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.

India as Global Aviation hub...

India’s aviation industry is in a mess.

Pick up any of India’s main papers and stories abound about India’s airlines losing $2 billion in the last financial year. NACIL, the publicly-owned company that runs Air India is in particularly bad shape. The government has rejected a request for a $3 billion bailout package. Instead, the government wants to overhaul AI’s management within a month and has started the hunt for an experienced chief operating officer. With accumulated losses as of March 31 that total a staggering $1.5 billion, for the first time in its history the airline delayed paying its salaries in June. None of the other large carriers, including Jet Airways and Kingfisher, are faring much better. Those two have taken excess capacity out of the market and reduced overheads. Airport operators, oil companies, hotels and others have either threatened to introduce or already are operating cash-and-carry regimes with carriers that have, in some cases, significantly exceeded their credit limits. The spectacular growth rates of 30% to 40% that enticed airlines to ramp up aircraft orders and to devise unsustainable (but until not too long ago universally followed) strategies of buying market share by discounting tickets and adding capacity are now history.

In such a scenario, is there any chance that India will emerge as a global aviation hub?

Looking at its metropolises, including the megacities of Delhi and Mumbai, India should already sport at least one major global aviation hub. Both cities have populations approaching 20 million inhabitants. Delhi is the country’s political capital and arguably its second most important commercial hub. It also does not suffer from the severe space constraints afflicting Mumbai’s Chhatrapati Shivaji International Airport. In fact, the masterplan for Delhi’s Indira Gandhi International Airport envisages a capacity of 100 million passengers at the end of its development. The capital hosts embassies of most of the world’s countries, international schools, good hotels and entertainment facilities, a rapidly growing infrastructure and, if one includes the satellite towns of Gurgaon and Noida, more head offices of multinational companies than any other city in India. Until today, infrastructure has been a major handicap. Lack of efficient connectivity between the domestic and international terminals made transfers from domestic to international flights (and vice versa) an unpredictable nightmare for passengers and airlines. With the airport’s development and the construction of an integrated domestic/international terminal this problem will be resolved by the middle of next year.

“Capacity reduction is still lagging behind demand.”

However, their poor shape and the relatively small size of India’s airlines compared with majors such as Emirates, Lufthansa or Singapore Airlines — all with their already well-established hubs and route networks — will make it difficult for any desi carrier to assert itself. The merger of Air India and Indian Airlines was conceptually the right way forward. It was aimed at giving the state carrier the size and route network to effectively compete with its domestic and international challengers. Unfortunately, the marriage between the two airlines was never properly consummated and hardly any of its envisaged synergies have materialized.

So what should India’s aviation industry do to extricate itself from this mess?

To begin with, the airlines will have to start addressing the problems that they themselves have caused. This process has already started with Jet and Kingfisher deferring orders for new aircraft, mothballing new deliveries or, where possible, leasing or selling them to foreign carriers. In short, with the exception of some of the low cost operators, a significant amount of capacity has been taken out of the market. Jet has transferred much of its remaining capacity to its economy-only Jet Konnect product as well as to its low cost subsidiary JetLite. Kingfisher has followed the same strategy by shifting passengers onto its no frills Kingfisher Red product. On another front, a truce in the price wars has yet to be reached. Yet capacity reduction is still lagging behind demand. With all airlines chasing bums on seats, charging prices that will cover costs and hopefully leave a margin for profit remains difficult in such a hotly-contested market. We will surely see more consolidation or bankruptcies in the medium term. This is precisely an area where the government should step in. Before the elections, the Ministry of Civil Aviation contemplated allowing up to 49% foreign domestic investment in domestic airlines. This would include foreign airlines as potential investors – something that is currently explicitly prohibited. It seems obvious that in an industry where average profit margins do not exceed 1.5%, the most likely investors would be other airlines seeking to strengthen their market position, increase their route network or realize economies of scale. Since the elections, however, nothing more has been heard of this proposal.

Another deterrent: The cost of fuel, which in India is among the highest in the world. At current prices, fuel accounts for 45% to 50% of operating costs in India. While the central government has instructed the public-sector oil companies to provide generous credit terms to the airlines, it could do more by naming fuel a declared good which attracts a uniform 4% sales tax.

At present, it is up to individual states to charge fuel taxes as they see fit. Some of them are charging well over 30% – a figure that keeps on rising in absolute terms as fuel prices go up. Internationally, aviation fuel does not attract any levies in many major markets. For India, this means a distorted market, putting its carriers at a relative disadvantage especially on international routes and making technical or fuelling stops in India for international carriers non-viable.

Furthermore, service tax and other levies have been a bone of contention between the airline industry and the government. A review and streamlining of the entire tax regime would surely be a sensible thing. Getting the fundamentals right is obviously a prerequisite for the establishment of a successful hub. To date, India has been fairly liberal in its approach to so-called bilateral agreements which regulate how many flights and/or to which points carriers from two contracting countries can serve. This is a good thing. An open bilateral regime stimulates competition and traffic growth as the examples of Singapore and Dubai have shown. It is also instrumental in bringing down the cost of travel and promoting economic growth.

