Indian Aviation Review 2010

Air Traffic Growth

The year 2010 has seen a robust growth in terms of aircraft movement and passengers handled. Vis-a-vis 2009 the growth rate has been 3.4% in respect of aircraft movement and 16.2% in respect of passengers handled and 26.9% with respect to cargo.

Passengers carried by domestic airlines from January-November, 2010 were 468.09 lakh as against 393.53 lakh in the corresponding period of the year 2009 thereby registering growth of +18.9%.

There are, at present, 16 Scheduled (11 scheduled passenger airlines, 02 scheduled regional airlines and 03 scheduled cargo airlines) and 121 Non-scheduled Operators. At present there are 419 aircraft with the scheduled operators. The total aircraft in the Non Scheduled category are 360.

This year saw the Ministry of Civil aviation take several initiatives to facilitate the passengers to undertake hassle free and convenient air travel by the issue of CARs through the Directorate General of Civil Aviation (DGCA).

A state of the art new integrated Terminal-3 has been operationalized at the Delhi Airport in July this year creating a new beginning in world class infrastructure, with public-private participation in the aviation sector.

The much awaited environmental clearance has also come through for construction of a New Green Field airport at Navi Mumbai.

Following are some of the important issues taken up by the Ministry of Civil Aviation during the year 2010:

Initiatives of the Ministry in the field of Economic Regulation

To elicit the views of stakeholders, to gain expertise from the concerned experts and to augment capacity to address issues that are predominantly economic in content, the Civil Aviation Economic Advisory Council was established on 9 December, 2010 under the Chairmanship of Secretary Civil Aviation and with members drawn from different fields of expertise that are directly and indirectly connected to Civil aviation sector. The first meeting of the Council took place on 13 December 2010.

Consumer protection measures

(i) On 6 of August, 2010 a Civil Aviation Rule (CAR) has been issued which provides for compensation and facilities to the passengers in case of denied boarding, cancellations and delays. The violation of this CAR is punishable under the provisions of scheduled VI to the Aircraft Rules, 1937. This will be a category III offence attracting a maximum penalty of 6 months in prison or Rs. 2 lac fine or both

(ii) On 31 July, 2010 CAR has been issued in order to promote fair competition in the airline sector and to ensure that consumers do not receive inaccurate or misleading information on airline services, by strengthening the computer reservation system/global distribution system

(iii On 3 September, 2010 the relevant Rule has been amended and circular issued to provide that the Pilot-In-Command may permit the use of cellular/mobile phones after the aircraft has landed and cleared active runway. However, this facility will not be available during low visibility conditions.

Connectivity in North Eastern Region

At present, there are 11 operational airports served by the Scheduled airlines in the North-East region viz. Dibrugarh, Guwahati, North Lakhimpur, Imphal, Dimapur, Agartala, Shillong, Jorhat, Silchar, Tezpur & Lengpui. 348 flights per week are being operated by NACIL, Alliance Air, Jet Airways, JetLite, Kingfisher Airlines, Spicejet and IndiGo to/from these airports.

The no. of flights in the NER has been increased from 286/week in Summer Schedule 2010 which is an increase of 21.67%. In addition, Pawan Hans Helicopters Ltd. (PHHL) is providing helicopter services under the aegis of the State Governments of Arunachal Pradesh, Nagaland, Meghalaya, Sikkim, Tripura.

Further, the DGCA has commissioned a comprehensive study to evolve a roadmap for air connectivity to the North-eastern region.

Bilateral Agreements

Election in the Council of ICAO

In the 37th Assembly session of the International Civil Aviation Organisation (ICAO) held at ICAO Headquarters at Montreal in Canada on 28 September – 08 October, 2010, elections were held for the representation of the Member State countries in the Part I, Part II and Part III of the Council of ICAO. India has contested for continuance of its representation in the Part II.

The total number of seats was 12, equaling the number of contestants. 163 countries cast their votes. India secured 148 votes out of 162 votes and was at number 2 position in the group in terms of number of votes secured.

Amendments of Air Services Agreements (ASAs) with foreign countries

Keeping in view the recent developments in the civil aviation sector, and with a view to modernize and update the existing ASAs with foreign countries as per the ICAO templates, bilateral air services consultations were held in 2010 with foreign countries viz. Zimbabwe, Indonesia, Ireland, Brazil, UK and Iran and the respective ASAs have been amended and finalized.

Bilateral Air Services Agreements were formally signed with Bhutan, Iceland, Nepal, Bosnia & Herzegovina, South Africa and Iran. Apart from these, new Air Services Agreements have been initialed with Senegal, Barbados and Rwanda.

