Desperate times require desperate measures and the global airline industry is no different.
With the International Air Transport Association (IATA) pointing out in its latest report that global passenger demand for travel fell by close to three per cent in July this year as compared to the same period last year, international carriers are looking at wooing fliers back with a variety of sops. Discounts of up to 50 per cent for business and first class fliers and creating new zones within the economy class are some of the schemes being tried.
The Air France-KLM combine, for instance, is soon going to offer a new travel option product for its customers.
“On the Air France aircraft, we will have a new class between economy and business called Premium Voyager. In terms of pricing, it will be positioned between the economy and business class tickets. On KLM aircraft, there will be no separate class but there will be a separate zone within the economy class,” said Mr Erik F. Varwijk, Executive Vice-President, Air France KLM.
The separate zone will come with wider seats and more privacy for fliers. The new product will roll out in November on Air France aircraft, while the entire KLM fleet will be converted to accommodate the new zone by December.
Through this move, the Air France-KLM combine is hoping to target two segments of its fliers. The first is the corporate customer who wants to save costs and the second is the leisure traveller who, according to Mr Varwijk, “desires a bit more luxury than economy.”
Malaysia Airlines is wooing passengers through its Economy Plus scheme and business class “buy one, get one free” offer. The Economy Plus scheme allows a passenger to travel in business class on a confirmed basis at fares which are 30-50 per cent lower than what a normal business class fare will cost. “This product has been specifically designed to promote travel during these bad times,” Malaysia Airline’s Regional Manager, Mr Azahar Bin Hamid, South Asia, told Business Line.
British Airways, on the other hand, is offering a discount of 25 per cent to its business and first class travellers. Bookings for this scheme are open only till the end of the month and out-bound travel must be completed by December 31. The tickets, however, are valid for a year.
Source: The Hindu Business Line
Monday, August 31, 2009
Friday, August 28, 2009
Airline passengers face new stealth fare rises
Desperate to raise extra cash, airlines have cut the limit on baggage in a move which could add at least £100 to the cost of a holiday for a family of four.
The levies are being imposed against a backdrop of airlines facing their worst financial crisis since the September 11 terrorist outrages, with fare income plummeting because of the global recession.
A number of American carriers either have - or are about to - charge economy class passengers for a second piece of luggage going into the hold on transatlantic flights.
The $50 levy (around £31) is being imposed within weeks by Delta, Continental, US Airways and American Airlines, and will affect many of the more than four million Britons a year who are estimated to visit the USA every year.
British Airways, which lost £401 million in the last financial year, has made three major changes to its baggage policy, which will come into force from early October, for economy class passengers. The changes - which will cost up to £40 for a second bag - have been made within weeks of launching an attack on no-frills carriers for their hidden charges
And Virgin Atlantic is imposing a one-bag limit on economy passengers from late September flying to destinations such as Dubai, Shanghai and Singapore, and charging £35 for more. However, all passengers will still be allowed to check in two bags on flights to the USA, Caribbean, Kenya and Nigeria.
The new charges were condemned by Simon Evans, chief executive of the Air Transport Users Council. "It's just about making money, that is what is happening.
"They just want to get more money out of us. BA seems to have buried it on the website. When you think if British Airways' attack on other airlines hidden charges, this does seem like people in glass houses throwing stones."
The additional fees will hit holidaymakers particularly badly as they normally carry more luggage than business travellers and are more likely to fly economy.
In addition, BA has decided that sporting equipment, such as skis, will now form part of the baggage allowance, which means anyone carrying a suitcase will have to pay an extra £40 at the airport – or £32 if it is checked in on line.
It will hit skiers and snowboarders in a move described as "disappointing" by the Ski Club of Great Britain.
BA is also raising the levy on "heavy luggage" - weighing between 50.7 lbs (23 kg) and 70.5 lbs (32 kg) from £25 to £30.
Cutting baggage allowances is one of a series of economy measures taken by BA, which earlier this year it announced that it would no longer be serving economy class passengers meals on flights of less than two and a half hours.
BA has also appealed to staff to work for nothing or take unpaid leave as it struggles to balance its books.
Until now on BA transatlantic passengers had been allowed to check two bags onto the plane, having been exempted from the single bag limit which was introduced for the rest of the world two years ago.
An airline spokesman defended the charges. "These are unprecedented economic times and we believe this can generate revenue for British Airways and help return us to profitability. Our free hold and hand baggage allowances remain generous," he said.
He added that passengers were being told of the new allowances and that, while passengers to North America were seeing their luggage allowance cut, charges imposed to other destinations such as Dubai were being reduced.
A Delta spokesman said the new arrangements reflected customer demand.
"Delta has continued to un-bundle certain fees to ensure that passengers pay for the services they choose to use. We believe applying this model to international Economy class tickets on travel to and from Europe is appropriate based on the success we have had with this model within the United States."
Meanwhile a spokesman for Virgin Atlantic also said its new baggage policy was justified. "We are reacting to passenger demand and where they want to take more bags.
"In the United States, people tend to want to take more, so they can bring shopping back, while when they go to Sydney, they tend to be happy with one."
Source: Telegraph
The levies are being imposed against a backdrop of airlines facing their worst financial crisis since the September 11 terrorist outrages, with fare income plummeting because of the global recession.
A number of American carriers either have - or are about to - charge economy class passengers for a second piece of luggage going into the hold on transatlantic flights.
The $50 levy (around £31) is being imposed within weeks by Delta, Continental, US Airways and American Airlines, and will affect many of the more than four million Britons a year who are estimated to visit the USA every year.
British Airways, which lost £401 million in the last financial year, has made three major changes to its baggage policy, which will come into force from early October, for economy class passengers. The changes - which will cost up to £40 for a second bag - have been made within weeks of launching an attack on no-frills carriers for their hidden charges
And Virgin Atlantic is imposing a one-bag limit on economy passengers from late September flying to destinations such as Dubai, Shanghai and Singapore, and charging £35 for more. However, all passengers will still be allowed to check in two bags on flights to the USA, Caribbean, Kenya and Nigeria.
The new charges were condemned by Simon Evans, chief executive of the Air Transport Users Council. "It's just about making money, that is what is happening.
"They just want to get more money out of us. BA seems to have buried it on the website. When you think if British Airways' attack on other airlines hidden charges, this does seem like people in glass houses throwing stones."
The additional fees will hit holidaymakers particularly badly as they normally carry more luggage than business travellers and are more likely to fly economy.
In addition, BA has decided that sporting equipment, such as skis, will now form part of the baggage allowance, which means anyone carrying a suitcase will have to pay an extra £40 at the airport – or £32 if it is checked in on line.
It will hit skiers and snowboarders in a move described as "disappointing" by the Ski Club of Great Britain.
BA is also raising the levy on "heavy luggage" - weighing between 50.7 lbs (23 kg) and 70.5 lbs (32 kg) from £25 to £30.
Cutting baggage allowances is one of a series of economy measures taken by BA, which earlier this year it announced that it would no longer be serving economy class passengers meals on flights of less than two and a half hours.
BA has also appealed to staff to work for nothing or take unpaid leave as it struggles to balance its books.
Until now on BA transatlantic passengers had been allowed to check two bags onto the plane, having been exempted from the single bag limit which was introduced for the rest of the world two years ago.
An airline spokesman defended the charges. "These are unprecedented economic times and we believe this can generate revenue for British Airways and help return us to profitability. Our free hold and hand baggage allowances remain generous," he said.
He added that passengers were being told of the new allowances and that, while passengers to North America were seeing their luggage allowance cut, charges imposed to other destinations such as Dubai were being reduced.
A Delta spokesman said the new arrangements reflected customer demand.
"Delta has continued to un-bundle certain fees to ensure that passengers pay for the services they choose to use. We believe applying this model to international Economy class tickets on travel to and from Europe is appropriate based on the success we have had with this model within the United States."
Meanwhile a spokesman for Virgin Atlantic also said its new baggage policy was justified. "We are reacting to passenger demand and where they want to take more bags.
"In the United States, people tend to want to take more, so they can bring shopping back, while when they go to Sydney, they tend to be happy with one."
Source: Telegraph
Wednesday, August 26, 2009
Jet says pilot strike will not hit operations
Jet Airways will face its biggest challenge in recent times from the midnight of September 7 when its pilots go on strike.