For the sake of its national economy, the current plight of the national carrier should not discourage India from keeping its aviation market open. Instead, liberalization should be used as a tool to make its industry more competitive and its national carrier a leaner, more focussed and especially a more customer-centric organization.

Air India has taken a couple of encouraging steps. It has selected a European hub at Frankfurt, its first outside India. It is phasing out its unreliable fleet of old B777s and B747s. It has been selected as a member of the Star Alliance and is in the process of joining. That will give Air India a greater reach into the coveted U.S. market in addition to its flights from India. It is through its alliance membership that Air India could widen its appeal and route network from India to the rest of the world.

Overall, India either has or is building the necessary ingredients for establishing a successful aviation hub, most likely in Delhi. But to fulfil that promise will require a broader partnership involving alliance partners, regulators, airport operators and local authorities to overcome the many hurdles that remain.

Study says airport fees in India among the lowest in world

Even as airlines hit out at private airport developers against the "exorbitant" charges being collecting from carriers, the Association of Private Airports Operators (APAO) — comprising private airport operators of India — has come up with a study that puts operating costs at major Indian airports as among the lowest when compared to other major airports around the world.

"The association wishes to clarify the misconception that airport charges in India are amongst the highest in the world," it said. In a survey conducted in 2008 by Jacob Consultancy, which specialises in aviation consultancy, Mumbai airport was ranked 50th in a sample of 50 worldwide representative airports. "This indicates that charges at Mumbai (Delhi airport has similar charges) were amongst the lowest," said APAO secretary general K L Kanthan.

Mumbai's charges are 16 per cent of what Toronto — which charges the maximum fee — collects from airlines. However, airlines do not buy the argument. "There are three components to airport charges. The passenger service fee (PSF), the navigation charges and finally the airport charges. Taken together, it forms a substantial chunk of our operating costs," said a senior official from Air India.

The APAO has also argued that airport charges in India were increased by 10 per cent only once after eight years against the aggregate inflation of 48 per cent, based on average annual cost inflation of 5 per cent. "The fact is that airport charges in India constitute only about 3.25 per cent to 3.5 per cent of total operating cost of airlines as compared to ATF (aviation turbine fuel) which constitutes 40 per cent of the costs."

However, according to Centre for Asia Pacific Aviation (CAPA), while there has to be a recovery model in the billions of dollars being invested in these airports, the introduction of airport development fees (ADF) and user development fees (UDF) came at a very wrong time.

"Airlines in India should understand that such investments need to be absorbed. But from their point of view these new charges came at a very wrong time when the industry was in bad shape and the extra costs passed on to passengers could not be absorbed by them”.

"Unlike airlines, which have the flexibility of focusing on profitable routes and reducing capacity, airports have to maintain the same level of service and facilities irrespective of numbers of passengers. Investment in airport capacity needs to be done with a 5-10 year future horizon to take care of future growth in traffic," the APAO statement said.

India's struggling airlines

“FLY the good times,” urges the slogan of Kingfisher airlines. But for India’s commercial-aviation industry, these are far from good times. On July 31st the Federation of Indian Airlines (FIA) threatened a one-day strike to put pressure on the government to save its seven members from going bust. As the government mulls a bail-out for one of them, the moribund state-owned Air India, the FIA is demanding that it also help privately owned airlines by lowering taxes on jet fuel, which are especially high in India. In response, the government warned airlines against inconveniencing passengers and offered talks. The FIA said it would put the strike, scheduled for August 18th, “on hold”.

Until recently India’s private-sector airlines, which carry more than 80% of domestic passengers, were lauded as a symbol of the country’s spectacular economic growth. But growth began to stall in 2007, when rapidly rising fuel prices pushed up fares and the economy slowed. In the first half of this year, airline passenger numbers fell by 8% to 21.1m. Last year India’s aviation industry lost more than $2.5 billion—about 25% of total world airline losses despite accounting for only 2% of global traffic. This year is set to be as bad.

For Kingfisher and its main competitor, Jet Airways, both full-service carriers, times are especially tough. Kingfisher, which reported a net loss of 2.43 billion rupees ($51m) in the quarter to June, owes more than 9.5 billion rupees in unpaid fuel bills and is surviving on bank loans. Jet Airways recorded a net loss of 2.25 billion rupees in the same period.

High fuel costs certainly exacerbate Indian airlines’ woes. Fuel tax is set by most of India’s states at 28%, whereas in much of the rest of the world aviation fuel is untaxed. The airlines want it to be declared an “essential commodity”, making it eligible for tax at 4%. A handful of states, most recently Rajasthan, have cut jet-fuel taxes to 4% in a bid to encourage airlines to establish local services. But others, including two of the most important, Maharashtra (home to Mumbai) and Delhi, are reluctant to follow for big airports: the tax is a valuable source of revenue out of which fuels used by the poor, such as kerosene and diesel, are subsidised.

