Airlines see blue skies in FY11 on cost cuts, improved traffic

India’s airlines are expected to post aggregate losses of around $2 billion (Rs9,260 crore) in 2009-10, largely on account of excess capacity and high fuel prices, but most of them are looking forward to a better, even profitable, 2010-11 on the back of their own cost-cutting measures and an increase in passenger traffic. The growth has already started coming in. If the current situation prevails, the next financial year will be good for airlines. Most importantly, the gap between demand and supply will disappear in the year. Demand could outstrip supply by 2014. That marks a significant turnaround for a sector plagued by overcapacity in 2008-09 and part of 2009-10. The aggregate loss of India’s airlines rose 44% to Rs8,557.37 crore in 2008-09 and the airlines expect to post a loss of a similar magnitude this year. Meanwhile, passenger traffic in the country, the fourth highest in the world after that in the US, China, and Japan, fell in 2008-09 on the back of high tariffs; it also fell in the first part of 2009-10. (Negative outlook: The aggregate loss of India’s airlines rose 44% to Rs8,557.37 crore in 2008-09 and the airlines expect to post a loss of a similar magnitude this year.) However, most airlines have started posting better results in recent months. Jet Airways (India) Ltd, the country’s largest airline, showed a 33% increase in its domestic passenger traffic in November, compared with the same period last year. The airline’s international passenger traffic has also registered a growth of 19% in November. Even in what is typically the lean season for Indian airlines, Jet Airways managed to clock an operating profit of Rs44.24 crore for the quarter ended 30 September. However, its net loss in the quarter widened to Rs406.69 crore from Rs384.53 crore a year earlier, largely on account of a five-day pilots’ strike and lower airfares. The Indian aviation market is growing realistically at 4-5% currently, compared to the levels of 2007-08, which was the boom period. The issue of overcapacity has been addressed. That’s an opinion that is seconded by analysts. The airline sector is exhibiting strong recovery, with an increase in passenger traffic and bottoming of yields. This, along with stable oil prices, is expected to lead to (the) sector turning profitable by next year. “I have always been very optimistic about the Indian market. All signs are that traffic is improving but we also need to see an improvement in yields. The yield improvement will come as capacity is constrained and I am sure we will see another wave of orders (for planes) in 2011-12,” said Kiran Rao, executive vice-president, marketing and contracts, for aircraft manufacturer Airbus SAS. Not everyone agrees with that. Airline CEOs (chief executive officers) are always optimistic and they will expect profit every year. As long as the growth is artificial and fares do not cover the cost of operations, profitability will be a question. An industry analyst, who did not want to be identified, pointed out a potential problem arising from Indian carriers cancelling or deferring orders for aircraft. “Most of the carriers have deferred their aircraft acquisition plans. If the revival is true and if they fly back to black, they will miss the wave of next boom.” Over the past month, shares of Jet Airways have risen 19.68% and closed at Rs560.45 each on Wednesday on the Bombay Stock Exchange. Shares of Kingfisher Airlines Ltd rose 15.06% to close at Rs60.35 each, and those of SpiceJet Ltd zoomed 31.22% to close at Rs55.90 each in the same period. The exchange’s benchmark Sensex index has risen by 3.8% in the same period and ended Wednesday at 17125.22 points.

DGCA deregisters 3 Paramount aircraft...

Directorate General of Civil Aviation (DGCA), has deregistered three of the five aircraft in the fleet of Chennai-based Paramount Airways Pvt. Ltd. This is the second time since last year that the regulator has deregistered aircraft at the behest of lessors owing to defaults in lease payment. GE Commercial Aviation Services (Gecas) last year confiscated three aircraft from Kingfisher Airlines Ltd, the country’s second largest private airline, for this reason. In October Gecas had sought to de-register Paramount’s aircraft and DGCA was considering the move. Four-year-old Paramount, with a market share of around 2%, largely flies within southern India, using its leased fleet of Embraer 70-75 seater aircraft. “Air traffic control (ATC) has already been informed of the registration numbers of the aircraft today,” said one of two top government officials. The second government official said the airline has told DGCA that the aircraft should not be deregistered as the carrier has won a case over lease payments in London against Gecas. “We will not go on hearsay,” the official said. “When the original copy of any such order comes, then we can register them again with the relevant charges.” A Paramount Airways official who spoke on condition of anonymity confirmed that there was an order to deregister the aircraft but reiterated that the airline has won a case over the issue in London. Paramount will present its case to DGCA, this official said, adding that he expects the planes to keep flying. Paramount’s aircraft carrying the registration numbers VT-PAD, VT-PAE and VT-PAF have been deregistered, according to the officials. The three aircraft were part of a lease agreement with Gecas dated 29 July 2005. The airline is currently operating around 20 daily flights after two of its aircraft were grounded in the past three months due to engineering issues, said another airline official who asked not be named as he is not authorized to speak with the media. Gecas’s spokesperson could not be reached for comments by email or telephone. DGCA’s spokesperson was not available to comment.

