How Kingfisher, Jet made a hash of their business models

Via - Firstpost.com

Running an airline in India is a mugs’ game. Once defined as the simple business of “getting bums on seats”—more “bums” means better bottomline—the way the Indian industry is being run, one wonders if the “bums” are paying enough for the seats they sit on.

Thursday’s newspapers said Kingfisher’s auditor was tut-tutting about the poor state of its balance-sheet. Without owner Vijay Mallya putting in more equity, the airline is on a crash course, with accumulated losses eroding more than “50 percent of its net worth.”

Look at the carnage. Kingfisher hasn’t seen black since 2005. Market leader Jet Airways hasn’t sniffed profits since 2007-08. SpiceJet has got a whiff, but has accumulated sackfuls of losses (Rs 720 crore) in the past. In the first quarter of 2011-12, Jetmade a loss of Rs 123 crore after many accounting adjustments, Kingfisher lost a whopping Rs 264 crore, and SpiceJet Rs 72 crore.

A Jet Airways aircraft (R) and Kingfisher Airlines (L) are seen on the tarmac at the airport in Mumbai. Punit Paranjpe/Reuters

One figure tells it all. Between last year and now, the three listed companies – Jet, Kingfisher and SpiceJet – destroyed Rs 6,600 crore of shareholder wealth, a drop of 59 percent when the overall market (as measured by the Nifty index) fell only 13.48 percent.

As for Air India, the less said the better. When last heard of, it had racked up losses of Rs 22,000 crore against a shrinking market share – and its management is accumulating frequent flier miles to-ing and fro-ing between Delhi and Mumbai, trying to wangle thousands of crores in equity infusion. What it needs is an infusion of cyanide.

The airline business is clearly a value destroyer. And it’s doing it all by itself, without help from Praful Patel.

Or is it? In India, there is clear line dividing successful (or near successful) airlines from the rest. And that line is drawn in sand. It divides the pure low-cost carriers (LCCs) with a clear business model (SpiceJet, Indigo) from the ones who operate both full-service and low-cost carriers (Jet, Kingfisher, Air India).

It’s the full-service carriers (FSCs) that are bleeding profusely for they have a confused business model. They have fallen between two stools.

The world over, there are five keys to airline success: costs, costs, costs, costs, costs. This is where the LCCs score over the FSCs.

The first cost in this bums-on-seats business is a four-letter word – CASK, or the cost per available seat kilometre. It helps to have more bums on seats, but the critical thing is to have the lowest possible seat cost per possible bum. CASK is a metric that measures what it costs to fly every seat for each km of distance.

Indigo and SpiceJet are the industry champs in CASK, though clearly comparable figures are not available. A Forbes India report quotes

Citibank’s airline industry analysts Jamshed Dadabhoy and Arvind Sharma as saying that “the capital costs per passenger for full service airlines have jumped several fold over the last few years, while those of budget airlines have remained stable or moved up very little. SpiceJet, for instance, has a CASK of between Rs 2.30-2.40 while the number for Jet Airways is around Rs 3.60.”

The second cost to control is debt. Debt brought Air India down, with some help from Praful Patel, who was the Civil Aviation Minister when the airline suddenly ordered 50 medium and long-range aircraft for $7.2 billion when the management thought 18 would do. The resulting debt laid the airline low. It current debt: a crippling Rs 42,570 crore.

Contrast that with what Indigo and SpiceJet have cannily done. Both take aircraft only on lease. Even if they buy them, the aircraft are resold to financiers and leased back. Says Antique Stock Broking, which put a buy on SpiceJet in July: “The company has used an asset light model for business growth with sale and leaseback strategy. Its entire fleet is currently leased and the strategy has helped the airline to keep its debt levels to minimum, avoiding debt burden. This strategy has paid off SpiceJet very well and it stands out distinctly amongst its competitors. The company has managed to survive the downturn and grow, while competing players are finding it difficult to expand the fleet due to heavy debt burden.”