But burdensome though the taxes are, they are not the only reason why India’s private airlines are suffering. Over-capacity should take much of the blame. “India’s airlines grew too big, too fast,” says Centre for Asia Pacific Aviation. Anxious to chase market share, the airlines priced tickets well below cost. By some estimates, they bought twice as many aeroplanes as the market could support. As competing airlines poached pilots and mechanics, staff costs soared. “It was all about ego rather than business,” says Captain G. R. Gopinath.

Today those egos are badly bruised and, in line with trends elsewhere, it is low-cost airlines that are taking an increasing share of the market. Of India’s three listed airlines, a budget carrier, Spicejet, was the only one to turn a profit in the most recent quarter. The other two are Jet and Kingfisher. Fighting back, Jet launched a no-frills subsidiary, Jet Konnect, in May; last year, Kingfisher took over Air Deccan to create Kingfisher Red. The budget carriers are hoping to ride the economic downturn by offering better value to corporate travellers. But in the longer term they are eyeing a much bigger opportunity: the 98% of Indians who have never flown.

Airline-Sector Woes Slam India's Highflier

Running an airline is a reliable way to lose money. The turbulent ride of India's Jet Airways shows why. Naresh Goyal shook up Indian aviation when he founded Jet in 1992. With punctual flights, new planes and friendly service, Jet was the first carrier here to truly modernize air travel.

