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EDITOR-IN-CHIEF’S NOTE
Where is the common sense?
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t’s perfectly reasonable for Interglobe Technologies to apply for a global tender floated by Air India. After all, they are in the business of call centre operations, which include contract ticketing amongst other things, and who wouldn’t want a deal with the Maharaja? AI had floated the tender last September — Contact Centre Services for domestic and international callers — and the bids closed on October 6, 2008. Well, in the first week of February 2009, the tender was awarded to Interglobe Technologies and an agreement signed by the country’s national carrier. Interglobe will undertake ticketing and package booking services for Air India and receive a two per cent commission on the transaction amount. What Air India has done is akin to British Airways outsourcing their contract operation to Virgin Atlantic or United given to American Airlines. How else does one explain this extraordinary deal? Here is a company that wants to outsource a key element of its reservations and the best applicant happens to be a company that also runs an airline that competes day in and day out with AI’s domestic wing (formerly Indian). It is taken that Interglobe Technologies will keep this slice of its business separate from its airline business. But when multimillion dollar budgets are involved and confidential data is concerned, one is supposed to err abundantly on the side of caution, and surely this deal in no way proclaims that the Maharaja is proceeding with any caution. Some years back, Captain Gopinath of Air Deccan chose to terminate a deal with Interglobe Technologies because they were launching IndiGo and he was worried about the confidentiality of his business. He decided to opt out. Interestingly, Interglobe
CRUISING HEIGHTS February 2009
chooses to power their airline with Navitaire, rather than go with their own system. This isn’t the first instance when Air India has chosen to keep silent — despite several senior officials dissenting in-house — on an issue in which greater application of mind was required. When the merger process was initiated, there was a gobal tender floated by the Ministry of Civil Aviation to hire a consultant for the process. Finally they zeroed in on Accenture, who got the deal despite much controversy about the process by which they were chosen. For over three years now, they have been presiding over the monumental mess that is the merger. But we aren’t discussing that here. Close to two years back, Vijay Mallya announced, without batting an eyelid, that he was signing on Accenture to look into the Kingfisher-Air Deccan merger, and that was it. There were no questions asked, there were no objections raised. Air India had nothing to say on the issue. No conflict of interest, nothing. All right, one could argue as to how can one bar Accenture from working for other airlines? Agreed. But surely they can’t be working on two merger processes in the same industry in the same country at the same time. If this isn’t conflict of interest, what is? Both the Interglobe and Accenture episodes only illustrate the tragedy of Air India. When it should be firing on all cylinders to face up to the competition and muscle its way back into the market place, it’s making choices that can only be described as inexplicable. Why blame Interglobe and Accenture. They are in business. It’s for the Maharaja to use his grey matter. Unfortunately, as the saying goes, common sense isn’t exactly common!
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Out with CO2 The International Air Transport Association (IATA) recently highlighted aviation’s commitment to its environmental responsibility. Its vision is to achieve carbonneutral growth on the way to a carbon-free future. Aviation, according to IATA, accounts for two per cent of global CO2 emissions. Despite the worst revenue situation in 50 years, the association is determined to deliver effective solutions that will reduce emissions. It is leading the air transport industry’s efforts with a four-pillar strategy: investing in technology, flying planes effectively, building efficient infrastructure and using positive economic measures. The strategy is delivering results. Aviation’s emissions will fall 4.5 per cent in 2009. Airlines are investing in fuel-efficient aircraft and retiring old ones. In the first 11 months of 2008 1,037 new aircraft — with improved fuel efficiencies of 20-30 per cent — were delivered. In 2008 alone, IATA identified and saved 15 million tonnes of CO2, equal to US$5 billion. Since 2001, the air transport industry has improved its fuel efficiency by 19 per cent, and by 2020 the industry target is to achieve a 25 per cent improvement in fuel efficiency compared to 2005. Among the critical areas IATA has identified that could help the industry deliver better results are: Search for alternative fuels: IATA is committed to using 10 per cent alternative fuels by 2017. Better air navigation: Every Continuous Descent Approach (CDA) saves between 150 to 600kg of CO2. Each Clean Airspeed Departure (CAD) saves between 600 to 5,000 kg of CO2. IATA has been trying to ensure that governments take the initiative to put in place tough efficiency targets by 2012 to save 16 million tonnes of CO2.
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CRASHING SKYWARDS!
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Any hopes Air India (merged) might have had to transform its fortunes have hit bottlenecks galore. From its financial woes to its administrative chaos, nothing seems to be going right for this government-run entity. Simmering differences between the erstwhile Air India and Indian Airlines have hampered the growth of the airline, which has been unable to cope with the growing competition in the aviation industry.
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The Board of the Airports Authority of India (AAI) is all set for a makeover following the appointment of three key new members, including the inimitable Deepak Parekh. Plus: The farewell and welcome dinner hosted by the new AAI chairman. CRUISING HEIGHTS February 2009
NEWS DIGEST
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The Airports Authority of India (AAI) is faced with some tough issues as it struggles to move on post the ‘miniratna’ status.
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ARTICLES NEWS VIEWS EDITS INTERVIEWS CLIPPINGS TRAVEL & TOURISM PROFILES NEWS DIGEST
CRUISING HEIGHTS Editor-in-Chief
K SRINIVASAN Managing Editor
TIRTHANKAR GHOSH Senior Editor
RENU RANGELA
CARGO
Consulting Editor
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Finally, things are moving in the direction of giving the Indian aircargo industry the much-needed adrenalin boost — a move that will decidedly go a long way in consolidating the growth of the country’s economy.
R KRISHNAN
COLUMN
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Veteran aviation watcher R Krishnan reopens the debate on whether, and how much, FDI should be allowed by foreign airlines in Indian carriers.
Art Director
BHART BHARDWAJ Layout Artists
RUCHI SINHA PRADEEP JHA RAVINDER GUSAIN Co-ordinating Photo Editor
H C TIWARI Subscription
JAYA SINGH Gen Manager
SNIPPETS
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SpiceJet has appointed the Doha-based Qatar Tours as its first overseas general sales agency, while Kingfisher has tied up with Hilton HHonors, the guest rewards programme for the more than 3,000 Hilton family hotels worldwide. Plus: More aviation and tourism news.
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Mexican low-cost carrier Volaris has set an example of sorts by sponsoring a concert by Zoe y Molotov, in collaboration with Coca-Cola. Plus more unusual aviation stories.
Director
RAVI SHARMA
In his first interview after taking over the new AAI chairman, Vijai Prakash Agrawal talks about his plans, the key to which lies in ensuring the best for the airlines, the employees and air travellers.
FOCUS GLOBETROTTING
RAJIV SINGH
INTERVIEW p38
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William M. “Willie” Walsh, the CEO of British Airways, is credited with turning the failing Aer Lingus airline around. Now he is busy finding ways to help the aviation industry survive these tough times.
CRUISING HEIGHTS February 2009
Executive Director
RENU MITTAL Editorial & Marketing office: Newsline Publications Pvt. Ltd. C-15, Sector 6, Noida 201 301 Tele: +91-120-4145555 All information in CRUISING HEIGHTS is derived from sources we consider reliable. It is passed on to our readers without any responsibility on our part. Opinions/views expressed by third parties in abstract or in interviews are not necessarily shared by us. Material appearing in the magazine cannot be reproduced in whole or in part(s) without prior permission. The publisher assumes no responsibility for material lost or damaged in transit. The publisher reserves the right to refuse, withdraw or otherwise deal with all advertisements without explanation. All advertisements must comply with the Indian Advertisements Code. The publisher will not be liable for any loss caused by any delay in publication, error or failure of advertisement to appear. Owned and published by K Srinivasan 4C Pocket-IV, Mayur Vihar Phase-I, Delhi-91 and printed by him at Nutech Photolithographers, B-240, Okhla Industrial Area, Phase-I, New Delhi 110020 Vol III No 10
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That's optimism
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Since the price of jet fuel has come down by 50 per cent in the last two quarters, our company will be profitable in the 2009-10 fiscal.
SpiceJet CEO SANJAY AGGARWAL on the nearly Rs. 198 crore loss suffered by his airline for the 2nd quarter of the current fiscal.
Grounded! India's new ground-handling policy (Cover Story, January ’09) acquainted the readers with the rigmaroles that the ground-handling policy in India is going through. The prevailing “state of affairs” regarding the new groundhandling policy have kept even the experts guessing for a long time. As a matter of fact, in the wake of repeated terror attacks, ground-handling has been given a raw deal by the government. It is high time that that those in charge should put in place the necessary ground-handling measures, so that our airports become safe and secure. Archana Dubey, Bangalore Rs 60
Illustrations: Rajeev Kumar
The story, Flying into the future (January ’09) made pleasurable reading. The aviation scene in the future would certainly be bigger and better, as illustrated in the story. Aviation technology would enable man to have a complete flying experience by becoming more adventurous and reaching out to more destinations. Air travel would definitely become the means of transportation for the masses and would also become more dependable. At the same time, air traffic would grow enormously, making it perhaps a little more risky and accident-prone. All in all, the future of the aviation sector looks quite promising. Ridhi Shah, Vadodara
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Senior consultant for KPMG India, MARK MARTIN, on the prospects for the airlines industry.
Lower fares
LETTERS TO EDITOR
January 2009
2009 will be a good year for airlines as ATF prices have fallen sharply, apart from airfares too moving southwards. All this will bring the load factor back to the 75 per cent level in a few months.
Pawan Hans has come a long way since its inception, as has been exemplified in the story, Washing the 'hotlines’ (January ’09). It has got one of the best helicopter fleets in the region. And the latest initiative of cleaning the insulators on top of trasmission lines has displayed to the world its extensive capabilities. The initiative taken by Pawan Hans is unique and will definitely give the company a special standing in the world of helicopters. I hope Pawan Hans is invited to replicate this business in other parts of the world. Shyam Lal, Kanpur All correspondence may be addressed to Editor, Cruising Heights, C-15, Sector 6, Noida 201 301 OR mail to cruisingheights@newsline.in
The current low prices of Air Turbine Fuel (ATF) allowed Kingfisher to pursue an opportunity to significantly increase market share by offering the fine fivestar flying experience at reduced fares. Kingfisher Airlines Chairman VIJAYA MALLYA on the decision to reduce fares.
The right way We need the right price to make an exit either through the initial public offering route or by divesting in favour of a strategic investor. KPEG Chief Executive Officer NITIN DESHMUKH on the company's desire to exit from Paramount with a rider.
Option open Allowing foreign airlines to hold stakes in domestic airlines has always been an option. There is no firm decision yet, though. Civil Aviation Minister PRAFUL PATEL on the government proposal to allow foreign ownership of Indian operators.
Mapping India We have not gone as far as looking at India at the moment. It will certainly be on the map because when you look at the connecting traffic, you look at the airports that the people are connecting from, and India is one such market. IATA Director (Security and Facilitation) GEORGINA GRAHAM on bringing India on the one-stop security map for international airports.
Safety matters We are working in right earnest to get the BASA (Bilateral Aviation Safety Agreement) concluded by 2010. Union Civil Aviation Secretary M MADHAVAN NAMBIAR on the proposed bilateral safety agreement with the US.
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Figures speak
COLD STATS
Jet Airways grabbed the major chunk of domestic passengers during 2008, with Air India a close second. According to official data, the total domestic passengers carried by the Scheduled Airlines of India in 2008 stood at 407.73 lakhs. For the first quarter of 2008 (January to March), the figure reported was 111.90 lakhs. The break-up of the total passengers flown by domestic carriers in 2008 was: Air India (Domestic) - 66.35 lakhs, Jet Airways - 87.62 lakhs, Jet Lite - 32.50 lakhs, Deccan - 49.78 lakhs, Kingfisher - 62.80 lakhs, Spice Jet 40.69 lakhs, Paramount - 6.30, Go Air - 13.63 lakhs, IndiGo - 47.46 lakhs. The percentage share of the carriers in 2008 was: Air India (Domestic) 16.3 per cent, Jet Airways - 21.5 per cent, Jet Lite - 8.0 per cent, Deccan - 12.2 per cent, Kingfisher - 15.4 per cent, Spice Jet - 10.0 per cent, Paramount - 1.5 per
cent, Go Air - 3.3 per cent and IndiGo - 11.6 per cent. The total domestic passengers carried by the Scheduled Airlines of India in the fourth quarter of 2008 (October 2008 to December 2008) was 94.57 lakhs: Air India (Domestic) - 16.61 lakhs, Jet Airways - 17.42 lakhs, Jet Lite - 7.43 lakhs, Deccan - 8.16 lakhs, Kingfisher - 16.95 lakhs, Spice Jet - 9.95 lakhs, Paramount - 2.05 lakhs, Go Air - 2.20 lakhs, IndiGo - 13.55 lakhs. The percentage share of the carriers in the fourth quarter of 2008 was: Air India (Domestic) 17.6 per cent, Jet Airways - 18.4 per cent, Jet Lite - 7.9 per cent, Deccan - 8.6 per cent, Kingfisher - 17.9 per cent, Spice Jet - 10.5 per cent, Paramount - 2.2 per cent, Go Air - 2.3 per cent and IndiGo - 14.3 per cent. (The Deccan figures cited are till November, 2008).
LOOKING GLASS Sorry, we can’t accommodate any more passengers. With two of us overweight ladies in the cabin, the plane will have trouble taking off!
Capital issues Jet Airways will raise funds from two nationalised banks to meet our working capital requirements. Jet Airways CEO WOLFGANG PROCKSCHAUER on the airline’s second round of fund-raising.
We have no need to raise any funds. IndiGo president ADITYA GHOSH, denying any cash crunch for the Delhi-based low-fare airline. CRUISING HEIGHTS February 2009
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What an idea Sirji! I t was the mother of all farewells, and welcomes as well. Newlyappointed Airports Authority of India Chairman Vijai Prakash Agrawal organised the first big dinner of the season, with a glittering do that had the entire Ministry and its nodal agencies in attendance. Beginning with Civil Aviation Minister Praful Patel, there was Civil Aviation Secretary Madhavan Nambiar, and all other officers from the Ministry, DG of the DGCA, Naseem
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Zaidi and his predecessor Kanu Gohain, Pawan Hans Chairman R K Tyagi, and all serving members at the AAI and the two retiring members, H S Bains and former Chairman K Ramalingam, present. What an idea Sirji! Converting a farewell into an omnibus do that could get together the entire top brass of the Ministry at one go. In keeping with the spirit of the season, Agrawal felicitated each one of them. Apart from Ramalingam, who has CRUISING HEIGHTS February 2009
been almost co-terminus with the Minister (who joined in May 2004), several others will also be bidding farewell by the time this is in print, including R K Singh and K N Srivastava (both Joint Secretaries in the Ministry). Kanu Gohain retired just two months back and his successor Naseem Zaidi is in position. So it was a golden opportunity for some notes to be exchanged. The new Chairman has set a tearing pace from day one, crisscrossing
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the country to beef up staff morale and get the Authority to respond to the needs of the public. Having served in various capacities in the North East and in the Northern region, he is perfectly placed to take the team forward. Meanwhile, his wife Archana is preparing to give a complete makeover to Kalyanamayee, the women’s organisation that is traditionally headed by the Chairman’s wife.
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Clockwise: 1. Relaxed Vijai Prakash Agrawal and Mrs Archana Agrawal 2. With Joint Secretary Arun Mishra 3. Minister Praful Patel arrives for the function with OSD Kamal Choubey 4. Kanu Gohain in conversation with R K Tyagi of Pawan Hans 5. Agrawal chatting with Air India Director (Personnel) Anup Srivastava 6. Felicitating Minister Praful Patel 7. Felicitating his predecessor K Ramalingam 8. On the dais: K Ramalingam, DGCA Naseem Zaidi, Kanu Gohain, Madhavan Nambiar, K N Srivastava, Mrs Vlasini Ramachandran and V P Agrawal 9 & 10. Mrs Agrawal felicitating Mrs Dutta and Mrs Bains 11. Felicitating Secretary Madhavan Nambiar 12. Praful Patel greets Zaidi as Nambiar looks on 13. Agrawal, Mrs Ramachandran and Ramalingam 14. Felicitating Kanu Gohain 15 . Mrs Agrawal felicitating Mrs Ramalingam 16. Mrs Agrawal with CVO D S Mishra and his wife 17. Dignitaries on the dais 18. Felicitating H S Bains 19. Felicitating J K Dutta 20. Mrs Agrawal, Mrs Bains and Mrs Seth 21. Mr Bains, Mr Seth and Mr Malviya chatting at the dinner 22. Mr and Mrs Bains with Mr S C Chatwal. CRUISING HEIGHTS February 2009
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T What’s up at
AERA?
he first choice of the Civil Aviation Minister was V Thulasidas. However, the former Chairman of Air India is believed to have said ‘no’ to applying for the position. He is right, for, after close to five years as head of AI, close to a decade as Chief Secretary of Triupura, the last thing Thulasi wanted was to stand in the queue for the AERA Chairmanship. “If you need me, you call me,” he is believed to have told those who were backing his candidature. But those in the know claim that Thulasi really isn’t interested. He is already the Special Officer for the Kannur airport. The new airport, that has been on the cards for the past one decade, was cleared by the Central Government last year. He is also the Executive Director of the Rajiv Gandhi Academy for Aviation Technology (RGATT) and really has his plate full at the moment. Also, clearly, he is pretty cutup about the manner of his exit from the airline in February last year, after assurances of an extension. Once he said ‘no’, the Ministry (read Minister) scrambled to find a candidate
V Thulasidas
Raghu Menon
Hafeez Contractor
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up the Board CRUISING HEIGHTS February 2009
Brijesh Kumar
Arun Bongirwar
hen Deepak Parekh was appointed to the Board of Satyam recently, following the Ramalingam Raju scam, one leading newspaper interviewed our man for all seasons. Parekh spoke at length on various issues, lamenting the fact that independent directors need to act independent and speak their mind. Also, that there must be some self ‘cap’ on the number of Boards that one can conceivably sit in on. Well Parekh, who is Chairman of Housing Development Finance Corporation Limited (HDFC), is also the Non-Executive Chairman of GlaxoSmithKline Pharmaceuticals Ltd, HDFC Asset Management Company Ltd., HDFC Chubb General Insurance Company Ltd,
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who was most acceptable. The alternative they came up with was Ajay Prasad, who met the Minister days before he went to Davos and whose name was also discussed when the Committee set up to identify the candidate met on February 2 under the Chairmanship of the Cabinet Secretary. Two other key members of this Committee are Civil Aviation Secretary Vasudevan Nambiar and former DGCA DG Kanu Gohain (as an outside expert). However, what came up at the meeting was a need to define the modalities of the selection and the sort of candidate they are looking at. In other words, how could the Committee call Prasad and ignore a large number of other candidates with similar or better qualifications who are also available? That’s where the case rests at the moment. And if Prasad’s case has to go forward then Praful will have to push hard, really hard. Amongst the others who have also applied are former Airports Authority Chairman K Ramalingam, former Air India Chairman Brijesh
HDFC Standard Life Insurance Company issues, fighting on his behalf (in the backLtd, Siemens Ltd. and Infrastructure ground of course) was the redoubtable Development Finance Company Ltd. He Deepak Parekh, who is great friends with sits on the Boards of Castrol BP India, Jaswant Singh, the then Finance Minister Hindustan Lever, Indian Hotels Company, in the NDA Government. Mahindra & Mahindra and SingTel. So the airlines will now have a symYou can now add one more to the tal- pathetic voice on the AAI Board — not ly, with the Ministry of Civil Aviation that Deepak will plug for them, but he will appointing him and three others (architect Hafeez Contractor, industrialist Sajjan Jindal and former Maharashtra Chief Secretary Arun Bongirwar) to the Board of the Airports Authority of India. This comes in the wake of the AAI getting the `Miniratna’ status Of course, the list does not include the innumerable committees and other government bodies that Deepak has been nominated to. Just to jog your memory, Deepak was on the Board of Indian Airlines when P C Sen was the Chairman and Manag- CLOSE CONNECTIONS: Praful Patel (centre) and ing Director of the corporation. That Sajjan Jindal (left) entire Board was summarily dissolved by Ananth Kumar when he took sure offer their perspective as well. over as the Minister for Civil Aviation. Well, the others on the Board too have Clearly, there are few people who some connection with the aviation busiseem to have the sort of comfort level ness. Architect Hafeez Contractor is the with the political class as Deepak Parekh one who has designed the new terminal does. One remembers that when Naresh (now under operation in Mumbai). It was Goyal first got into a controversy over Jet one of the first contracts finalised by the Airways’ source of funds and security AAI soon after Praful Patel took over at
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Kumar, Former Rural Development Secretary V Subramanian N Puri, Advisor (Transport), Planning Commission and a former Chairman of the Railway Board. Those in the know say that it is almost certain that Ramalingam and Puri will be members of the new Authoritry. Ramu, with is background from AAI, could be the Member(Technical) and Puri, with his financial background, could takeover as Member(Finance). That still leaves open the Chairman’s job. It’s literally a race against time to fill the position. With the Election Commission starting proceedings to finalise the dates for the General Elections, the Ministry has no time to loose if it wants to wrap up the selection of the candidates, and then put them through the ACC wringer and have it gazzetted before the polls are declared. As one officer in the Ministry summed it up: “it’s the Sea Harrier process-you need to be airborne with minimum runway available.” According to insiders in Rajiv Gandhi Bhavan, Secretary. Civil Aviation, Madhavan Nambiar is not averse to any delay in getting the first new Chairman for AERA. Rajiv Gandhi Bhavan. It’s aesthetic and hugely appreciated, but neither Hafeez nor AAI get the credit for the job. By the time it was just about ready, the GVK-led MIAL (Mumbai International Airport Ltd) team had taken over the airport and it’s they who get the applause! Sajjan Jindal is again an airline buff. Apart from the fact that he has his own aircraft, his company has a strip in Bellary that was formally inaugurated for regular flights by Patel some two years back. He has strong views on the airport business and is sure to bring it to the table. Arun Bongiwar was at one time the Chairman of the Maharashtra Airport Development Co. Ltd, which is now headed by R C Sinha and is at the forefront of developing the Nagpur airport, and the adjoining land that it has acquired, into a Memphis-like hub for the Indian sub- continent. Would it be right to say that a grateful Praful is saying ‘thank you’ to the former Maharashtra Chief Secretary for the effort he put into the project to get it off the ground? For the record, the appointments have been made by the Government, but the process of completing the formal paperwork is still underway.