Jet is better off compared to Air India, but it is still tottering under debt. In a recent interview, Jet’s Senior Vice-President (Finance) Mahalingam Shivkumar agreed that debt exceeded its airline assets. He said: “We have a debt of about Rs 13,400 crore, out of which Rs 9,000 crore is our acquired aircraft. Against that, we have an asset worth Rs 9,000 crore and we have a balance of Rs 4,000 crore.”

The market agrees. Rs 4,300 crore is the value of Jet’s drop in market capitalisation over the last one year.

The third cost is fuel. Thanks to rising fuel prices over the last one year, SpiceJet’s fuel costs as a percentage of sales have moved up from 37 percent to 56 percent of sales, but if its balance-sheet is looking prettier than its competitors’, its not because it is able to drive better bargains with the oil companies. Aviation fuel costs the same for everybody. So what makes the difference?

Aircraft age. Keep your aircraft fleet young, and you get fuel savings. Says the Forbes article on Indigo: “Indigo has six-year sale and leaseback agreements for most of its planes. The lessor takes the planes back after this and the airline can induct a brand new one in its place. Though at a cost, this is effectively like a perpetual elixir of youth. The most important financial implication is that it never has to undertake the ‘D’ check, where the aircraft is completely stripped down and airlines often discover the need to spend on major repairs. This check is usually done when the plane is about eight years old.”

The average age of Indigo’s fleet, as indicated by aviation website www.airfleets.net is 2.4 years. It’s a fleet-footed toddler in Indian airspace. Go Air’s average fleet age is also a stripling 2.5 years. SpiceJet’s birds are a bit older at an average of 4.7 years.

But the three airlines with a mix of full-service and low-cost operations—Kingfisher, Jet and Air India—had the oldest fleet mix. Kingfisher and Kingfisher Red had 4.6 years and 5.9 (making for an above 5 average for the company as a whole), Jet had 5.8, and Air India had a gerontocratic 9.8 years.

Age is beginning to tell on the big boys.

The fourth cost relates to aircraft maintenance. Globally, airlines have to maintain and service airlines to strict safety standards. This is why airlines with a diverse mix of aircraft tend to have higher costs, because they need separate staff to maintain Boeings or Airbuses or whatever.

The low-cost carriers (LCCs) have cannily focused on having only one basic aircraft (or sometimes two, with the second one connecting the smaller towns). SpiceJet uses Boeing 737s (NextGen). And Indigo Airbus 320s. But the big boys use several types. Kingfisher uses many different Airbuses (from A319-321 to 330) and ATRs. Jet uses Airbuses, Boeings and ATRs. Air India uses Airbuses, Boeings and even a Lockheed L-101 Tristar (anyone’s heard of them?)

In this business, diversity is weakness.

The fifth cost is the cost of idling. Getting bums on seats is one half of the challenge, but there’s no point getting them seated till you can fly them. In short, you have to fly more bums more often and for longer – and this means airlines which keep their aircraft flying for longer hours get better revenues. The figure to watch here is the aircraft utilisation rate – the time the aircraft spends in the air in a 24-hour cycle.

Indigo tries to keep the idle time between two journeys to 30 minutes and manages an aircraft utilisation rate of 11.5 hours a day. Air India’s? Don’t ask. It’s 9.1 hours.

Apart from costs, the full-service carriers compounded their problems by making fundamental strategic errors in their desire to scale up and raise market share.

Domestic market shares in 2001 stood at 26 percent for Jet (including JetLite), 19 percent for Kingfisher, 18 percent for Indigo, 16 percent for Air India, 14 percent for SpiceJet and 7 percent for Go Air, according to data from the Directorate General of Civil Aviation.

Two areas are worth mentioning. Mergers and branding.

All the full-service boys messed up their mergers. Coincidentally, all three—Jet, Kingfisher and Air India—went in for acquisitions and mergers in 2007-08. While Jet bought Sahara, Kingfisher bought Air Deccan and Air India merged with Indian Airlines. The traditional logic of mergers is cost savings and synergy, where two and two equals five.