Jet controlled nearly half the domestic market by early this decade, with most of the rest going to state-owned Indian Airlines. In Jet's 2004 fiscal year, as many of the world's carriers were still recovering from the Sept. 11 terrorist attacks on the U.S., it outpaced the industry with net profits of $33 million. Jet's initial public offering, in 2005, valued Mr. Goyal's 80% stake at $2 billion. Now, Jet is scrambling to stay aloft. Low fares from no-frills competitors ravaged revenue. Staff costs soared as rivals poached pilots and mechanics. Airport congestion in India made for a logistical nightmare -- forcing Jet to open an international hub 4,000 miles from home, in Brussels. Amid a glut of capacity, Jet's market share slid from a high of almost 49% in 2003 to roughly 25% this year. The airline started posting sharp losses in late 2007. Jet eked out a net profit in its latest quarter by selling assets, slashing costs and booking tax credits, but the outlook remains tough. "It's been hard," said Mr. Goyal, the 59-year-old founder, in an interview at his $15 million London townhouse. "We were making so much money, and now we're losing money." The carrier's woes began as India's economy boomed in 2005, thus highlighting a broader problem for the global airline sector: Even in good times, the industry struggles to generate sustainable profits. Jet Airways has struggled to capitalize on growth as it got squeezed between uncontrollable costs and increasingly unfettered competition. Jet's slide can be traced to a sea change in the global aviation business. Deregulation, the rise of Internet ticket sales and other factors have made it easier than ever for upstarts to challenge bigger, established carriers. In India, where state-run carriers and government policies stymied air travel for decades, the sudden transition proved tumultuous. Last year was particularly rough. The airline business floundered as fuel prices surged, the credit crunch hit and world-wide travel plunged. Jet is reacting by cutting staff, closing offices around Asia and reducing flight frequencies. Searching for profitable routes, Jet recently took planes from India's crowded domestic market and expanded service to Dubai. It soon plans to start flying to Saudi Arabia. Mr. Goyal cut his teeth in the airline business by working -- and sleeping -- at his uncle's New Delhi travel agency while he was an 18-year-old student. Seven years later, in 1974, he started his own agency, bankrolled by personal savings and a gold bracelet of his mother's that he pawned. As the Indian sales agent for overseas carriers including Air France and Hong Kong's Cathay Pacific Airways Ltd., he learned the ins and outs of upscale air travel. Jet was one of several carriers launched after India began deregulating domestic aviation in 1991, and initial competition was fierce. Jet survived as rivals failed, thanks in part to Mr. Goyal's longstanding links to foreign carriers with which Jet cooperated to fly international passengers. Although Indian law had granted state-owned Air India a monopoly on foreign flights since 1953, Mr. Goyal prepared for the day that Jet would be allowed to extend its network overseas. He entertained politicians, aviation officials and travel professionals in his London townhouse overlooking tony Regents Park. "I was convinced one day India would have to open up," he says. Anticipating the change, Mr. Goyal focused on creating a passenger experience to rival the world's best carriers. He poured tens of millions of dollars into cabin entertainment systems, ergonomic seats and staff training. He also turned the trend of outsourcing to India on its head by hiring American pilots, recruiting managers from leading Asian and European carriers, and unabashedly aping the innovations of up-market trailblazing airlines such as Singapore Airlines Ltd. "Naresh Goyal's policy of hiring expats broke the mold in India -- he was a pioneer," says Craig Jenks, president of Airline/Aircraft Projects, a global aviation consulting firm in New York. In 2004, India allowed private airlines to fly overseas. Mr. Goyal jumped at the opportunity. He ordered 10 Boeing 777s, and fitted the first-class cabins with spacious private compartments modeled after those created by Dubai's upscale Emirates Airline. Jet's initial public offering in 2005 was 16-times oversubscribed amid national enthusiasm for the airline and its whole industry. But Jet's success also spawned competition. Vijay Mallya, chairman of brewing and distilling giant United Breweries (Holding) Ltd., launched upscale Kingfisher Airlines. It was meant to double as a flying promotion for his top beer brand, Kingfisher. A tiny upstart launched in 2003, Air Deccan, proved even more damaging to Jet. Copying the no-frills approach pioneered by Southwest Airlines Co., it served secondary cities that Jet didn't touch. Deccan opened a floodgate by showing the low-cost model could work in India. In 2005, a group of entrepreneurs started a similar low-cost carrier, SpiceJet Ltd. That same year, a major Indian travel-services company started its own budget carrier, IndiGo. Mr. Goyal fought back by acquiring no-frills competitor Air Sahara, which he rebranded as JetLite. Indian carriers grabbed the spotlight at the 2005 Paris Air Show, the aviation sector's big industry event. There, they announced orders for planes valued at more than $15 billion. IndiGo ordered 100 Airbus airliners even before it secured government permission to start flying. Although Kingfisher had only been flying for two months, Mr. Mallya splashed out by ordering five Airbus A380 superjumbos, the world's largest passenger planes. India's growing middle class was helping tug the global aviation industry from its post-9/11 slump. "Everyone is talking about China," observed Airbus Chief Operating Officer John Leahy at the Paris Air Show that year. "But the biggest growth story we see is India." Foreign investors, financiers and leasing companies, all hungry for new markets, raced to bankroll India's breakneck airline expansion. Indians who had long squeezed onto wheezing, sweaty trains began jetting about the country. Jet soon faced another hurdle: India's outdated aviation infrastructure clogged up. Air-traffic delays added 10% to flight times and cost $80 million in wasted fuel during 2006, Jet executives said, and things were getting worse. "The average 70-minute domestic flight spends another 35 minutes circling," Mr. Goyal complained last spring. The lack of modern aircraft-maintenance facilities in India forced Jet to send planes overseas for routine upkeep, adding millions of dollars to its bills. The cost of retaining veteran mechanics, flight attendants and pilots soared as new rivals poached qualified staff. Even Jet's budget subsidiary, JetLite, and other no-frills carriers struggled. "There are no low-cost airlines in India, only low-fare, no-profit carriers," Mr. Goyal said at a Jet media gathering in 2007. Yet Indian carriers kept chasing market share by slashing fares and adding planes, even as losses ballooned. By last June, Mr. Goyal saw that competition had made business untenable. "We're all in trouble," he lamented at