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Bhai bhai with ATC
SEASON’S GREETINGS: IndiGo top brass share light moments with Air Traffic Controllers
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ndiGo has been the first of the private sector carriers to accede to the International Civil Aviation Organisation’s diktat that airlines and the Air Traffic Control must interact more often to help in not just better relations but better performance. So, Indigo’s CEO Aditya Ghosh, Director (Operations) Shakti Lumba, and their Head of Corporate Relations Vijay Handa spent a delightful evening in company of the controllers.There was a lucky draw, plenty of ribald jokes, the usual back and forth arguments between the pilots and the Controllors, but at the end of it all they agreed they had to work together. Now when was the last time you saw the Controllers and the pilots swapping jokes?
Mars and Venus —II L adies and gentlemen, Mars and Venus will be check-by- jowl, close to Cubbon Park, next to Vittal Mallya Road, near UB City, beginning February 6. Well, for those of you who don’t understand what that means, here is the translation: Captain Gopinath of Air Deccan fame is shifting to a new house in the locality - a town house he bought some years back and has had refurbished. The house-warming is on February 6. His neighbour is the Chairman of Kingfisher Airline, Vijay Mallya. Well, we have no idea if VJ has been invited for the do, but we do understand that the two gents have gone their separate ways and it is best not to ask one about the other. But they are good Kannadigas, and one is sure there would be plenty of `hail fellow, we’ll meet’, if they bump into each other. We suggest an invigorating walk at Cubbon Park, it’s good for the system, near home, and will do them plenty of good. By the way, what’s this allusion to Mars and Venus? That was Gopi’s description of the two of them, when news first surfaced about a potential getting together. Much water has flown in the Cauvery since then, but one thing we can tell you, the stars somehow seem to be conspiring to keep Mars and Venus together! And here was Gopi who felt the raashis clashed!
Vijay Mallya
Captain Gopinath
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‘DIAL’ T3 for world-class experience the ‘Trinity’ (airports, concessionaires and brands) debate of recent years, DIAL executives spoke about the spirit of partnership that would allow all stakeholders to prosper at T3 to the ultimate benefit of the travelling consumer. Speaking on the occasion, DIAL Chief Executive Officer B S Shantharaju promised “an exciting and enticing customer experience”. He said: “Our dream is to create a world-class facility in Delhi... and to call it the pride of the nation.” Such an ambition, he was quick to point out, rested on the quality of the customer experience from the time of entering the car parks to the point they returned there. He promised an unprecedented focus on maximising the speed of check-in, passport control and securiFROM OUR FILES: Civil Aviation Minister Praful Patel to GMR airports CEO Kiran Kumar Grandhi (right) at the T3 ty. Around 95 per cent of passengers construction site. B S Shantharaju, DIAL CEO is walking behind alongwith former AAI Chairman K Ramalingam. should clear security within 10 minutes, t was the perfect ‘underground’ and specialist retail companies were also he said. gathering. GMR, promoters of the present. DIAL’s Chief Commercial Officer The new domestic and internapublic-private Delhi international Gavin Mckechnie said that T3 would be airport limited invited big ticket tional integrated terminal building, due “a fusion of all that is great and unique global concessionaires for a pres- to open in 2010, will be built over in India, along with the best technology, entation at Delhi’s Taj Hotel on February 500,000 sq m and feature some 168 experience, convenience and indul3. They unveiled the retail marketing logo check-in desks and 36 self check-in gence... an experience that reminds you — skyline avenue-but not a word in the kiosks. It will have a capacity of some at every step that you are in Delhi, a 34 million passengers annually. city media. blend of rich heritage and the contempo The retail area will be based One wise PR head said: “It is a comrary. We want to be synonymous with mercial event we have nothing to do around a series of zones, including duty- quality and service,” he said. free (at the beginning and end of the walkwith.” Minakshi Sondhi , DIAL’s Head — Anyway, why should we deprive you through), luxury retail (eight units ranging Commercial Retail spoke about the five readers of the inside dope, just because from 39 sq m to 150 sq m), a ‘Dilli critical “mantras”: Service, Respect, GMR officals have been sloppy? So Bazaar’, a watches and jewellery zone, and Promise, Quality and Creativity. a range of specialist and utilitarian retail. here’s the lowdown: Arrivals at the duty-free, always crit The Retail Marketing Launch saw All this will be complemented by a com- ical to Indian travel retail, will be well DIAL outline its vision to create a world- prehensive food and beverage offer and served by a 1,200 sq m outlet directly class airport in Delhi, including over other consumer services. after immigration. “You cannot miss it 20,000 sq m of retail space. If the nature of the presentation is — it’s an absolutely superb opportuni A new airport retail branding anything to go by, Terminal 3’s travel- ty,” said Gill. called Skyline Avenue (‘Destination ling consumers are in for a treat. In an DIAL is still finalising the structure You’) was unveiled. impressive articulation of many of the of the duty-free bid, but it is likely to The potential value of the forthkey principles that have been central to invite a combination of approaches, coming tenders — perhaps, the including a standard concession biggest commercial opportunity agreement — with no Minimum in Indian airport history — was Annual Guarantee in the first underlined by the presence of set-up year — and a long-term many international retailers, contract (probably nine years including DFS, Flemingo, Dufry, with a one-year extension). Gebr Heinemann, The Nuance Meanwhile the new domesGroup, Aldeasa and Alpha (both tic terminal coming up betwen Autogrill), Aer Rianta InternaIA and IB is likely to be tional-Middle East, Aelia, innaguratedby Minister Praful Lagardère Services Asia Pacific, Patel later this month.Hwever, Lotte Duty Free and King Power the formal use of the terminal is (HK). likely to begin only in the first Leading F&B operators, week of April, according to including SSP and HMSHost, DIAL’s Chief Commercial Officer Gavin Mckechnie unveils the T3 plans. inside sources.
I
Courtesy: www.moodiereport.com
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INFRASTRUCTURE NEWS
oon after the government conferred the status of mini Navratna on Airports Authority of India (AAI), and a new Chairman took over — along with new Board members who included the ubiquitous Deepak Parekh — the Authority is faced with the prospects of tackling a very tough issue. What to do with the nearly 4,000 AAI staff that were on deputation with private developers, GMR for DIAL and GVK for MIAL, since the two airports — Delhi and Mumbai — were handed over to them by AAI in May 2006? As per OMDA, AAI staff were supposed to work for the two private promoters for three years and get absorbed at the end of the three-year tenure. But only five per cent of the 4,000 staff have offered and got absorbed in DIAL and MIAL. They are mostly the highly skilledcategory people and do not include the majority of the class C and D employees, who have not been able to adjust to the private sector culture. Nor would these AAI employees like to be posted to the North East or any other far-off place. Under these circumstances, the AAI management has no alternative but to offer them a VRS which, for 4,000 staff, could cost more than Rs 1,000 crore. The fact
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AAI is faced with the problem of 4,000 employees whom it had sent on deputation to GMR and GVK
that has to be kept in mind is that AAI does not own Delhi and Mumbai airports, which were the main money spinners for the Authority. Nor do they have with them the old Bengaluru and Hyderabad airports, as the new Greenfield airports have replaced them. Between these four airports, nearly 85 per cent of air traffic earlier handled by AAI has vanished. So, whatever AAI is doing now, it is due to past receipts which are also shrinking, notwithstanding the anticipated higher revenues from the 35 non-metro airports which are currently being upgraded. Though it will take some time before
New airport hits turbulence The hew Bengaluru International Airport (BIA) has hit turbulence within months of its opening. The first airport of international standards in Karnataka was an important milestone in air travel but it is facing a lot of criticism because of a series of factors, including the long drive,
any profit begins to flow into AAI coffers, the prospects of the 4,000 returning staff are bleak. AAI now believes the provisions in OMDA could help it out. As per the provisions, the two new airport companies, DIAL and MIAL, will have to share the costs with AAI towards any Voluntary Retirement Scheme (VRS). The provisions say if less than 60 per cent of AAI employees are absorbed at the two airports being newly upgraded, then their promoter companies shall pay retirement compensation for the difference between that benchmark and the number of workers who take jobs in the new airport firms.
particularly from the southern parts, the user development fee, and the lack of adequate amenities. Amid the public furore over the poor standards at the airport, the state legislature has constituted a Joint Committee to investigate the matter. Meanwhile, traffic expert and member of the Agenda for Bangalore Infrastructure Development (ABIDe) MN Sreehari has questioned the necessity of having multimodal transport options to the Bengaluru International Airport (BIA) when a well-laid six-lane road with four-lane service roads are available. The existing rail route to Chickballapur should be patronised and passenger trains should be operated on high frequency to connect BIA with the city as an alternative, Sreehari said. He termed as uneconomical the proposed high-speed rail link and elevated expressway to one destination. According to him, Mono rail was a better option.
New-look arrival hall at Chennai airport Bengaluru International Airport
The Chennai airport has a new-look, renovated arrival hall at the Anna international terminal. The work of
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AAI is a mini Navratna. As per AAI report, its staff cost totalled Rs 950 crore (excluding Delhi and Mumbai) during the last fiscal 2007-08, marking a 13 per cent rise over the previous year. With the government also accepting and implementing the Sixth Pay Commission, the situation for AAI could become even more difficult, especially at a time when the aviation industry, in all its aspects, is going through a serious depression that could continue for two more years. This is already evident from the lack of response to AAI bids for offering duty-free concessions at six of its smaller
Airports Authority of India
international airports. For instance, there were no bids for running duty-free shops in Jaipur, Lucknow, Amritsar and Thiruvananthapuram. In the case of Coimbatore, two bids were received from Dubai-based Flemingo
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International Ltd and our own sarkari ITDC. As for Pune, it got only one bid from Flemingo. The poor response was a setback to the AAI plans to open another revenue stream after it closed shop in Delhi, Mumbai, Hyderabad and Bengaluru. Globally, non-aeronautical revenues account for 70 per cent of airport revenue. But in India it is not more than 37 per cent, as was the case in the fiscal ending March 2008. In fairness to AAI, the well-known promoter of Big Bazaar, Kishore Byani pulled out his Pantaloon from Delhi airport. Even the ITDC-Spanish duty-free retailer Aldeasa JV exited MIAL as it found the guarantee revenue payment of Rs 571 crore over three years to GVK simply out of question. MIAL then got on board Hong Kong-based DFS at a much lower revenue guarantee of Rs 270 crore. Not surprisingly, no foreign bidders bid for the six airports’ duty-free concessions invited by AAI. So we do not know if the non-metro airports will be ready without the duty-free shops or instead run by a Thakela ITDC. There is also a question mark over the development of the city side after the government decided that terminal work and its management will remain with AAI along with the air side in the case of all non-metro airports that are being upgraded and modernised.
BIG PLANS TAKE OFF
N
otwithstanding such a discouraging development over AAI’s non-metro airport bids for duty-free shops, India’s first private international airport, Cochin International Airport Limtied (CIAL) has chalked out big plans to become the toast of Kerala, which of late has become warring CPM leaders’ own country. CIAL is commissioning a centre for perishable cargo and expansion of both its domestic and international terminals. Besides, it will be undertaking construction of additional aprons, first phase of golf course, improvement of facilities in the emigration wing, launch of an Aviation Academy and setting up of an industrial park. CIAL has decided to market itself as a tourism destination and cargo hub. According to CIAL, the Centre for Perishable Cargo will handle 25,000 tonnes of cargo annually. The state-of-the-art and fully automated CPC will ensure export of farm products. The airport MD Krishnadas
Decks cleared for Sikkim airport construction
Chennai airport
renovation was undertaken over 7,850 square metres area in the ground floor and 3,640 square metres in the first floor at a cost of Rs 28.40 crore. The renovation work began in January 2008. With the completion of the renovation works, the arrival hall at the international terminal has expanded to cover nearly 15,800 square metres, including the existing arrival hall. A highlight of the renovation includes a new Automated Teller Machine of a nationalised bank. Plasma television sets for information display and separate immigration counters at the first floor are other new attractions.
Decks have finally been cleared, after a decade of the Central approval for an airport in Sikkim, for construction to begin for the state’s first greenfield airport at Pakyong. The Punj Llyod Group has been awarded the contract by the Airports Authority of India (AAI). The Rs 264-crore project is to be completed in 24 months. The scope of the project includes construction of a 30-m-wide runway, a 1.7-km-long taxiway, an apron drainage system and electrical works for the airport. The Punj Lloyd Group feels it is a challenge to build an airport in hilly terrain at a height of 1404 m above mean sea level.
Orissa to get 2nd airport The Airports Authority of India (AAI) is all set to sign a memorandum of understanding (MoU) with the Orissa government for the development of a second airport in the state at Jharsuguda. “We have already submitted the draft MoU to the state government and discussed the matter with the Orissa Chief
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GOOD LUCK,
L
CC pioneer Capt Gopinath was all set to launch his new venture — Deccan Express Logistics in May 2009, if all had gone well. But precisely then, or should we say during the “if all had gone well phase”, things went awry for Gopi, as with many not only in India but worldwide. When Gopi copied his dream on paper, the world economy, and also the Indian economy, were not in the kind of danger they are in today. The economy was still solid. This emboldened Gopi to place orders for Air India’s three A310s, and even pay for their lease/conversion into freighters in September 2008. But just then came the inevitable global economic meltdown, which melted everything on its way, including the Indian economy, besides of course the big banks in the US. Many bullish and bouncy PE firms suddenly went quiet as the aviation industry stalled and world trade contracted. This resulted in a virtual tsunami effect, like when the water recedes. What we have today is a global
Cochin Airport
has stated that more parking bays will be built to enable more airlines to park their aircraft at night. At least one bay will be used exclusively for cargo operations. By May 2009, the expansion work on international terminal will be completed and the total area of international departure will be 4,80,000 square feet, with 60,000 square feet duty-free area. While the domestic terminal is also being expanded, the first phase of the 9-hole golf course attached to a country club will be commissioned by September 2009 and the membership drive will begin in three months. The ambitious Aviation Academy of CIAL will be launched next academic year and DGCA has been approached for starting various courses, including in aircraft maintenance. CIAL is also looking at a prospective aerospace- related SEZ. It is strange that despite having four international airports — Kochi, Thiruvananthapuram, Kozhikode, Cannore — the state receives no cargo flight. Therefore, as a pro-active measure, CIAL is setting up a cargo hub.
Secretary for the development of the proposed airport at Jharsuguda,” said PK Singhal, executive director, AAI (eastern region). The state currently has only one full-fledged airport in Bhubaneswar. Around 90 acres of land is required for the development of the new airport at the industrial town of south Orissa. AAI would invest about Rs 80 crore in the first phase of the project while the investment in the second phase would depend on the traffic of the airport.
Nagpur airport in for overhaul The Nagpur airport is in for overhaul, with the Airports Authority of India (AAI) working out a detailed plan for revamping the airport’s infrastructure. The overhaul is aimed at getting a fresh aerodrome licence from DGCA. According to reports, the new licence will be issued to the airport by Directorate General of Civil Aviation (DGCA) after the AAI provides necessary infrastructure and technical changes at the airport. At present, Air India, Air Arabia and Qatar Airways operate from the airport, linking it to Dubai, Doha and Sharjah. However, once the airport gets fresh aerodrome licence, more international airlines will begin operating from
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GOPI! economic recession, and this has not spared even India, which may take pride in a possible 7 per cent GDP growth in 2008-09. With the prospects for 2009-10 being even worse and growth unlikely to top 5.5 per cent, everyone is in a soup, not just the Captain. Air India has virtually written off its cargo plans. Gati, which had a tie-up with erstwhile Indian, is not renewing its contract (vigilance issue is a different matter) and the two Boeing 737-200s that were leased should come back to Air India (domestic). Late last year, Gopi had announced that Deccan Express Logistics will be the largest and double the size of the existing industry players from day one. Besides the already ordered three A310 converted freighters, he had also ordered the induction of at least four, to start with, and had plans to later increase it to six ATRs for hub and spoke cargo carriage. But the serious funds constraint has, according to industry sources, already hit the ATR plan and, in all probability, the plan for ATR has been postponed for
Nagpur, which is strategically located between aviation hubs like Delhi and Mumbai. Meanwhile, Essar Realty Holdings, the real estate arm of Essar Group, has won a bid worth Rs 500 crore for building a five-star hotel, utility centre and a multiplex at the upcoming Multimodal International Hub Airport in Nagpur. It has formed a joint venture with US-based Accor Hospitality to develop the project. The five-star hotel will be developed on 10 acres, adjacent to NH-VII on the Nagpur-Wardha road. It will have capacity to accommodate 1,000 people. It will also have service apartments to cater to the needs of long-staying executives.