The National Aviators Guild (NAG), the recently formed union of Jet Airways’ pilots, has around 650 members who will join the strike. The airline has around 700 pilots on its rolls.
The union had issued a notice to the carrier on Monday about its intention to go on strike following the sacking of two pilots, Capt. Sam Thomas and Capt. D. Balaram.
Jet had reportedly terminated their services through an e-mail saying that their services were not required. Capt. Girish Kaushik, President, NAG, told Business Line: “The pilots were sacked because they formed the guild. The guild is not illegal and is registered with the Labour Commissioner’s office. Our only demand is they (Jet) take the two pilots back, failing which there will be an indefinite strike.”
The airline in a statement issued on Tuesday said the notice issued by the guild was taken up for conciliation by the Regional Labour Commissioner (Central). “Jet Airways assures its guests that appropriate action will be taken to ensure that there is no disruption in its operations and that no inconvenience is caused to the travelling public,” the statement said.
Jet has 84 aircraft in its fleet and operates 365 daily domestic and international flights. If the strike was to happen, it could hit operations from the second day.
“The airline can handle the initial impact through its expatriate pilots who will not join the strike,” said a company official. Jet may even consider deploying some management cadre pilots.
Source: The Hindu Business Line
The National Aviators Guild (NAG), the recently formed union of Jet Airways’ pilots, has around 650 members who will join the strike. The airline has around 700 pilots on its rolls.
The union had issued a notice to the carrier on Monday about its intention to go on strike following the sacking of two pilots, Capt. Sam Thomas and Capt. D. Balaram.
Jet had reportedly terminated their services through an e-mail saying that their services were not required. Capt. Girish Kaushik, President, NAG, told Business Line: “The pilots were sacked because they formed the guild. The guild is not illegal and is registered with the Labour Commissioner’s office. Our only demand is they (Jet) take the two pilots back, failing which there will be an indefinite strike.”
The airline in a statement issued on Tuesday said the notice issued by the guild was taken up for conciliation by the Regional Labour Commissioner (Central). “Jet Airways assures its guests that appropriate action will be taken to ensure that there is no disruption in its operations and that no inconvenience is caused to the travelling public,” the statement said.
Jet has 84 aircraft in its fleet and operates 365 daily domestic and international flights. If the strike was to happen, it could hit operations from the second day.
“The airline can handle the initial impact through its expatriate pilots who will not join the strike,” said a company official. Jet may even consider deploying some management cadre pilots.
Source: The Hindu Business Line
Tuesday, August 25, 2009
Delhi-London route: Nacil opposes Kingfisher
State-owned National Aviation Co. of India Ltd (Nacil), which runs flag carrier Air India, has written to the ministry of civil aviation asking it not to allow Kingfisher Airlines Ltd to operate on the New Delhi-London route, said two Nacil executives familiar with the matter.
Nacil noted in the letter that Kingfisher Airlines, India’s second largest carrier by passengers flown, was already discontinuing its Bangalore-London service because of mounting losses. The letter cited excess capacity on the India-UK sector and potential losses to Nacil should Kingfisher also be allowed to fly New Delhi-London, said the two executives, who didn’t want to be named because they are not authorized to speak to the media.
“Adding more capacity on New Delhi-London route will result in further losses for all carriers operating in that sector,” one of the executives said. Getting approval to fly on the new route is important for Kingfisher Airlines, controlled by billionaire liquor baron Vijay Mallya, to keep its landing slot at London’s Heathrow airport, which will fall vacant once it ceases its Bangalore-London flights. Airport slots are hard to come by at Heathrow, and Kingfisher had bought the slot from KLM Royal Dutch Airlines in early 2008 for an undisclosed sum. Kingfisher Airlines, Jet Airways (India) Ltd, British Airways Plc. and Virgin Atlantic Airways Ltd operate on the India-UK route.
In a statement on 11 July, Kingfisher Airlines said it would suspend its Bangalore-London flights and its Colombo-Bangalore feeder service beginning 15 September. The airline said it had applied to the ministry of civil aviation to start operations on the New Delhi-London sector and that it would announce launch dates once it got the go-ahead.
Air India and its rivals are already facing challenges from competition, excess capacity and the impact of the economic slowdown that has hurt air traffic growth. With accumulated losses of Rs7,200 crore and debt of Rs15,241 crore at the end of June, up from Rs6,550 crore in November 2007, cash-strapped Nacil has sought a loan and equity infusion of around Rs15,000 crore from the government.
A senior official at the ministry of civil aviation said the ministry had already asked Jet Airways and Kingfisher Airlines to explain why they hadn’t been flying on some international routes they had been given permission to operate on, and was awaiting a response from the carriers.
“We have not given approvals for Kingfisher Airlines to fly New Delhi-London,” said the official, who didn’t want to be named. “We will take a final view on route approvals only after private carriers respond to us.”
A senior executive at Kingfisher Airlines confirmed that the carrier had not yet received permission to offer New Delhi-London flights. The airline is expecting resistance from the ministry, given the government is attempting to turn around the national carrier, said the executive, who didn’t want to be named. Kingfisher Airlines spokesman Prakash Mirpuri and Nacil spokesman Jitender Bhargava declined to comment for this story. Nacil chairman and managing director Arvind Jadhav could not be contacted.
Intensifying competition, Jet Airways is also in the process of expanding its capacity on the New Delhi-London route, starting in October, by replacing its 220-seat Airbus A330 plying on the route with a 312-seat Boeing 777.
On 17 August, Anita Goyal, executive vice-president (network planning and revenue management), had said in an interview that Jet Airways’ London operations will become profitable during this winter schedule, which lasts from October through March.
“I wish them all the very best,” Jet Airways founder chairman Naresh Goyal said when asked what would be the impact of Kingfisher’s entry in the New Delhi-London route.
Employees of Air India, claiming that excess capacity is the primary cause of the airline’s troubles, have appealed to Prime Minister Manmohan Singh for government intervention. In a recent letter to Singh, they sought “directions and guidelines so that the domestic operators do not operate flights to one and the same destinations more than their requirements”.
An airline consultant, who didn’t want to be named, said restrictions would not help.“These are not the ways to save Air India,” he said. “For that you will have to take harsh steps. You cannot deny an airline’s right to fly any destination, once that carrier is eligible to fly overseas.”
Source: Mint
Nacil noted in the letter that Kingfisher Airlines, India’s second largest carrier by passengers flown, was already discontinuing its Bangalore-London service because of mounting losses. The letter cited excess capacity on the India-UK sector and potential losses to Nacil should Kingfisher also be allowed to fly New Delhi-London, said the two executives, who didn’t want to be named because they are not authorized to speak to the media.
“Adding more capacity on New Delhi-London route will result in further losses for all carriers operating in that sector,” one of the executives said. Getting approval to fly on the new route is important for Kingfisher Airlines, controlled by billionaire liquor baron Vijay Mallya, to keep its landing slot at London’s Heathrow airport, which will fall vacant once it ceases its Bangalore-London flights. Airport slots are hard to come by at Heathrow, and Kingfisher had bought the slot from KLM Royal Dutch Airlines in early 2008 for an undisclosed sum. Kingfisher Airlines, Jet Airways (India) Ltd, British Airways Plc. and Virgin Atlantic Airways Ltd operate on the India-UK route.
In a statement on 11 July, Kingfisher Airlines said it would suspend its Bangalore-London flights and its Colombo-Bangalore feeder service beginning 15 September. The airline said it had applied to the ministry of civil aviation to start operations on the New Delhi-London sector and that it would announce launch dates once it got the go-ahead.
Air India and its rivals are already facing challenges from competition, excess capacity and the impact of the economic slowdown that has hurt air traffic growth. With accumulated losses of Rs7,200 crore and debt of Rs15,241 crore at the end of June, up from Rs6,550 crore in November 2007, cash-strapped Nacil has sought a loan and equity infusion of around Rs15,000 crore from the government.
A senior official at the ministry of civil aviation said the ministry had already asked Jet Airways and Kingfisher Airlines to explain why they hadn’t been flying on some international routes they had been given permission to operate on, and was awaiting a response from the carriers.
“We have not given approvals for Kingfisher Airlines to fly New Delhi-London,” said the official, who didn’t want to be named. “We will take a final view on route approvals only after private carriers respond to us.”
