too, does not believe in taking
a minority interest in Indian carriers. “We don’t want (a situation where)
somebody is managing our cash and we have no influence in the management
decisions of that airline.” Singapore Airlines has also echoed the same
sentiment Along with the Tata group, it had tried to bid for a 40% stake in Air
India in 2001 Chew Choon Seng, CEO of Singapore Airlines, said that in
principle, he is interested in investing in the Indian aviation sector, but “it
cannot be a situation where there is only economic exposure, but no real
influence or participation in management and decision making” West Asian
carriers, less affected by the economic slowdown, are also not enthusiastic
about Indian conditions. Tim Clark, president of Emirates, said India should
have a long-term policy on investments by foreign carriers “This cannot be
changed frequently, based on the change in the political landscape.” Gulf Air’s
CEO, Bjorn Naf, said his airline wouldn’t be interested in this “in 2009” A
senior Mumbai-based aviation analyst, who tracks airline stocks, said the basic
idea behind foreign carriers’ presence in the country is to take passengers from
various Indian cities to their hubs and beyond Foreign airlines, he added, do
not need to invest in Indian carriers for that can be done through code-sharing
agreements “Investment makes a lot of sense when a foreign carrier wants to
expand operations in India or the government opens up the civil aviation sector
fully,” he said, asking not to be identified. If the foreign carriers decide to
stay away even after the ministry partially opens the sector, many Indian
aviation firms will be disappointed as they are looking to get some reprieve
from international carriers, with local financial institutions not willing to
give them money Vijay Mallya, chairman of Kingfisher Airlines Ltd, wants foreign
investment, but Jet Airways (India) Ltd’s founder chairman, Naresh Goyal, is
against it Mallya, in a letter to member airlines of lobby group Federation of
Indian Airlines (FIA) early this year, said it is essential to have access to
strategic foreign capital while investment sentiments at large towards aviation
are dismal and banks are reluctant to lend Jet Airways’ executive director Saroj
K. Datta countered Mallya’s argument in a mail to FIA, saying the inherent
problems such as excess capacity, irrational pricing, high input costs and
inefficient infrastructure are not going to be corrected by permitting the
foreign airlines to invest in Indian carriers. “The current reduced valuation of
the Indian carriers will also mean that the volume of funds that the foreign
airlines will be able to bring in will be pitifully small and will serve
virtually no purpose except to dilute control. The principal objective of the
Indian carriers, if they want to participate in the equity of Indian carriers,
is to be able to more easily channelize Indian origin traffic to support their
own operations to and from India,” Datta wrote. He echoed the same sentiments in
an interview with Mint this week Another senior executive with a private
airline, who asked not to be identified, said there is no rationale in diluting
equity when airline stocks are at record lows. The market capitalization of Jet
Airways is now around Rs2,600 crore, and that of Kingfisher Airlines at Rs1,700
crore. “Jet Airways and Kingfisher Airlines have raised Rs2,000 crore each from
banks. The amount vanished quickly because of (their) high cost structure Even
49% dilution to foreign carriers is not a permanent solution at all,” added this
executive.
Source: June 11, 2009, Mint
5. Konnect
may get Jet’s non-profitable routes
Jet Airways plans to discontinue flying on non profitable metro routes and plans
to replace these routes with its newly launched all-economy service Jet Airways
Konnect. The private airline, which lost its leadership position in terms of
occupancy to its domestic rival Kingfisher Airlines in past few months mainly
due to cut in business class travel by companies, is taking all possible
measures to regain its market share and increase the profitability of its
flights. The company has identified routes across the country on which the full
service carrier, Jet Airways, operates and has seen a significant decline in
occupancy. “We have identified certain routes, but are not ready to divulge
more,” Sudheer Raghavan, chief operating officer, Jet Airways, told Financial
Chronicle. He said that Jet Airways Konnect had seen a 25 per cent uplift in
passenger on average per flight compared with the full service carrier. The all
economy service completed one month of operation on June 7. Raghavan said that
any route where the company had seen significant preference for a low-fare
option was a candidate for Jet Konnect. “It is a flexible and rapidly deployable
solution,” he added. At present, Konnect connects metros such as Mumbai -
Chennai, Chennai-Bangalore , Bangalore-Hyderabad, Kolkata-Bangalore and Mumbai-Ahmadabad,
other than flights between metros and non-metros. Experts say that Jet’s full
service is battling with low seat factor on its flights in the southern region
of the country. So it would be wise to replace Jet Airways with Jet Airways
Konnect, as it will help push up the load factor. According to the data released
by the Directorate General of Civil Aviation, seat occupancy rate for Jet
Airways in April 2009 was almost 10 per cent lower to 65 per cent than 74.7 per
cent in same month the previous year. During the January-March 2009 quarter
also, occupancy level for Jet Airways was around 64 per cent, compared with over
70 per cent in the same quarter in 2008.