an industry conference, saying each domestic carrier should slash capacity by 30%. Kingfisher's Mr. Mallya scoffed that Mr. Goyal "doesn't know how to do math." But Kingfisher was losing so much money that it soon canceled airplane orders and new routes vital to its overseas expansion. In a sign of the industry's distress, the bitter rivals last October announced an alliance to share airport facilities, coordinate schedules and reduce capacity. The deal still faces regulatory approval. Mr. Goyal had enjoyed a major edge over rivals in one key battleground: overseas flights. Indian deregulation in 2004 opened up international routes only to private carriers that had flown domestically for at least five years. Jet's experience allowed Mr. Goyal to move first, launching flights to Singapore, London and Kuala Lumpur in 2005. Jet quickly grabbed traffic from state-owned Air India, which had struggled to compete globally due to its poor service. Wealthy Indians who had preferred foreign carriers such as British Airways PLC were glad to have a local alternative. Ajit Balakrishnan, founder of India's largest Internet portal, says Jet staff "deliver a superb product" on the domestic flights he takes weekly from Mumbai, and so he jumped at the chance to fly Jet overseas. The 60-year-old veteran advertising executive often books on Jet, which began offering service to New York-area airports in August of 2007. He recommends Jet to foreign friends for its "modern luxury." But Mr. Goyal's intercontinental ambitions faced huge obstacles at India's overtaxed airports. Flights from India to the U.S. or Europe require big planes to carry sufficient fuel, and big planes need lots of passengers to run profitably. In mature markets, airlines generally fill long-haul flights with traffic from many smaller planes arriving at a hub for connections. To coordinate this, airlines need lots of boarding gates, airplane parking spots and runways slots. India's major airports lacked all of them. Anxious to expand, Mr. Goyal hit on an unlikely option during a state visit to India by the King of Belgium in 2005: using the Brussels airport as a hub for North American-bound flights. The facility had sat largely empty since the collapse of national carrier Sabena four years earlier. Talks with Belgian officials at Mumbai's luxurious Taj hotel quickly yielded an action plan. "It was a proper business meeting with an agenda," recalls Mr. Goyal, who was more accustomed to India's glacial bureaucracy. Winning regulatory approval for the unusual arrangement from Belgium and the U.S. took months, but by late 2007, Jet's wide-body airliners were arriving in Brussels each morning from Delhi, Mumbai and Chennai, mixing passengers and departing again for New York's JFK International Airport, Newark Liberty Airport and Toronto. Another three planes did the same trip in reverse. The four-hour Brussels stopover lengthens passengers' trip time compared with a nonstop flight. It also forces Jet to move hundreds of passengers and their bags quickly through a foreign airport at great expense. But thanks to close cooperation with the privately owned airport, which was hungry for business, Jet was able to offer nine different connections between Indian and North American airports, compared with only three connections possible with nonstop flights. But as fuel prices rose in 2008 and America's financial problems rippled to India's outsourcing operations, Jet flights through Brussels grew emptier. Costs rose. Only weeks after adding a seventh Brussels flight last Oct. 31, from Bangalore, Jet reversed course on Nov. 25 and canceled the route, citing economic turmoil. Jet now serves 60 destinations, including 19 outside India. "The crisis has forced us to look much more closely at costs," Mr. Goyal said at his London mansion. Mr. Goyal says he remains committed to Brussels and predicts the North American operation will break even this summer. But many rivals doubt the long-term viability of a hub so far from home. "It doesn't work," says Pierre-Henri Gourgeon, chief executive of Air France-KLM SA, which operates huge hubs in Paris and Amsterdam. Successful hubs rely on big traffic volumes, which Jet cannot guarantee, he says In mature markets, airlines generally fill long-haul flights with traffic from many smaller planes arriving at a hub for connections. To coordinate this, airlines need lots of boarding gates, airplane parking spots and runways slots. India's major airports lacked all of them. Anxious to expand, Mr. Goyal hit on an unlikely option during a state visit to India by the King of Belgium in 2005: using the Brussels airport as a hub for North American-bound flights. The facility had sat largely empty since the collapse of national carrier Sabena four years earlier. Talks with Belgian officials at Mumbai's luxurious Taj hotel quickly yielded an action plan. "It was a proper business meeting with an agenda," recalls Mr. Goyal, who was more accustomed to India's glacial bureaucracy. Winning regulatory approval for the unusual arrangement from Belgium and the U.S. took months, but by late 2007, Jet's wide-body airliners were arriving in Brussels each morning from Delhi, Mumbai and Chennai, mixing passengers and departing again for New York's JFK International Airport, Newark Liberty Airport and Toronto. Another three planes did the same trip in reverse. The four-hour Brussels stopover lengthens passengers' trip time compared with a nonstop flight. It also forces Jet to move hundreds of passengers and their bags quickly through a foreign airport at great expense. But thanks to close cooperation with the privately owned airport, which was hungry for business, Jet was able to offer nine different connections between Indian and North American airports, compared with only three connections possible with nonstop flights. But as fuel prices rose in 2008 and America's financial problems rippled to India's outsourcing operations, Jet flights through Brussels grew emptier. Costs rose. Only weeks after adding a seventh Brussels flight last Oct. 31, from Bangalore, Jet reversed course on Nov. 25 and canceled the route, citing economic turmoil. Jet now serves 60 destinations, including 19 outside India. "The crisis has forced us to look much more closely at costs," Mr. Goyal said at his London mansion. Mr. Goyal says he remains committed to Brussels and predicts the North American operation will break even this summer. But many rivals doubt the long-term viability of a hub so far from home. "It doesn't work," says Pierre-Henri Gourgeon, chief executive of Air France-KLM SA, which operates huge hubs in Paris and Amsterdam. Successful hubs rely on big traffic volumes, which Jet cannot guarantee, he says. Mr. Goyal says falling Indian wages now give him a leg up, because labor accounts for only around 15% of Jet's costs, compared with more than 20% for most Western carriers. Still, he says Jet will refocus on cutting costs and expanding in less-competitive markets of Bangladesh, Nepal and Sri Lanka. "I want to learn how to buy my insurance for the next four years," Mr. Goyal said of his efforts to protect Jet. "I'm the biggest shareholder, so I suffer the most."