A senior executive at Kingfisher Airlines confirmed that the carrier had not yet received permission to offer New Delhi-London flights. The airline is expecting resistance from the ministry, given the government is attempting to turn around the national carrier, said the executive, who didn’t want to be named. Kingfisher Airlines spokesman Prakash Mirpuri and Nacil spokesman Jitender Bhargava declined to comment for this story. Nacil chairman and managing director Arvind Jadhav could not be contacted.
Intensifying competition, Jet Airways is also in the process of expanding its capacity on the New Delhi-London route, starting in October, by replacing its 220-seat Airbus A330 plying on the route with a 312-seat Boeing 777.
On 17 August, Anita Goyal, executive vice-president (network planning and revenue management), had said in an interview that Jet Airways’ London operations will become profitable during this winter schedule, which lasts from October through March.
“I wish them all the very best,” Jet Airways founder chairman Naresh Goyal said when asked what would be the impact of Kingfisher’s entry in the New Delhi-London route.
Employees of Air India, claiming that excess capacity is the primary cause of the airline’s troubles, have appealed to Prime Minister Manmohan Singh for government intervention. In a recent letter to Singh, they sought “directions and guidelines so that the domestic operators do not operate flights to one and the same destinations more than their requirements”.
An airline consultant, who didn’t want to be named, said restrictions would not help.“These are not the ways to save Air India,” he said. “For that you will have to take harsh steps. You cannot deny an airline’s right to fly any destination, once that carrier is eligible to fly overseas.”
Source: Mint
Monday, August 24, 2009
Domestic air fares nosedive sharply on swine flu fears
Air fares in several domestic sectors have crashlanded and flying to places such as Goa, Mumbai and Bangalore is once again possible for less than Rs 2,000 if you booking the right flight at the right time.
Travel experts say airlines have responded to falling passenger loads and swine flu fears to bring fares to their lowest point in two years. Even flights to usually expensive destinations such as Kolkata, Chennai, Guwahati and Jammu are almost 30%-40% lower and tickets are available for anything between Rs 2,500 and Rs 3,000 if you shop around for the right fare.
"Only two months ago, domestic fares were so high that people were choosing to travel abroad because of the attractive fare packages. A ticket to a very well-connected destination, came at between Rs 3,500 and Rs 4,500 even in low-cost carriers," a travel expert said. "But the situation has turned on its head to benefit economy-class travellers."
GoAir, for instance, is offering Mumbai-Goa tickets for Rs 1,975; a discount of Rs 300 brings the fare down to sub-2,000 levels. Spice Jet has pitched the same ticket at 2,150 minus Rs 150 (to give you a ticket for Rs 2,000). Even full-service carrier Kingfisher's ticket is priced at Rs 2,250.
Similarly, if you book a Mumbai-Banglore ticket for Sept 1 either on Indigo or GoAir, you can expect to get a ticket for as low as Rs 1,553. The maximum fare, offered by even full-service carriers, is also between Rs 3,000 and Rs 4,000. You can get air tickets for Delhi, too, at Rs 1,998. And tickets for destinations like Jammu, which are usually priced between Rs 5,000 and Rs 8,000, are priced at Rs 1,803 for September 1.
"This hasn't happened in a long time; minimum air fares have been touching the Rs-3,500 mark or perhaps a little less in the non-peak season. But the low fares on offer now will also make bookings for the peak October season cheaper," Cirrus Travels managing director Rajesh Rateria said.
Travel experts also offer some tips if you are looking for a cheap fare; it's always wiser to look for afternoon flights as they are much cheaper than those in the morning or evening. "Non-prime time flights are cheaper. Most business travellers prefer morning-to-evening schedules and so that leaves afternoon flights with hardly any load," Travel Agents' Federation of India (TAFI) vice-president Pradip Lulla said. "But swine flu has created panic even among people who travel on business. The long Independence Day weekend, when air travel was expected to show a spurt, was also lukewarm," he added.
Source: The Times of India
Travel experts say airlines have responded to falling passenger loads and swine flu fears to bring fares to their lowest point in two years. Even flights to usually expensive destinations such as Kolkata, Chennai, Guwahati and Jammu are almost 30%-40% lower and tickets are available for anything between Rs 2,500 and Rs 3,000 if you shop around for the right fare.
"Only two months ago, domestic fares were so high that people were choosing to travel abroad because of the attractive fare packages. A ticket to a very well-connected destination, came at between Rs 3,500 and Rs 4,500 even in low-cost carriers," a travel expert said. "But the situation has turned on its head to benefit economy-class travellers."
GoAir, for instance, is offering Mumbai-Goa tickets for Rs 1,975; a discount of Rs 300 brings the fare down to sub-2,000 levels. Spice Jet has pitched the same ticket at 2,150 minus Rs 150 (to give you a ticket for Rs 2,000). Even full-service carrier Kingfisher's ticket is priced at Rs 2,250.
Similarly, if you book a Mumbai-Banglore ticket for Sept 1 either on Indigo or GoAir, you can expect to get a ticket for as low as Rs 1,553. The maximum fare, offered by even full-service carriers, is also between Rs 3,000 and Rs 4,000. You can get air tickets for Delhi, too, at Rs 1,998. And tickets for destinations like Jammu, which are usually priced between Rs 5,000 and Rs 8,000, are priced at Rs 1,803 for September 1.
"This hasn't happened in a long time; minimum air fares have been touching the Rs-3,500 mark or perhaps a little less in the non-peak season. But the low fares on offer now will also make bookings for the peak October season cheaper," Cirrus Travels managing director Rajesh Rateria said.
Travel experts also offer some tips if you are looking for a cheap fare; it's always wiser to look for afternoon flights as they are much cheaper than those in the morning or evening. "Non-prime time flights are cheaper. Most business travellers prefer morning-to-evening schedules and so that leaves afternoon flights with hardly any load," Travel Agents' Federation of India (TAFI) vice-president Pradip Lulla said. "But swine flu has created panic even among people who travel on business. The long Independence Day weekend, when air travel was expected to show a spurt, was also lukewarm," he added.
Source: The Times of India
Friday, August 21, 2009
‘We will not privatise Air India, may offload equity’: Praful Patel
Despite being the ninth biggest aviation market, India is the world’s least tapped market. That’s Civil Aviation Minister Praful Patel speaking to Hindustan Times over lunch on issues ranging from restructuring Air India (AI) to taxes on aviation turbine fuel (ATF) and high airport charges. Despite the downturn, he’s upbeat about the sector, particularly its role as an employment generator. Excerpts:
On privatising Air India
We will not privatise Air India but we are not averse to a strategic partner. We will offload some equity in the airline. I have always told people in AI that they would have to work very hard. I have told them you either perform or perish, but perish is not an option.
On bailout for Air India
AI has been under intense scrutiny and I do not subscribe to the word ‘bailout’ as the government has never spent a rupee for the airline. But the government being the owner of the airline has a duty to see it perform. AI was on the sale list of the erstwhile National Democratic Alliance government.
On the AI-Indian Airlines merger
A well-intended merger process has landed in internal bickering. The government had planed an internal public offer for AI and Indian Airlines in 2006. But both had a negative net worth and the consultants suggested that we merge them for better valuation. The airlines were merged on lines of Singapore Airlines and Lufthansa to create strategic business units (SBUs) so that these units could generate profits for the airline but that failed to happen.
On Air India workforce
Workforce is certainly an issue. The airline is overstaffed by 30-40 per cent and we wanted to deploy the extra workforce to the SBUs but that is yet to work out. We will not reduce the workforce in the airline but will deploy them to areas where we are short-staffed.
On AI’s debts
Every company goes for debt restructuring. AI’s debts of Rs 16,000 crore are being reworked and on being done it will save the airline nearly Rs 800 crore per year.
On reducing ATF prices
A group of ministers, headed by finance minister Pranab Mukherjee, has been constituted to look at the issue of high price of ATF. High jet fuel prices are leading the industry towards sickness. The ministerial panel is expected to decide in the next three months.
On states’ response on ATF
I have always impressed upon the states to bring down taxes on ATF as it would only help the states generate greater revenues and make airlines competitive. ATF touched an all-time high of Rs 71,000 per kilo litre in 2007. That shook the foundation of the civil aviation sector and the high prices were passed on to consumers. That’s when the airlines started losing passengers.