Outbound passengers to pay for IGI facelift To fund the development programme of the Indira Gandhi International Airport, which has hit a funds crunch, outbound passengers will soon be required to pay upto Rs. 1,000 as Airport Development Fee (ADF). The Union Aviation Ministry is in final stages of clearing GMR-backed Delhi International Airport Pvt Ltd’s (DIAL) plea for charging Rs 300 and 1,000 from each domestic and international passenger, respectively, to cover their shortfall of about Rs 3,000 core. The Ministry is trying to finalise
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the time being. Captain Gopinath had committed his own $25 million, and another $50 million was to come as equity and the remaining $ 100 million was to come in as debt. The global meltdown has already hit the equity placement option, especially when PE firms have done the vanishing trick. But all has not been lost and the never-say-die Captain Gopinath, who has the good wishes of millions of Indians to given them the concept of LCC (now every airline, including full service carrier like Air India, Jet and Kingfisher, is competing to become the best LCC) is waiting for a big investor. According to industry sources, Intel (yes, Intel, the computer chip giant), which has a subsidiary which invests money in new ventures, is seriously looking at Gopi’s Deccan Express Logistics. Already, all his erstwhile colleagues and those who joined him in promoting the LCC Air Deccan (since taken over by Mallya) are back with him at his Richmond Road office in Bengaluru. Thank
God, Gopi did not give it to the King of Good Times. Even though it was stated earlier that Gopi’s project has evoked seven expressions of interest from financial and strategic investors, the queue has virtually shortened to one or two. Intel is the only one still looking at it, while the earlier planned foray by Citibank is now out as Citi itself is in a serious shape. According to sources, Gopi paid for the three A310s, as well as some money towards the exclusive warehousing facilities in Nagpur, Bengaluru and perhaps Delhi. Even as he was doing all this, the global meltdown scared away investors. It is rather interesting to see that while the OECD economies, including the US, UK, Japan have virtually contracted, Indian economy has expanded by 7 per cent. When growth becomes negative in those countries, India will still be able to touch 6 per cent growth. Then why are investors shy to fund the first ever cargo/freight venture like the one planned by Capt Gopi? Besides air connection, Deccan Express Logistics has also big plans for road movement of goods by a fleet of trucks. According to the original plan, the company was to reach out to 68 locations across India. The latest rumour is that Deccan Express Logistics is in talks with a global telecom equipment major to air freight its goods into, through and out of India. The fully refurbished A310 freighters are likely to be delivered to Deccan Express by March 2009. Good luck to Gopi.
Unisys to support DIAL infra project
Indira Gandhi International Airport
a ‘moderate’ figure that’s acceptable to both DIAL and passengers. While DIAL had sought ADF levy for two to two-and-a-half years, the government is trying to limit it to 16 to 18 months. However, the final amount and time period for which it can be levied will have to match the developers’ shortfall for the project to meet its tight Commonwealth Games 2010 deadline.
Unisys India subsidiary has been named master systems integrator in support of the infrastructure project to modernise and restructure Delhi International Airport Limited (DIAL), including work on the airport’s new Terminal 3. This was announced recently by Unisys Corporation. Terminal 3 will provide the much-needed additional capacity to Delhi during the 2010 Commonwealth Games, and also serve the more than 34 million passengers per year anticipated by DIAL. Unisys has been awarded two contracts: the master systems integration agreement to work with GMR, the infrastructure leader at DIAL, and a subcontracted systems integration agreement with Larsen & Toubro Limited, the prime contractor for the project. As part of the project, Unisys will design, test and commission the overall integration of various disparate airport systems that supply information to the airport community, including airlines, ground handlers, and government agencies such as Immigration and Customs and franchise operators. Unisys will also assist DIAL in defining future operational processes to support its role as a competitive hub airport in the region.
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J
et Airways is still looking for money to stay where it is. The global meltdown, global economic recession and slowdown in the Indian economy have impacted every sector, and more so the aviation sector. A fine product like Jet, which expanded on its image perhaps a little too fast, continues to be in serious financial trouble. The speed with which it proceeded during the 9 per cent GDP growth of India in the past four years saw it acquiring wide body aircraft like Boeing 777-300 ERs and A330-200s, and later supplement them with Boeing’s latest dream-liner B787. Now it is the reverse phase. After the sale — lease back of one A330 and another possibly soon — Jet also went in for shortterm lease of two A330s to Oman Air and three B777s to Turkish Airlines. While the A330 to Oman may be coming back in
Wolfgang Prock Schauer
March 30 (it was a short lease), Jet plans to lease another four B777s to Oman. The two A 330s with Oman now are on wet lease and fly Bahrain-KL and Bahrain-
I
t has come not a day too soon. After much delay, US aircraft manufacturer Boeing has finally inked a lease agreement with Maharashtra Airport Development Company (MADC) for setting up a $100-million Maintenance, Repair and Overhaul (MRO) facility at Nagpur. The facility is slated to become functional by the end of 2010. MADC, a government agency, has provided the land for the facility, which is a joint venture between Boeing and national carrier Air India. The 99-year lease agreement is for 50 acres of land, located adjacent to the Dr Babasaheb Ambedkar International Airport under the prestigious Multi-modal International Passenger and Cargo Hub, Nagpur project.
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Bangkok, among other sectors, with Jet crew. Once the aircraft come back, Jet will really not know what to do with them. This is because with even higher loads this fiscal, Jet is making more losses compared to last year when loads were lower. True, the usual refrain will be high ATF prices. But have they not started falling since late August 2008 to reach rates today that are actually at a three-year low? So why not make money by sending the planes back, instead of taking passengers with higher fares! According to Wolfgang ProckSchauer, Jet Airways expects to make at least Rs 10 crore to Rs 20 crore per aircraft per month by leasing it. As for the A330, they were wet leased to Oman for a short period of three to four months. The question is why is Jet now getting back its leased A330s and not, instead, leasing out B777-300 ERs? The answer, according to insiders, is very simple. While A330 is smaller in two class configuration and easier to fill up, say 60 to 70 per cent, it is very difficult to fill up the much bigger B 777-300 ER. So even if a B777 can claim to be more fuel-efficient, it will make sense only if it carries a minimum threshold load to justify the fuel economics, which Jet of late is finding it extremely difficult to meet. To top it all, carriers like SIA, Cathay have also begun to withdraw the fuel surcharge imposed at the height of fuel price rise and become far more competitive. This comes on top of, again, the vanishing passengers, as evident from IATA figures. So why not opt for the best option — lease and earn rentals? Why fly and get into a jam?
The sale and lease-back of its one A330s fetched Jet Airways $22 million. It proposes to do another such sale and leaseback of one more A330 the moment the aircraft return from Oman Air and are replaced by B777-300 ERs. Even as this continues, Jet Airways has recovered part of the Rs 367.83 crore it had advanced as interest-free loan, as on December 31, 2008, to its LCC subsidiary JetLite, whose accumulated losses were more than its net worth. As on December 31, 2008, Jet Airways had equity-cumpreference investment of Rs 1645 crore in JetLite. There is also a proposal to lease some of JetLite aircraft. Ending December 31, 2008, Jet Airways recorded net sales of Rs 2,908 crore against Rs 2,426 crore on a year-onyear basis. It recorded a standalone loss of Rs 214 crore at the end of December 2008,
PROMISE FULFILLED,
AT LAST! Nagpur airport
CRUISING HEIGHTS February 2009
The Nagpur MRO will be the Chicago-based aerospace giant’s second such facility after Shanghai, China. The world-class greenfield facility will have the capacity to service 250 aircraft a year. “We have finally signed the necessary papers to live up to the promise made in 2006 that Boeing will have its world’s second MRO with Air India as
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MONEY MATTERS
against Rs 91 crore for the same period a year ago. Revenues were up by 21.7 per cent against Rs 2,426 crore on a year-onyear basis. It recorded a standalone loss of Rs 214 crore at the end of December 2008 against Rs 91 crore for the same period a year ago. Revenues were up by 21.7 cent at Rs 3,063 crore. The domestic seat factor during the third quarter ending December 2008 was at 62.4 per cent, against 72.3 per cent in the same period of 2007. Jet Airways’ international seat factor was higher at 67.8 per cent against 66.4 per cent a year ago. The company’s pre-tax loss on domestic operations was Rs 130 crore against Rs 14.4 crore in the third quarter of last year. On international side, the pre-tax loss was Rs 119 crore, compared to Rs 115 crore in the same period of 2007. For instance, the brand new route — Mumbai-
Shanghai-San Francisco (especially the last two legs), which has since been withdrawn — made a loss of $9 million or Rs 40 crore. Similarly, Jet Airways’ Amritsar-London route made a loss of $3.5 milllion or Rs 16.5 crore. To tide over its financial gap, Jet Airways has already taken a loan of Rs 1,250 crore from Punjab National Bank and Indian Overseas Bank at 14 per cent interest. The airline is actively looking for another Rs 750 crore in loan to meet its working capital requirement. In the case of the loan from Punjab National Bank, Jet Airways has pledged that its international ticket sales and the proceeds from it will be kept in a special account from where PNB will withdraw its share, leaving the balance to the airlines. The net loss of Jet airways would have
partner in the city,” Boeing senior vice-president Dinesh Keskar said. According to Keskar, Boeing plans to float tenders, by the end of the current fiscal, for constructing hangars which will accommodate two wide-bodied or four medium-bodied aircraft for maintenance and repairs. Boeing chose to set up the MRO in Nagpur on account of the ample availability of manpower and land, besides the excellent weather conditions for aircraft maintenance and repair works. Since the region (Eastern Maharashtra) has a number of engineering colleges, there should also be no problem about availability of the necessary technical
been Rs 2,307 crore for the nine months (April- December) 2008 and Rs 572 crore for the third quarter ending December 2008, instead of Rs 455 crore and Rs 214 crore as reported. This was because Jet had certain foreign currency differences which had been treated in books as per Accounting Standard (AS)-11. Jet Airways entered into a code-share with JetLite and now hopes to make Rs 40 crore through this arrangement. As for its code-share with Mallya’s Kingfisher Airlines, the differences are still being ironed out, and a sort of Common Minimum Programme is being worked out in the true political tradition as the promoters of both the airlines have great flair for politics. Whether this new CMP will also include a clause on foreign airlines holding equity in domestic Indian carriers remains to be seen.
manpower in aviation, avionics and aerospace, said Keskar. Air India already has a large fleet of Boeing aircraft requiring periodical maintenance and has further placed huge orders for such aircraft. Besides Air India, private airlines like Jet Airways and SpiceJet, who own Boeing aircraft, would also use the MRO. Eventually, the MRO facility will be opened by Boeing to airlines outside India too. Boeing has asked MADC, which is developing the cargo hub, to construct the taxi runway to be used by Boeing for positioning aircraft in the hangars. “The runway should also be ready by the time MRO construction is completed,” said Keskar.
Dinesh Keskar
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DGCA NOTES
RAM AUR SHYAM
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s the DGCA a different place under Naseem Zaidi? Regular visitors say `yes`. For one, Zaidi is a low-key, quiet operator, who isn’t the `sock-it-in your-face’ officer. One obvious Bollywood fan in the department said that it was like Ram aur Shyam when compared with the Gohain era! Now you can draw your own conclusions as to who is Ram and who is Shyam. For the moment, Zaidi has his plate full. Amongst the most important of projects that he has undertaken is one that will help convert the Directorate into an Authority, which will give it complete financial freedom and free it
from the clutches of Rajiv Gandhi Bhavan — at least as far as money matters go. So what he has done is put together a detailed note on the issue that is now under examination with the Civil Aviation Ministry! And once the note is processed, they are likely to commission the International Civil
Aviation Authority (ICAO) to undertake a study on the entire issue. While it is unlikely that anything will come of it immediately, it is indeed the right way forward. “Can you imagine, for any expenses over Rs one lakh we have to refer papers to the Ministry? We are supposed to regulate the entire aviation sector in this country, but we have no control to run our own business,” said one official. Hopefully, in 12 months’ time, the DGCA should be on its way to being an Authority, like the Airports Authority, with its own members, Boards and a professionalised modern set-up.
GOING ONLINE
T
hat apart, Zaidi has also initiated steps to make the DGCA an organisation that overcomes the image of an opaque institution where corruption is the order of the day. So how does one go about achieving that? As a first step, he is preparing to float RFPs (Request For Proposals) for computerising some of the most important functions of the DGCA, like medicals/clearances for pilots etc. The idea is to minimise the human element that is responsible for all the woes, making it a transparent, aboveboard online procedure, that will stop all talk about favouritism, below-thetable deals etc.Well, this too has to go through the Ministry, considering the complex level of IT required. But it should happen, and this should take less than the 12 months.
Naseem Zaidi
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KUCH KARO, BABA!
M
eanwhile, here a few interesting issues that he may like to look into: Issue one: Foreign co-pilots working with scheduled Indian carriers have received their Foreign Air Crew Temporary Authorisation (FATA) to fly over Indian skies till 2010.This was done for the convenience of Indian carriers, who were finding it impossible to get local recruits during the heated up aviation scene some time back. But the same does not apply to Indian citizens who may have travelled overseas for the Commercial Pilot’s Licence (CPL).We know of one case where the poor chap was declined the FATA and asked to get his DGCA certification. The poor guy is cooling his heels and waiting for the next exam. Koi sunwai nahin hai. Would you like his name Zaidi Saab? Maybe you would like to act on it. Issue two: Obtaining a radio telephony licence — required for operating VHF (Very High Frequency) and HF(High Frequency) radios — is one of the toughest chores in the subcontinent. Bigtime commanders flunk. And it should really come as no surprise to anyone. What else do you expect when the exam is conducted by the Wireless advisor, Ministry of Telecommunication? They have simply no idea about the complexities of flying, or the issues related to flying. Their examiners have nothing to do — by a long mile — with the business of flying. In the US, if you have a CPL (Commercial Pilot’s Licence), you will automatically get your RT. Not so in VT (Victoria Territory), because we are still in the Victorian Era!
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PAWAN HANS NOTES
METRO IS PASSE, LOOK FOR THE CHOPPERS!
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f any marks have to be awarded to the one person who has set a breakneck speed these past 12 months, it will go, without doubt, to RK Tyagi, the low-profile but hugely ebullient Chairman and Managing Director of Pawan Hans. Tyagi is working literally each day to enhance the scope of this public sector helicopter corporation, that was really looked upon as a country cousin of behemoths like Air India and Indian Airlines. Well, as it often happens in such stories, the big ones are in deep trouble and the tiny fellow is ready to fly, raking in profits for years and years, and presenting a sprightly and energetic face to the world.
WAKING UP THE DDA
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yagi’s biggest triumph so far has been getting the DDA to give him 40 acres of prime land in Delhi. And those who have dealt with the Delhi Development Authority will tell you that this, by itself, is deserving of a Padma Shri. What Pawan Hans has got is 25 acres in Rohini and 15 acres at Akshardham, next to the Commonwealth Games Village. While the first piece of land will really be a skyport that PHHIL (Pawan Hans Helicopters India Ltd, to give their full name) will own, the other is for the purpose of the Commonwealth Games — to ferry delegates and dignitaries in and out of the key Games complex. What this would mean is a 15-
Pawan Hans helicopter
minute flight for what could otherwise have been a 90-minute trip. Once he connects the Eastern and Western corridors with a hub in Safdarjung, Tyagi and the PHHIL will be up and away. To be fair, as Tyagi incessantly tells you when you meet him, all this would have not been possible without the support and backing of the Ministry, in particular Joint Secretary Arun Mishra, who is also on the Board of the Corporation. The low-profile and reticent Mishra has been pushing real hard to get choppers off the ground in the Capital and believes that, like the Metro, once its visibility and advantage are seen, then it would be a matter of time before other big cities scramble to replicate it. Two weeks back, the duo, along with other officials, made a detailed presentation to Delhi’s LG Tejinder Khanna on the advantages of having a heliport service in the city, on helicopters and medical emergencies, and why a big city like Delhi will be advantaged by adopting this route. Needless to say, an impressed Khanna has called for a more comprehensive meeting to get the whole process moving.
LIGHTNING-FAST HARYANA
M RK Tyagi
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eanwhile, the state of Haryana is on overdrive, offering PHHIL several sites across the state for its proposed feeder operations. Amongst sites on offer are plots in Fardiabad, Sohna, Gurgaon, Manesar and elsewhere. The offers came during the course of a meeting with the Chief
CRUISING HEIGHTS February 2009
Secretary to set up operations in Manesar, where the SPG (Special Protection Group) and the NSG (National Security Guard) are located. This would also mean tycoons like KP Singh of DLF getting themselves a chopper to zip around North India, before returning to Gurgaon or Akshardam in the evening. One person who does that routinely is patriarch Jaiprakash Gaur of the Jaypee. He flies
Arun Mishra
off to Himachal in the morning to meet with company officials at their plant and returns the same evening to Greater Noida, and then zips home to Vasant Vihar. How convenient! Don’t be surprised if one of the states around Delhi gets off the mark faster than the city state of Delhi. That’s because they are quicker and faster in their decision-making. In Delhi, it has to go through the labyrinth that is North Block. Thankfully, Mishra has done much to wake up the Dilli Sarkar and Tejinder Khanna has been most responsive. Watch this space for the updates.
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COLUMN/CHOCKS OFF
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R Krishnan
Praful Patel’s earlier vehement opposition has now suddenly given way to pro-FDI by foreign airlines in Indian carriers, because of the severe financial crisis 24
t is now 10 years since the United Front government, then headed by the humble farmer Deve Gowda (it was headed by IK Gujral in the second half of its 20-month life span), decided to change the goal post to suit the whims of one airline, which is even today against FDI by foreign airlines in Indian carriers. The then Civil Aviation Minister CM Ibrahim went out of his way to stall an application of Tatas for setting up a domestic carrier in a JV with Singapore Airlines. When the Civil Aviation sector was opened in 1992-93 to private players, first as Air Taxi operators and later as scheduled carriers, the foreign equity component was fixed at 40 per cent. That policy did not bar foreign carriers from holding equity in Indian carriers. In the absence of a bar, Tatas tied up with SIA to start a domestic carrier in India. I remember, when the sector was opened to the private sector in 1992-93, late Madhav Rao Scindia was the Civil Aviation Minister. He was a total pro-reforms person and not given to political interference in aviation, unlike many of his successors, irrespective of party affiliation. After Scindia, the Civil Aviation Ministry was headed, respectively, by Ghulam Nabi Azad, CM Ibrahim, Jayanthi Natarajan, Ananth Kumar, Sharad Yadav, and Shah Nawaz Hussein representing NDA. Then came Praful Patel, who has earned the distinction of holding the Civil Aviation Minister’s job uninterrupted for nearly five years, since he took over as a constituent of UPA, which came
are still leasing their aircraft to minimise operation cost. Praful Patel’s earlier vehement opposition has now suddenly given way to pro-FDI by foreign airlines in Indian carriers, because of the severe financial crisis where all PE firms have vanished. I wonder if this is the right approach. When Tatas came in with SIA, the then dominant private carrier, Jet Airways used all its political strength to stall the Tata Airline. In 1996-97, when UF was in power, a then Union Minister and friend of Naresh Goyal issued a statement saying any approval to Tata Airlines with SIA equity participation will threaten the security of IAF. All this lobbying led the Deve Gowda government to call a CCEA meet, and then decide that no FDI by foreign airlines, directly or indirectly, will be allowed in any Indian carrier. Jet Airways, which then had 40 per cent foreign equity from foreign airlines, Gulf Air and Kuwait Air — directly and indirectly — suddenly bought it back to be within the guidelines. Tatas then decided to enter into a technical collaboration and re-submitted their application, this time to NDA during its first term (April 1998 to May 1999) headed by Prime Minister AB Vajpayee. It was expected that this time it would get clearance from the Ministry of Civil Aviation headed by Ananth Kumar. But this time also, the application was stalled and the FIPB decided to defer it without assigning any rea-
Still waiting
for ITS TIME TO COME... to power in May 2004. It is now going to be full five years of his rule. Praful Patel, like his predecessors and successors of Scindia, was against FDI by foreign carriers in Indian airlines. He told at least two interviewers — BBC and Devil’s Advocate of Karan Thapar — that he will not permit FDI from foreign carriers till such time that Indian carriers attained a critical mass (of fleet) of 800 to 1,000 aircraft. In the four years of 9 per cent plus GDP growth till 2007-08, it appeared that Indian carriers will hit that fleet number. But then came the oil crisis and sky-rocketing fuel prices, followed by the global economic meltdown. Indian carriers began to reschedule the deliveries already firmed up, and also cancel some of their orders placed with aircraft manufacturers. Few Minister for Civil Aviation Praful Patel (centre) is not in favour of more than 25 per cent FDI by foreign carriers.