But, surprise, two plus two ended up as three for all of them. While some cost rationalisations did come through from route swapping and capacity and code sharing, all three made branding and HR errors.

Air India never fully consummated the marriage with Indian Airlines as its human resources issues did not get sorted out (pay structures, etc). Jet and Kingfisher committed cardinal branding errors by renaming their low-cast carriers in their own image.

While Jet renamed Sahara as Jet Lite, consumers wondered what the difference was. Kingfisher converted Air Deccan into Kingfisher Red – and duly landed deeper in the red.

The issue is simple: when two brands—one full-service with all the frills of flying, and another, with low fares—are given the same or similar names, how is the consumer to know the difference? It is easy to assume that Kingfisher Red’s service is no different from Kingfisher’s, when the fares of the former are far lower. If Rolex were to buy Titan and name the latter Rolex Lite, will Rolex’s sales go up or Titan’s?

It is more than likely that many air passengers downtraded to the LCCs due to this brand confusion.

The full-service carriers have clearly to rethink their business models and branding. Or else, they can kiss goodbye to profits forever.

Low-cost carriers drive Indian revival

Indian low-cost carrier IndiGo's order for 180 Airbus A320s in January has thrown the spotlight back on the country's airline industry, amid growing confidence that the sector could finally be putting behind its troubles of the last few years.

This time, however, it is the low-cost airlines that are leading the way. Privately held IndiGo's memorandum of understanding was for 150 of the new re-engined A320neo and 30 regular A320s, with the deal likely to be confirmed in the coming months. The aircraft, set for delivery between 2016 and 2025, and the move for the Neo, marked the first public commitment for the airframer's re-engined narrowbody.

Another of the country's low-cost carriers, SpiceJet, the airline taken over last year by Indian media tycoon Kalanithi Maran, firmed up an order for 30 Boeing 737-800s featuring blended winglets in late 2010. These aircraft will be delivered from 2012. The carrier, which already operates 24 737-800s and 737-900ERs, has also ordered up to 30 Bombardier Q400 turboprops that will be delivered from the second quarter of this year.

Both are expanding to take advantage of the growth in the price-sensitive domestic market, to increase their network within the country as the infrastructure catches up with demand, and to begin international operations. Under Indian government regulations, airlines must be in business for five years before starting international services. SpiceJet met that criteria last year, and IndiGo will do so later this year.

The three main full-service carriers - state-owned Air India and the publicly listed Jet Airways and Kingfisher Airlines - are in various stages of recovery. All of them made excessive orders for aircraft in 2005-07, and then dumped capacity in the following years in an attempt to capture market share. But with falling yields, all began to report losses that worsened during the downturn. The capital investments also drained their balance sheets, and all have tried to raise funds through different sources. All three also operate a hybrid business model, with a full service airline supported by a low-cost carrier that they incorporated later partly in response to the emergence of the budget airline market in the country. However, a failure to fully separate the two businesses has meant that the inherent inefficiencies and high costs from the full-service business have seeped into the subsidiaries. They have paid the price.

Air India has been making a loss for years. Beset by internal resistance to change and public objection to the state using tax dollars to bail it out, it is still trying to overcome its many problems. Jet and Kingfisher also reported losses, but appear to be faring better after cutting capacity and costs, and as the recovering economy boosted demand. All of them want to begin new services and say that they are ready to compete once again. But the low-cost carriers, despite their significantly smaller fleets, are holding their own. Indian airlines carried 4.88 million passengers in November, up 5.9% from October. While Jet Airways and its subsidiary JetLite were the domestic market leaders with a 26.2% share, followed by Kingfisher with 19.1%, IndiGo edged ahead of Air India with the third largest share at 17.3%. And IndiGo led the pack with a seat factor of 91%, ahead of SpiceJet with 87.5%, closely followed by Kingfisher.

While infrastructure remains a problem, the Airports Authority of India plans to build and upgrade airports in various secondary cities. It also has plans to build the infrastructure in smaller upcoming cities, citing a growing population and rising demand. That would mean greater demand for new aircraft as airlines renew and add to their fleets.