On the health of airlines
The industry is the first to be affected whenever there is a slowdown, a terror attack or the spread of an epidemic, as travel goes down. I have been speaking to corporate house and all of them including Infosys, Reliance and Wipro have drastically cut down travel. Corporate and business travel has gone down by as much as 50 per cent. Coupled with the epidemic scare this has dealt a body blow to the airline industry.
On bailing out private airlines
We cannot bail out private airlines. In AI’s case, the government is the owner. In Kingfisher’s case Vijay Mallya is the owner and in case of Jet Mr Naresh Goyal is the owner and they will have to pull their airline out of the red.
On high airport charges
I can cite 10 examples of airports that are more expensive than airports in India and 10 that are less expensive. Airport charges do not have a huge impact on the profitability of airlines. The airport development charges are being levied from passengers for the facilities that they will get. However it is still being debated if these charges should be levied once the facility is in place or they should be charged when the airport is under construction.
Source: Hindustan Times
On privatising Air India
We will not privatise Air India but we are not averse to a strategic partner. We will offload some equity in the airline. I have always told people in AI that they would have to work very hard. I have told them you either perform or perish, but perish is not an option.
On bailout for Air India
AI has been under intense scrutiny and I do not subscribe to the word ‘bailout’ as the government has never spent a rupee for the airline. But the government being the owner of the airline has a duty to see it perform. AI was on the sale list of the erstwhile National Democratic Alliance government.
On the AI-Indian Airlines merger
A well-intended merger process has landed in internal bickering. The government had planed an internal public offer for AI and Indian Airlines in 2006. But both had a negative net worth and the consultants suggested that we merge them for better valuation. The airlines were merged on lines of Singapore Airlines and Lufthansa to create strategic business units (SBUs) so that these units could generate profits for the airline but that failed to happen.
On Air India workforce
Workforce is certainly an issue. The airline is overstaffed by 30-40 per cent and we wanted to deploy the extra workforce to the SBUs but that is yet to work out. We will not reduce the workforce in the airline but will deploy them to areas where we are short-staffed.
On AI’s debts
Every company goes for debt restructuring. AI’s debts of Rs 16,000 crore are being reworked and on being done it will save the airline nearly Rs 800 crore per year.
On reducing ATF prices
A group of ministers, headed by finance minister Pranab Mukherjee, has been constituted to look at the issue of high price of ATF. High jet fuel prices are leading the industry towards sickness. The ministerial panel is expected to decide in the next three months.
On states’ response on ATF
I have always impressed upon the states to bring down taxes on ATF as it would only help the states generate greater revenues and make airlines competitive. ATF touched an all-time high of Rs 71,000 per kilo litre in 2007. That shook the foundation of the civil aviation sector and the high prices were passed on to consumers. That’s when the airlines started losing passengers.
On the health of airlines
The industry is the first to be affected whenever there is a slowdown, a terror attack or the spread of an epidemic, as travel goes down. I have been speaking to corporate house and all of them including Infosys, Reliance and Wipro have drastically cut down travel. Corporate and business travel has gone down by as much as 50 per cent. Coupled with the epidemic scare this has dealt a body blow to the airline industry.
On bailing out private airlines
We cannot bail out private airlines. In AI’s case, the government is the owner. In Kingfisher’s case Vijay Mallya is the owner and in case of Jet Mr Naresh Goyal is the owner and they will have to pull their airline out of the red.
On high airport charges
I can cite 10 examples of airports that are more expensive than airports in India and 10 that are less expensive. Airport charges do not have a huge impact on the profitability of airlines. The airport development charges are being levied from passengers for the facilities that they will get. However it is still being debated if these charges should be levied once the facility is in place or they should be charged when the airport is under construction.
Source: Hindustan Times
Tuesday, August 18, 2009
Airlines stocks in red on ATF price hike
Airline stocks have suffered on the back of a hike in ATF prices.
Jet Airways opened at Rs 253, touched a high of Rs 255 and then slipped into the negative terrain to touch a low of 248, down 5% from the previous close. Around 97,980 shares have been traded on the BSE so far. The stock has moved 7% in a week.
Kingfisher Airlines opened at Rs 49 and then slipped to touch a low of Rs 47.75. The scrip is now trading at Rs 47.80, down 4.59 per cent. Around 643,172 shares have been traded on the BSE so far today.
SpiceJet opened at Rs 22, touched a high of Rs 23.75 and slipped to a low of 21.30. The scrip is now trading flat at Rs 22.75. Around 3.72 million shares have been traded on the BSE so far.
ATF rates in Delhi have been increased by Rs 1,663 per kilo litre to Rs 38,585 per kilo litre. In Mumbai, the rate has been increased to Rs 39,830 from Rs 38,098 per kilolitre previously. This is the second price hike in a month. Earlier on 1 August 2009, state-run oil firms had raised ATF price by 1.6% to Rs 585 per kl.
ATF accounts for over 40% of the total operational cost of an airline in India, compared with 20-25% globally.
Source: Business Standard
Jet Airways opened at Rs 253, touched a high of Rs 255 and then slipped into the negative terrain to touch a low of 248, down 5% from the previous close. Around 97,980 shares have been traded on the BSE so far. The stock has moved 7% in a week.
Kingfisher Airlines opened at Rs 49 and then slipped to touch a low of Rs 47.75. The scrip is now trading at Rs 47.80, down 4.59 per cent. Around 643,172 shares have been traded on the BSE so far today.
SpiceJet opened at Rs 22, touched a high of Rs 23.75 and slipped to a low of 21.30. The scrip is now trading flat at Rs 22.75. Around 3.72 million shares have been traded on the BSE so far.
ATF rates in Delhi have been increased by Rs 1,663 per kilo litre to Rs 38,585 per kilo litre. In Mumbai, the rate has been increased to Rs 39,830 from Rs 38,098 per kilolitre previously. This is the second price hike in a month. Earlier on 1 August 2009, state-run oil firms had raised ATF price by 1.6% to Rs 585 per kl.
ATF accounts for over 40% of the total operational cost of an airline in India, compared with 20-25% globally.
Source: Business Standard
Friday, August 14, 2009
Airlines expected to grow at 8.5% per year till 2015
India’s aviation sector, which contracted 4.7% in 2008, is expected to grow by at least 8.5% every year till 2015, civil aviation minister Praful Patel said on Thursday. “We do expect that kind of growth because of the 300-million-strong middle class,” Patel said.If the economic situation improves, the sector could even see a 25-30% growth, the minister said.
“It’s reasonable,” domestic carrier SpiceJet Ltd’s chief commercial officer Samyukth Sridharan said.The country’s civil aviation sector grew 46.4% in 2006 and 32.5% in 2007, before shrinking in 2008 in the wake of a global economic downturn.
In the first half of 2009, traffic has dipped by 4.9% but figures for June and July have shown better-than- expected passenger numbers. Civil aviation in India—the world’s ninth-biggest—is a $14 billion (Rs67,340 crore) industry.
The government also decided on Thursday to constitute a group of ministers to look into the high sales tax of jet fuel levied by the state governments. “The base price of fuel... is much higher then most places internationally,” Patel said. Domestic airline firms have been complaining about the high taxes on aviation fuel, which accounts for around 40% of their operating costs.
The government is yet to decide on who would comprise the group of ministers and has not announced a timeline for the outcome of the committee’s deliberations.
Airline stocks shot up after the announcement on the Bombay Stock Exchange. SpiceJet was up 11.53% to close at Rs20.80, Kingfisher Airlines Ltd rose 6.23% to Rs48.60 and Jet Airways (India) Ltd gained 3.28% to touch Rs239.20. The benchmark Sensex index was up 3.46%.
Source: Mint
“It’s reasonable,” domestic carrier SpiceJet Ltd’s chief commercial officer Samyukth Sridharan said.The country’s civil aviation sector grew 46.4% in 2006 and 32.5% in 2007, before shrinking in 2008 in the wake of a global economic downturn.
In the first half of 2009, traffic has dipped by 4.9% but figures for June and July have shown better-than- expected passenger numbers. Civil aviation in India—the world’s ninth-biggest—is a $14 billion (Rs67,340 crore) industry.
The government also decided on Thursday to constitute a group of ministers to look into the high sales tax of jet fuel levied by the state governments. “The base price of fuel... is much higher then most places internationally,” Patel said. Domestic airline firms have been complaining about the high taxes on aviation fuel, which accounts for around 40% of their operating costs.
