Issue 266

1. Jet, KFA raise fuel surcharge by Rs 400
The country’s private full service carriers, Jet Airways and Kingfisher Airlines (KFA), have increased their fuel surcharge by Rs 400 from today, as a result of successive increases in the prices of Aviation Turbine Fuel (ATF). Two days earlier, state-run oil firms hiked ATF rates by over 12 per cent on firming international oil prices. Indian Oil, Bharat Petroleum and Hindustan Petroleum raised the ATF price by Rs 3,949, to Rs 36,252 per kl in Delhi. International crude oil prices have firmed to a seven-month high of $72 per barrel, on hopes of demand revival in the US. The increased air surcharge, now at Rs 3,400 a ticket, are applicable on tickets of Jet and its two wholly owned low-fare subsidiaries, JetLite and Jet Airways Konnect. A company statement from Jet Airways says, “The increase was necessitated by sharp increase in ATF prices by 33 per cent since March 2009.” On Kingfisher First and Kingfisher Class, for distances below 750 km, the surcharge will now be Rs 2,550. For distances above 750 km, it will now be Rs 3,400. On Kingfisher Red, for distances below 750 km, the surcharge will now be Rs 2,350, while for distances above 750 km it will now be Rs 3,100. State-run carrier Air India also has plans to hike fuel surcharge very soon. “We are actively examining the impact of ATF price hike. We will be announcing our decision in a day or two, ” a spokesman said. AI currently levies fuel surcharge of Rs 1,950 and Rs 2,700 on tickets up to and beyond 750 km, respectively. Among the low-cost carriers, SpiceJet may also come up with a price revision tomorrow. “We are still evaluating the price hike. We will take a decision tomorrow,” said Samyukth Sridharan, Chief Operating Officer. Industry experts say the low-cost carriers may hike the surcharge by Rs 300 to Rs 400. Travel portals, however, do not see the hikes as a serious threat. “Families which are going for leisure trips, who have time in their hands may rethink before confirming their bookings. But I don’t think single travellers and corporate travellers will feel the pinch,” said Bhawna Agarwal, Head of Air Business, Yatra.com.
Source: June 18, 2009, Business Standard

2. JAL to cut flights due to swine flu
Japan Airlines (JAL) on Tuesday said it will cut the number of flights it operates on eight international routes, including to Delhi this summer due to flagging demand amid the global economic downturn and the spread of the new strain of influenza. JAL plans to reduce the number of flights it operates on five routes linking Narita Airport with Beijing, Shanghai, Taipei, Seoul and Delhi. It will also cut the number of flights on two routes linking Osaka's Kansai International Airport with Shanghai and Seoul. The number of flights on the routes will be reduced from July or August to October 24. However, the airline did not say how many fights will be cut under the new schedule. JAL's decision came after the government relaxed a rule allowing for the withdrawal next year of arrival and departure slots for international flights in the event of low levels of usage. The government announced last week it has suspended the rule in the face of declining demand for air travel and cargo due to the economic downturn and the new-flu outbreak.
Source: June 17, 2009, Financial Chronicle

3. Etihad increases services from Kozhikode
Etihad Airways, the national airline of the United Arab Emirates, will increase its connections from Kozhikode to major destinations in Europe and the US as also to Saudi Arabia through its hub in Abu Dhabi. The improved connections follow revisions to the flight schedule due to which services from Kozhikode will depart at 5 a.m. hrs on Mondays, Wednesdays and Saturdays and at 2-15 p.m. on Thursdays. Ms Neerja Bhatia, Country Manager for India and Sri Lanka, Etihad Airways, said the airline started services to Kozhikode in August 2008. In response to the evolving needs of passengers, the airline had introduced a restructured schedule, which will provide better connections and added value to customers in Kerala. This is an extremely “important route for us and we are committed to providing a superior, all-round travel experience.” With the rescheduling, Kozhikode will connect to Paris, Manchester, Milan and Geneva in Europe and to New York and other destinations through interline agreements in the US, she said in a statement.
Source: June 18, 2009, The Hindu Business Line

4. Jet takes off on the low-cost, no-frills route
To draw more passengers, Jet Airways is going the low-cost way. By end-June, 110 of its 290 flights will offer no-frills services.