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sons. This application never came up in the next few meetings of FIPB, forcing Tatas to drop their airline project. The buzz then was that some private airline operators were able to lobby successfully with constituent members of NDA, and persuade Vajpayee not to clear the Tata project. One BJP leader told me that Vajpayee apparently told his colleagues that he did not want his government to fall over a silly airline application. But then, don’t you reap the fruits of your karma? One of the lobbyists against the Tata Airline project and constituent member of NDA pulled the rug under Vajpayee’s feet and his government fell. The only change brought about by the NDA government was to up the FDI component in Indian carriers to 49 per cent, while retaining the bar on foreign carriers directly and indirectly. The best comment made in private to some came from the then Singapore Prime Minister, who said it was amazing that a private airline project involving SIA had been successfully stalled. Therefore, what Praful Patel first sought to do was not surprising. But, towards the end of his five-year rule, Vijay Mallya wanted FDI for his carrier. Earlier, Praful Patel submitted his Vision 20-20 document to the cabinet, which envisaged rule change to allow foreign flights by domestic carriers after three years in operation, instead of five years as now. One lobbying airline got it stalled, and Mallya could do nothing about it. He was forced to acquire Air Deccan to fulfill his foreign dream. Soon thereafter, Jet Airways acquired JetLite. Sadly for both of them, the 35 per cent passenger traffic boom began to slowly ebb. In the last two years, a combination of factors like rising fuel prices, over-capacity, etc. acted as a serious dampener on the Indian carriers, who began to make huge losses. They, in turn, demanded bailout in the form of cheap loans, redefining of ATF as a declared public good to attract only 4 per cent sales tax etc.
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When none of these requests were even considered, Mallya first demanded that FDI rules be changed to include foreign carriers. However, Jet Airways CEO Wolfgang Prock Shauer said ‘No’, as his airline was opposed to foreign carriers coming in and setting predatory fares on the domestic sector. Last time also, Naresh Goyal opposed FDI, fearing that foreign carriers will join hands with domestic carriers and introduce predatory pricing, which will kill competition. May I ask him and others as to who is now killing the Indian carriers? As for the so-called predatory pricing, if LCCs can offer low fares, why should his man Wolfgang object. He has been opposing low fares in major aviation seminars and meetings. Later, unable to do anything, his boss decided to buy Air Sahara and rechristened it as JetLite and offer low fares. In doing so, his company did what has always been advised. If you cannot beat them, then join them to offer predatory fares. Just check out the kind of fares even Jet is offering to attract customers. Jet wanted so badly its flights to San Francisco via Beijing and did high lobbying when our beloved Prime Minister Manmohan Singh visited China early 2008. Jet launched its Mumbai-Shanghai-SFO flight, but withdrew after it made losses. The new joke: Jet opposed the entry of foreign carriers through the equity route in Indian carriers. But when it is in financial crisis, Jet is minimising its pain by sending its planes on lease to foreign airlines. Alongside, we are also faced with another serious debate. Should FDI be 25 per cent or more? Praful Patel and his ministry’s note reportedly said FDI by foreign carries should not exceed 25 per cent. Already, BA, Virgin, Cathay, SIA etc. are all waiting to enter India. The sanctity of 25 per cent is due to India’s Company Law, which doest not allow a 25 per cent equity holder to stall any special resolution. But if it goes up to 26 per cent, then such a stakeholder can prevent any special resolution. Officials supporting the 25 per cent equity cap say even the US has a similar cap. But then, suppose an Indian promoter gets a funny idea that he should be in MRO, Ground Handling, Catering and everything connected with airlines business, will a serious airline investor sit quite? Obviously not, he will exit. And should this happen, it will reflect very badly on India. Prime Minster Manmohan Singh had said that nothing can stop an idea whose time has come. In India’s Civil Aviation history, the idea of FDI by foreign carriers came first, and then disappeared, and has again come. It is only that its time is not coming, even as Prime Ministers and Civil Aviation Ministers have come and gone with time. (Veteran journalist and long time aviation watcher R Krishnan is Consulting Editor at CH. He can be reached at rkrishnanji@yahoo.com.) CRUISING HEIGHTS February 2009
The sanctity of 25 per cent is due to India’s Company Law, which doest not allow a 25 per cent equity holder to stall any special resolution 25
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Around the world, there are more than 3,000 international treaties of this type. These treaties date back to the earliest days of international civil aviation in the 1940s. I can understand why they were felt appropriate then. Countries were recovering from World War. But what was understandable in the 1940s, when there were no more than nine million passengers worldwide per year, is incomprehensible today for a mature industry...
N
The first step (to tackle the tough times) has been for us to reduce our flying programme…Clearly, it is essential we do everything we can to bring down our non-fuel costs.
Customers are not interested in governmental imposition of route rights. What they want are safe, secure airlines, flying where they want to go at a price they want to pay.
Bold moves in tough times
o one can say that British Airways lacks experience of India. I am very proud to tell you that this year we will be celebrating our 80th anniversary of flying to the subcontinent. Back in 1929, the journey took more than a week, used four different aircraft and included 20 stops en route. Customers spent seven nights in hotels. And for the leg of the journey between Switzerland and Italy, they went by train. More than three quarters of a century later, we are launching our newest route to India (London-Hyderabad) in a single aircraft, on a non-stop flight, without trains — and I can assure you the journey is slightly quicker. So we have made progress over the years. But there is absolutely no doubt that the aviation industry as a whole is facing extremely tough times — perhaps the toughest times it has ever faced. Bold moves need to be made in response —
26
There are too many airlines — at least 500 of significant size worldwide. You don’t need 500 airlines to create competition. There is too much state ownership and too much subsidy.
To survive these difficult times, the aviation industry needs to get out of the 1940s mindset and resort to radical moves, says Willie Walsh. bold moves by British Airways as an individual airline, by the aviation industry as a whole, and also by those who sit in positions of regulatory power.
At the moment, I would expect things to continue getting worse rather than better. I cannot see the bottom of this crisis yet CRUISING HEIGHTS February 2009
Tough times According to the airlines’ trade association IATA, the industry lost $5 billion in 2008, as many months of record oil prices combined with an accelerating economic downturn and finally a financial crisis. It was a cocktail of horror for the industry — and no surprise that more than 30 airlines went out of business. Air travel is driven primarily by economic growth and is linked very closely to the economic cycle, expanding and contracting at roughly twice the rate of the
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overall economy. The latest economic forecasts show global GDP growth slowing to less than one per cent, with the US, Japan and Europe in recession. So the outlook for 2009 is no better. Passenger traffic is expected to fall by three per cent — significantly more than in the last major economic downturn in 1991, and after growth of two per cent in 2008. Yields will fall by three per cent, and cargo traffic is expected to decline by five per cent. By value, air cargo comprises 35 per cent of goods traded internationally — and the steep falls in cargo volumes in recent months is as good an indicator as any of the depth of this recession. The drop in global trade will have a disproportionate effect on Asia-Pacific carriers, who carry 45 per cent of the worldwide cargo market. IATA forecasts that the losses of carriers in this region will more than double, from $500 million last year to $1.1 billion in 2009. So this will also be an extremely tough year in an exceptionally difficult trading environment. For us in the UK, the outlook is certainly no easier than anywhere else. Because of the high importance of the financial services sector in the UK economy, it is perhaps a bleaker outlook than in other countries. At the moment, I would expect things to continue getting worse rather than better. I cannot see the bottom of this crisis yet. There is some distance to go, and I would expect this very difficult environment to last for at least another 24 months.
BA response: Immediate So those are the tough times we are facing. The question for me, as CEO of British Airways, is this: what moves should we make in response?
Our response cannot consist simply of retrenchment. Despite the grim economic background, we must be bold in maintaining our focus on the customer With oil prices at the levels we have seen, our fuel bill for this year will be about £3 billion (£1=Rs 70 approximately) — that is an increase of 50 per cent on last year. Fuel now represents about 35 per cent of our total costs, compared with less than ten per cent at the start of this decade. So the first step has been for us to reduce our flying programme…Clearly, it is essential we do everything we can to bring down our non-fuel costs. That is why we have put in place a freeze on recruitment, and are undertaking a review of all areas of the business. We are looking to simplify the business, reduce costs and remain competitive. However, our response cannot consist simply of retrenchment. Despite the grim GRAND TERMINAL: Willie Walsh throws up his hands in praise of the new Terminal 5 at Heathrow Airport, which is exclusively used by British Airways
CRUISING HEIGHTS February 2009
economic background, we must be bold in maintaining our focus on the customer. That means not being afraid to innovate to meet the ever evolving needs and preferences of the market.
Emissions Some people say that one consequence of tough economic times is that environmental issues become neglected. I am determined that will not be the case for British Airways. We have taken climate change issues very seriously for a long time. More than a decade ago, we became the first airline to publish fuel efficiency targets — and we have achieved an improvement since then of almost 30 per cent. We led the way in arguing that emissions trading was the most effective policy instrument for dealing with aviation’s climate change impacts — and we are the only airline to have had experience of emissions trading. We were the first airline to introduce a carbon offset scheme, and we have helped fund research into alternative aviation fuels. We are working closely with Rolls-Royce to develop alternative fuel opportunities. But we must do more — and I am pleased to announce a new target for British Airways to achieve a 50 per cent reduction in net CO2 emissions by 2050, compared with 2005.
Historic issues The truth is that the traditional economic structures of the aviation industry have failed. They have brought the global industry year after year of losses or negligible profits. There are too many airlines, too much political interference, too much regulation and too much attachment to national-based controls for the very industry that drives economic globalisation. In large areas of the aviation industry, normal market forces do not operate. Air routes are highly restricted, with agreements between different national governments laying down strict limits on who can fly where, how often and sometimes even at what price. Around the world, there are more than 3,000 international treaties of this type — almost all of which stipulate that an airline operating a specific route must be majority-owned by nationals of the country in which the airline is based. These treaties date back to the earliest days of international civil aviation in the 1940s. I can understand why they were felt appropriate then. Countries were recovering from World War. Mass air transport was in its infancy. Flights were infrequent, and relatively hazardous. It was not surprising
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FOCUS years immediately before. The medicine has worked in other markets too. The UK-India market is an excellent example. Liberalisation just over three years ago led to a sharp increase in the number of direct flights between the two countries and the entry of new operators. At British Airways, we have increased our own total of flights from 19 a week to 48.
EU-US: Stage Two
BA IN HYDERABAD: British Airways’ inaugural flight to Hyderabad being welcomed with a grand water cannon salute from the fire-fighting team ‘Panthers’ at the Rajiv Gandhi International Airport, Hyderabad, on December 7, 2008.
that governments should seek to guard airline ownership (or assume it themselves) and impose regulations intended to shore up standards of safety and security. But what was understandable in the 1940s, when there were no more than nine million passengers worldwide per year, is incomprehensible today for a mature industry with an outstanding safety record, carrying 38 million passengers a week. Airlines simply cannot achieve the kind of sensible consolidation across national boundaries that is taken for granted in banking, telecom, pharmaceuticals, electronics and so many other industries in the modern world economy. The result is inefficiency — and typical operating margins for the industry as a whole of one per cent or less. There are too many airlines — at least 500 of significant size worldwide. You don’t need 500 airlines to create competition. There is too much state ownership and too much subsidy.
government regulation should end. Governments do not need to run airlines, or bail them out when they run into trouble, or decide who can fly where and when. Surely, the lesson of the last 25 years of economic history is that these issues are best resolved by markets. We know that liberalisation works. The creation of the Single European Aviation Market in 1993 transformed both supply and demand, and showed how artificial the old regime had been. Deregulation allowed any airline to fly any route as often as it liked and to set its own fares. It led to new operators, new routes, new markets, massive competition, greater efficiency, lower fares and a bonanza for consumers. The average annual growth rate in traffic in the years immediately following deregulation was almost double what it had been in the
Case for liberalisation We need a new world order in aviation. A world order in which the structure of the industry is determined not by government hand-outs or directives, but by the needs of the travelling public. Customers do not care who owns airlines. They are not interested in governmental imposition of route rights. What they want are safe, secure airlines, flying where they want to go at a price they want to pay. Of course it is right that governments should act together to lay down consistent, relevant rules to guarantee the highest levels of safety and security. But that is where
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You don’t need 500 airlines to create competition. There is too much state ownership and too much subsidy CRUISING HEIGHTS February 2009
So now is the time for boldness from the regulators. Now is the time to advance toward the goal of deregulation in markets that remain restricted, and to ensure that deregulation applies not just to routes but to airline ownership too. The greatest opportunity for real progress lies in the Stage Two discussions between the EU and the US over a new aviation treaty. Both sides have committed to reach an agreement by the end of next year — with the possibility that the initial Stage One deal (which came into effect last spring) could be cancelled if no meaningful agreement is made. In the US, there is a new administration — and I hope that leads to a less cautious, less protectionist approach from the US negotiators. It really is “time for change” in relation to the Americans’ traditional position. We need a genuine Open Aviation Area, based on a common deregulated framework for flights within Europe, flights within the US and flights between the two. The outdated restrictions on ownership and control of airlines would be relaxed, so that EU investors could take majority stakes in US airlines, and vice versa. Liberalisation creates jobs. It creates growth and it creates opportunity. It is estimated that a transatlantic Open Aviation Area could generate more than 70,000 jobs within five years — a third of those directly within aviation. And total economic benefits worth $16 billion. We know the aviation industry, and indeed much of the world’s economy, is struggling with tough times — and is as yet uncertain as to when they will end. We know that this is a time for bold moves — for radical solutions that will not only provide a path to short-term survival, but also help to ensure sustainable success when the recovery comes. (A qualified pilot, William M. “Willie” Walsh is the Chief Executive Officer of British Airways. Known as a miracle worker for having turned the failing Aer Lingus airline, he took charge of BA in 2005. The article is part of a speech he delivered at the Indian School of Business, Hyderabad.)
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Those were happy days indeed with the Maharaja lording it over everyone else. Today, the Maharaja is a sadder man. As he looks back, it is with a sense of gloom and despair: fuel prices are down but his trusty airline is tottering and is deep in the red. Never one to abandon his cheery smile, the Maharaja waits for the government to deliver the much-needed booster shot of finances. Even so, Air India will probably never get back to those times!
MAHARAJA'S MANY FACES: The naughty diminutive Maharaja of Air India has become a world figure. He can be a lover boy in Paris, a sumo wrestler in Tokyo, a pavement artist, a Red Indian, a monk... he can effortlessly flirt with the beauties of the world. He has completed many years of service and has become the most recognisable mascot the world over. His antics, his expressions, his puns have allowed Air India to promote its services with a unique panache and an unmatched sense of subtle humour. We reproduce one of Air India’s classic advertisements to remember the good old times when the Maharaja was the emperor of the skies.
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CRASHING SKYWARDS!
AIR INDIA’S PLANS TO TURN AROUND
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e, at CRUISING HEIGHTS, had traced the valiant efforts made by Air India and its domestic cousin Indian Airlines to merge and blossom fully. True, they merged physically, but not mentally and emotionally. As for blossoming, it is anything but that. In Botany we might have called it problems encountered in tissue culture. But in the case of NACIL, its erstwhile two arms, AI and IA, continue to move in different directions. So much so that even the so-called wage settlement and arrears has become a bone of contention between the two. Notwithstanding these deep differences and apprehensions, the Government thought it should be best left to the Chairman and Managing Director Raghu Menon (he earlier handled both of them from his office in the Ministry of Civil Aviation), who has been in office for over nine months, to take the mammoth organisation (not in terms of fleet, but certainly in terms of employees who number nearly 32,000) skywards. But Menon, counting the petals muttering Hamlet-like, “To be or not to be”, has suddenly decided that it is best to forget Shakespeare and scamper to Delhi. Why else would Menon apply for the post of Chairman AERA, that in all probability may be set up before March 31, 2009 as mandated in the official gazette soon after the Pres-
ident gave assent to AERA bill passed by both houses of Parliament in October 2008? What is interesting to note is that with the implementation of the Sixth Pay Commission, it has been decided that for all central regulatory bodies like TRAI etc, the Chairman or Chairperson, as well as members, will not be allotted any government accommodation or car. They will have to meet those expenses from their salary. Last heard, TRAI Chairman Nripen Mishra was clearing his government accommodation and moving to his house in Noida. When seen in this context, the goodies one gets as Air India Chairman Managing Director are just not comparable. AI CMD not just gets first class air travel for self and family but excellent house, best hotel suites across the globe, and what not, besides of course the huge entertainment account and patronage. With Raghu Menon still having nearly 30 months to go for his IAS retirement age of 60, why did he also throw his hat in the AERA ring? Simple, just can’t do anything to Air India, unless there is drastic surgery to take a few thousand staff off its rolls and ensure continuous infusion of oxygen (read funds from the centre) to keep it from gasping. Once this is done, then perhaps, any management can think of its real business of flying! When Nambiar had visited Mumbai in January 2009 for a review meeting of Air India (both international and domestic), it is believed that a presentation was made to him which ran into nearly 72 slides. The financials of the presentation were
attached separately, as it was supposed to be only for his eyes, and the rest just got to see the slides, while the paper they were holding had only non-financial details. CH, got a post-view (as against Air Indians’ preview) of financial details, which definitely indicate that even if the Government of India were to give the much demanded Rs 4,000 crore (equity cum loan), Air India will just not be able to fly smoothly. Yes, there has to be a drastic surgery, and it cannot be done if Air India continues to be a parking place for babus or even resident Air Indians.