Source: June 08, 2009, Financial Chronicle
6. Business class back for babus
Air travel for bureaucrats availing of leave travel concession (LTC) will become
luxurious again as the Department of Personnel and Training (DoPT) has
re-introduced business class for them, six months after the finance ministry
restricted their flights to the “cheapest economy fare”. The DoPT’s new order
enables officers and their families to travel business class on LTC by any
airline, provided their fares are on a par or below those offered by Air India
under its LTC scheme for business class. “The ministry of civil aviation may
bring out a scheme on the lines of LTC 80 for travel by business class. The
officers and/or their families may choose to travel on LTC by any airline
provided the fare does not exceed the fares offered by NACIL (Air India) under
their new LTC scheme for business class,” reads the order, which became
effective from June 3. The decision was taken in consultation with the finance
ministry, which had earlier stipulated that for officials who are entitled to
travel by air and are availing of the LTC, “only the cheapest economy fare” will
be allowed, irrespective of their entitlements. After the restriction, the DoPT
received a number of references to restore travel entitlement as per a previous
official memorandum which said entitlements on LTC and official tours and
transfers will be the same but no daily allowance will be paid.
Source:
June 08, 2009, The Times Of India
7. DGCA
verdict on ‘zero commission’ likely this week
The tussle between travel agents and air carriers has gained momentum by
reaching the doors of regulatory body, directorate general of civil aviation (DGCA)
with the outcome expected this week. “We were evaluating to extend our boycott
from Singapore Airlines to the other foreign airlines who had gone for zero
commission. However, now we have kept it on hold and are confident that DGCA
decision will work for the survival of this industry. The airlines who have gone
to zero commission are asked to respond to DGCA with their views on certain
queries within 10 days (from May 29) post which the DGCA will take a final
decision,” said Rajinder Rai, president Travel Agents Association of India (TAAI).
The travel agents have been demanding to go back to the commission regime, while
foreign airlines are maintaining a status quo on ‘zero’ commission. In December
last year, over 2,500 accredited IATA (International Air Transport Association)
agents had taken the step to boycott Singapore Airlines tickets and stopped
selling the tickets of the carrier. They had expressed to boycott other foreign
airlines resorting to zero commission rule. The commission rates have been
progressively whittled down by the airlines from 9% to 7% and finally to 5%,
before eliminating them altogether. Agents had also toned down there demand in
case of Singapore Airlines from 5% earlier to 3% but had no success following
which they had approached Praful Patel, minister of civil aviation and planned
to intensify their agitation after the general elections. An agent who along
with members of his fraternity approached the DGCA to sort out the ‘zero
commission’ matter said, “The DGCA has asked the airlines to respond to our
complain.” Previously, agents were given 5% commission calculated on the basic
fare of any ticket, but now they contend that travel agents should charge
transaction fee from end-consumer. An official from a private airline says, “We
are doing away with the commission to save on distribution costs—the industry
spends close to Rs 200 crore on commissions to travel agents and portals.” He
further added that a time when the sector is reeling under financial crunch due
to dip in air travel, even a miniscule saving would mean a lot. On the other
side, agents say that The IATA resolution 810 (I) provides for payment of
commission at a rate to be fixed by the member (means the airline). It does not
say that commission is zero. “Its correct interpretation should be that a
reasonable rate would be fixed by the member,” said an agent.
Source:
June 08, 2009, The Financial Express
8. Air
India mulling no-frill service through AIE domestically
State-run Air India may now enter the no-frill segment in the domestic sector to
beat the downturn in the aviation industry. “We don’t see a turnaround in the
industry at least before two years ...We have to look at different business
models. One of the options could be a low-frill model...If a decision is taken,
it has to be Air India Express for the domestic sector” a top NACIL official
said here. While only four per cent of India’s population travels by air, in
Malaysia it is 50 per cent. Air India is exploring different business models to
beat the downturn and one of the options could be the low-frill model, the
official said. Air India already operates its low-cost Air India Express (AIE)
service on the Gulf and South-East Asian routes from several destinations in the
country. So far, AIE has not entered the domestic sector, even though it has
been planning to do so for quite some time. But now it has been forced to look
at this option seriously as in the current situation a business model has to be
evolved that is, “low-cost, low fare and meets the challenges of falling
passenger demand, rising operating costs and excess capacity,” the official
said. Recently, Jet Airways launched a new all-economy, low-cost service, Jet
Konnect, on 54 domestic routes with eight aircraft to begin with. Over all, Jet
Konnect plans to operate over 60 flights under this service, almost a quarter of
its total capacity. Jet’s peer, Kingfisher Airlines too has dedicated almost 50
per cent of its capacity to its budget arm, Kingfisher Red. Air India Express
presently operates over 200 flights per week. Of these, 175 are across
international destinations, 13 on the domestic routes and another 13 on behalf
of Air India. From an abysmally low two per cent market share during April
2007-December 2007 period, AIE’s market share jumped to six per cent during
February 2008-January 2009. The airline ferried over 2.25million passengers in
the just concluded fiscal as against 1.7million passengers carried by it in FY
08. AIE claims a load factor of on an average 75 per cent and providing
connectivity from interior points of the country directly to major destinations
across the two geographies.