No free meals
The 110 flights will be offered on Jet’s sub-brand, Konnect, launched on May 8. The on-ground and in-flight service on Konnect will be delivered by Jet Airways staff; however, travellers will have to buy their meals on board. Jet Airways also owns JetLite low-cost airline, which will operate 109 daily flights. Thus, of the 400 daily flights, about 220 will have only the economy class. Giving financial analysts, an indication of things to come, the airline’s Chief Executive Officer, Mr Wolfgang Prock-Schauer, said, “For the short to medium term, the company is adapting to the existing market realities and intends to capture price-sensitive markets through Jet Konnect, in addition to the JetLite offering. These are no-frills economy class services designated to meet the needs of the of the low-fare segment. ”He said the global recession had impacted corporate travel as companies were cutting down costs and travel. “Leisure travel has been impacted. The domestic market has shown a decline of around 10 per cent for the year ended March 2009 and as against this capacity offered has reduced only by 3 per cent for the period. Currently, yields have been on the decline due to low occupancy in business class,” he added. The Chief Commercial Officer, Mr Sudheer Raghavan, said that with consumer demand changing rapidly in a dynamic global environment, the Konnect service will give the airline the flexibility and the speed to deploy capacity to meet these changing trends. The service, which was launched with two Boeing 737s and six ATRs, will have a fleet of seven Boeing and 10 ATR aircraft by the end of the month.

Kingfisher too
The decision of Jet Airways to operate more flights in the no-frills economy class airlines from among its brands comes on the heels of another full-service airline, Kingfisher, going the same path, In May, Kingfisher Airlines converted more than 20 flights to Kingfisher Red, its low-cost cousin. The decision of Jet Airways to go the low-cost road will affect several vendors including those in the catering business. “The move will result in a drop of about 25 per cent in the catering business, which means that if Jet Airways was uplifting 100 meals a day, they will now pick up only 75,” a source in the catering industry said. The move could also affect the travel agents as their incomes can get affected due to lower fares.
Source: June 18, 2009, The Hindu Business Line

5. Macau-India direct flight to take off soon
The country is likely to have direct flights to and from Macau soon, a tourist destination that earns about S l billion monthly from casino gambling, located in the eastern Asian region, around 60 kilometres southwest of Hong Kong, bordering China. Viva Macau, a low cost airline that operates direct flights between Macau and other destinations that include Jakarta, Sydney, Vietnam is planning to start direct flights to Indian destinations in the second half of this year. Macau attracts over 30 million tourists annually and earned $3.3 billion in the first quarter of 2009 as revenue from casino gambling. "We are working towards operationalising direct flights to and from Indian destinations. We hope to start direct flights in the later half of the year, in most likelihood between Macau and Mumbai," said Reginald Macdonald, CEO, Viva Macau Ltd. Viva Macau, a privately-owned airline in which international venture capital firm MKW Capital has invested, is hunting for partners in India to market and distribute Macau tourism. Macau, that hosted the UFA film awards this year, has seen a seasonal spurt of around 25-30% rise in Indian tourists in last 3-4 months compared to the first 2-3 months of 2009, observe tour operators of Macau participating in Ficci-IIFA global business forum. According to the Macau government data, the destination with 22 odd casinos, has witnessed about 28% year-on-year growth in tourists from India for the month of April. The annual growth for January-April 2009 (23,607 tourists) stands at 19% compared to the corresponding period of 2008 (19,758 tourists). Macdonald notes that the number of Indian visitors could be much higher as a large chunk of Indian tourists come to Macau from countries like Indonesia or other Southeast Asian destinations, to which Macau is directly connected by air. He hopes that the real tourism potential between India and Macau can be harnessed, once direct air connectivity is ensured between the two destinations and more such crowd pulling events like UFA are hosted. KK Modi, chairman, Modi Enterprises and head of Ficci's India-China Joint Business Council also seconds Macau as an attractive and economical destination for business tourism. "We had organised a meet, mostly business executives from Modi Enterprises in Macau in April. Considering the bulk discounts and package tour offers, hosting an event of such a scale in India would have proved more expensive," said Modi saying that Indian tourists are just waking upto Macau's potential.
Source: June 15, 2009, The Financial Express

6. ‘Air France plane split in two before it hit water’
The Air France jet that crashed into the Atlantic with 228 people on board broke apart before it hit the water, throwing out some passengers at high altitude, investigators believe. Their conclusion is based on the discovery of two trails of bodies more than 50 miles apart, suggesting that the Airbus split in two after going out of control in bad weather and turbulence during its flight from Rio de Janeiro to Paris on June 1. Examination of bodies discovered off the north eastern Brazilian coast suggested that they were dead by the time they hit the water. They were stripped of clothes, apparently in the rush of air as they fell from as high as 35,000ft. Multiple fractures were most likely to have been caused by hitting the water at about 120mph. The absence of any traces of an explosion, such as burn marks or inhaled smoke, supports the view of investigators that the disaster was caused by a combination of factors, possibly beginning with the blockage of speed sensors. The sensors, called pitot tubes, are prone to getting clogged with ice and insects. One theory is that the “inconsistent” speed readings caused the automatic pilot to disengage, leaving the crew trying to fly manually - a difficult task at high altitude without knowing the plane’s speed.
Source: June 15, 2009, The Times Of India