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Is anybody answerable? isting the woes, the presentation on `Market Overview 2008’ stated the obvious: “That 2008 was a difficult year for airlines worldwide, including Air India” as a result of fuel prices and economic slowdown globally. Besides, it said the domestic traffic showed steep decline in recent months. Though factually these are correct, there is however slight masking of comparative indicators. The fuel prices began to rise only in June 2008 and peaked in early September 2008. What happened to Air India and its domestic operations before and after that four-month period? Other international carriers like SIA, Cathay, Emirates, who love to fly into, across and out of India, did not suffer like Air India. Considering that even Air India has got brand new planes on important routes, why could it not attract passengers, and hence up its load? Air India says that all domestic full service carriers also saw migration of passengers to LCCs, which now accounted for 50 per cent of the domestic traffic. Yes, one agrees to this point, but then why is Air India’s domestic operations attracting loads much lower than either Jet-
L
JetLite or Kingfisher and Kingfisher Red? After all, many of Air India Express flights from Chennai to Mumbai and vice versa carry lot of big domestic passengers. This is also true in some other sectors. Is it because of the misfit cross-culture between Air India and erstwhile Indian? As for international traffic, Air India has blamed the continuous increase in foreign airline capacity deployed in India, of which Gulf-based carriers accounted for 70 per cent rise. (CH has already carried a detailed piece on this subject in its earlier issue). According to Air India, the passenger load factor fell from 65.6 per cent in 2006-07 to 63.8 per cent in 2007-08, while the yield fell from Rs 3.38 per RPKM (Revenue Passenger Kilometer) to Rs 3.22 per RPKM. With the acquisition of new aircraft, both Airbus and Boeing, there was steep rise in interest cost and depreciation, and consequent increase in working capital requirements. Besides the rise in fuel costs, which has been the refrain of every CEO of both AI and IA (like India always having great potential but is passing through a crisis that
What is sought to be done now is totally different. Instead of pointto-point, Air India is moving to hop, step and jump operation
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CRUISING HEIGHTS February 2009
Listing the woes, the presentation on `Market Overview 2008’ stated the obvious: “That 2008 was a difficult year for airlines worldwide, including Air India” as a result of fuel prices and economic slowdown globally. Besides, it said the domestic traffic showed steep decline in recent months. Though factually these are correct, there is however slight masking of comparative indicators. The fuel prices began to rise only in June 2008 and peaked in early September 2008. What happened to Air India and its domestic operations before and after that four-month period? Other international carriers like SIA, Cathay, Emirates, who love to fly into, across and out of India, did not suffer like Air India. Considering that even Air India has got brand new planes on important routes, why could it not attract passengers, and hence up its load? Air India says that all domestic full service carriers also saw migration of passengers to LCCs, which now accounted for 50 per cent of the domestic traffic. Yes, one agrees to this point, but then why is Air India’s domestic operations attracting loads much lower than either Jet-JetLite or Kingfisher and Kingfisher Red? After all, many of Air India Express flights from Chennai to Mumbai and vice versa carry lot of big domestic passengers. This is also true in some other sectors. Is it because of the misfit cross-culture between Air India and erstwhile Indian? As for international traffic, Air India has blamed the continuous increase in foreign airline capacity deployed in India, of which Gulf-based carriers accounted for 70 per cent rise. (CH has already carried a detailed piece on this subject in its earlier issue). According to Air India, the passenger load factor fell from 65.6 per cent in 200607 to 63.8 per cent in 2007-08, while the yield fell from Rs 3.38 per RPKM (Revenue Passenger Kilometer) to Rs 3.22 per RPKM. With the acquisition of new aircraft, both Airbus and Boeing, there was steep rise in interest cost and depreciation, and consequent increase in working capital requirements. Besides the rise in fuel costs, which has been the refrain of every CEO of both AI and IA (like India always having great potential but is passing through a crisis that persents a full exploitation of this potential!), the new combine, NACIL, also had to incur higher costs on account of new wage agreements with the unions. All these factors resulted in Air India posting a loss of Rs 2,226 crore in 2007-08, as compared to a projected loss of Rs 2,144 crore and a loss of Rs 688 crore in 2006-07. With 2007-08 ending on such a serious note, any hope of even a modest turnaround in the current fiscal 2008-09 (which is
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already 10 months past now) remains bleak, as already evident from the ‘Market Overview of 2008’, and the outlook which Air India has projected for 2009. The outlook says the market growth is expected to be sluggish, both for domestic and international operations, and the year 2009 may turn out to be the worst ever year in aviation history. True to prediction, fares and yields have begun to decline further. But can we have it both ways? When fuel prices went up, fares were hiked, sending passengers away. Fuel prices are now down, and so are the fares, but yields have shrunk. But this is what typically happens in a market faced with competition. It is true that these are extraordinary times, with a global recession melting on its way. But in the case of Air India, it gives an impression that it was always facing a global meltdown and was always in the melting pot. When there was no competition (either domestic or international), Air India used to make a profit of Rs one crore per day in 1991-92. Today, Air India, in its new avatar combined with Indian, is making a loss of Rs six crore a day. It will be wrong to blame the current management for the ills. It has been a long, continuous and collective failure of the airlines now merged. The response has been as it was in the past. Major loss-making flights have already been curtailed, and capacities deployed on both domestic and international networks have been cut. Not surprisingly, in the heading ‘Market Outlook for 2009’, Air India has not only blamed Gulf airlines’ continued expansion or relentless expansion for its problems, but also the entry this time of Kingfisher Airlines in the BenagluruLondon sector. There has also been unprecedented fare volatility, virtually on a daily basis. Against this, Air India had budgeted a loss of Rs 2,156 crore in 2008-09. But in all probability, it is likely to be much higher as per admission by its Management to the Civil Aviation Secretary. Whether it would cross Rs 3,000 crore is anybody’s guess, but not Air Indians, who feel that at least this revised loss target could well be within the reach of Air India. The factors stated as being responsible for this sorry state include increase in annual fuel bill from Rs 6,712 crore to Rs 7,564 crore. But what is not known is that even though the fuel prices did rise for four months, they have fallen so sharply that they are now below what they were, say, three years ago. Maybe Air India has other explanations which others do not know. However, the major blow to Air India comes from the financial side. The cost of borrowings for Air India, like others, has
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persents a full exploitation of this potential!), the new combine, NACIL, also had to incur higher costs on account of new wage agreements with the unions. All these factors resulted in Air India posting a loss of Rs 2,226 crore in 2007-08, as compared to a projected loss of Rs 2,144 crore and a loss of Rs 688 crore in 2006-07. With 2007-08 ending on such a serious note, any hope of even a modest turnaround in the current fiscal 2008-09 (which is already 10 months past now) remains bleak, as already evident from the ‘Market Overview of 2008’, and the outlook which Air India has projected for 2009. The outlook says the market growth is expected to be sluggish, both for domestic and international operations, and the year 2009 may turn out to be the worst ever year in aviation history. True to prediction, fares and yields have begun to decline further. But can we have it both ways? When fuel prices went up, fares were hiked, sending passengers away. Fuel prices are now down, and so are the fares, but yields have shrunk. But this is what typically happens in a market faced with competition. It is true that these are extraordinary times, with a global recession melting on its way. But in the case of Air India, it gives an impression that it was always facing a global meltdown and was always in the melting pot. When there was no competition (either domestic or international), Air India used to make a profit of Rs one crore per day in 1991-92. Today, Air India, in its new avatar combined with Indian, is making a loss of Rs six crore a day. It will be wrong to blame the current management for the ills. It has been a long, continuous and collective failure of the airlines now merged. The response has been as it was in the past. Major loss-making flights have already been curtailed, and capacities deployed on both domestic and international networks have been cut. Not surprisingly, in the heading ‘Mar-
ket Outlook for 2009’, Air India has not only blamed Gulf airlines’ continued expansion or relentless expansion for its problems, but also the entry this time of Kingfisher Airlines in the BenagluruLondon sector. There has also been unprecedented fare volatility, virtually on a daily basis. Against this, Air India had budgeted a loss of Rs 2,156 crore in 2008-09. But in all probability, it is likely to be much higher as per admission by its Management to the Civil Aviation Secretary. Whether it would cross Rs 3,000 crore is anybody’s guess, but not Air Indians, who feel that at least this revised loss target could well be within the reach of Air India. The factors stated as being responsible for this sorry state include increase in annual fuel bill from Rs 6,712 crore to Rs 7,564 crore. Against this, Air India had budgeted a loss of Rs 2,156 crore in 2008-09. But in all probability, it is likely to be much higher as per admission by its Management to the Civil Aviation Secretary. Whether it would cross Rs 3,000 crore is anybody’s guess, but not Air Indians, who feel that at least this revised loss target could well be within the reach of Air India. The factors stated as being responsible for this sorry state include increase in annual fuel bill from Rs 6,712 crore to Rs 7,564 crore. would cross Rs 3,000 crore is anybody’s guess, but not Air Indians, who feel that at least this revised loss target could well be within the reach of Air India. The factors stated as being responsible for this sorry state include increase in annual fuel bill from Rs 6,712 crore to Rs 7,564 crore. would cross Rs 3,000 crore is anybody’s guess, but not Air Indians, who feel that at least this revised loss target would cross Rs 3,000 crore is anybody’s guess, but not Air Indians, who could well be within the reach of Air India. The factors stated as being responsible for this sorry state include increase in annual fuel bill from Rs 6,712 crore to Rs 7,564 crore.
What is sought to be done now is totally different. Instead of pointto-point, Air India is moving to hop, step and jump operation
CRUISING HEIGHTS February 2009
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M Madhavan Nambiar
Praful Patel
gone up sharply following the: (i) liquidity crisis across the globe on account of global meltdown; (ii) rise in interest rates on rupee loans for working capital loan to as much as 14 to 16 per cent; (iii) steep increase in spreads over LIBOR in respect of foreign currency loans and (iv) invocation of market disruption clause in respect of certain aircraft loan, thereby hiking borrowing costs. The depreciating rupee has also had its impact. This is because aircraft loan balance will be converted at prevailing exchange rate at the end of the financial year, resulting in foreign exchange transaction loss. The fourth factor that will also play a role in increasing losses for 2008-09 is the falling load factor. The decline has followed global economic slowdown, inflationary trends and heightened issues of security. Revenue generation is also under severe strain due to the presence of LCCs in all markets. So, Air India itself now admits that competition is killing it. Or else why would the presentation state that revenue generation is also under severe strain due to the presence of LCCs in all markets. Earlier, the usual refrain of Air India and Indian was their old fleet, and hence a bad product. Now they have new fleet on important routes, on which again they are not getting loads. But this time round, the blame is on competition from LCCs. Perhaps the only solace Air India can take is from the dire state the other two full service carriers, Jet Airways and Kingfisher, are in. But they, despite all the crises, are still managing to attract more passengers than Air India, at least in their domestic leg. If Air India were to state that both Jet and Kingfisher are also helped by their respective low cost carriers — Jetlite and Kingfisher Red, then is it not time to convert Air India’s domestic arm (former Indian) into an LCC? But this cannot be done because of the huge workforce which we mentioned before. It was earlier taught that with rising fleet, the workforce will get rationalised.
But instead, the rising wages, allowances and arrears, besides the sheer number of employees, have ‘irrationalised’ the fleet, if we could use that expression. All this has forced NACIL, to use the name appropriately, now to increase its working capital borrowings. At the end of March 2006 (before merger) Indian working capital borrowings were Rs 313 crore against Air India’s Rs 2,056 crore. At the end of March 2007, these were Rs 684 crore and Rs 3,686 crore. At the end of November 2007, when merger process was on, they were Rs 1,100 crore and Rs 5,450 crore. If we take the total figures for the two airlines together as NACIL, even before it was set up, the working capital borrowings were Rs 2,369 crore, Rs 4,370 crores and Rs 6,550 crore, respectively. Once merged, the working capital requirement scaled to Rs 9,550 crore on June 30, 2008 and reached Rs 12,489 crore as on January 11, 2009. Air India’s problems are twofold — one, it is not getting the right load and revenue-paying passengers to support its fleet acquisition; and second, it is unable to beat the LCC-driven competition at home and Gulf carriers-driven competition overseas. Sadly, it has no control over both. Seen in this context, the already borrowed working
It remains to be seen if Air India breaks even, or its very back is broken by adverse competitive circumstances CRUISING HEIGHTS February 2009
Raghu Menon
capital loan of Rs 12,489 crores, against the NACIL Board sanctioned limit of Rs 13,550 crore, clearly shows how serious is the trouble that Air India is in. On top of all this, it has to make provision for depreciation on all the newly acquired wide-bodied and narrow-bodied planes. In a way, even the acquisition of new aircraft, absence of which was always blamed for its serious state, has actually now become the albatross round the NACIL neck. The number of passengers carried by NACIL during the first half of the current fiscal (April-September 200809) was 53,42,432, as compared to 75,15,214 in April-September 2007-08. Contrast this sharply with the likes of Jet Airways, which has done sale and leaseback of one A330-200 and is about to do another. Besides, it earlier wet-leased two A330s to Oman Air and dry-leased three B777-300 ERs to Turkish Airlines. Now, Jet wants to get back its A330s and lease four more B777s to Oman Air. It has done all this so fast that it managed to earn money even while being in the process of taking a decision. Can we ever expect something like this in a sarkari company like Air India, where fleet acquisition takes a decade and even giving an order and actual signing of a contract for the much-delayed PRS (Passenger Reservation System) has taken more than 18 months? Therefore, “if time cannot stand still then we will’, say those behind Air India. So what one does naturally is also sought to be done in Air India — Cut Costs! Now another installment of cost cut has been announced, but has encountered resistance from the unions. The latter say they will come out with their own cost cutting schedule, which will be resisted this time by the non-unionised officer class of employees. In announcing his new cost cutting, Raghu Menon said “a number of measures have been initiated by the industry at large
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ROYAL SERVICE: Air India carbin crew serving passengers on a long-haul flight
to cut costs and enhance revenue, including pay cuts and retrenchment of staff. While NACIL will not be doing these, it is extremely important that costs are further curtailed and revenue enhanced, so that the company is able to achieve break-even at an early stage.” It remains to be seen if Air India breaks even, or its very back is broken by adverse competitive circumstances. Among other responses, Air India is trying to renegotiate hotel contracts, redeploy capacity in line with load factor, review the Productivity Linked Incentive (PLI) for its staff at overseas destinations, undertake rationalisation of various offline offices, besides posting of managers, customer-relation managers and airport managers in and outside India. While Jet may have postponed its misery by leasing out its brand new aircraft, Air India does not know what to do. Air India CMD had earlier announced that it will receive 23 new Airbus aircraft in the next 12 months, which will be deployed on the domestic sectors. What can be said, except that if the proof of the pudding is in the eating, then the proof of the new aircraft is in filling it by Air Indians? But this proof will be difficult to get and establish, as one of Air India’s primary tools in having a common passenger reservation system is still a far cry. Air India had always been using the UNISYS PLATFORM for its reservations, while Indian had been using IBM. Last year, Air India formally joined Star Alliance and also paid the requisite fee. But for Star Alliance benefit to accrue to Air India it was necessary that India’s flag carrier had a common reservation platform for both its domestic and international operations. In anticipation of this, nearly two years ago Air India got into the process and subsequently called for bids, and finally zeroed in on EDS to support its Passenger Service System (PSS). The entire evaluation and verification process of different bidders took more than a year, and even after selecting EDS,
the actual signing of the contract has taken more than 12 months. As a result, Air India will not be able to get any benefit out of its Star Alliance, and alternatively Star Alliance has also taken serious note of this inordinate delay. It is rumoured that there were some outside Air India who had arranged this arrangement. And all this took time, and revenue which could have been earned was lost. At present, Air India flies under AI numbers and Indian under IC. Unless it all becomes AI, no member of Star Alliance will want to confuse its passenger user. Air India says this will now happen in the first quarter of 2010. Meanwhile, the same Jet Airways which quickly acted to lease its planes in order to save some money, and also earn some money, is running very fast to close a deal with Star Alliance. Air India used to say, like other members, that one cannot become a member of Star Alliance unless invited. With the power to extend invitation vested in the CEOs of airline members of Star, what can Air India do should Jet get the invite, what with its already ready state-of-the-art reservation system integrating both its domestic and international operations. Air India thought it will be able to earn revenue of Rs 300 crore to Rs 500 crore through code shares, FFP arrangement etc.
What is sought to be done now is totally different. Instead of pointto-point, Air India is moving to hop, step and jump operation CRUISING HEIGHTS February 2009
This prospect has dimmed after EDS informed Air India that it will take an additional one year to put in place the new PSS. After all, it has to completely eliminate two systems and then replace the same by one integrated system, instead of just replacing one by another. If Air India now tries to get the other bidder Amadeus, which lost out to EDS, it will mean again re-tendering, and another two years before a new PSS can be in place. By then, Jet, should it get into Star Alliance, reap at least Rs 700 crore through a similar code share and FFP. This could become yet another topic for the CVC, CBI etc, which are “well-known swear words” in both Air India building in Nariman Point and Airlines House in New Delhi. So why manage an airline which has so many unguided missiles, and get hit? Meanwhile, Air India is thanking its star (a different Star) for not receiving the Boeing 787 Dreamliner, whose deliveries are delayed because of various problems, including the machinist strike at Boeing’s factory for nearly 50 days in 2007. It is happy because it will get compensation for not getting the aircraft on time. Rather, for the first time, Air India will get revenue despite zero loads. Even Kingfisher and some other customers got it when Airbus delayed the delivery of A380s. Imagine what Air India would have done had it got even the Dreamliners, which as per its former CEO V Thulasi Das, was to be used for point-to-point connection from six cities in India to Europe and the US. Perhaps Air India could have used the delayed time to develop some of these markets out of India. What is sought to be done now is totally different. Instead of point-to-point, Air India is moving to hop, step and jump operation. If the Maharaja’s wish is to wear new clothes, who can help the emperor? After a brief tryst with scissors operation in the past, which only delivered losses, Air India is once again embarking on a similar ‘mission impossible’. Beginning March
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COVER STORY 26, 2009, Air India will commence its long-awaited scissors operation over Frankfurt. It will be the Delhi-FrankfurtChicago daily. While this sounds okay, the next one is going to be a question mark, or something like a hunch-back-maharaja. Air India will fly daily Ahmedabad-Mumbai-Frankfurt-Newark. Now why would anyone from Ahmedabad take a flight to Mumbai and then to Frankfurt, and then onwards to Newark in the US, a little away from JFK in New York? Some years ago, Air India used an A310 which took off from Chennai and landed in Delhi and then flew to Kuwait. This meant passengers leaving their homes in Chennai or undertaking overnight journey from various districts, arriving in Chennai, reaching airport two and a half hours before departure, then taking the flight to Delhi and again waiting and then flying to Kuwait. Today they can fly direct. So one really does not get the new logic. From winter 2009, Air India plans to fly Ahmedabad-Frankfurt direct non-stop. Obviously, it has to be non-stop. It has got to be so even in the March ‘09 schedule, otherwise you will not know if you are developing Mumbai-Frankfurt or Ahmedabad-Frankfurt via London. Air India knows better, as it has withdrawn routes introduced with much fanfare earlier, for example Los Angeles, Dar-ESalam, and Seoul. Further, Air India also proposes to launch Amritsar-FrankfurtToronto flights from winter of 2009. In the coming summer of 2009, Air India is planning its long-haul flights from Delhi to SFO from August 09, and increasing the Amritsar-London-Toronto frequency from three flights to six flights a week. Air India headquarters in Mumbai
Then it is resuming its Mumbai-London terminator, except that this time it will be a “well-timed daily terminator”, after getting feeds from Southern Indian points. But why should a Madrasi, Telugu, Kannadiga or Mallu fly all the way to Mumbai to fly to London? He can either take a BA or Emirates from Hyderabad, or BA/Emirates from Chennai, or fly Cathay or BA or Kingfisher from Bengaluru to London, and all types of Gulf carriers including Emirates to not only fly to London but entire Europe and the US. So who does Air India want to compete? To support its long-haul plans, Air India, which already has five Boeing 777300 ERs is getting three such aircraft types in June, July and August 2009. Besides five Boeing 777-200 LRs it has for India-US direct non-stop flights, Air India is getting one more 777 LR in July, two in August and one in September of 2009 respectively. One old leased Boeing 777-200 will be returned in September 2009. According to Air India, the seat factor during October-December 2008 for Delhi-JFK-Delhi was 75 per cent and Bom-JFK-Bom 56 per cent. So where will Air India deploy its 777-LRs, other than Delhi-SFO, once Mumbai goes back to one-stop travel? As we see here, while Jet Airways is trying to rationalise its fleet deployment, including by leasing out for short terms, Air India is deploying more and more, but failing to get passengers, as evident from the falling number of passengers indicated earlier. Air India now wants to make Frankfurt its hub for outbound connections. How it proposes to compete with the Germans is not known. But it is true that Frankfurt is a far more efficient airport than Heathrow, which also has serious slot problems for Air India, though Mallyas and Naresh Goyals managed to get what they wanted. The only silver lining in an otherwise financial scary scenario is Air India Express, which has done fairly well and has now begun connecting Thiruvananthapuram with Kuwait. It connects over 11 foreign destinations and is also making profits. But these are completely absorbed by huge losses made by the parent company. Apparently, a Board note has been moved to suggest that Air India Express should renew its lease for the eight Boeing 737-800s for a period of another 5 or 10 years. These aircraft came in June 2006 and are up for renewal only in June 2010. Perhaps Air India wants to take advantage of the low lease rentals. Now back to Air India’s financials. As stated earlier, out of the Board sanctioned limit of Rs CRUISING HEIGHTS February 2009
13,550 crore for working capital loans, Air India has utilised Rs 12,489 crore and it also has unpaid invoices of around Rs 1,330 crore. Its fuel bills that are outstanding but not due stand at Rs 1,075 crore as of January 1, 2009. Air India has disputed the interest being charged by oil companies and oil credit will end on March 31, 2009. Additionally, the anticipated fuel bills for January-March 2009, the fourth and last quarter of fiscal 2008-09, will be approximately Rs 600 crore. This will put further pressure on the working capital requirement and increase the gap further. Meanwhile, banks have shown their unwillingness to lend due to the liquidity crunch. They say their Single Company Exposure Limit has been reached. Besides, Unsecured Loan Limit has also been reached. ICRA has not yet completed the credit rating of Air India, which should have been done earlier, or perhaps ICRA was unable to do it as, all along, Air India continued to be in a rather dynamic mode. Since Air India is not a credited rate company, it is now required to maintain higher capital adequacy ratio by banks and consequentially, higher lending costs. In view of its dire financial situation, banks have asked for Comfort Letter from the Government of India, which owns Air India, as also the PSU Banks. Should the government give it, then borrowing costs would be lower and improve Air India’s grade to at least Investment Grade. Air India has already requested Government for this support. Air India is currently borrowing / has borrowed from 17 nationalised and private banks. Since banks have refused to roll over the loans, it has led to much higher cost and distress borrowing. So, Air India is again singing the tune and has asked the Government to expedite the soft loan of Rs 2,750 crore and equity infusion of Rs 1,250 crore. This request has been pending for more than a year. But now it has reached a collapsing point. Air India needs this support to shore up its slender equity base of Rs 145 crore, which is supposedly supporting the borrowing for aircraft acquisition worth Rs 44,000 crore. Unless early action is taken, Air India will not be able to infuse confidence among institutional lenders to support its aircraft acquisition programme. Not only losses will mount, but soon, Air India will have no money to pay wages, lease commitments and aircraft loans. All we want to know where is Accenture, which supposedly recommended the merger plan of Air India and Indian? It was supposed to do hand-holding operations for a year after the merger. Who is holding whose hands is what people n would like to know.