Technical co-operation agreements with Nepal and Afghanistan

Technical co-operation agreements were signed by the Director General of Civil Aviation (DGCA) and Airports Authority of India (AAI) with the Nepalese and Afghan civil aviation authorities in order to provide active technical support including training of personnel to these countries by India to promote and develop civil aviation sector.

India – EU civil aviation co-operation programme

Under the Joint Action Plan, a Civil Aviation Co-operation Project - II has been agreed to. Its Terms of Reference (TOR) have been finalized. The project called “Institutional Capacity Building in the Civil Aviation sector in India (ICAA)” has been started under India – EU civil aviation co-operation.

India – US Aviation Joint Working Group on Security

The India – US Aviation Joint Group Meeting on Security was held in New Delhi on 20 – 21 January, 2010. During this meeting two MoUs on deployment of Air Marshals and Co-operation in Airport Technical Visits were signed between the Government of India and the Government of United States of America. The two MoUs mark the beginning of an ongoing co-operation between the two countries in matters of security.

Equity Induction by the Government in Air India

Air India is expected to incur a loss of Rs. 5,656.52 crores during the year 2009-10, mainly due to the prevalent economic recession, low yields and load factors coupled with higher fuel costs, higher interest payment on working capital loans and aircraft loans.

The present paid up equity capital of NACIL is Rs. 145 crores which is not sufficient for an aviation company of its size. Therefore, the Government has approved the release of funds to the extent of Rs. 800 crores in tranches of Rs. 400 crores in a month in the form of equity.

Accordingly, an amount of Rs. 800 crores has been released in February and March, 2010. A provision of Rs. 1200 crores has been made in the current financial year, the release of which is expected to happen this year. The equity induction would ease the cash flow situation of the company and preclude borrowing from the markets at high costs to this extent.

Meanwhile the company has seen an increase in load factor from 62% to 67% and also passenger yield from Rs. 2.92 to Rs. 3.30 RPKM.This has resulted in an increased Passenger and cargo revenue of Rs. 1,189 crores.

The company has undertaken several cost reduction measures with active support from the Government.

Security Measures

Keeping in view the security scenario and enhanced civil aviation activities, four regional offices of the Bureau of Civil Aviation Security (BCAS) has been created at Guwahati, Amritsar, Hyderabad and Ahmedabad airport in addition to the existing Regional offices at Delhi, Mumbai, Chennai and Kolkata.

The Anti-Hijacking (Amendment) Bill, 2010

With a view to enhance the punishment, for the offences of hijack of aircrafts and also for the conspirators, to death penalty, the amendment is proposed in the Anti-Hijacking Act, 1982. The final Bill has been introduced in the Rajya Sabha on 19 August, 2010. The Bill has now been referred to the Ministry of Law.

Mangalore Crash - IX 812 of Air India Express operating from Dubai to Mangalore was involved in an unfortunate accident on 22nd May 2010. There were 160 passengers and 6 crew members on Board. There were only 8 survivors. A Court of Enquiry headed by Air Marshal (Retd.) B.N. Gokhale was set up. The Court has submitted its report which is under examination.

Airports

Phase-I of the Modernization of Delhi Airport was completed on 31 March 2010, at an estimated project cost of Rs. 12258 crores. A new integrated Terminal-3 has become operational which has 34 million passengers handling capacity per annum.

The major development works completed Modernization of Mumbai Airport during 201010 are South-West pier, integrated processor terminal, Baggage Handling System (BHS) in the new domestic terminal, six Passenger Boarding Bridges (PBBs) in the new domestic terminal.

Under the Policy for Greenfield Airports the Government, during the year had accorded “in-principle” approval for setting up of a Greenfield airport at Dabra (Madhya Pradesh), Palladi (Rajasthan), Itanagar (Arunachal Pradesh), Kushi Nager (Uttar Pradesh).

Airports Authority of India (AAI) Airports Authority of India registered an all time high revenues of Rs. 4,615 Crores, which was 10% more than the previous year. Similarly, capital expenditure incurred on infrastructure works at various airports rose from Rs. 2547.52 crores to Rs. 2,742.54 crores.

New Terminal Buildings have been commissioned at Varanasi, Barapani (Shillong), Madurai, Mysore and Ahmedabad airports.Existing terminal buildings have been upgraded/ modernized at Pune, airport. Runways/ Taxiways have been extended / expanded at Varanasi, Ranchi, Guwahati, Bhopal, Gondia, Ludhiana, Cuddappah and Coimbatore airports.