Mid Year assessment of Aviation Industry...

Its exactly half of 2009, lets have a assessment of Aviation industry in India. This report has been take from IBEF : -

*Sector structure/Market size : With a growth rate of 18 per cent per annum, the Indian aviation industry is one of the fastest growing aviation industries in the world. The government's open sky policy has led to many overseas players entering the market and the industry has been growing both in terms of players and number of aircrafts. Today, private airlines account for around 75 per cent share of the domestic aviation market. India has jumped to 9th position in world's aviation market from 12th in 2006. The scheduled domestic air services are now available from 82 airports as against 75 in 2006. *Potential for Growth : The Indian Civil Aviation market grew at a compound annual growth rate (CAGR) of 18 per cent, and was worth US$ 5.6 billion in 2008. The Centre for Asia Pacific Aviation (CAPA) has forecast that domestic traffic will increase by 25 per cent to 30 per cent till 2010 and international traffic growth by 15 per cent, taking the total market to more than 100 million passengers by 2010. India's civil aviation passenger growth, presently at 20 per cent, is one of the highest in the world. By 2020, 400 million Indian passengers are likely to be airborne. By 2020, Indian airports are expected to handle more than 100 million passengers including 60 million domestic passengers and around 3.4 million tonnes of cargo per annum. Moreover, significant measures to propel growth in the civil aviation sector are on the anvil. The government plans to invest US$ 9 billion to modernise existing airports by 2010. The government is also planning to develop around 300 unused airstrips. *Airport Infrastructure : Mumbai and Delhi airports have already been privatised and are being upgraded at an estimated investment of US$ 4 billion over 2006-16.Greenfield airports are operational at Bangalore and Hyderabad. These are built by private consortia at a total investment of over US$ 800 million. A second greenfield airport being planned at Navi Mumbai is going to be developed using public-private partnership (PPP) mode at an estimated cost of US$ 2.5 billion. 35 other city airports are proposed to be upgraded. The city side development will be undertaken through PPP mode. Over the next five years, AAI has planned a massive investment of US$ 3.07 billion—43 per cent of which will be for the three metro airports in Kolkata, Chennai and Trivandrum, and the rest will go into upgrading other non-metro airports and modernising the existing aeronautical facilities. *Aviation Policy : Many policies supporting the infrastructure are now in place. 100 per cent FDI under automatic route is permissible for greenfield airports. For existing airports, FDI up to 74 per cent is permitted through automatic approvals and up to 100 per cent through special permission (from FIPB). Private developers allowed setting up of captive airstrips and general airports 150 km away from an existing airport. 100 per cent tax exemption for airport projects for a period of 10 years. 49 per cent FDI is permissible in domestic airlines under the automatic route, but not by foreign airline companies. 100 per cent equity ownership by Non-Resident Indians (NRIs) is permitted. overhaul (MRO) and training offer high investment potential. A report by Ernst & Young says the MRO category in the aviation sector can absorb up to US$ 120 billion worth of investments by 2020. 74 per cent FDI is permissible in cargo and non-scheduled airlines. The Indian government plans to set up an Airport Economic Regulatory Authority to provide a level playing field to all players. *Major Investments : Over the past year, various companies have shown an interest in the Indian aviation industry. US-based business jet maker, Hawker Beechcraft Corporation (HBC), opened its first authorised service centre in Delhi in partnership with Interglobe General Aviation with a total investment of US$ 8 million. Richard Branson, who controls UK carrier Virgin Atlantic Airways Ltd, has sought permission to start a domestic airline in India. GMR Infrastructure is looking to tap the growing corporate jet market in India with investment plans to the tune of US$ 151 million. It is also in talks with aircraft component manufacturers such as Honeywell and Safran to set up a components assembly plant in the country. The company plans to invest US$ 60 million for the proposed JV. US aircraft maker, Boeing Co, will deliver 100 planes worth US$ 17 billion over the next four to five years to India. *Road Ahead : The Indian aviation sector is likely to see clear skies ahead in the years to come. Passenger traffic is projected to grow at a CAGR of over 15 per cent in the next 5 years. The Vision 2020 statement announced by the Ministry of Civil Aviation, envisages creating infrastructure to handle 280 million passengers by 2020. Investment opportunities of US$ 110 billion envisaged up to 2020 with US$ 80 billion in new aircraft and US$ 30 billion in development of airport infrastructure. Associated areas such as maintenance, repair and

Aircraft Fractional Ownership & India...

I was wondering why I have never posted about any of the charted airlines, even though i did my internship in a charted airline. Let me break this unsaid rule. With so much hype of B-jets (entering in India, Tata has stake in this) & Netjets offering what is known as Aircraft Fractional Ownership (AFO). Being the only person in India (i think so) who has done a project on Aircraft Fractional Ownership (I did a my Internship with Club One Air on the project titled - "Feasibility of Aircraft Fractional Ownership in India"), i believe its my duty to tell my readers about this AFO thing. The concept of AFO can best known on Netjets website, as this company introduced the concept to the world. I would like to cover issues pertaining to AFO in specifically in India. These issues are a roadblock to this concept-

1. Inappropriate Infrastructure.
2. Charted Flights are not allowed to take off on busy timings.
3. Secondary preference given to charted flights.
4. Even Indian Corporates love to have discounts in AFO, how these players will overcome that.
5. Indians dont love to share thier vehicles, how they will share an aircraft.