Boeing said in its 2010 market outlook that India would need 1,150 commercial jets over the next 20 years, while Airbus forecasts demand for 1,032 aircraft over the same time period. Boeing also believes that the airlines are finally getting a handle on the situation after the highs and lows of the recent years.

"Airlines have matched capacity more closely to demand, especially on newly launched international routes," says the airframer in its recent 20-year outlook for India. "Measures like [leasing out] have proved effective in mitigating the near-term effects of the [economic] downturn and will, in the longer term, facilitate the return of leased airplanes to Indian carrier fleets."

Airbus predicts in its latest global forecast that domestic Indian traffic volume is set to soar at 9.2% a year, the overall figure exceeding 250 trillion revenue passenger-kilometres by 2029. It also predicts traffic from India to China, South-East Asia and North America as being among the fastest-growing flows.

Low-cost carriers such as IndiGo and SpiceJet are likely to be the major beneficiaries of this growth, suggests the Centre for Asia Pacific Aviation.

"India will also undoubtedly offer an enormous international short-haul market in its own right. The Indian diaspora has traditionally been underserved and, as new regional centres open up, the opportunities for low priced non-stop travel are magnified," it adds.

Wings on fire

Paramount Airways is all set to enter the big aviation league. An airline that has been operating what it calls an all-executive-class fleet, is now in final stages of talks with Bombardier and ATR. In not more than two months, by February 2010, Bombardier's Q400s or ATR's turbo props - 10 aircraft in all - will adorn the fleet of the south-Indian carrier. The target for paramount is simple. All ground work is through to operate the turbo props predominantly in Tier II and Tier III cities. Some of the cities that have been shortlisted are Pondicherry, Mysore, Salem, Bellary, Rajamundry etc., all in south India to start with. The number of destinations the airline covers will then increase from the current 17 to 40 by 2011.With a bare minimum fleet of 5 aircraft (all Embraer) the company has maintained the best passenger load factor among all airlines in the country. Paramount is also the only Airline in India that have seen Rs 79 cr profits as of March 2009. Come October 2010, when the airline completes 5 years of its operations, it will spread its wings overseas. Negotiations are already complete with Airbus to buy 10 of their 321 aircraft. The planes are to be acquired at a list price of USD 90 million. The deal is to be funded by the European Central Bank through a 12 year loan.The Airbus 321s will all be used for the company's international flights. Initially, Paramount will fly to South-East Asian destinations like Singapore, Kuala Lumpur, Bangkok, Penang and Middle East designations like Dubai and Abu Dhabi.

India's Airline Industry Goes From Boom to Bust...

A few years ago, India's airline industry was flying high. A booming economy made India one of the fastest growing and most competitive aviation markets in the world. Six new carriers launched while established airlines laid on new routes and bought new jets. In the last four years, Indian carriers ordered 400 Boeing and Airbus jetliners worth about $37 billion.

Brace for impact. The global recession has hit air carriers everywhere, but a sharp decline in passenger numbers is especially bad news for India. With oil prices rising to $73 a barrel, Indian airlines — which carry just 2% of the world's passengers — could sustain more than $2.5 billion in losses this year, accounting for one-fourth of the projected $9 billion in losses for the entire industry, according to the International Air Transport Association. Weighed down by overcapacity, debt and the government's refusal to provide bailouts, Indian carriers are being forced to slash their operations and reduce ticket prices. "Indian aviation is undergoing a regime change in just four years," says chief executive officer of the Center for Asia Pacific Aviation.

That change includes deferring aircraft deliveries, cancelling orders, rationalizing routes and trimming staff to stave off financial collapse. "It's going to be tough, but we mean business," says Praful Patel, India's civil aviation minister. At the same time, three of the country's largest carriers — state-owned Air India, and private players Jet Airways and Kingfisher — are trying to attract more passengers by turning their full-service domestic fleets into budget businesses. In January, India's budget airlines fleet totaled 75 jets, compared with 120 full-service planes. The Center for Asia Pacific Aviation's Kaul reckons that by the end of the year, the skies will be dominated by up to 160 low-fare jets as companies switch to budget operations.