Upto November 2010 progress of work for modernization and development at Chennai and Kolkata Airports has been 66% and 46%.Work on the construction of new Greenfield Airports at Pakyong in Sikkim is in progress.

For the implementation of the GAGAN project of satellite based navigation, site acceptance test for Indian reference stations has been completed at Goa, Jaiselmer, Porbander and work is in progress at Dibrugarh, Nagpur and Bhubaneswar.

A dedicated Air Cargo Complex facility at Veer Savarkar Airport, Port Blair has been operationalised.

A new Joint Venture Company under the name “Chandigarh International Airport Limited” has been set up to undertake the construction of a new International Terminal Building at Chandigarh Airport.

Setting up of International airport at Navi Mumbai: After getting the environmental clearance in November this year, the development of the Greenfield airport at Navi Mumbai will get underway. It is projected to have sufficient capacity to handle the additional traffic around Mumbai, which is expected to go upto about 80 mppa by 2031-32

Helicopters

Pawan Hans Helicopters Ltd. (PHHL) In 2009-10 the Company achieved record revenue hours of 29,890 as compared to 27,050 in 2008-09. During 2009-10 the net profit after tax was Rs.35.59 crores as against Rs.25.12 crores in 2008-09.An MOU has been signed with Andaman & Nicobar Administration for introduction of Sea Plane Operation in Andaman & Nicobar Islands. The Sea Plane operation for the first time in India will commence from 27 December, 2010. PHHL has completed and operationalised two projects of heliport /helipad in October, 2010 – one at Akshardham and the other at Rohini, both in Delhi. DGCA has also allowed PHHL to utilize the facilities at Gliding Center at Hadapsar to set up a Heliport and helicopter training institute.

Training and development

Indira Gandhi Rashtriya Uran Akademi (IGRUA): - The Akademi this year, has inducted 14 Single engine DA 40 Aircraft and one twin engine DA 42 aircraft and installed two Flight Simulators. The Akademi has 14 flying instructors and has flown 14934 hrs during 2010. So far this year, 62 cadets have completed their flying and 114 trainees have been inducted. Campus selection team from Air India and Jet Airways visited Akademi in Aug/Sept. and December, 2010 for induction of trainee pilots.

Events and Accolades

India Aviation 2010 - a Civil Aviation air show, was held for the second time at Begampet Airport, Hyderabad in March 2010. The next edition would be held from 14-18, March 2012.

An independent audit by FAA under IASA program confirmed India to be a role model in the Asia Region in the Civil Aviation. The Ministry of Civil Aviation was awarded on 1 December, 2010 the “KPMG – Infrastructure Today Award” for being the most admired Central Entity in the transport sector.

Aviation sector has grown due to low fares

Expressing concern over exorbitant fares charged by airlines, Civil Aviation Minister Praful Patel today said the aviation industry should keep in mind that the phenomenal growth in the sector has been due to the low fares offered earlier.

"For five years, the aviation sector has grown on the back of low fares. We can''t ignore this fact. The benefits of low fares have gone to the travelling public," he told PTI days after warning the airlines that the government "cannot be a mute spectator" to the exorbitant last-minute fares they were charging.

He said the government wanted to be "open and transparent, but not interfering. It does not want to see either inconvenience to passengers or an unhealthy industry. It has to be a judicious mix of the two."

Patel''s comments came days after the Ministry and the Directorate General of Civil Aviation (DGCA) asked domestic carriers to reduce spot fares (last-minute fares) and maintain transparency so that passengers were aware of the price they would pay if they travel on a route on a given date.

"Our concern is two-fold -- one that the fare structure is transparent and simple so that one knows what is the cost when one buys a ticket, and there are no hidden costs. The other concern is that the absolutely exorbitant spot fares, ... are not acceptable to the government," he said answering questions.

He, however, made it clear that "we are not fixing the fares. We cannot decide airfares in a de-regulated sector. We don''t wish to get into this area as airfares are driven by competition."

Patel said the spot fares were substantially hiked by airlines during and after Diwali as there was "a temporary mismatch between demand and supply."

Maintaining that the new Tariff Monitoring Unit (TMU) set up in the DGCA would not intervene in fare fixing, he said it would examine the fares and advise the government especially when the fares are very high.

"We also do not encourage predatory fares that encourage unhealthy competition and jeopardise the prospects of the industry," the Minister said, making it clear that the TMU would only guide the DGCA and the government when fares are very high or low.