7. Jet Konnect ups flights to 100 per day
Jet Airways Konnect, an all economy service run by Jet Airways (India), has increased the number of flights by over 60 per cent within a month of operation to 100 per day. The increased frequency kicks in with effect from Monday. Konnect was launched with 62 flights on May 8, this year. On June 12, the Naresh Goyal-promoted carrier increased the flights further to 92. The steady month-on month increase in flights is symptomatic of the pressure facing the struggling aviation industry in India that is desperately seeking to woo travellers with discount pricing. Jet, which is known as a premium airline, wants to limit the dilution of its brand equity and has therefore come up with a new brand to compete in price wars, industry experts said. Jet Airways also controls the economy carrier JetLite. Senior Jet Airways officials told Financial Chronicle that they are introducing Konnect services on price sensitive routes where lower fares are likely to spur increased occupancy that could help the airline break even and perhaps even earn profits. “The company has seen an increase in bookings by 35 per cent and the occupancy has also gone up from 50 per cent to 70 per cent for the low cost service,” said Ragini Chopra, vice-president – corporate communications, Jet Airways (India). The company plans to add four Boeing 737-800 aircraft in a phased manner from June 16, 2009 for the Konnect offering. With the introduction of these new aircraft, Konnect will have a fleet of seven Boeing 737-800 and 10 ATR 72-500 aircraft. Chopra said the airline has enhanced the capacity in the Boeing 737-800 aircraft by removing the business class seats. “Some aircraft will be able to seat 176, while some can accommodate around 168 passengers,” she said. When asked, whether the company is planning to increase its fares due to rising crude oil prices, Chopra said, “Nothing has been decided on fare hikes. We are watching the market condition based on which we will take a decision.”
Source: June 16, 2009, Financial Chronicle

8. BA asks staff to work for nothing
British Airways (BA), which reported a record annual loss last month, said on Tuesday it had asked its staff to work for free as part of the company’s battle for “survival” in tough market conditions. The appeal to its British based employees, which featured in the company’s staff magazine, asks workers to volunteer for between a week and a month in unpaid leave or in unpaid work. CEO Willie Walsh, who along with the chief financial officer Keith Williams has promised to work for nothing in July, said the idea was part of BA’s across the board cost-cutting measures. “Many of you from across the airline are stepping up to help the company,” Walsh said. “I am looking for every single part of the company to take part in some way in this cash-effective way of helping the company’s survival plan.” BA posted annual operating losses of £220 million and scrapped its dividend in May, saying it had suffered from a downturn in air travel and forecast no immediate revival.
Source: June 17, 2009, The Economic Times

9. IndiGo adds Patna as a new sector
Low cost airline IndiGo announced on Tuesday the launch of Patna as a new sector, expanding its route network. IndiGo will introduce two new flights with round trips from Patna with effect from July 4. With the launch, IndiGo will operate 137 daily flights connecting 19 destinations.
Source: June 17, 2009, Business Standard

10. US investment co shows interest in funding KF
Kingfisher Airlines, which is actively looking for an equity infusion, is said to have received an expression of interest from Indigo Partners, a US-based airline investor. According to sources, Indigo Partners has submitted a term sheet to Kingfisher Airlines. The term sheet is said to have come with certain conditions, which airline owner Vijay Mallya may have to abide by if he wants Indigo’s support. Indigo is a pure-play global aviation investor, and is one of the key investors on board Singapore Airline’s low-cost airline Tiger Airways. Indigo has also invested in numerous airlines based in Russia and Europe. Sources in Mallya’s UB Group said that while Kingfisher has received a term sheet from Indigo, it has not yet executed on that. Indigo is said to have asked for a detailed statement on the financial health of the loss making carrier. The investors are also believed to have laid down a clause seeking a joint committee to whom the CEO and CFO of the company would report to. That means Kingfisher would have to appoint a full-time CEO to run the operations. Currently, Mallya is at the helm of the airline company with various operational heads running the show. Sources say that the talks with Indigo have not progressed much beyond getting the term sheet, as Mallya is still pondering the clauses. Kingfisher is currently negotiating with nationalised banks—including State Bank of India, Punjab National Bank, Bank of India and Bank of Baroda—to raise a debt of Rs 2,000 crore. Mallya has said in the past that he is looking at an equity dilution at the entity level amounting to $400 million (Rs 2,000 core). Kingfisher Airline’s market capitalisation calculated on the company’s current share value stands at Rs 1,547 crore. Mallya had also been lobbying for foreign direct investment in the aviation space, which would allow international carriers to hold equity stake in Indian carriers. Recently, there was speculation over Singapore Airlines looking to pick up a stake in Kingfisher.
Source: June 17, 2009, The Times Of India

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