Hardest hit by the economic downturn has been national carrier Air India: It reported annual losses of $1 billion in the fiscal year ending March 31, along with an accumulated debt of $3.5 billion; that debt load is expected to rise to $7 billion by 2012 if it takes delivery of 111 new aircraft already on order. Air India alone accounts for 10% of the total projected losses for the global airline industry this year — even though it carries just 0.35% of global traffic. Air India is suffering from an aging fleet and a bloated staff roster of 31,000 permanent employees and 20,000 contract staff; its labor costs amount to 18% of its total operating expense, the highest ratio in the world, according to Patel.

With no bailout help from New Delhi in sight, Air India is bidding to bring its profitable international budget brand — Air India Express — to Indian turf. Air India Express, which has been flying routes to the Middle East and Southeast Asia for the past five years, will configure 10 of its 57 planes for budget flights by September, says Air India managing director Arvind Jadhav. The company plans to increase the number of budget flights a day from 25 initially to 43 by October. Ticket fares will be down 25% making it attractive for fliers. The logic, says aviation minister Patel, "is to fill up seats and operate at lower costs." Unlike its parent, the profitable Air India Express operates as an independent company with lower overheads. Besides, with no business seats they will be able to pack in more people at a time when the passenger count for all airlines is down 30% since last year.

Following similar logic, private players Jet Airways and Kingfisher, owned by the liquor baron Vijay Mallya, are expanding existing budget operations to try to increase business during the economic downturn. They aren't starting from scratch. Both airlines already had rechristened budget carriers — Jet Lite and Kingfisher Red — acquired in 2007. Now they are transferring capacity to the economy fleets. Kingfisher Red jets are flying more routes; as a result, about 75% of all domestic passengers that now fly with Kingfisher are traveling budget class, up from 50% a year ago. Meanwhile, Jet Airways, India's oldest private player, has converted some of its jets by removing all business-class seats and rebranding them as JetKonnect — giving the company two budget brands. "It gives us the flexibility and speed to deploy capacity and reverse it to meet changing trends," said Sudheer Raghavan, chief commercial officer of Jet. Launched in May, JetKonnect offers 40% lower fares and plans to take the current 130 flights a week to 160 by October.

Officials for both carriers say they hope to resume normal operations once the economy rebounds. But analysts say that may be difficult because the industry has yet to solve a basic problem: too many airlines flying too many flights in a country that, despite its economic growth, is relatively poor. India's airlines are now crowding into the budget market, just as they crowded into regular and premium air travel services a few years ago. "With everybody fighting for the same piece of business, this could once again create overcapacity and fuel fare wars," says Ankur Bhatia, executive director of Bird Group, a New Delhi company that provides technology to the travel industry. Lowering fares may attract more travelers but it may not improve the overall financial health of the industry. "To make profits while shifting business models, the airlines have to think, act, breathe and be low cost," Amitabh Malhotra, managing director of investment bank NM Rothschild & Sons in Mumbai. "That doesn't happen overnight." Adds Patel, India's aviation minister: "This time every airline will learn a lesson the hard way."