Budget airlines are the real culprits in fleecing

AIR TRAVELLERS, accustomed to paying low fares since the advent of low-cost airlines, have been up in arms at being ‘fleeced’ by airlines during the recent weeks. High fares on certain sectors for last-minute ticketing has compelled the DGCA and the civil aviation ministry to intervene and reportedly force the airlines to roll back the fares.

As all of us would naturally be interested in low fares, the justification of supply-demand determining fare levels advanced by the airlines hasn’t found acceptance. They have been described as greedy and engaged in exploitation. As the dust on the issue settles with fares returning to almost normal levels, it’s time to take a dispassionate look at the issue. Which of the two sides has been right and to what extent?

It needs to be understood that the airline industry is in the unregulated sector and market forces should therefore logically determine the are levels, like in other sectors of the industry. It also needs to be appreciated that the airlines are here for business, not charity. The industry is seasonal in character and passenger loads are not uniformly even year round. India has witnessed low fares not because they are economical and give adequate returns on investment to the airlines, but because the new players, who entered the market in the 2004-06 period, first offered low fares to garner marketshare. The subsequent years of economic downturn compelled the airlines to keep fares at low levels — thus making them, though uneconomical from the airlines’ point of view, look like ‘realistic’ fares.

All airlines, irrespective of their geographical location, follow a revenue management system like the Indian carriers. Seats on a flight are segmented in various sub-classes at different fare levels. If you buy the initial few seats you pay less. By the same logic, if you buy close to the flight’s departure time, you pay more and this fare is at the core of the controversy. Airlines have worsened their case by listing fares at Rs. 30,000-Rs. 40,000 at the upper end of the price band. The media has largely focussed on these ridiculous fares rather than presenting the realistic scenario of fares being high only during peak periods when flights operate with high occupancy and last-minute travellers are buying the last few seats. Fewer the number of seats available, higher the value of tickets. Nothing unique about this principle.

If a section of the media and some passengers had been unreasonable in accusing the airlines of charging exorbitant fares during peak periods, airlines recovering from the losses incurred during the economic downturn of 2008 apparently began feeling that these happier days may not last very long and hence should boost their bottom line by charging whatever they can get a passenger to pay. This action is clearly indefensible. As passengers are the bread and butter for an airline, the latter need to maintain long-term relationships rather than enhance revenue manifold by taking a myopic view. What’s been surprising is that it has been the low-cost airlines that have jacked up their fares to astronomical levels, giving the entire industry a bad name.

Considering that the number of passengers has been growing and the augmentation of capacity in the domestic market hasn’t been keeping pace, airlines are expected to continue recording high load factors and therefore be in a position to manipulate the market. The ministry should logically monitor capacity and not fares. Induction of capacity periodically by either the existing airlines or new airlines will be the safest guarantee against exorbitant fares.

My Views -

Its unfair to blame low cost airlines for this fair, each airline is equally important in this. I my self has paid around Rs. 8000/- for a Bangalore-Delhi (via-Ahmadabad) flight 3 years back when I bought it directly from the airport with luggage in my hand.

Though last moment fares can be higher if Airlines are selling with deep discounts for initial tickets, but those should not create a hole in passengers purse.

Praful Patel worked more as a minister for Naresh Goyal (owner of Jet Airways)

Well this is latest on Praful episode on Air India. So sad for a minister to work for one or two company... for the sake of kickbacks... www.outlookindia.com | 11-188819-0-28-20090529-125818

the Niira Radia tapes regarding Air India

Surojit: Praful Patel 'screwed up the airline' and now wants to bring in Ratan Tata to tell the PM that he would do something. 'It was Sharad Pawar who wrote to Vajpayee to allow Naresh Goel to bid for Air India' and these are the people who are now trying to say that they are trying to revive the airline... www.outlookindia.com | #126 Surojit: Jul 08, 2009 09:46:37

www.outlookindia.com | #118 Jaideep Bose, ET: Jul 07, 2009 20:44:12

This is I got from Outlook Magazine - With Jaideep Bose, ET: "The whole intention of Praful Patel was to strip the airline... huge amounts of kickbacks have taken place in various aircraft purchases... but he's raped it, asset-strip so that he could give it away to Vijay Mallya and Naresh Goyal... Praful's a silent partner in Indigo..he's made at least in the vicinity of 15,000 crores.. and they removed Sunil Arora because he had sent a whole dossier to PM and Sonia Gandhi... Praful wanted him out because he wouldn't cut deals". www.outlookindia.com | #118 Jaideep Bose, ET: Jul 07, 2009 20:44:12