Unused Airports in India...

There are 32 airports belonging to Airports Authority of India (AAI) which are non-operational (Unused). They are Cuddapah, Donakonda and Warangal in Andhra Pradesh; Passighat in Arunachal Pradesh; Rupsi in Assam; Jogbani, Muzaffarpur and Raxaul in Bihar; Bilaspur in Chhattisgarh; Deesa in Gujarat; Chakulia in Jharkhand; Mysore in Karnataka; Khandwa, Panna and Satna in Madhya Pradesh; Akola, Solapur and Jalgaon in Mahrashtra; Shella in Meghalaya; Aizwal in Mizoram; Jharsuguda in Orissa; Kishangarh in Rajasthan; Vellore in Tamil Nadu; Kailashahar, Kamalpur and Khowai in Tripura; Asansol, Balurghat, Behala and Malda in West Bengal & Jhansi and Lalitpur in Uttar Pradesh. Expenditure incurred on the maintenance of some of these 32 non-operational airports during the last 3 years as well as the loss incurred at these airports are as under. The expenditure made and loss occurred (Rs. In lakhs) are in bracket:- For the year 2006-07 – Cuddapah (10.51,10.47), Jogbani (0.50, 0.50), Jharsuguda (78.77, 78.11), Kailshahar (1.24, 1.24), Vellore (6.95, 6.93), Balurghat (4.81, 4.51), Behala (24.88, 24.88) and Malda (23.07, 22.76); for 2007-08 – Cuddapah (14.50, 14.48), Jharsuguda (83.73, 83.37), Vellore (11.12, 10.81), Balurghat (10.48, 10.48), Behala (51.36, 43.64) and Malda (36.48, 36.48), and for 2008-09 – Cuddapah (42.33, 41.86), Mysore (13.88, 13.88), Jharsuguda (154.79, 154.79), Vellore (18.78, 18.79), Balurghat (10.76, 10.76), Behala (112.59, 112.59) and Malda (56.41, 56.41). Cooch Behar in West Bengal and Akola and Solapur in Maharashtra were made operational in the last three years. Mysore Airport in Karnataka will be made operational in 2009-10. This information was given by Shri Praful Patel, Minister of Civil Aviation in Lok Sabha.

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Falcon 7X approved for India

Dassault Falcon is expecting a surge of orders from India following announcement that the French manufacturer has received a type certificate for the Falcon 7X from India's civil aviation authority. Falcon 2000 and 900 models are already certificated in India and around 16 large-cabin Falcons are in service in the country. The first Falcon 7X in India will be delivered in January 2010 to Religare Voyages, a charter company based in New Delhi and part of a multi-billion dollar integrated transnational promoter group straddling financial services, diagnostics, health and wellness, and IT services, globally. Religare Voyages operates a Falcon 2000, together with smaller jets and turboprops.

A dozen of other large-cabin Falcons including several 7X aircraft are on order for customers in India. The performance of the Falcons are especially valued in India, where short airfields, elevated runways and high temperatures are common. Dassault has also established in the last few years a spares centre in Mumbai, along with a customer service team based in Mumbai, a liaison office in Delhi, and service centres approved by the Indian civil aviation authority. "India has been one of our strongest markets over several years so Falcon 7X type certification is of real significance," says John Rosanvallon, Dassault Falcon president and chief executive. "As the country's economy continues to strengthen, there will be an increasing need to connect India efficiently with other major centres of trade around the world. For example, the Falcon 7X provides direct, non-stop access from Chennai, India with London City airport."

Paramount Airways flying in rough weather

Aircraft lessor GE Commercial Aviation Services (Gecas), an arm of General Electric Co. (GE), has asked India’s aviation regulator to de-register three Embraer jets leased to Chennai-based Paramount Airways Pvt. Ltd, after the airline defaulted on payments for the aircraft. Indian carriers have been under financial strain with at least $1 billion (about Rs4,800 crore) in losses in the fiscal year ended March, resulting in defaults on aircraft payments. Simultaneously, the global economic recession has meant that lessors suffering a credit crunch are pushing hard to extract payments. Last year, Gecas confiscated three aircraft from Kingfisher Airlines Ltd, the country’s second largest private airline, owing to non-payment of dues. In a letter dated 25 September to Paramount and the Directorate General of Civil Aviation (DGCA), Gecas says the airline “has failed to remedy the events of default referred in the notice and as at the date of this notice there still remains $215,540.18” in dues. Paramount has informed DGCA that it has already paid 65% of the sum and has a deposit of about $15 million with Gecas, including a $5 million safety deposit and the balance towards maintenance reserve. “As per the contract, Paramount is entitled to refund to the tune of $1.27 million,” it said. A Paramount official said on condition of anonymity that the airline has asked Gecas “to offset the rentals against the reserves”. He added that the matter is being resolved through talks. Paramount, which has a 2% share in the domestic market, runs a fleet of five leased Embraer jets. It has kept its operations limited and manageable so far, unlike other carriers that have outpaced the local industry’s growth. Gecas has sought back three of these aircraft, leased as part of a 29 July 2005 agreement. Gecas said in its letter to DGCA that it has the option to terminate the leases if Paramount continued to default on payments and operate the aircraft in breach of its grounding notice dated 24 September.