Dealing with Challenges at Air India

Air India has been going through a major transformation over the past two years. It has been inducting new aircraft for the first time in well over a decade, has introduced new long-haul flights and in-flight products that are getting decent reviews, has merged its operations with the former Indian Airlines, is modernising IT systems and is preparing to join the Star Alliance. In reality it is all long overdue, as Air India had been stagnating for so long. Chairman and managing director Raghu Menon is the first to admit that the change process should have started long ago, but as he puts it: "It is better late than never." India's air transport market has itself seen massive change over the past five years, since Air Deccan was launched as the country's first low-cost carrier. Its success led to the launch of many more airlines, which in their fight for market share brought airfares down sharply, resulting in huge growth in demand. At the same time the government opened up air services agreements to allow foreign airlines to operate more services to India, and began modernising airport infrastructure at last. The new players put immense pressure on state-run Air India and Indian, which had long been regarded as employment machines with apathetic staff, ageing aircraft and outdated in-flight products. The plan was to create a true network carrier operation to help the combined entity compete effectively with the new players. Air India had until then focused on international services while Indian focused on the domestic market, with some international services to Southeast Asia and the Middle East. "The merger is one of the best things that has happened. It has made us an airline of competitive scale in the region, in the South and Southeast Asian region. The main gains that we anticipated have turned out to be quite realistic, particularly the network synergies and the synergies in operations, and despite all doomsday predictions the human resource merger has also been of great ­benefit," says Menon, who only became ­chairman and managing director earlier this year after moving over from the Ministry of Civil Aviation. Air India still has real problems and some rival airlines say privately that its change process has largely been cosmetic without addressing the real issues of ­improving the balance sheet and cutting staff ­numbers. Officials at Air India feels other way costs have been reduced due to the enlarged entity's increased purchasing power. Offices abroad are being merged, and there has been a significant revenue boost which has exceeded all expectations. The feed is the major positive development. Its trying to ensure that the traffic from the domestic network feeds into two major hubs of Delhi and Mumbai, from where most of our international operations take place, so that passengers travelling abroad as well as passengers coming to India are able to get good seamless connectivity. The route duplication is almost completely removed. Also the duplication in offices and personnel in various locations has been removed, helping a big saving in cost. Financial benefits are impossible to quantify as the carrier does not release earnings at timely intervals since results must first be ­presented to Parliament. The last published accounts were for the year ended 31 March 2007, when Air India posted a loss after ­several years of profitability. It admits it is still losing plenty of money. Insiders say it lost more than Rs20 billion ($406 million) in the last financial year and the civil aviation minister himself was recently quoted as saying losses could hit Rs30 billion this year. One of the assurances which the government gave at the time of the merger was that there would be no retrenchment of employees. Another major problem is with information technology, particularly the lack of a single reservations system. This means that although only the Air India name is now used, the old Indian Airlines code remains. Passengers booking online, for example, still need to choose their flights from one of two websites. Changing this is a priority and a new booking system should be in place by the middle of 2009 from vendor EDS which will allow the two airlines to merge fully under the Air India code. Pushing it to speed up the implementation is the fact that it is due to join the Star Alliance in 2009. Air India will be the first Indian carrier to join an alliance and this should give it an edge over its competitors at home, all of which are struggling financially as a result of increased costs, overcapacity and a recent drop in demand. The tougher times have led to major changes in the operating environment and over the past two years there has been a wave of consolidation. Aside from the Air India-Indian merger, Jet Airways acquired the former Air Sahara (now JetLite) and Kingfisher acquired the former Air Deccan.These three groups now control 77% of the market by passenger numbers. Air India is looking for injection of equity,as its equity base is very low. The second proposal is for a soft loan. Air India holds a lot of promise and should not be underestimated. It is an airline which has performed for over 75 years, and with the transformation that is taking place it will perform even better.

Deccan with Kingfisher...

A few months back I promised that I will review Deccan website. To be very honest I didn't found any thing different or special to share. Every body knows it now has a feel of Kingfisher but, thats only the feel & nothing like Kingfisher. A jingle was there initially & I could not find it now. Infact, I downloaded it but, its not peppy. They have removed the history of the airline from their website, very sad. They have decreased the check-in weight to 13 kg. I have not flown in Deccan since, its merger with Kingfisher but, some of my close friends don't give healthy review for it. Same old story of being late. Now, the latest about it what I feared earlier. Deccan will cease to exist.

History of low-cost airlines in India...

Knowing about my passion for Airlines one of dear friend send me a link. It had all the latest information about the low cost airlines in India. The ailines covered in that article are as follows -

• Air Deccan
• JetLite
• GoAir
• SpiceJet
• Indigo
• Air India Express
• Jagson Airlines
• MDLR Airlines
• Paramount Airways

I have not even changed the title of the article. Plz click on the title to read brief history of the above said airlines with present situations. Its a beautiful article on rediff.com

Indian Aviation in the new year...