Well I will not discuss my findings but, these are the million dollar question to be answered.

Developments in Indian Aviation

Important Developments in Indian Aviation -

• Four airlines given NOC to operate as Regional Airline – M/s. Star Aviation for Southern Region, Jagson Airlines for Northern Region, M/s. MDLR Airlines Pvt. Ltd., for Northern Region and M/s. Zav Airways for North-East/Eastern Region.
• Air India will become the full-fledged member of the Alliance formally by 2009, when the IT Integration and other issues will be completed. Specialized teams at Air India, Star Alliance and its member carriers are now working on the integration process.
• Approval given by Government to set up Greenfield airports in Kannur (Kerala), Navi Mumbai and about the international airport at Jewar, Greater Noida that is under the consideration.
• Andhra Pradesh State Government announced the reduction in the sales tax on ATF from 33% to 4%.

more details about Zav Airways can be taken from http://zavairways.com/

The Youth Movement In Indian Aviation...

One can see the youth movement in the cockpits of some Indian airliners. 19-year-olds are flying as first officers in aircrafts like Boeing 737s and A320s and the four-striper beside them might be as young as 25. In India about 5 percent of commanders on jet aircrafts are under 30 years of age. Thnax to the rapid expansion of Indian aviation. Indian pilots are now, trained almost exclusively for airline positions and the training has become very focused. A young pilot can be commercially rated at 18 years of age and, for some airlines, it needs just 1,500 hours of flying hours to get control of the wheel. Is it good or bad??? especially given the demanding flying conditions in India. If one becomes a commander after flying as a copilot for only two years, there is a level of risk involved due to lack of experience. One must remember that a 19-year-old copilot may be sharing the cockpit with a 25-year-old commander -- there are hardly any years of experience between them. to read complete click on the title...

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SOMETHING WAITING FOR AVIATION SECTOR

GOM is planning to draft a new policy for aviation sector. The issues to be included for discussions are – 1. GOM is planning to ease out polices and rules for Indian airlines to fly abroad. The scheduled airlines can run on international routes after 3 years of operating as domestic airlines. 2. To open the gulf route for other players which currently are the monopoly market of Air India. 3. To ease out rules for foreign airlines to fly into India. 4. 100% FDI for merchant airports. 5. Sharing of airspace between civil and defense aircraft. 7. Modernization of 35 non-metro airports, 8. Route dispersal guidelines expected to be changed. 9. Under new policy the air traffic control is to be corporatized 10. Setting up the Airport Economic Regulatory Authority (AERA) for regulation of airport charges. 11. The amendment of the Aircraft Act 1934 to enhance the powers of the Directorate General of Civil Aviation. These are issues which want to be included in new aviation policy, let’s see once they will include in the policy what effect they will have on the aviation sector.

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Competiotion @ its best...

Objective of the hoarding was to highlight the Image makeover of Jet Airways. It was done to reposition the airlines as an int'l airlines. The theme of the ad shows that the airline has changed...bt, some of the issues which i feel left uncovered were, as the airline changed its logo it has not been given much attention. If the size of logo would have been big enough then, the hoarding would have been much more effective. now, if some1 gives a simple look to it, its hard to find out which co. has is it for. even, the name of co. is written in very small, it should hv been big & bold.the message is nt so clear, wat could hv been, at least wat 1 can expect from Jet Airways. now, it looks sm kind of cool stuff in a frst look, the logo & co. name is visible, the message is clear for Kingfisher. they hv positioned the billboard right over the jet's hoarding, the msg. given is clearly understood. bt, wait 1 questn...is this ethical frm a brand like Kingfisher??? i mean the wat they hv gained financially frm this, may be nothing, it looks so cheap... if they hv put this money in sm good ad. it would hv been gr8. ohhh...this is really crap now, its a clutter, all this look catchy in a frst shot, bt, to read it completly u hv to stop ur vehicle for a while & read it to understand its meaning. every1 is tryin to dwngrade every other. in the terms of communication, its a noise in the communication process. GoAir,a LCC is trying to show, its presences in between full service carriers. nice try. all this happened in our own Mumbai. if m nt, wrong in the month of march or april.

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Jet Airways repositioning...

how can i be so mean that, i forgot my fav. airline about its repositioning & image makeover by having new logo & new cabin crew uniform...even i never mentioned about the Mumbai-Brussels-New York Flight started by it on Aug. 05... may be bacause, i got complance that Jet already offers World Class service & Air India till date used to stand no where in frnt of it...well its always "better late than never", i hv cm up with smthing regarding the new look of the airline... In order to reposition Jet Airways as an int'l airline, it has gone in for an image makeover. the new look of uniforms for cabin crew has been designed by Italian designer Roberto Capucci. The new logo has been inspired by a dupatta, to give a touch of India to its new international look. The airline has also installed newly designed seats and cabins for its economy, first and business class travelers and state-of the art in-flight entertainment systems for long haul international flights. Jet Airways decided on a new look as it is facing intense competition from Vijay Mallya-promoted Kingfisher Airlines.... Seed Newsvine Dig the Web!