Source: June 08, 2009, Business Standard
9. Global
airlines enter trouble zone as fuel costs soar, demand slumps
The global airline industry may lose $9 billion this year on account of falling
demand, excess capacity and increasing fuel price, and calls for a “drastic
reshaping” by governments and industry partners, according to the head of
umbrella body of air travel industry worldwide. “The industry is not looking for
a bailout. Our future depends on a drastic reshaping by partners, governments
and industry. We cannot bear the cost of government micro-regulation, crazy
taxation and partners abusing their monopoly power,” said International Air
Transport association (IATA) director general Giovanni Bisignani. This year,
around $80 billion will be wiped off the balance sheets of airline companies due
to a sharp fall in yield, fears of a pandemic and weak demand, he said at the
organisation’s 65th annual general meeting here. “Numbers can tell powerful
stories. We lost $10.4 billion last year. The ground shifted and our industry
was shaken. Skyrocketing oil prices dominated the first half of 2008. Global
recession was the story of the second half. The landscape is harsh,” Mr
Bisignani said. About 50 airlines across the world have gone under in the past
18 months, and industry estimates warn that airline companies would need about
$1 trillion for re-capitalisation. Advance technologies such as
videoconferencing has helped corporate houses to cut down travel budgets,
inflicting a heavy blow to the industry, he said. “We face a 15% drop (in
passenger traffic) because of the global recession. Our future depends upon
drastic resizing and reshaping by airlines,” Mr Bisignani said. After 9/11 in
2001, airline revenues fell by 7%. It took three years for the industry to
recover from that blow. In its revised forecast for the global airline industry,
IATA said that the industry’s revenues would decline by $80 billion to $448
billion in 2009 from $528 billion the previous year. The industry body estimates
about 100,000 jobs in the sector at risk.
Source: June 09, 2009, The Economic Times
10. Jet,
Kingfisher in touch with Airbus after Air France plane crash
In
the backdrop of flight AF 447, Air France’s ill-fated Airbus 330 aircraft that
was involved in last week’s crash in the Atlantic Ocean, Indian airline
companies using the same aircraft model Jet Airways and Kingfisher Airlines have
said they are in constant touch with Airbus. “Jet Airways is in continuous
communication with Airbus, if and when any new development/requirement arises
they will be complied with,” its spokesperson told Business Line. Till date, the
French aircraft manufacturer has not issued any directive to airlines regarding
any fault in Airbus 330 planes. However, quoting French air investigators,
foreign media reports said on Monday that Airbus had detected faulty speed
readings on its A330 aircraft ahead of last week’s crash, and had advised
clients to replace a part. An airspeed indicator is a flight instrument that
displays airspeed. This airspeed indicator has standardized markings for a
multi-engine airplane. The Jet spokesperson also said, “In January 2008 Airbus
had called for an inspection of Airspeed Indication System of the Airbus A 330
fleet. A programme was initiated and all inspections in accordance with Airbus
requirements were completed by April 2009.” Jet has 12 Airbus 330 in its fleet,
of which 10 are being operated by it and two have been leased out. Kingfisher
Airlines currently has five A330s in its fleet. According to Kingfisher’s
spokesperson, “All of these aircraft are equipped with the latest speed sensors
and hence no upgrade or changes are required to be made at this time”. He also
said the airline is in “full compliance with all precautionary guidelines issued
by the aircraft manufacturer”.
Source:
June 09, 2009, The Hindu Business Line
Prepared by
Jennifer Kumar, BBA (ANU) Alumni
Skyline Business School
Hauz Khas Enclave, New Delhi 110 016
Tel: 2686 4848, 2652 4399
http://www.skylinecollege.com