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INTERVIEW
“ I SHALL CONTINUE TO STRIVE FOR
HIGH STANDARDS Despite the difficult times that the aviation sector is going through, Vijai Prakash Agrawal, the new chairman of the Airports Authority of India (AAI), is confident of delivering the best, to the airlines, the employees, the air travellers and all other stakeholders in the industry. In his first interview since taking over AAI, he shares his vision for the Authority.
Q
: You have taken over as Chairman at a very important time in the history of AAI. Could you broadly outline your agenda for the next five years and your priorities? : Civil aviation, world over, is passing through a turbulent phase. We in India have also faced the impact on aviation due to the economic slowdown that the world is currently passing through. So, it is definitely an important time-period for Civil Aviation and AAI. My main priorities, therefore, would be: To ensure that infrastructure developmental projects, initiated by AAI, continue without facing any financial crunch. To look for enhancement of cash flow from untapped sources, like city side development, ground handling etc. To make airports user-friendly so as to infuse confidence in the travelling public. To ensure the highest level of security and safety for all air travellers. To develop fuel-efficient and seamless air-routes, taking into account the satellite-based technology in a time-bound programme, finalised in consultation with ICAO.
A
“
Development of airport infrastructure through Public Private Partnership (PPP) route is the need of the hour
“
38
The Public Private Partnership or the PPP route has become a bone of contention, with many in the Airports Authority having deep reservations about it. What is your own take on it? Development of airport infrastructure through Public Private Partnership (PPP) route is the need of the hour. We have taken this route for a few selected airports. The infusion of funds from private sources will result in maintaining the robust growth which has been planned for future. This route or path of development through PPP is not unique to airports; it is being adopted for development in other sectors also. Some issues are bound to come up when a new or different concept is tried, and our challenge is to address those issues or concerns and continue with what is best for the country. You come to the helm after wide and varied experience across the country. How do you hope to motivate the work-force that seems to have lost its enthusiasm of late? AAI has been awarded the ‘Miniratna’ status recently. It has been due to the sincere and hard work put in by AAI’s employees. I intend to pay special attention to ensure that all the employees remain motivated and continue to contribute to achieve the laiddown organisational goals. I intend to have regular dialogue with my collegues, employees
CRUISING HEIGHTS February 2009
and their unions/associations to address their concerns and alleviate their grievances, with a view to encouraging them to do their best for AAI. The modernisation of the nonmetro airports is another key driver for the AAI. Could you outline your plans in this regard? The restructuring of Delhi and Mumbai airports and the Greenfield airports at Hyderabad and Bengaluru under the Public Private Partnership (PPP) model has already been completed. These airports are operational. CNS/ATM facilities at these airports are provided by AAI. The Government of India has already conveyed in-principle approval for constructing Greenfield airports at Mopa in Goa, Navi Mumbai International Airport in Maharashtra, Kannur in Kerala, Bijapur, Simoga, Hassan and Gulbarga in Karnataka, Sindhudurg in Maharashtra, Dabra in Madhya Pradesh and Durgapur in West Bengal. In addition, the following two airports are being developed in 90:10 funding in NER: 1) Pakyong (Sikkim) 2) Itanagar (Arunachal Pradesh) You are in the process of putting together a modern airport in Sikkim. Could you please tell us your plans to open the vast hinterland to air traffic? A new airport at Pakyong in Sikkim is being developed at a
”
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“
Photo: H.C. Tiwari
I intend to pay special attention to ensure that all the employees remain motivated
“
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INTERVIEW cost of Rs. 358.36 crores. As mentioned earlier, plans are afoot to develop new airports at Kannur in Kerala, Bijapur, Hassan, Gulbarga and Simoga in Karnataka, Sindhugarh in Maharashtra, Dabra in Madhya Pradesh and Durgapur in West Bengal. AAI has also taken the initiative to examine the feasibility of 32 non-operational airstrips/airfields located in various states, all over India. Action plan will be formulated once the initial study is completed. These airports are Akola, Asansol, Balurghat, Behala, Bilaspur, Chakulia, Cuddapah, Deesa, Dona Konda, Hadapasar, Hassan, Jhansi, Jharsuguda, Jogbani, Kailashahar, Kamalpur, Khandwa, Khowai, Lalitpur, Maldah, Muzaffarpur, Mysore, Panna, Passighat, Raxaul, Rupsi, Satna, Shella, Sholapur, Turial (Aizwal), Vellore, Warangal.
“
In the last two months, the modernisation of Chennai and Kolkata has been formalised. Usually, projects of this nature see cost overrun and delays. How do you hope to keep things in control? AAI has taken up the development of Chennai and Kolkata airports with full vigour. Dedicated project implementation teams, headed by senior level officers with adequate powers, have been put in place. Turnkey contracts to take up all Civil, Electrical, Mechanical works have been awarded through global tendering. Regular monitoring at Corporate HQ will ensure that no time delays and cost overruns take place.
“
The Airports Authority has a role that straddles many sectors. You have to have good relations with the Ministry of Civil Aviation, with the private players, with infrastructure giants, airlines, and balance the needs of all these players. Isn’t it a tough task? Civil Aviation is a multi-task and multi-organisation sector. Each organisation has its own area of responsibilities and duties. AAI has excellent relations with the Ministry of Civil Aviation, DGCA and other government organisations. These relations
AAI has excellent relations with the Ministry of Civil Aviation, DGCA and other government organisations
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have been nurtured over the years. There are no contradictions in either the thoughtprocesses or the functioning. Airlines are key players and are our partners in functioning; we complement each other at every level as all of us recognise the needs of air travellers and appreciate the working ethos of each other. Other private companies in infrastructure, construction and service sectors have also their tasks cut out, and regular interaction, both formal and informal, helps in smooth functioning for everyone. What are your thoughts on AERA? How will it impinge on the performance of the Airports Authority? There is a general feeling that Airports Authority airports are more expensive than those of the private sector. Would you agree with this view? The proposed AERA is a regulatory authority, based on the key principle of economic regulation
in the country, resulting in costeffective services to air travellers. There have also been plenty of opinions about the role of the ATC, as to whether it should be hived off or should it be part of AAI. It now seems that ATC will function under the AAI. How do you hope to beef up its operations? ATC is an integral part of AAI. One of main roles of AAI is to provide air traffic services over the entire Indian airspace, measuring 2.8 million sq. nautical miles. I will ensure continuance of upgradation of ATC services through proper training and by providing all necessary state-ofthe-art and latest technical equipment and infrastructure. Finally, are you confident that you have the manpower and the innovative skills to take on the likes of GVK and GMR? AAI manages 124 airports and civil enclaves in the country and, in addition, provides CNS/ATM
Dibrugarh Airport
along with setting up of performance standards. AAI welcomes AERA, as its main objective is to provide a level playing field. The various charges and fees which private airport operators can levy can be regulated to bring parity with AAI airports. AAI airports are, in fact, least expensive as they do not levy any User Development Fee (UDF) or separate charges for providing facilities like baggage trolley, PBB etc. AAI therefore feels assured that in the future, AERA will be able to regulate the fees/charges for various airports
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services at all the civil airports. We have the necessary resources, in the form of trained and experienced technical manpower and the latest equipment and technology to carry out the role assigned to us. I am quite confident that, in a conducive environment, all my team members will provide a very strong and stable platform for Civil Aviation to progress and prosper in the country. AAI will continue to strive to achieve the highest standards in safety and quality in air traffic services and airport management for total cus tomer satisfaction.
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IN THE NEWS
Truly global. That’s what the India-born Ram Charan is. He lives nowhere and goes everywhere, consulting for the largest and most powerful companies seven days a week, 365 days a year. Low profile to the point of invisibility, Ram Charan will be heard about a lot more — he will be helping Capt Gopinath in the cargo and logistics venture — in the coming few months. Tirthankar Ghosh profiles the man.
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normal fortnight would go something like this: “I go to India on Friday…I am Sunday morning in Mumbai. Monday morning I am in Delhi. Wednesday I’m in Mumbai. Thursday I’m in Bengaluru. Saturday I’m in Thiruvananthapuram. Wednesday I’m in Johannesburg. Friday morning, at seven, I am in New York. I have a two-hour meeting with a CEO who has flown in to see me. I have two more meetings and I fly out that night to Dubai. I am in Dubai on CRUISING HEIGHTS February 2009
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IN THE NEWS Sunday and Monday, then I come back here (to Dubai). On Thursday night, I fly out to Jubail, Saudi Arabia. Then I come back here. Tuesday morning I have a whole-day schedule in New York. Tuesday night I go to Milwaukee. I came from Milwaukee (to Dubai) last night. They diverted my plane so I had to stay in Pittsburgh. I had a meeting this morning in Philadelphia. I had three meetings here in the afternoon. And I’m here tomorrow, with GE. Then an hourand-a-half phone call. Then I’m going out tomorrow night to West Palm Beach. Monday morning I have a breakfast meeting in New York. And then I’m flying out to Perth, Australia.” Who is this man? Restless as ever, he flits about between cities and continents seven days a week, 365 days a year, as if he was moving from one section of a city to another in the metro. He isn’t a high-flying CEO of a multinational corporation. He is Ram Charan — yes, the person who heads the team of advisors with Capt G R Gopinath’s latest enterprise, Deccan Express Logistics — talking to Fortune magazine almost two years ago. The man has not stopped zipping in and out of airports and cities, even after a triple-bypass heart surgery in 1999. Apparently, after the operation, he took it easy for around two weeks and then went back to his old routine. For almost the whole working world, this kind of “living-out-ofa-suitcase” life would be a veritable hell. But not so with Ram Charan. He told a reporter, “This is all vacation for me…If you love your job, this is the juice of life.” Simply put, Ram Charan advises — and he is paid a pretty sum; it is rumoured that the figure is somewhere near $20,000 per day —- some of the largest and most powerful companies around the world. All he does for them is pry into a complex problem and bring out the answers. Perhaps, what is most important is, to quote one of his few profilers, that Ram Charan is not like many consultants, “who, as the old joke goes, will borrow your watch to tell you what time it is: he doesn’t reinforce his clients’ preconceived notions.” Ram Charan has been in touch with India and India-based companies, but his link with Deccan Express and its founder, who is regarded as the man who helped the common man realise his dream of flying, is Ram Charan’s way of getting back to his roots and helping the country move forward. Very little is known about Ram Charan, and the man himself does not like to speak about his past or his family. However, what is known is that he was born in 1939 in a small town in UP. His was a typically large Indian joint family. The sixth of seven children, Ram
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Charan’s father and uncle owned a shoe shop. He worked hard, cutting fodder for the cows that the family had, making cowdung cakes for his mother’s chulha and studying. A keen student and one who absorbed everything, Ram Charan studied in the flickering light of a mustard oil lamp. He also helped his father run the shop, and to this day remembers that he counted the money that came in at the end of the day’s business with regularity every day. That habit stands him in good stead whenever he does his consultations. Any company he goes to, the first thing he does is count the cash or the “blood”, as he likes to call it, of business. If there isn’t much, he says, “Where’s your cash flow? No blood, you got a problem right away.” At the same time, Ram Charan perfected his own art of condensing whatever he had learnt in school that day in each subject on one sheet of paper. His dedication and mastery brought out the best. Today, he uses these one page summaries for his clients. The small-town boy was sent to the Banaras Hindu University, at the insistence of his teachers, to become an engineer. Unable to be at ease with other students who were not only two years older than him but also from rich families and spoke better English, the young boy immersed himself in his studies and got the third rank in his class.
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Some of Ram Charan’s bestselling works
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From Banaras, the young man travelled to Australia to work in an exchange programme. The money he spent for his air ticket came from his grandmother who had to pawn her jewellery. Ram Charan paid it all back within a year. And it was while applying for a passport that the name Ram Charan was born. At the passport office, he did not know what to put as his last name since he was used to only mentioning Ramcharan whenever anyone asked him his name. On the application form, he split the name into two: Ram and Charan. From Australia, he moved to the US and the Harvard Business School, where he was awarded an MBA (1965) and a doctorate (1967). Before becoming a full-time consultant in 1978, he taught at the Harvard Business School, the Kellogg School of Management, and Boston University. However, it is at his work in Sydney that he gave his first advice — Jack Welch later such advice would make him one of the world’s most soughtafter and knowledgeable consultants. An Australian boss at the company he worked for called Ram Charan to his office and asked him if he had any questions about the organisation. Ram Charan said that he had been looking at the company’s financial statements in his spare time and had come to the conclusion that the company had been borrowing money to pay dividends. The boss did not think it was true but, after checking up with the finance department, found that the young Indian was right. Ram Charan instantly became one of the boss’s trusted employees. At Harvard Business School, MBA students had to read three case studies a day, six days a week. While others pooled together to study and later share notes, Ram Charan went his own way and read up the mandatory three case studies on his own and made the single-sheet summaries for himself. He was driven by the belief that if he learnt something, he would succeed. At around the same time, Ram Charan worked in summer for a gas company in Honolulu. There too, he found a problem with the dividend, and this time his boss asked him to solve it. He did, six weeks later, when he told his boss that the pressures in the gas pipes between 10 in the night and 4 in the morning were too high. Further, he had also noticed that the man in charge of production had not been talking to the man in charge of distribution; hence the leakage. Once all these were corrected, the company
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would be able to make the dividend. That was the ideal consultant speaking: he had combined his financial skills, his engineering knowledge and his understanding about inter-personal relationships to solve a problem. Ram Charan believes that it was in Honolulu that the real consultant was born. After Harvard, he became a teacher and got the `best teacher’ award at Northwestern University. But he was not cut out for research that most top-level universities excel in. He was more into cause and effect, always asking questions like: How can I help this company or this person? Within a short time, he decided that consultancy was what he had been made for, and gave up everything else. He got an office in Dallas and still keeps it, though never visits it. Since those early days, Ram Charan has consulted for many well-known comIvan Seidenberg panies such as GE, KLM, and Bank of America. Among his friends are CEOs like GE’s Jack Welch, Richard Harrington of Thomson Corp., Verizon’s Ivan Seidenberg and Citicorp’s John Reed. And he has also written a number of popular books on business among which are bestsellers, Boards That Deliver, What The CEO Wants You To Know, Boards At Work, Every Business Is A Growth Business (with Noel Tichy), Profitable Growth Is Everyone’s Business, Confronting Reality, KnowHow and Execution (with Larry Bossidy and Charles Burck), etc. He has no home — though he recently bought one — and no family. That, perhaps, makes him a workaholic of the first order. Always on the move, his assistants at his Dallas office send him freshly washed clothes, shoes and undergarments by courier every week. On his part, Ram Charan sends his dirty laundry every week to them from whichever part of the world he is in. His monk-like existence is only broken now and then when he listens to Lata Mangeshkar’s classics —- and that too never from an iPod. The Fortune magazine correspondent — perhaps the only one to have accompanied Ram Charan on his travels and consultancy sessions — suggested that he get an iPod. A visibly upset Ram Charan told him: “No, I don’t do that, I couldn’t do it. Would just distract me. Music can make you very sentimental. Couldn’t do it.” Steadfast in his belief of “purpose before self”, Ram Charan insists that he has no ambition. “My dedication is going to take me where I’m going to be,” he told the correspondent.
Hallowed Company
John Reed
Richard Harrington
Since those early days, Ram Charan has consulted for many well-known companies such as GE, KLM, and Bank of America
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GUEST COLUMN
Urgent need to review aircargo industry Keshav Tanna
The Indian aircargo industry is in urgent need for an overhaul to enable it to tackle the challenges it faces in the current economic scenario. The ACAAI has made several recommendations to the Ministry of Civil Aviation in this regard.
T
The five major airports account for about 90 per cent of the total cargo handled in the country, with the Mumbai airport garnering the lion’s share 44
he aircargo industry in India has grown significantly in recent years due to increased liberalisation and enhanced competitiveness of many segments of the Indian industry. The previous couple of years witnessed general buoyancy in India’s international trade. In contrast, the current scenario, in the backdrop of the global recession, is quite bleak. The government, in consultation with the industry, is constantly reviewing the need for further liberalisation of the economy and taking steps towards globalisation of trade. The growth in the economy, generally, has resulted in the growth of both exports and imports, which has, in turn, manifested itself in substantial growth in all sectors of the economy, be they Information Technology, Manufacturing or the Services sector of foreign trade. The aircargo industry is expected to play an active role in India’s export and imports. The five major airports account for about 90 per cent of the total cargo handled in the country, with the Mumbai airport garnering the lion’s share. International cargo handled has grown at 6.8 per cent per annum, while domestic cargo has grown at 9.9 per cent per annum. Quite clearly, airfreight cargo has grown manifold. And to keep pace with this growth, infrastructure facilities at many airports have to be improved; connectivity needs to be increased with the entry of many low-cost carriers and faster economic growth. With the open sky policy, and about 100 airports functional in the country, the development and growth of a number of export promotion zones, as well as better infrastructural facilities, will be needed to facilitate economic growth and provide further impetus for the growth of the aircargo industry. The Air Cargo Agents Association of India (ACAAI) has made recommendations to the Ministry of Civil Aviation as regards infrastructure development. The Association has suggested that there is an urgent need for an review. In addition, it feels there should be a vision at the local level for overall effectiveness of the airports, and a detailed look should be taken at the overall transaction, cost and time that the customer bears. READY TO TAKE OFF: The Indian aircargo industry is in for an overhaul on the basis of the recommendations made by ACAAI.