The government is yet to decide on who would comprise the group of ministers and has not announced a timeline for the outcome of the committee’s deliberations.
Airline stocks shot up after the announcement on the Bombay Stock Exchange. SpiceJet was up 11.53% to close at Rs20.80, Kingfisher Airlines Ltd rose 6.23% to Rs48.60 and Jet Airways (India) Ltd gained 3.28% to touch Rs239.20. The benchmark Sensex index was up 3.46%.
Source: Mint
Thursday, August 13, 2009
Airlines carry more passengers but earn less
Airlines have started to come out of the dive that they started in November 2008, when they flew 3 million passengers, compared with 4.1 million in May of that year.
In June 2009 they carried almost 3.7 million passengers, and in July they carried marginally fewer passengers at 3.6 million. Good news? Not quite, because they are making less money per seat they sell than they were in 2008. This is the effect of the shift towards the low-cost model — sell more seats but earn less per seat.
The latest data collated by the Directorate-General of Civil Aviation show that during July this year the airlines flew 35.97 lakhs passengers or almost 3.6 million, registering a growth of 18 per cent compared with the same period in the previous year.
Yields become casualty
“The airlines are filling their planes but most of the capacity is turning low-cost. This is leading to a situation where airline yields are becoming a casualty,” said Mr Kapil Kaul, CEO, Indian sub-continent & Middle East, Centre for Asia Pacific Aviation. The Chief Executive Officer of a full service airline also confirmed that the yields were not in “the right zone”.
To overcome this situation, Jet Airways has indicated that by October this year close to two-thirds of the total capacity offered will be on Jet Konnect, the low-cost sub-brand launched in May. Kingfisher has also started operating more flights on its low-cost variant Red, while State-owned Air India is to launch low-cost operations in the domestic market with Air India Express next month.
In July this year, the highest increase in passenger carriage for a stand alone airline was shown by the Mumbai-based low-cost airline Go Air which carried 2.04 lakh passengers, up from 75,000 in July last year. Kingfisher Airlines, which does not give a break-up of number of passengers flown by its 100-per cent subsidiary Red, carried 8.29 lakh, up from 4.69 lakh passengers. In July last year, Kingfisher and Air Deccan were operating as separate entities. But later Kingfisher Airlines purchased Air Deccan and renamed it Kingfisher Red.
NACIL (Domestic), JetLite, SpiceJet, Paramount and IndiGo all flew more passengers during July this year compared with the same period in the previous year.
Positive impact
“Our passenger growth has far exceeded the drop in yield. We are seeing a strong positive impact on the top line. The launch of Jet Konnect has helped us record seat factors of upwards of 75 per cent,” the Chief Commercial Officer, Jet Konnect, Mr Sudheer Raghavan, said.
Source: The Hindu Business Line
In June 2009 they carried almost 3.7 million passengers, and in July they carried marginally fewer passengers at 3.6 million. Good news? Not quite, because they are making less money per seat they sell than they were in 2008. This is the effect of the shift towards the low-cost model — sell more seats but earn less per seat.
The latest data collated by the Directorate-General of Civil Aviation show that during July this year the airlines flew 35.97 lakhs passengers or almost 3.6 million, registering a growth of 18 per cent compared with the same period in the previous year.
Yields become casualty
“The airlines are filling their planes but most of the capacity is turning low-cost. This is leading to a situation where airline yields are becoming a casualty,” said Mr Kapil Kaul, CEO, Indian sub-continent & Middle East, Centre for Asia Pacific Aviation. The Chief Executive Officer of a full service airline also confirmed that the yields were not in “the right zone”.
To overcome this situation, Jet Airways has indicated that by October this year close to two-thirds of the total capacity offered will be on Jet Konnect, the low-cost sub-brand launched in May. Kingfisher has also started operating more flights on its low-cost variant Red, while State-owned Air India is to launch low-cost operations in the domestic market with Air India Express next month.
In July this year, the highest increase in passenger carriage for a stand alone airline was shown by the Mumbai-based low-cost airline Go Air which carried 2.04 lakh passengers, up from 75,000 in July last year. Kingfisher Airlines, which does not give a break-up of number of passengers flown by its 100-per cent subsidiary Red, carried 8.29 lakh, up from 4.69 lakh passengers. In July last year, Kingfisher and Air Deccan were operating as separate entities. But later Kingfisher Airlines purchased Air Deccan and renamed it Kingfisher Red.
NACIL (Domestic), JetLite, SpiceJet, Paramount and IndiGo all flew more passengers during July this year compared with the same period in the previous year.
Positive impact
“Our passenger growth has far exceeded the drop in yield. We are seeing a strong positive impact on the top line. The launch of Jet Konnect has helped us record seat factors of upwards of 75 per cent,” the Chief Commercial Officer, Jet Konnect, Mr Sudheer Raghavan, said.
Source: The Hindu Business Line
Wednesday, August 12, 2009
Airlines gear up to combat flu scare
With the flu scare gripping the country, airlines, airports and the travel industry in general, have stepped up measures to combat the H1N1 virus. Mumbai International Airport is conducting massive “thermal camera screening” of incoming passengers. The airport has also distributed surgical face masks to employees at Chhatrapati Shivaji International Airport. Two air cleansing machines have been set up to purify arrival area at regular intervals, said an airport executive.
“We have procured a thermal camera and government doctors are conducting the screening process,” the Mumbai International Airport spokesperson told ET. Chhatrapati Shivaji International Airport is the first airport in India to have a thermal camera for screening of swine flu.
At the domestic terminal, facemasks have been distributed and there are plans to make travel packs available to passengers and employees. These packs will contain facemasks, sanitary wipes and Receptol tablets.
Kingfisher, the largest private airline, is closely monitoring the situation and is in regular touch with the airport health authorities and other national and international stakeholders. Factual information on H1N1 influenza was disseminated to employees of Kingfisher Airlines. An advisory was circulated to all cabin crew and flight deck crew listing out the specific precautions.
“Surgical face masks are provided on all international flights to and from countries listed by WHO and crew have been advised to distribute masks on request or to those exhibiting flu symptoms,” a Kingfisher spokesperson said. On all inbound international fights of Kingfisher Airlines, the health declaration forms as advised by the health authorities are being distributed to guests on board.
All employees of GoAir suffering from cold, cough or fever have been asked to abstain from work till completely cured. At airports, GoAir has requested authorities to provide face masks for use of airport staff who come into direct contact with customers.
Low cost carrier SpiceJet has said that internal messaging is being done to create awareness on strict hygiene measures and posters with key messages have been put up in high visibility areas. In addition to this, SpiceJet ground staffs in Pune have been given special masks to ensure employees and guests’ safety. “We have been sharing regular updates on H1N1 virus with employees to generate awareness. Washrooms in our offices are being equipped with special disinfecting liquid,” a SpiceJet spokesperson said.
Source: Economic Times
“We have procured a thermal camera and government doctors are conducting the screening process,” the Mumbai International Airport spokesperson told ET. Chhatrapati Shivaji International Airport is the first airport in India to have a thermal camera for screening of swine flu.
At the domestic terminal, facemasks have been distributed and there are plans to make travel packs available to passengers and employees. These packs will contain facemasks, sanitary wipes and Receptol tablets.
Kingfisher, the largest private airline, is closely monitoring the situation and is in regular touch with the airport health authorities and other national and international stakeholders. Factual information on H1N1 influenza was disseminated to employees of Kingfisher Airlines. An advisory was circulated to all cabin crew and flight deck crew listing out the specific precautions.
“Surgical face masks are provided on all international flights to and from countries listed by WHO and crew have been advised to distribute masks on request or to those exhibiting flu symptoms,” a Kingfisher spokesperson said. On all inbound international fights of Kingfisher Airlines, the health declaration forms as advised by the health authorities are being distributed to guests on board.
All employees of GoAir suffering from cold, cough or fever have been asked to abstain from work till completely cured. At airports, GoAir has requested authorities to provide face masks for use of airport staff who come into direct contact with customers.
Low cost carrier SpiceJet has said that internal messaging is being done to create awareness on strict hygiene measures and posters with key messages have been put up in high visibility areas. In addition to this, SpiceJet ground staffs in Pune have been given special masks to ensure employees and guests’ safety. “We have been sharing regular updates on H1N1 virus with employees to generate awareness. Washrooms in our offices are being equipped with special disinfecting liquid,” a SpiceJet spokesperson said.