Cleaning aircraft-cabin air

ONE concern of travellers is that flying can make you ill. Despite soothing reassurances from airlines that the air inside an aircraft’s cabin is as clean as it can be, hundreds of people cooped up in a small space for a long time increases the risk of catching an infection. Viral diseases such as swine flu have spread quickly around the world by air. There are also pollutants to worry about: some airline staff claim to have been made seriously ill by engine fumes leaking into the cabin. A new development could help passengers and crew breathe more easily. It can be fitted during a routine overnight service and uses less power than a light bulb, but is capable of zapping just about all the bacteria, viruses and other biohazards in cabin air—as well as destroying chemical contaminants and pollutants. And it also removes nasty smells.

Staying alive

Air has to be pumped into the fuselage of an aircraft once it flies above 3,000 metres (9,800 feet) because from there the air outside starts to become thin with too little oxygen to keep people alive. In the early days of commercial flight, when piston engines turned propellers, electrical generators were used to provide the power to pressurise the cabin. But with the arrival of faster, higher-flying jets, aircraft-makers found it more efficient to pressurise the fuselage by “bleeding” some of the air entering the compressor stage of the jet turbine (before it is mixed with fuel and ignited). At first only fresh air was taken from the engines. But as jets have become more fuel-efficient, air bled from the engine has been mixed with recycled air from the cabin. This is because the big fans mounted on modern “high bypass” jet engines achieve thrust more efficiently by sending a larger volume of air around the turbine rather than through it. With less air available in the compressor, any that is bled off means the turbine has to work harder, which in turn increases fuel consumption. Typically an airline will strike a balance by using a 50:50 mixture of fresh and recirculated cabin air, although pilots can reduce the amount of fresh air to save fuel. Some are thought to cut it back to only 20%. The mixed air is maintained in the cabin at a pressure which is equivalent to an altitude of 2,500 metres and is passed through what are called high-efficiency particulate arrest (HEPA) filters. Provided they are well maintained, HEPA filters will trap most microscopic particles. But some things can get through, especially tiny viruses. The new AirManager system is said to kill 99.999% of pathogens in a single pass. Even on a short flight of about one hour, the cabin air will pass through the filters around 30 times. David Hallam, inventor of the technology and a director of Quest, says the device works by generating a non-thermal plasma (sometimes called a “cold plasma”) using a high voltage to strip electrons from some of the molecules in a gas. The plasma is confined using an electric field and the cabin air is passed through it. The free electrons disrupt the molecular bonds of any particles in the air, causing them to break up into electrically charged pieces. An electrically charged filter then traps the bits like fly paper. It has tested it with five European airlines that operate BAE’s small regional jet and recently obtained certification for an airline to fit the units to a Boeing 757. “There is a very tangible difference in the quality of air being breathed according to aircrew,” says Sean McGovern, who runs BAE’s regional-aircraft business. The companies will now offer the system to operators of other Boeing and Airbus aircraft. Each unit costs about $16,000. Two are needed on a BAE regional jet and five on an aircraft like the 757. By allowing air to be recycled more safely, the devices could pay for themselves within a year by reducing the amount of engine-bled air that is needed and hence fuel consumption, says Mr McGovern. Another advance that will make flying more comfortable in the coming years is the greater use of carbon fibre, especially by Boeing and Airbus, to make aircraft fuselages. Carbon fibre is stiffer than aluminium, which has long been used to make aircraft, and does not suffer from metal fatigue. One reason cabin pressures are kept low at the moment is to avoid stressing the fuselage too much. The use of carbon fibre will make it possible to pressurise cabins to a higher, more comfortable level. Nor does carbon fibre corrode, so the air inside the cabin will not have to be kept quite so dry—which often leaves passengers with a wrung-out feeling after a long flight. And with recent advances in power electronics, Boeing has decided that it is now more efficient to go back to using electrical generators to pressurise the air in the cabin. This change will start with its forthcoming (and much-delayed) 787, which is supposed to fly for the first time by the end of the year. That will put an end to the trade-off between air quality and fuel consumption. As all these developments start to reach the market, passengers may start checking not just flight schedules and fares before booking a journey but also their airline’s cabin-air quality.