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Regulatory functions should be implemented in tune with trade needs. At the same time, national and local fora/interactions may periodically review the effectiveness of discussions and action. Improved interface is needed between various parties at airports, like handing over responsibility, liability, accountability, etc. There is also a huge gap between proposals, approvals and implementation for infrastructure, procedures, and especially systems. Today, for example, outdated technologies, such as bar coding, continue to be under implementation. There is a need for new EDI Systems that can take care of non-availability of cargo (haphazard holding, stacking, etc). Such factors need to be effectively tackled. There is also a need to focus on commodities/types of cargo imported and exported, heavy and odd-sized cargo, valuable cargo, hazardous/dangerous goods and, of course, inadequate facilities, especially at Mumbai.
Bonded terminals for aircargo agents The freight forwarding community has been demanding off-airport facility for every international gateway airport. That will ease airport congestion, improve capacity utilisation and bring about
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greater efficiency in operations. Any aircargo complex should serve through-traffic of unitised cargo, and aiding it should be agents’ bonded terminals (part of the Cargo Village concept), mirroring the idea of off-dock ICDs and CFSs serving the ports. Furthermore, all Gateway Airports should implement standardised, simplified procedures for exports, imports and trans-shipments.
Industry-level EDI implementation Currently, there is no industry level platform, and each segment of the aircargo industry has its own EDI system, thereby fragmenting the EDI change process. The various segments need to be integrated and a uniform standalone system, which is able to communicate effectively with each segment of the industry, needs to be put in place urgently. Not only would this increase the level of efficiency, it would also decrease problems faced due to multiple data entries, thereby reducing costs and delivering a high level of performance. This needs to cover all players in the supply chain industry — a mission which is high on the ACAAI agenda. The system of ICDs / CFSs clearance of aircargo, which facilitated inter-modalism, has already been started at some airports, with support from the Customs department. Steps are being undertaken to fully implement the EDI at all ICDs / CFSs. The ACAAI has also stressed the need to study terminal charges and other costs, and to examine the liability regimes.
Standardised processes In an effort to standardise processes, the ACAAI has recommended that the Customs department be empowered to permit trans-shipment of Import Consol cargo at all airports, without trans-shipment bonds, etc. Standardisation of import/export registration, clearance, drawback and duty settlement, ‘e-payment’ of duty, Customs operations 24x7, and exemption from duty of containers are some other key recommendations of the ACAAI.
The Association has also suggested that Risk Management System (RMS) and green channel clearance be considered at all airports.
Security With regard to Aviation Security Screening & Handling, the ACAAI’s recommendations include: Adequate X-ray screening facilities to be put in place at every airport. ULD screening equipment to be installed at all gateway airports. Screening process to be efficient, speedy, customer-friendly. Appropriate, relevant, present-day technology to be considered for the security and screening systems at the airports. Advanced technology to replace bar-coding, which has already become obsolete, and is being put aside by users worldwide, in view of its problems of inadequate data capture, delays in manual hand-held scanning, etc. The ACAAI is of the view that it is important, simultaneously, to extend the standardisation of processes to Security Declarations. There is need for realistic view of actual flow of cargo, sterility of cargo at each stage, working backwards from airport’s secure areas to the shipper’s door, and maintenance of sterile/secure environment all along for cargo movement and handling. Based on extensive studies, the ACAAI has concluded that the Regulated Agents Scheme is not working well in most countries. The physical infrastructure, security processes and personnel required of each agent under the scheme are unrealistic and impracticable. The ACAAI has officially advised BCAS that aircargo agents are unable to accept criminal and civil liabilities under the Scheme without direct and effective control over the shipment until on board the aircraft.
Special Cell for aircargo industry The ACAAI is in favour of a special cell or division within the Ministry of Civil Aviation for the aircargo industry. The Proposed Shipping Trade Practices Act 2005, initiated by DG-Shipping, proposes to license, regulate and direct all agencies and bodies involved with all modes of transport and including statutory bodies such as DGCA, AAI, etc, along with airlines, shipping lines, courier companies, etc. This Bill is shortly being introduced in Parliament for enactment. However, the ACAAI is of the view that the Bill needs urgent review as it would defeat the open market policy. Alongside, the Ministry also urgently needs to address itself to the problems in the infrastructure at the cargo terminals, namely, poor quality warehousing; outdated handling equipment; absence of efficient storage systems and quick clearance of cargo; and finally, absence of improved inven tory systems. (Keshav Tanna is President of Air Cargo Agents Association of India.) CRUISING HEIGHTS February 2009
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AIRCARGO
ADRENALINE SHOT TO
REJUVENATE AIRCARGO The Airports Authority of India’s 10-year development plan to boost the aircargo market comes at a crucial time. Long regarded as an ‘also ran’ in the aviation race, aircargo has the potential to enhance the growth of the economy. Tirthankar Ghosh reports on the moves by the AAI and other stakeholders.
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round three years ago, at the Air Cargo Agents Association of India (ACAAI) annual meet, one of the top cargo bosses of Lufthansa told this correspondent that there were three important factors that hindered the growth of aircargo in India. Counting on his fingers, the gentleman said, “1. Infrastructure. 2. Infrastructure. 3. Infrastructure.” They were certainly not prophetic words. Anyone from the sector, or even closely associated with it, could easily have uttered those words — with as much emphasis — after a brief foray into any of our metro airports. The only people who
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The government has become aware of the potential of aircargo CRUISING HEIGHTS February 2009
seemed to have little interest in the development of the cargo sector were those who had the power to change the situation. Maybe the attraction towards passenger business was more. However, now with the downturn and the losses afflicting the aviation industry, the honeymoon with passenger carriers seems to have ended and the government has become aware of the potential of aircargo. So, plans are on to enhance and upgrade aircargo infrastructure. It was, perhaps, the persistent demands from stakeholders that did the trick. In a move that can only spell future growth, the Airports Authority of India (AAI) recently decided to go ahead with a
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10-year development plan that seeks to ensure the creation of modern cargo hubs across the country. In addition, the AAI is keen to bring about an aircargo policy. Titled Vision 2020, the policy is being prepared by international consultancy firm PriceWaterhouseCoopers, which will project a vision for aircargo growth by the year 2020. The report, therefore, would be a document which would take stock of the procedures involved in the sector, and lay down the ground rules. According to sources in the civil aviation ministry, the PwC’s report will be in two parts: the first part would suggest measures to remove infrastructure bottlenecks; and the second would provide the growth projection for 2020. The move to enhance aircargo infrastructure has been brought up a number of times at different fora. In May 2008, for example, the ACAAI held a one-day symposium in Delhi to highlight the problems faced by the aircargo industry. Aptly titled “Revitalising aircargo: Imperative for the growth of India’s global trade”, the symposium observed that the forwarding and logistics industry had been going through a difficult patch, particularly exports. “Not only had the growth faltered due to the weakening of the US and other economies, the dropping dollar and the soaring fuel prices, but aircargo too faced a host of challenges and constraints shackling the industry,” a note issued at the end of the symposium pointed out. Reacting to the constraints, the AAI initiated moves — even before Vision 2020 comes into effect — to enhance cargo infrastructure. Among the steps that have been taken to boost cargo infrastructure over the last few years are: A Perishable Cargo policy has been introduced in April 2006. The policy offers a number of concessions for setting up state-of-the-art centres for perishable cargo. According to security guidelines, colour X-ray machines for the scanning of all export cargo have been installed at metro and other airports by the AAI. Further, X-ray machine usage charges have been reduced to boost perishable export. Import/export cargo in cargo terminals have been provided round-the-clock security. Automation in aircargo handling has been brought about by introducing Elevated Transfer Vehicle (ETV) for storage of ULDs (Unit Load Device) of Export Cargo. Dedicated Courier terminal has been established at Chennai airport. Electronic Data Interchange (EDI)
through Internet, with its community partners viz. Customs, Airlines, Exporters, Importers, Agents, Banks, etc. for exchange of messages electronically, has been established. EDI also facilitates tracking/ movement of export cargo. Bar code system has been introduced by AAI in its aircargo handling to bring accuracy and faster movement of cargo. AAI has formulated a policy to develop domestic airports for international cargo handling by leasing space/land to interested organisations. To reduce congestion at airports and to increase the capacity, the Civil Aviation Ministry has issued directives to all airport operators to reduce the free period granted to exporters/importers/airlines in the clearance of cargo. AAI has decided to invest Rs 284 crores for the modernisation of the existing infrastructure in the country during the XIth five-year plan. A committee, Civil Aviation Core Group (CACG), has been formed by the
Reacting to the constraints, the AAI initiated moves — even before Vision 2020 comes into effect — to enhance cargo infrastructure CRUISING HEIGHTS February 2009
Ministry of Civil Aviation with representatives from various stakeholders who would, inter-alia, endeavour to remove the bottlenecks in the growth of the aircargo industry. One of the subjects that the aircargo policy would deal with — and it is incidentally one that has been on the wish-list of most of the stakeholders in the sector — is the creation of cargo villages for the growth of the domestic aircargo industry. A cargo village will be a bonded area, preferably near the airport, where all air cargo consignments will be scanned and cleared before being transferred to the airport. In fact, a Cargo Village has been opened — the first of its kind — near the new Bengaluru International Airport. In addition, the Aircargo Policy would also take into account the implementation of Electronic Data Interchange (EDI) at all airports for faster clearance of cargo consignments. The technology would go a long way to reduce the time taken to clear cargo: 1012 hours for export and 24 hours for import, from the current few days. The EDI is indeed a sore point. Said Keshav Tanna, President of ACAAI, “The erratic working of the ICEGATE — the Customs EDI portal — is a big impediment. Over the years, there has been no serious investment in this and the system is just not able to take the back-breaking load of the growing export/import shipments. The system is far too slow and downtimes are high.” Apparently, orders have been issued to upgrade the system but things are not moving fast enough. Tanna also made another point: “While the Customs department,” he said, “has continued to be progressive in its approach towards facilitation of procedures, one just cannot understand why Customs procedures across
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India cannot be standardised? We are, after all, in one country!” he said. EDI, cargo villages and better facilities at cargo terminals are some of the points that ACAAI, among others associated with the trade, has been lobbying for quite a few years. Now that the AAI has got into the act, the situation should change. Snehal Parikh, a doyen of the cargo industry and one of the members of the CACG, said that “ACAAI should be involved at the planning stage in the development of various Indian airports, as this would go a long way to bring about a user-friendly product.” Other than the aircargo policy, the Civil Aviation Ministry has been toying with the idea of setting up all-cargo airports in different parts of the country. According to sources in the ministry, a number of entrepreneurs have expressed their willingness to build and operate these all-cargo airports. On the one hand, the airports would cater specifically to the entrepreneur’s needs, while on the other, they could be utilised for general cargo. However, no decision can be expected till the proposed Aircargo Policy is finalised. The Civil Aviation Ministry is likely to decide on the establishment of these all-cargo Greenfield airports only after thoroughly studying their impact on established metro or major airports nearby. According to industry watchers, such allcargo airports are not likely to have any major or adverse effect on established airports since almost all our airports are way behind in terms of cargo facilities. Even before government moves to enhance aircargo facilities took place, private airport players took the initiative to boost cargo revenues. The GMR Hyderabad
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International Airport, for instance, will be establishing a state-of-the-art centre for perishable cargo at the Rajiv Gandhi International Airport (RGIA). The move is wellplanned: the airport will be able to leverage its position and logistics facilities to ensure the reach of perishable cargo, both in India as well as South East Asia, the Middle East, Europe and USA. According to Viswanath Attaluri, Chief Commercial Officer, GHIAL, since infrastructure was the key to economic development, the Centre for Perishable Cargo (CPC) at Hyderabad would give a great boost to the movement of perishables and will boost the horticulture activity of Andhra Pradesh and south India in particular, benefit the farmers and make them more competitive in the present WTO (World Trade Organisation) regime. The CPC will be designed to handle 15,000 tonnes per annum of perishable cargo under Phase I (up to 2011) and the capacity will be raised to 25,000 tonnes per annum under Phase II (2013-2014). GHIAL believes that the perishable exports from the CPC would go up
The Civil Aviation Ministry has been toying with the idea of setting up all-cargo airports in different parts of the country CRUISING HEIGHTS February 2009
to 5,000 tonnes in the near future. In Delhi’s Indira Gandhi International Airport (IGIA), a GMR-managed airport, plans are on to expand cargo facilities. Despite the financial constraints, those looking after aircargo infrastructure are going ahead with the planned modernisation and upgradation process, which will include the creation of the second cargo terminal. Request for proposals (RFP) notices for the construction of the second cargo terminal have been sent out. The RFPs are basically aimed at those with experience in the cargo-handling business, asking them to come forward with proposals on the design, development and finances to build and operate the new terminal for a 25-year concession period. DIAL has also asked for separate proposals to upgrade the present cargo terminal. The last date to submit the bids is February 16. The second terminal would have an area of more than 70,000 square metres. It would have state-of-the-art handling and processing facilities and will, according to projections, handle a million tonnes of cargo a year. The present terminal spans over 70,000 square metres and handled 4,00,000 metric tonnes of cargo last year. The growth in aircargo from Delhi airport has been 10 per cent annually for the last four years. In Kerala’s Cochin International Airport (CIAL), similar moves are taking place. CIAL too has decided to set up a CPC. The Rs 53-crore project is being developed with assistance from the Agriculture Product Development Agency, and will have the facility to export about 20,000 tonnes of perishable cargo every year. In addition, Kochi airport has also started constructing dedicated parking bays for cargo flights and a container parking yard to facilitate the smooth functioning of the CPC. If the recent moves by the AAI, the Ministry of Civil Aviation and private operators are any indication, aircargo could very well come out of the shadows to claim its rightful place in the economy of the country. The figures indicate such a trend. According to industry estimates, Indian airports handled around 15.5 lakh tonnes of cargo in 2006-07 and 13.97 lakh tonnes during 2005-06. Aircargo has grown by around 19 per cent against 10.3 per cent and 9.2 per cent in shipping and railways respectively, in the last three years. The total cargo traffic at all airports has increased from 15.6 per cent during 2005-06 to 21.5 per cent in 2006-07, recording a compounded annual growth rate of 9.5 per cent for the last six years. According to government statistics, aircargo is expected to grow from 1,020 tonnes in 2006-2007 to 1,745 tonnes by 2011-2012.
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CARGO JOTTING New senior appointment for OAG Cargo OAG CARGO Solutions recently announced the appointment of Naveen Malik as Country Manager for India. The appointment is aimed at strengthening the company’s focus on aircargo carriers and freight forwarders in the region. Malik will be based at the Gurgaon headquarters of ABV Techno Solutions, OAG Cargo’s representative for India and Nepal. Malik has a background in the air freight and information technology sectors. He also has experience in business process outsourcing. Mike Navin, Managing Director, OAG Cargo Solutions, said that Malik’s knowledge and experience of the cargo industry, both within India and internationally, would be instrumental in strengthening OAG’s customer relationships within the region.
BAWC to focus on India, China IN ITS EFFORTS to maintain supremacy, British Airways World Cargo (BAWC) has decided to focus on its freighter operations out of India and China to tide over the global crisis. BAWC results for its latest financial half-year to September 30,2008 showed overall system-wide volume up two per cent on the comparable six-month period in 2007, to just over 2,437 million cargo tonne kilometres. BAWC reported commercial revenues (flown revenue plus fuel surcharges) of £363 million, an increase of 25.2 per cent against the same period in 2008. The carrier claimed to have outperformed the overall Asia-Pacific region aircargo market. In July-August, when the Asia Pacific aircargo market saw around a 6.5 per cent drop in volume compared with 2007, BAWC achieved about a one per cent improvement. During September ‘08, when the market probably saw about a nine to 10 per cent decline, BAWC’s shortfall was only about two per cent.
One of the ways BAWC was seeking to buck the downtrend was to maintain its established B747-400 freighter schedules. The carrier currently operates six frequencies a week out of Hong Kong and two a week from Shanghai Pudong to London Stansted. Those flights are all routed via various points in India to provide a present schedule of four services from Delhi, two from Mumbai and two from Chennai. On the outbound leg from UK to Hong Kong and Shanghai, the freighters are variously routed via Germany, Georgia and the Middle East/Gulf. The carrier intends to continue with that basic strategy for Asian region freighter services in 2009.
Swiss goes live with Worx SWISS WORLDCARGO, the cargo division of Swiss International Air Lines Ltd., has officially gone live with “Swiss Worx”, a customised version of the comprehensive end-to-end IT cargo management system ‘SkyChain’, developed by Mercator, the Dubai-based business technology provider. With most cargo carriers using systems that are 10 to 30 years old, there has been a clear recent call for more flexibility. Using Oliver Evans the latest Java technology, Swiss Worx substantially meets this demand and improves business efficiencies across the air freight life cycle. As the system was made available to outside cargo operators, Swiss WorldCargo was the first to take advantage of the opportunity. Speaking about Worx, Swiss’ Chief Cargo Officer Oliver Evans said that the carrier could look back on a smooth and seamless migration in what has been the biggest IT Patrick Naef project in Swiss history to date. Kicked off in January 2007, the project actually saw the involvement of over 50 IT and cargo professionals in Zurich and Dubai, and the overall effort of some 7,000 personnel-days. Patrick Naef, President, Mercator, commented that the collaboration with Swiss had been one of the most exciting projects. The Swiss team provided insights on cargo operations.
Lufthansa tackles downturn GERMAN CARRIER Lufthansa has instituted new initiatives, as well as cost-cutting measures, to stay in the air. In what the carrier’s management refers to as a “flexible response” to the crisis that is plaguing global trade and, with it, global cargo traffic, it has cut down on the number of flights. Between October and November 2008, the Lufthansa Group recorded a nine per cent decline in cargo traffic, which, according to Nils Haupt, Lufthansa Cargo’s Director for Corporate Communications, had affected routes to Asia and to the United States. While the carrier’s MD11 fleet will continue to fly, the deployment of two MD11 aircraft and one Boeing 747-400 leased from World Airways will be stopped and given to Lufthansa’s associate carrier in China, Jade Cargo International. Dirk Steiger, Managing Director of Frankfurt-based Aviainform, a market research and business intelligence company specialising in aircargo, echoed Haupt’s sentiments. Steiger recently told cargo magazine, ‘Cargonews Asia’, that “the ASEAN region will also post good growth, though not in the same manner as China.” He also mentioned the Indian market:
“India is quick to tighten the belt when there is a crisis. India consumes but also produces quite a lot itself. India’s infrastructure will be expanded further, as envisioned in the country’s master plan. Aviation and aircargo transportation in India will get priority,” said Steiger. In fact, he was bullish on the BRIC — Brazil, Russia, India and China — markets, referring to them as “growth drivers of the future”.