Source: Economic Times
Tuesday, August 11, 2009
Kingfisher seeks to tap Delhi-London route
After receiving a less than expected response for its Bangalore-London-Bangalore service, the Vijay Mallya-promoted Kingfisher Airlines has decided to pull out from this route September 15 onwards and has given a fresh proposal to the civil aviation ministry, seeking permission to fly on the Delhi-London route.
The airline, which has been in the red and owes substantial amounts to airport operators and oil marketing companies alike, has projected that it will be able to generate revenue to the tune of Rs 23 crore per month if allowed to tap this route; its operating cost is likely to be around Rs16-18 crore per month, said sources close to the development. It has proposed daily flights on the London-Delhi route.
While seeking permission for the Bangalore-London-Bangalore route earlier, Kingfisher had projected a healthy demand. But, the flight received a major setback after the global slowdown claimed the Indian IT industry as its victim and traffic fell down substantially on this route.
Source: The Indian Express
The airline, which has been in the red and owes substantial amounts to airport operators and oil marketing companies alike, has projected that it will be able to generate revenue to the tune of Rs 23 crore per month if allowed to tap this route; its operating cost is likely to be around Rs16-18 crore per month, said sources close to the development. It has proposed daily flights on the London-Delhi route.
While seeking permission for the Bangalore-London-Bangalore route earlier, Kingfisher had projected a healthy demand. But, the flight received a major setback after the global slowdown claimed the Indian IT industry as its victim and traffic fell down substantially on this route.
Source: The Indian Express
Monday, August 10, 2009
Kingfisher eyes east, Jet looks west at low-cost fliers
The competition in the low-fare flight segment is all set to intensify. Vijay Mallya-owned Kingfisher Airlines and Naresh Goyal’s Jet Airways are looking at East and West Asia for full service offerings, and come September, Air India’s low-fare offering too will be airborne.
Kingfisher is launching a direct flight from Kolkata to Bangkok on August 14, while Jet Airlines will begin its second daily service from Mumbai to Bangkok two days later.
Jet also starts a daily Kochi-Sharjah flight on September 1. On Friday it launched a daily flight to Riyadh from Mumbai. These services are being offered to improve yields and to maximise aircraft deployment.
“Besides catering to entrepreneurs, traders and leisure traffic, the flights will cater to MICE traffic, with excellent connectivity from Bhubaneshwar, Guwahati, Patna and Ranchi,” said Siva Ramachandran, VP (Global Sales) Kingfisher Airlines.
Air India has also announced plans to start its low-cost service, Air India Express, from September. Looks like both the companies and the fliers will be happy together again.
Source: Hindustan Times
Kingfisher is launching a direct flight from Kolkata to Bangkok on August 14, while Jet Airlines will begin its second daily service from Mumbai to Bangkok two days later.
Jet also starts a daily Kochi-Sharjah flight on September 1. On Friday it launched a daily flight to Riyadh from Mumbai. These services are being offered to improve yields and to maximise aircraft deployment.
“Besides catering to entrepreneurs, traders and leisure traffic, the flights will cater to MICE traffic, with excellent connectivity from Bhubaneshwar, Guwahati, Patna and Ranchi,” said Siva Ramachandran, VP (Global Sales) Kingfisher Airlines.
Air India has also announced plans to start its low-cost service, Air India Express, from September. Looks like both the companies and the fliers will be happy together again.
Source: Hindustan Times
Friday, August 7, 2009
Etihad Airways to extend operations to Hyderabad
Etihad Airways, the national airline of the United Arab Emirates, will start operation of its flights between Abu Dhabi and Hyderabad four times a week from November 2009. The service will become daily from the start of 2010. The addition of Hyderabad brings the number of Indian destinations served by Etihad to seven.
“Hyderabad is a key Indian destination not currently served directly from Abu Dhabi. It, therefore, represents a great opportunity for our airline,” James Hogan, Etihad Airways’ chief executive, stated in a press release.
“This will provide a wider choice for travellers wishing to fly to the United Arab Emirates from our airport,” Sripathy, CEO of GMR Hyderabad International Airport Ltd, said.
Etihad currently operates 38 flights a week from the UAE to India, with flights from Abu Dhabi to Mumbai, New Delhi, Thiruvananthapuram, Kochi, Kozhikode and Chennai. The airline is also pushing to secure further traffic rights from Abu Dhabi to other India cities, including Bangalore.
Etihad will operate a two class Airbus A320 on the new Hyderabad route configured to carry 140 passengers with 20 in business class and 120 in economy class.
Source: Business Standard
“Hyderabad is a key Indian destination not currently served directly from Abu Dhabi. It, therefore, represents a great opportunity for our airline,” James Hogan, Etihad Airways’ chief executive, stated in a press release.
“This will provide a wider choice for travellers wishing to fly to the United Arab Emirates from our airport,” Sripathy, CEO of GMR Hyderabad International Airport Ltd, said.
Etihad currently operates 38 flights a week from the UAE to India, with flights from Abu Dhabi to Mumbai, New Delhi, Thiruvananthapuram, Kochi, Kozhikode and Chennai. The airline is also pushing to secure further traffic rights from Abu Dhabi to other India cities, including Bangalore.
Etihad will operate a two class Airbus A320 on the new Hyderabad route configured to carry 140 passengers with 20 in business class and 120 in economy class.
Source: Business Standard
Thursday, August 6, 2009
Surajeet Das Gupta: Flying on empty
Airline losses have more to do with their business models than the price of aviation fuel.
Private airlines, who called off their strike threat after the government contemplated action, continue to argue they backed down because they didn’t want to inconvenience passengers, but maintain that their reasons for striking remain as valid today — a very high aviation turbine fuel price and high airport charges in the country. Much of this is untrue, and what the larger airlines are not saying is that there was a split in the Federation of Indian Airlines — under whose aegis the strike threat was announced — with the budget carriers unwilling to go along with the larger full-service carriers who, incidentally, also offer low-fare services. Indeed, just how justified the airline grievances are is best brought out by the sharp contrast in the performance levels of the two sets of airlines.
First, not everyone in the aviation business is making losses (see graphic) — it is the full-service carriers who are losing the most. Kingfisher lost Rs 243 crore in the latest quarter ending June 2009, Jet Airways lost Rs 225 crore while budget carrier SpiceJet made Rs 26 crore of profits. Indeed, as compared to the same period a year ago, Jet’s revenue’s are down 18 per cent while SpiceJet’s are up 15 per cent.
Interestingly, this has taken place while aviation turbine fuel prices in India, though much higher than those internationally, have fallen by almost half — from Rs 71,028 per kilolitre in Delhi in August 2008 to Rs 36,992 in August 2009. While this happened, Kingfisher’s revenues fell slightly, from Rs 1,398 crore in the quarter ended June 2008 to Rs 1,314 crore in the quarter ended June 2009; its losses rose from Rs 158 crore to Rs 243 crore in the same period. In the case of Jet Airways, while revenues fell 18 per cent, its profits of Rs 143 crore turned into losses of Rs 225 crore. SpiceJet’s revenues rose and its losses of Rs 129 crore in the June 2008 quarter got transformed into profits of Rs 26 crore. None of this jells with the argument often made by private airline companies — that since aviation fuel comprises around 40 per cent of costs, India’s higher aviation fuel costs are the reason for their losses. Also, airlines like Jet earn around 53 per cent of their revenues from international operations — all international flights get aviation fuel at international prices! In other words, it is difficult to argue that fuel prices are as critical as the airlines make them out to be — it is even more difficult to argue that the airlines were not aware of the differential between Indian and global prices, either when they first entered or when they began their expansion spree.
Of course fuel costs matter, but what matters more is how efficiently the airlines are managing other costs; if the plane is flying anyway, are they getting the maximum number of passengers they can, and so on. Once again, this is where the budget carriers score over their full-service counterparts. Air India has a passenger load factor (PLF) of 67.9 per cent, Jet Airways’ is around the same and Kingfisher’s is 72 per cent — SpiceJet, however, is 77.3, GoAir 85,1 and IndiGo 81.6 per cent (all figures for June 2009). That is, the budget airlines are getting in more passengers per flight. Since they have lower costs of flying, this means their costs per passenger seat are much lower than those of the full-service airline.