Happy New Year... with this note let me point out some of the issues i am concerned about in this new year... -

• What if after the coming General Elections govt. gets changed & it keeps different views than the present one?
• What if the ATF (Aircraft Turbine Fuel) keeps on rising?
• Will the new MD of Air India be able to do what the present is dreaming of?
• Is some other LCC will have the same fate like that of Air Deccan (now known as Simplifly Deccan)?
• Will common man will still be able to take on the skies wit rising fares n taxes?

In the end just hoping that this yr turns out to be excellent one for the Airline Industry.

Jet flying in turbulent weather...

The problems for Jet Airways are incresing just like the taxes n surcharges on air tickets... it all started when Kingfisher changed its business model from being a LCC to a full service premium airline & started taking on Jet... Then came its IPO & the Jet sahres were listed above Rs. 1000 per share. But, only then its decision to acquire Air Sahara came. The market & even the department heads of Jet reacted to it very sharply (agianst the deal). Share prices tumbled by nearly 50%, which till now have not been able to touch its listed prices, many of the department heads left Jet . Every body knows the end result of the deal... Air Sahara becoming Jetlite. By that time there were so many entrants & tough competition from LCC's started eating up its profit. In the mean time, International routes were opened for Indian private carriers & Jet tried to capitalise on this oppurtunity. Jet purchased new aircrafts...exactly the same time competition came from Air India with its new image, services, planes, etc... Jet just trying to handle this situation, Kingfisher announced its acquisition of Air Deccan to directly take Jet Airways head on. As of now Jet & Kingfisher have equal market share of nearly 29% (with thier combined entities respectively). As of now, all the decisions taken by it are going against Jet's favour... but, if Jet is able to survive this turbulance, I believe that Jet will return to its earlier position not only in Indian Aviation but, it will show the same performance internationally.

The Spicejet Way...

The most quite n non-controversial airline "Spicejet" has made a deal with Air India. Air India will take 02 of its boeing 737-800 aircrafts on wet lease. the aircrafts will be used for Haj Pilgrimage only, the flight number will be of Air India but the logo will be of Spicejet...its a great achievement for Spicejet as it is only in its 3rd yr of operation. A setback for all those airlines who are making a lot of hoopla to fly abraod, as they dont meet the criteria required of 05 yrs experience domestic flying. It will be connecting Varanasi, Jaipur & Lucknow with Jeddah for 75 days starting this november.

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Death of Low Cost Airlines from Indian Aviation…

From the time Kingfisher acquired a stake of 26% in Air Deccan, I have a gut feeling that this is the beginning of slow but, steady death of Low Cost Airlines in India. The ticket price has risen from the very next day. The colour of Aircrafts, change in attires of Airport staff etc. has been taking place. If Air Deccan dies its slow death, which I strongly feel so, then, I personally don’t think other small players will able to survive for long. Air Deccan was the largest operator in India, with touching more than 60 cities (even more than state owned Air India). If its gone than other players like Spicejet, Indigo Airlines & GoAir which do not constitute more than combined market share of 18-20%, will not be able to survive the blood bath. Next target is Spicejet for, every one from Kingfisher to Jet Airways & even Paramount is also looking for its bigger pie in the acquisition party. GoAir is already in trouble & Indigo will be left alone to wait & watch, it may also convert itself into a full service carrier. If this happens then, it will be blow for the growth of Indian Aviation, as common man may not be able to take on the sky. All blames to Ministry of Civil Aviation because, why the Jet fuel cost is rising in India, while other countries are still able to provide it much cheaper than India. Jet fuel counts nearly 35-40% of total operational cost for an Airline. Is the common mans airlines still for a common man, when the tax paid on an air ticket is Rs. 1500 & the fare is only Rs 1200 i.e. a person has to shell out Rs. 3700 in this case, which is more than triple of the fare. Due to lack of infrastructure Low Cost Airlines are not able to reduce there turn around time, which is the operational advantage for them. With all these adverse conditions how long will they be able to float them self??? Not much longer I think so…

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