The re-branding & positioning of Air India !!!

As a marketing student, I thought to apply some marketing funda’s. That’s how I came up with an idea to find something on re- branding & positioning of Air India. The process of re-branding took place in 2005. DMA Branding a division of Aliagroup was given the task of re-branding the airline. DMA branding has done projects for many products & companies like Dabur, Ayush etc. The steps in the way to re-branding of Air India-

1. Dropping of hyphen from its , name i.e. from “Air-India” to “Air India”.
2. Tagline “Fly Well” adopted.
3. Designing the seats (by DMA).
4. New uniform (new look to traditional sari) designed by Ritu Beri.
5. A graphic swan with Ashoka Chakra design. The positioning for Air India has been focused as a quality & premium traffic airline. The coverage of its new avatar has got excellent media hype. Advertising & Public relations have communicated its new image. Now, it’s the turn of word-of-mouth publicity. Air India is also planning to enter the prestigious Star Alliance (Air India may join Star Alliance after Dec. 2007). Star alliance is an alliance of int’l airlines airline which currently has17 members-

1. Air Canada
2. Air New Zealand
3. ANA
4. Asiana Airlines
5. Austrian
6. BMI
7. LOT Polish Airlines
8. Lufthansa
9. SAS Scandinavian Airlines
10. Singapore Airlines
11. South African Airways
12. Spanair
13. Swiss
14. TAP Portugal
15. Thai
16. United Airlines
17. US Airways...

This is the second & only chance to have a pie of boomin Indian Aviation for Air India to grab this opportunity & become the most preferred airline in the world.

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Air India ‘Mumbai to New York’…wats there!!!

The inaugural flight to New York is about to take off in an hour or two & I was wondering wat is so spl. for Air India’s flight frm Mumbai to New York…I mean every airline starts operatin on new routes… every newspaper I read, every channel I see there’s only this coverage… then why so much of hype for this sector, actually I would say good media hype … till now, not a single American city figures on the listing of the 10 busiest airline routes from India… Air India, which gets 70% of international revenues through Gulf flights, the US foray is a return to the Western world as well as a defensive move because competitors like Air Deccan may b allowed to enter the Gulf route in the future… All international carriers put together flew about 4 m passengers last year between the two countries. The only trump card Air India has got is its non-stop capability and unbeatable timings on the route… the timing chosen for this route is fabulous that means a passenger will board the aircraft around midnight, hv his dinner, fall off to sleep, wakes up 4 breakfast & lands in New York, again in the evening takes off around 2230 & lands Mumbai around 2130 hrs. +1 day ( time gap)… Major decisions taken by Air India--> is to maintain ontime performance,; two Boeing 777 LR (long range) planes to be used exclusively on the route, and one will stand by as a backup. This aircraft, will be used only on the India-Singapore route… whixch is scheduled to depart only after the plane going to US takes off from Mumbai — so in case of a technical hitch, it can replace the aircraft going to the US, well this one really is a big bet coz, if the flight to US has a technical hitch wat abt the flight going to Singapore; one cant cancel the Singapore flight 4 sure… also, the back up plane, an asset worth close to $200m, will be under utilised on a short haul route like India-Singapore… bedises this, Air India plan to join the Star Alliance, a grouping of 17 international carriers like Lufthansa, United Airlines, Air Canada etc… this is going to offer Air India passengers the choice of flying onward to smaller cities in the US… First and business class passengers can opt for a limousine-drop up to New Jersey…I can jus hope that Air India is trying to regain its lost glory, wen it was considered as the most preferred airline in the world…the first airline in aviation which had a fleet of all Jet planes…well it will be shock 4 sm to know that once upon a time Air India trained the Singapore airlines cabin crew…well I can only say that it’s a good leap forward frm the Maharaja, hope 4 d best… Seed Newsvine Dig the Web!

The Par-amount (Air)ways...

the only Business Airline in India...providing business class servies @economy fares...it flies only in South -India, where its a mkt. leader with a mkt. share of nearly 26% bt, if v see it on a national perspective its a mere 2%...it connects all the major n small cities in south- India... Paramount is eyeing a controlling stake of 51% in both Spicejet & GoAir... Spicejet is targeted 4 nearly $10 million where as, GoAir is targeted 4 anywhere between $ 25-35 million...if both the deals goes thru... Paramount will become third largest Airline in Indian Aviation industry...Paramount has a fleet 5 Embraer 170/190 series aircrafts the only airline in India using these jets... MD Mr. Thiagarajan was the youngest CEO of any Airline in the world when it took off (then, 27)...the business model adopted by Paramount is now being followed by many interntional airlines... atleast as of now, 4 me its really a Par-amount (Air)ways... Seed Newsvine Dig the Web!