Even more than the passenger load factor, what matters is the number of passengers being flown. At a time when the market has not expanded as fast as the airlines originally expected, what matters is the market share of each airline. Once again, it is the budget carriers that are doing better. The number of passengers flying on Jet Airways rose from 5.96 lakh in January 2009 to 6.12 lakh in June, but its market share has fallen from 17.9 per cent to 16.6 per cent; Kingfisher’s fell from 27.6 per cent to 24.4 per cent; SpiceJet’s market share has risen from 11.8 per cent to 12.8 per cent and GoAir’s from 2.4 to 5.4 per cent — IndiGo’s share has remained constant at around 13.6 per cent. As a result, SpiceJet’s PLF rose from 68.3 per cent to 77.3 per cent, GoAir’s from 64 to 85.1 per cent and IndiGo’s from 72.2 to 81.6 per cent. PLFs for Air India rose, but by less, from 60.2 per cent to 67.9 per cent, from 64.8 per cent to 67.8 per cent for Jet Airways and from 64 per cent to 72 per cent for Kingfisher.
As a result, SpiceJet has added 20 more flights in existing routes and leveraged the fuel price reduction by cutting fares by around 30 per cent to 40 per cent. SpiceJet has bought three new aircraft this year and there is no change in its original delivery schedule. Jet Airways, on the other hand, has cut capacity by 20 per cent and deferred eight aircraft deliveries. Kingfisher has deferred the delivery of 32 aircraft and reduced capacity by 26 per cent.
The other bogey, of high airport charges, is not fully true either. Airport charges went up in India after privatisation of major airports, but they’re still lower than those in comparable countries. Typical charges for a Boeing 747 on an international flight are around Rs 277,000 in Delhi and Mumbai — this is higher than Dubai’s Rs 188,000 but lower than Changi’s Rs 337,000 and Incheon’s Rs 406,000. A study by TRL which indexes airport charges to 2005 levels shows that the hike in airport charges in India is among the lowest in the world
The good news here is that full service carriers are planning to expand their low-cost services. The problem here, though, is that offering lower fares is not the same thing as having low-cost operations. Will Jet Konnect, for instance, pay its employees the same salaries that low-cost carriers do and will it remove service trollies which add to the fuel-burn in an aircraft?
Source: Business Standard
Private airlines, who called off their strike threat after the government contemplated action, continue to argue they backed down because they didn’t want to inconvenience passengers, but maintain that their reasons for striking remain as valid today — a very high aviation turbine fuel price and high airport charges in the country. Much of this is untrue, and what the larger airlines are not saying is that there was a split in the Federation of Indian Airlines — under whose aegis the strike threat was announced — with the budget carriers unwilling to go along with the larger full-service carriers who, incidentally, also offer low-fare services. Indeed, just how justified the airline grievances are is best brought out by the sharp contrast in the performance levels of the two sets of airlines.
First, not everyone in the aviation business is making losses (see graphic) — it is the full-service carriers who are losing the most. Kingfisher lost Rs 243 crore in the latest quarter ending June 2009, Jet Airways lost Rs 225 crore while budget carrier SpiceJet made Rs 26 crore of profits. Indeed, as compared to the same period a year ago, Jet’s revenue’s are down 18 per cent while SpiceJet’s are up 15 per cent.
Interestingly, this has taken place while aviation turbine fuel prices in India, though much higher than those internationally, have fallen by almost half — from Rs 71,028 per kilolitre in Delhi in August 2008 to Rs 36,992 in August 2009. While this happened, Kingfisher’s revenues fell slightly, from Rs 1,398 crore in the quarter ended June 2008 to Rs 1,314 crore in the quarter ended June 2009; its losses rose from Rs 158 crore to Rs 243 crore in the same period. In the case of Jet Airways, while revenues fell 18 per cent, its profits of Rs 143 crore turned into losses of Rs 225 crore. SpiceJet’s revenues rose and its losses of Rs 129 crore in the June 2008 quarter got transformed into profits of Rs 26 crore. None of this jells with the argument often made by private airline companies — that since aviation fuel comprises around 40 per cent of costs, India’s higher aviation fuel costs are the reason for their losses. Also, airlines like Jet earn around 53 per cent of their revenues from international operations — all international flights get aviation fuel at international prices! In other words, it is difficult to argue that fuel prices are as critical as the airlines make them out to be — it is even more difficult to argue that the airlines were not aware of the differential between Indian and global prices, either when they first entered or when they began their expansion spree.
Of course fuel costs matter, but what matters more is how efficiently the airlines are managing other costs; if the plane is flying anyway, are they getting the maximum number of passengers they can, and so on. Once again, this is where the budget carriers score over their full-service counterparts. Air India has a passenger load factor (PLF) of 67.9 per cent, Jet Airways’ is around the same and Kingfisher’s is 72 per cent — SpiceJet, however, is 77.3, GoAir 85,1 and IndiGo 81.6 per cent (all figures for June 2009). That is, the budget airlines are getting in more passengers per flight. Since they have lower costs of flying, this means their costs per passenger seat are much lower than those of the full-service airline.
Even more than the passenger load factor, what matters is the number of passengers being flown. At a time when the market has not expanded as fast as the airlines originally expected, what matters is the market share of each airline. Once again, it is the budget carriers that are doing better. The number of passengers flying on Jet Airways rose from 5.96 lakh in January 2009 to 6.12 lakh in June, but its market share has fallen from 17.9 per cent to 16.6 per cent; Kingfisher’s fell from 27.6 per cent to 24.4 per cent; SpiceJet’s market share has risen from 11.8 per cent to 12.8 per cent and GoAir’s from 2.4 to 5.4 per cent — IndiGo’s share has remained constant at around 13.6 per cent. As a result, SpiceJet’s PLF rose from 68.3 per cent to 77.3 per cent, GoAir’s from 64 to 85.1 per cent and IndiGo’s from 72.2 to 81.6 per cent. PLFs for Air India rose, but by less, from 60.2 per cent to 67.9 per cent, from 64.8 per cent to 67.8 per cent for Jet Airways and from 64 per cent to 72 per cent for Kingfisher.
As a result, SpiceJet has added 20 more flights in existing routes and leveraged the fuel price reduction by cutting fares by around 30 per cent to 40 per cent. SpiceJet has bought three new aircraft this year and there is no change in its original delivery schedule. Jet Airways, on the other hand, has cut capacity by 20 per cent and deferred eight aircraft deliveries. Kingfisher has deferred the delivery of 32 aircraft and reduced capacity by 26 per cent.
The other bogey, of high airport charges, is not fully true either. Airport charges went up in India after privatisation of major airports, but they’re still lower than those in comparable countries. Typical charges for a Boeing 747 on an international flight are around Rs 277,000 in Delhi and Mumbai — this is higher than Dubai’s Rs 188,000 but lower than Changi’s Rs 337,000 and Incheon’s Rs 406,000. A study by TRL which indexes airport charges to 2005 levels shows that the hike in airport charges in India is among the lowest in the world
The good news here is that full service carriers are planning to expand their low-cost services. The problem here, though, is that offering lower fares is not the same thing as having low-cost operations. Will Jet Konnect, for instance, pay its employees the same salaries that low-cost carriers do and will it remove service trollies which add to the fuel-burn in an aircraft?
Source: Business Standard
Tuesday, August 4, 2009
Airlines on warpath, threaten to strike on Aug 18
Private airlines on Friday ganged up and decided to suspend operations on August 18 if the government does not help them cut costs, prompting an offer of talks but no assurances from civil aviation minister Praful Patel.
Painting a desperate picture of their situation, industry lobby body Federation of Indian Airlines (FIA) said unless the government helps them by lowering taxes on jet fuel and bringing down airport charges, their survival is in doubt.
But the strike threat by Jet Airways, Kingfisher Airlines, SpiceJet, IndiGo and GoAir, which between them carry about one lakh passengers daily, was interpreted as a pressure tactic by a senior official in the civil aviation ministry.
“The strategy is dual. They want to put pressure on the government. Also, they are putting pressure on their creditors such as oil companies and airport operators,” he said on the condition of anonymity.
Jet Airways, Kingfisher, SpiceJet and IndiGo are yet to pay Rs 212 crore to the Airports Authority of India for using its infrastructure. Kingfisher, Jet and SpiceJet also owe Rs 1,726 crore to oil marketing companies.
The private airlines’ high-pitched demand has been timed to coincide with discussions that may result in the government bailing out beleaguered national carrier Air India soon, said an aviation analyst who did not wish to be identified.
The government last week asked the finance and petroleum ministries to help Air India. It has appointed SBI Caps as advisor to chalk out a revival plan for the ailing national carrier, which suffered losses of Rs 7,200 crore last year.
Air India will increase the number of flights to reduce inconvenience to passengers, Mr Patel said. It is not known if Paramount Airways will join its private sector peers in the strike.
Mr Patel told ET that sales tax on jet fuel was decided by state governments and that his ministry had been urging states to lower the tax. He asked private airlines to enter into a dialogue with the government. Finance minister Pranab Mukherjee promised to speak to Mr Patel on the issue.
FIA general secretary Anil Baijal told reporters that the planned August 18 “boycott” was to “highlight the urgency for the government to intervene immediately”. Passengers who have booked tickets to fly on that date will get a refund. “This is a well-considered decision,” Mr Baijal observed, saying jet fuel in India costs Rs 33,000-66,000 per kilolitre, 50% higher than global rates.
FIA wants the government to classify jet fuel as a ‘declared good’ to tax it at a uniform 4% rate throughout India. Jet fuel accounts for nearly half of operating costs for airlines in the country, the highest in Asia.
Aviation analysts are of the view that FIA may not implement the strike threat because the government has called private airlines for talks. Anoop Narayanan, partner at city-based legal firm Majmudar & Co, said the strike could be legally challenged. Our losses are no longer sustainable. We want the government to understand what happens when private carriers don’t exist,” said Vijay Mallya, Boeing's chairman of Kingfisher Airlines, the country’s biggest airline by market share. Mr Mallya told ET that the decision to suspend operations was “not a blackmail or a strike”.
“We don’t want a bailout or government charity. We cannot afford to pay such high taxes. Airfares are down from Rs 5,000 to Rs 3,000 a ticket while the government is taxing us in a very primitive way.”
He even remarked that he was open to the government picking up equity in Kingfisher Airlines. “We are bleeding today; we need help to sustain,” said Jet Airways chairman Naresh Goyal. The combined loss of the airline companies was Rs 10,000 crore in 2008-09. FIA estimates the industry will lose Rs 57,000 crore this year.
Source: The Economic Times
Painting a desperate picture of their situation, industry lobby body Federation of Indian Airlines (FIA) said unless the government helps them by lowering taxes on jet fuel and bringing down airport charges, their survival is in doubt.
But the strike threat by Jet Airways, Kingfisher Airlines, SpiceJet, IndiGo and GoAir, which between them carry about one lakh passengers daily, was interpreted as a pressure tactic by a senior official in the civil aviation ministry.
“The strategy is dual. They want to put pressure on the government. Also, they are putting pressure on their creditors such as oil companies and airport operators,” he said on the condition of anonymity.
Jet Airways, Kingfisher, SpiceJet and IndiGo are yet to pay Rs 212 crore to the Airports Authority of India for using its infrastructure. Kingfisher, Jet and SpiceJet also owe Rs 1,726 crore to oil marketing companies.
The private airlines’ high-pitched demand has been timed to coincide with discussions that may result in the government bailing out beleaguered national carrier Air India soon, said an aviation analyst who did not wish to be identified.
The government last week asked the finance and petroleum ministries to help Air India. It has appointed SBI Caps as advisor to chalk out a revival plan for the ailing national carrier, which suffered losses of Rs 7,200 crore last year.
Air India will increase the number of flights to reduce inconvenience to passengers, Mr Patel said. It is not known if Paramount Airways will join its private sector peers in the strike.
Mr Patel told ET that sales tax on jet fuel was decided by state governments and that his ministry had been urging states to lower the tax. He asked private airlines to enter into a dialogue with the government. Finance minister Pranab Mukherjee promised to speak to Mr Patel on the issue.
FIA general secretary Anil Baijal told reporters that the planned August 18 “boycott” was to “highlight the urgency for the government to intervene immediately”. Passengers who have booked tickets to fly on that date will get a refund. “This is a well-considered decision,” Mr Baijal observed, saying jet fuel in India costs Rs 33,000-66,000 per kilolitre, 50% higher than global rates.
FIA wants the government to classify jet fuel as a ‘declared good’ to tax it at a uniform 4% rate throughout India. Jet fuel accounts for nearly half of operating costs for airlines in the country, the highest in Asia.
Aviation analysts are of the view that FIA may not implement the strike threat because the government has called private airlines for talks. Anoop Narayanan, partner at city-based legal firm Majmudar & Co, said the strike could be legally challenged. Our losses are no longer sustainable. We want the government to understand what happens when private carriers don’t exist,” said Vijay Mallya, Boeing's chairman of Kingfisher Airlines, the country’s biggest airline by market share. Mr Mallya told ET that the decision to suspend operations was “not a blackmail or a strike”.
“We don’t want a bailout or government charity. We cannot afford to pay such high taxes. Airfares are down from Rs 5,000 to Rs 3,000 a ticket while the government is taxing us in a very primitive way.”
He even remarked that he was open to the government picking up equity in Kingfisher Airlines. “We are bleeding today; we need help to sustain,” said Jet Airways chairman Naresh Goyal. The combined loss of the airline companies was Rs 10,000 crore in 2008-09. FIA estimates the industry will lose Rs 57,000 crore this year.
Source: The Economic Times
Private airlines put on hold protest action
All major private airlines, who had called for a strike on August 18, have decided to put their proposed protest action on hold in view of the “agitated public sentiments and potential inconvenience to thousands of travelling public.”
In a brief statement here on Sunday night, the Federation of Indian Airlines (FIA) said the decision was also prompted by the government’s “willingness” to enter into a dialogue.
The FIA expressed the hope that talks with the government would lead to redressal of the grievances of the civil aviation industry.
The statement was issued on behalf of Jet Airways, Kingfisher, GoAir, SpiceJet and IndiGo.
The U-turn by the FIA came within 48 hours of the call for suspension of all domestic flights on August 18 in protest against the high rate of sales tax on aviation turbine fuel (ATF) and airport taxes.
The government had firmly ruled out the possibility of giving any bailout package to them. While favouring the way of dialogue to sort out the problems faced by the industry, Civil Aviation Minister Praful Patel had said the government understood the difficulties being faced by the aviation sector.
However, it did not support any move that would cause inconvenience to the travelling public, he said while asserting that Air India would mount additional flights on that day.
Even before the FIA formally withdrew its call for suspension of flights, cracks had started appearing in the grouping.
IndiGo and SpiceJet backed out of the protest action and favoured talks with the government.
According to the FIA, the estimated losses of the industry in 2008-09 would be Rs. 10,000 crore.
FIA secretary-general Anil Baijal had said the additional imposition of levies by the airport operators for the industry would be close to $250 million in a year.
While saying that the industry realised its role in the life of a nation, he said it might not be able to continue operations in view of the indifference shown by the government towards the industry.
Source: The Hindu
In a brief statement here on Sunday night, the Federation of Indian Airlines (FIA) said the decision was also prompted by the government’s “willingness” to enter into a dialogue.
The FIA expressed the hope that talks with the government would lead to redressal of the grievances of the civil aviation industry.
The statement was issued on behalf of Jet Airways, Kingfisher, GoAir, SpiceJet and IndiGo.
The U-turn by the FIA came within 48 hours of the call for suspension of all domestic flights on August 18 in protest against the high rate of sales tax on aviation turbine fuel (ATF) and airport taxes.
The government had firmly ruled out the possibility of giving any bailout package to them. While favouring the way of dialogue to sort out the problems faced by the industry, Civil Aviation Minister Praful Patel had said the government understood the difficulties being faced by the aviation sector.
However, it did not support any move that would cause inconvenience to the travelling public, he said while asserting that Air India would mount additional flights on that day.
Even before the FIA formally withdrew its call for suspension of flights, cracks had started appearing in the grouping.
IndiGo and SpiceJet backed out of the protest action and favoured talks with the government.
According to the FIA, the estimated losses of the industry in 2008-09 would be Rs. 10,000 crore.
FIA secretary-general Anil Baijal had said the additional imposition of levies by the airport operators for the industry would be close to $250 million in a year.
While saying that the industry realised its role in the life of a nation, he said it might not be able to continue operations in view of the indifference shown by the government towards the industry.
Source: The Hindu
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