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AT A GLANCE
Pay for your CO2 IN AN EFFORT to give guilt-ridden travellers a chance to offset the air pollution emitted from their plane rides, San Francisco International Airport has come up with a unique plan. It has decided to set up a series of kiosks for travellers to purchase certified carbon offsets. The plan will be kicked off with a pilot programme this spring. Travellers will enter their destination into the kiosk, which will calculate the amount of carbon dioxide for
Losing sting, at last! which they are responsible and the cost of offsetting it. After swiping their credit cards, they would get a receipt listing the exact carbon-reducing projects their money went to. Though unique, this is not the first time aviation industry is trying to contribute to the cost of offsetting such emission. Delta Air Lines Inc. offers its customers an opportunity to purchase carbon offsets on its Web site.
IT FINALLY SEEMS to be losing sting. The men’s room at the Minneapolis-St. Paul International Airport, where Republican Sen. Larry Craig was arrested in a sex sting, is drawing fewer tourists now. “We’re getting there,” said Patrick Hogan, director of public affairs for the Metropolitan Airports Commission. “I think we’ll all be glad when there’s no special interest in that restroom.” Craig was accused of soliciting sex in the bathroom in June 2007 and pleaded
When the pilots slept
Survivor ‘twitters’ crash account
A
man who survived a Denver plane crash recently provided one of the first eyewitness accounts of the accident with the help of Twitter and a mobile phone. Mike Wilson was riding in the Continental Airlines Boeing 737 when it ran off the runway at Denver International Airport during takeoff and plunged into a ravine. No one was killed but 58 people were injured in the crash. Using his mobile phone, Wilson started posting short blog entries on Twitter, a popular blogging service, as soon as he was safely in Continental Airlines’ presi-
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dential club. He described the takeoff as normal “when we suddenly veered off.” Wilson described a “sudden bottomdropped-out feeling and then a jolt” when the plane dropped into the ravine. Wilson and the other passengers escaped through an exit door and scrambled down the wing on the left side of the plane. Twitter, which is typically used to describe more mundane life experiences, is among the fastest growing social networking sites. In September, the number of users soared by 343% from the same month a year ago to 2.4 million, according to Nielsen Online. CRUISING HEIGHTS February 2009
PILOTS ON board a go! airlines flight that overshot the Hilo airport about a year ago have admitted that they fell asleep in the cockpit while the plane was on autopilot. According to a recently released 11-page report by the National Transportation Safety Board, the pilots stopped responding to air traffic control communications about halfway through Flight 1002 from Honolulu to Hilo on February 13, 2007, Air traffic controllers tried to contact the flight through other planes, including another go! jet and a Continental Airlines plane, but failed. Phoenix-based Mesa Air Group, which owns go! airlines, fired both pilots after the incident.
What a rocking flight! ROCKING IN the air? Now this is one kind that neither the airline nor the passengers would mind. Mexican Mexican low-cost carrier Volaris has set an example of sorts by sponsoring a concert by Zoe y Molotov, in collaboration with Coca-Cola. Now what’s new, one might ask. The novelty of it all lay in the fact that this particular concert was held on board a Volaris flight. The Zoe y Molotov singers sent passengers on board one of Volaris’ A319s rocking at 30,000 feet. Volaris called the flight, which took
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Happy New Year
off from its base at Toluca outside Mexico City and landed in Guadalajara, “Vuelo Zero” or “Flight Zero”. This was designed to promote Coca-Cola Zero, the new sugar-free version of Coke. Volaris also coined the flight “making the impossible possible”. This was just one more of the low-cost marketing gimmicks that Volaris has been adopting to promote the airline. Volaris services tequila on board its flights which is sponsored by one of Mexico’s tequila makers.
On sale! Pillows, blankets on flight US AIRWAYS plans to remove free pillows and blankets from its planes and replace them with forpurchase “combo pillow and blanket packs.” According to a report,, “despite falling oil prices that are expected to save airlines much more money in fuel costs, US Airways — Charlotte’s dominant carrier — expects to charge passengers about $7 for pillows and blankets on planes, according to the latest US Airways employee newsletter.”
For $300, they’ll take your bags to door IF YOU ARE willing to shell out an extra $300, it will take your baggage right to your door. United is adding a “door-to-door baggage” option that will let customers fly without dealing with their checked luggage. In a press release, United says the programme “enables customers in the continental US to conveniently ship their suitcases, or other travel items like skis or golf clubs, overnight from a home or office directly to their destination within the 48 contiguous United States.” Customers can also drop bags off at “a FedEx Office location or any other FedEx authorized shipping center.”
Quite a ‘partnership’ THE ‘PARTNERSHIP’ between Aer Lingus and United Airways is drawing some interesting reactions. Here’s one from
ahead of schedule. However, all the passengers were asked to remain seated because some idiot in business class — a welldressed Belgian — claimed he’d left an envelope in the bathroom with ...get this ... $10,000!
Illustrations by Rajeev Kumar
guilty to disorderly conduct in August 2007. The scandal attracted a lot of publicity and one person even offered to buy the restroom stall for $5,000. However, Hogan said the offer was not accepted as airport officials “don’t sell fixtures for novelty purposes.” Hogan added that though tourist interest has reduced, the surge of publicity from Craig’s arrest helped end the type of activity in the restroom that had prompted lewd-conduct complaints.
HAPPY NEW YEAR! Last week, we left off in Brussels, just after touching down on a flight from New York on my new favorite airline — Jet Airways. I arrived at Brussels Airport (BRU) at 6:58am, which was 50 minutes
Ryanair’s Michael O’Leary. To quote him, “they (Aer Lingus and United Airways) share many similar traits. They both used to be big in the 1950s and 1960s, but sadly today they are just shadows of their former glory. Both have recently announced losses, job cuts and pay cuts. After months of trawling around looking for partners, it is a sad reflection on Aer Lingus that the best they could come up with is one of the weakest and biggest loss makers in the US airline industry. Given the scale of United’s losses there is no guarantee that they will even be around in March 2010 to operate this “partnership”. In conclusion, he goes on to say that this so-called “partnership” with another “loser” like United shows that Aer Lingus has no independent strategy, and no prospect of remaining independent.
Changing times HERE ARE signs that times are changing in Iraq. The first commercial flight between Europe and Iraq in 17 years has landed at Baghdad. Commercial flights to Iraq stopped after Iraq’s invasion of Kuwait in 1990. With the Nordic Leisure flight from Denmark, however, things seem to be changing and one can hope to see other airlines resuming service to the troubled Gulf nation. The landmark flight carried about 150 passengers, mainly Iraqis. Iraqi Airways says it hopes to start services to Europe in the next few months. Air France-KLM signed a preliminary accord with Iraq recently, outlining plans for Iraqi Airways to fly to European destinations.
Lounge for everyone FROM USA TODAY’s Airport Check-in column: “Toronto Pearson International has opened its first passenger lounge available to all passengers. For $35 a day, travellers get wireless Internet, printers and flat-screen TVs, plus food and beverages. It’s located in the international pier of Terminal 1.”
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DOMESTIC AIRLINES Qatar Tours is SpiceJet’s overseas GSA SPICEJET HAS appointed the Doha-based Qatar Tours as first overseas general sales agency. Under an exclusive agreement, Qatar Tours will from now on promote, advertise and sell SpiceJet products and services to people residing in Qatar. The agreement was announced by SpiceJet Chief Executive Officer Sanjay Aggarwal. “With this step, we begin to expand our distribution footprint beyond India and make SpiceJet tickets available through travel agents, for people living overseas. This is a significant move that will help Indians and all others residing in the state of Qatar to travel to various destinations within India easily on work and leisure. In the long run this will contribute significantly to inbound traffic into India and help in promoting India as a chosen destination for people in this Middle East state,” he said.
Kingfisher allies with Hilton HHonors KINGFISHER HAS tied up with Hilton HHonors, the guest rewards programme for the more than 3,000 Hilton family hotels worldwide. The alliance allows members of King Club, frequent flyer programme of Kingfisher Airlines, to earn both King Miles and HHonors points when they stay at Hilton family of hotels. Hilton HHonors is the only guest rewards programme in the world that lets members earn both hotel points and airline miles for the same stay and redeem points for free nights with no blackout dates. As per the agreement, King A Hilton Hhonours hotel Club and Hilton HHonors members can earn Points and Miles® in either of the following ways: Points & Variable Miles: Earn 10 HHonors points and 1 King Mile for every eligible dollar charged to room at all Hilton Family hotels; Points & Fixed Miles: Members regularly earn 10 HHonors points for every eligible dollar charged to room and 500 King Miles per stay (100 miles at Hampton and Homewood). Gets nod to fly to KL, Bangkok, Singapore: Kingfisher Airlines has received the government nod to fly to Kuala Lumpur, Bangkok and Singapore. The airline will start daily services on Bangalore-Colombo and Chennai-Colombo routes. Kingfisher already operates flights to London. A Kingfisher spokesperson confirmed the development, saying the airline had received communication from Civil Aviation Ministry for operating services to various foreign destinations. The ministry has asked the airline to conduct a study on traffic on new routes before announcing the launch.
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Plans Valley-UAE link: Kingfisher Airlines plans to start flights from Dubai to Srinagar, thereby giving a major boost to Kashmir tourism. A report quoted Kingfisher Chairman Vijay Mallya as saying they had applied for a licence with the Civil Aviation Ministry for a flight from Srinagar to Dubai, with a halt in New Delhi. The airline operates 712 daily seats to Srinagar from Indian destinations on the domestic route. Mallya recalled his childhood in Kashmir, particularly Gulmarg, Mallya, and said he had always wanted to put Srinagar on the international map so that more and more people could see the most beautiful Indian destination.
Jet’s loss goes up to Rs 214 crore HIT BY HIGH oil price and poor load factors, Jet Airways has posted a Q3 loss, for the period ended December 31, 2008, of Rs 214 crore. This is coupled with another Rs 20 crore loss for same period by its low cost airline, JetLite. Jet’s loss in same period the previous year was Rs 91 crore. The airline has, for the nine months ended December 31, 2008, reported a net loss of Rs 455.33 crore, while it had a net loss of Rs 31.88 crore in the corresponding period a year ago. However, there has been an increase in revenue also during the same period. Jet’s total income rose 24.60 per cent to Rs 3,022.83 crore during Q3, from Rs 2,425.98 crore in the corresponding period a year ago. Exploring possibilities of aircraft lease-out: Jet Airways is negotiating with several airlines, including Oman Air, for exploring possibilities of leasing out its surplus aircraft. Jet has been leasing out its aircraft which have been grounded following route rationalisation, pruning of its operation and cost-cutting. As part of the cost-cutting measures, Jet Airways, which had launched its Mumbai-Shanghai flight last year amidst much fanfare, has already announced withdrawal from the sector from January 13. It has also shelved its plan to launch a second flight on Mumbai-Dubai sector. Besides, the airline has also put on hold its plans to start flight operations to Saudi Arabia. Earlier, Jet had leased two A330 aircraft to Gulf Air on a short term lease in December last which is ending in March this year. Also, two of its aircraft are on lease with Turkish Airline.
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Signs code-sharing deal with JetLite: Jet and JetLite have signed a code-sharing pact, to be implemented in two phases. Under the pact, JetLite’s domestic network will be available for sale under the Jet Airways’ code (9W) for tickets purchased at all international points across the globe. “With the code-share agreement between Jet Airways and JetLite, passengers will enjoy unbeatable connectivity between India and several international destinations, besides lower fares,” Jet Airways CEO Wolfgang Prock-Schauer said. He said the code-sharing would also result in other benefits, such as higher revenues and synergies for both carriers. The partnership will enable the twin carriers to boost online connectivity with a higher presence on global GDS screens, fully leveraging the power of global distribution networks. This process was initiated with the migration of JetLite to Jet Airways’ reservation platform in September 2008.
charges from employees availing themselves of that facility, cancellation of subsidised meals in canteens throughout the airline’s network and re-negotiation of hotel contracts.
AI introduces flight-specific fare
CAPT GR GOPINATH’S Sky Limo service has hit a bottleneck. The service, launched in July last year, is likely to be grounded in view of the poor demand. Douglas G Cavannagh, CEO, Deccan Charter, said the air limo service that was started to address the problems of traffic snarls and long distance travel to the new Bengaluru airport has not picked up as expected. This is prompting Deccan to review the air taxi service and re-launch it as a charter service. “It (city air shuttle service) is being reviewed at the moment. Even if it is discontinued, we can use the helicopter (fourseater Bell 206 jet ranger) for charter service. That would mean that, instead of selling one seat, we will be selling the entire helicopter,” he added. The trips of the air taxi service have dropped from 6-8 per month in the first few months of the launch to less than four per month now. The company, however, has not yet struck it off its portfolio of services.
AIR INDIA HAS introduced a flight-specific fare and revised easy and APEX fares on some sectors. An official release said a flight specific fare of Rs. 4,425 (all inclusive) would be offered as one way journey in economy class (X level fare) for travel from Chennai to Delhi by its morning flight IC-440. Advance Purchase Excursion Fare (APEX 7) of Rs. 3,925 (all inclusive)
and “X” level fare of Rs. 4,125 (all inclusive) would also be available for one way travel from Chennai to Kolkata in the economy class, the release said. The national carrier had also announced a special fare to Mumbai, which would be Rs. 300 plus taxes (total fare Rs. 3,225) for a one way journey from Chennai to Mumbai on its flight AI 643. A special promotional fare of Rs. 500 plus taxes (total fare Rs 3,425) would be applicable for flight no AI-641. Unveils further cost-cutting measures: In a bid to further cut costs and streamline operations, Air India has issued a further set of guidelines for its employees, effective January 1. The earlier guidelines were issued in August last year. Some of the first measures stated in a 25-point circular sent to senior officers include — payment on fuel reimbursement strictly through “vouchers and not self certification”, abolition of children’s education allowance to India-based officers abroad, reduction in cost of furnishing of residences given to Executive Directors and General Managers by half and 25 per cent respectively, restriction on foreign travel by officers and requirement of prior approval in cases where they exceed four visits in a year. Other important steps include collection of monthly transport
IndiGo to phase out foreign pilots INDIGO HAS decided to phase out its employment of foreign pilots in the next few years. The plans will move alongside a move to hire 100 cabin crew and up to 50 pilots in the near future. The airline also plans to increase its network to 2021 cities and enhance frequencies on its existing routes in the next one year. It currently operates in 17 cities in the country. “As we grow in size, pilots within the country would like to fly with us. Gradually we will have only Indian pilots. It saves us manpower costs too to have only domestic pilots,” IndiGo president Aditya Ghosh said.
Deccan likely to ground air limos
GoAir to expand fleet size GOAIR HAS decied to increase its fleet to 35 by March 2011 from the existing six. The expansion shall be undertaken in two phases. The airline will add 20 aircraft by this year and another nine in the next two years. GoAir hopes to break-even faster with the proposed expansion coupled with the tumbling crude and ATF prices. Further, GoAir is looking at an alliance with foreign carriers to expand services and increase its market share to more than 10 per cent from the existing 2.3 per cent. The country’s smallest carrier has increased the number of flights to over 900 in the winter season and operates across 11 destinations. India will need 1,001 new aircraft worth $105 bn in the next two decades, as demand for air travel in Asia’s fourth-biggest economy will grow in the coming years.
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SNIPPETS Also goes in for fare cut : Faced with competition, the Wadia Group’s low-fare carrier, GoAirlines (India) Pvt. Ltd, has also decided to slash fares, offering uniform fares, inclusive of surcharges and other taxes, for purchases made 21 days in advance. For short sectors, defined as less than 750 km travel distance, GoAir will charge Rs 1,700 a ticket and Rs 2,700 for longer distances, a GoAir statement said. In effect, a Mumbai-Delhi ticket on GoAir bought 21 days in advance can be bought for Rs 2,700 instead of the base fare of at least Rs 1,000 plus Rs 2,925 of surcharges and airport fees. Three major airline groups of the country have also resorted to price cuts to stimulate the passengers. The quarter ended December 31, 2008, witnessed an 18 per cent decline in domestic passenger growth.
Paramount promoters ready to buy back stake THE PROMOTERS of Paramount Airways are interested in hiking their stake in the airline to 100 per cent by buying back the about 5 per cent stake held by others. At present, the promoters’ stake in the Coimbatore-based airline is 95 per cent, while Kotak Mahindra and Bennet & Coleman
between them hold the remaining 5 per cent. Paramount Managing Director M. Thiagarajan was quoted saying, “We are closed to the idea of private equity funding. All our other group companies are 100-per cent owned. So, we want to see the same in Paramount Airways also. We had divested share as a relationship building exercise. But now we have told the shareholders that if they are ready to sell their stake, we will buy it.” India Growth Fund from Kotak Mahindra Group and Bennett & Coleman picked up a stake in Paramount Airways back in 2005. The airline, introduced in 2005, operates Embraer family of aircraft connecting 11 cities including Chennai, Coimbatore, Madurai, Bengaluru, Hyderabad, Goa and Pune.
INTERNATIONAL AIRLINES SAI offers special discounts SINGAPORE AIRLINES announced special New Year promotional offer to popular destinations this season, effecting discounts in the 42-59 per cent range. The airline operates 56 weekly flights to Singapore from eight cities in India, including Ahmedabad. In a statement, the airline said the ‘all-in prices’ ticket (inclusive of taxes and surcharges) to fly to Singapore would now cost Rs 16,830, South-East Asia Rs 23,980, and Australia Rs 41,350 from the Singapore Airlines Indian gateways. The bookings for this offer, which could be made till January
15, 2009, will be valid for travel till March 31, 2009 for Singapore and South-East Asia and from February 1 to June 30 for the Australian destinations. Customers can travel to these destinations via the airlines Indian gateways, namely New Delhi, Mumbai, Bengaluru, Chennai, Hyderabad, Kolkata and Ahmedabad. However, prices are subject to changes due to currency exchange fluctuations, C.W. Foo, General Manager, India, Singapore Airlines, said.
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Sticks to ‘no-commission’ rule: Despite strong protests by travel agents across the country, Singapore International Airlines (SIA) has refused to budge from its ‘no-commission’ stance. Protesting the non-payment of a commission of 5 per cent on ticket sales by airlines to travel agents in India, around 2000 agents and online travel portals associated with agents associations like Travel Agents Federation of India (TAFI), Travel Agents Association of India (TAAI), IATA Agents Association of India (IAAI) among others decided to boycott sales of Singapore tickets in India from December 29. Refusing to be cowed down by the protests, Chai Woo Foo, General Manager, Singapore Airlines, India said, “There is no change in our zero commission stance.” Foo, however, admitted to loads being lower than last year on all routes, while maintaining that the airline’s outlook in India continued to be positive. There will be a temporary reduction of one flight per week from Delhi between January 22 to March 25 and two flights per week from Mumbai between January 27 to March 26. “But this is part of the overall network wide review to adjust the capacity in the short term to current demand; including flights to East Asia, Australia and Europe,” he added. Meanwhile, the agents claimed that the boycott has considerably affected SIA’s sales in India since travel agents account for 80 per cent of the airline’s overall India sales. The carrier earns around 11 per cent of its global revenues from India. Braces for tough times: Singapore Airlines (SIA) is bracing itself for tough times in 2009 and has started re-looking its routes and services, with the option now of cutting pay, or even jobs, under active consideration. SIA’s fortunes took a downturn with the economic crisis in September. Stephen Forshaw, vice-
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president, Public Affairs, SIA, said: “It will be difficult. Let’s not make any mistakes about that.” Though SIA has survived the trubles better than most of its peers and is still profitable, it is now considering some tough measures to tide over the tough times. “If we move into periods of lossmaking, there are certain triggers within our respective collective agreements with our unions that will dictate certain pay cuts or cuts to the variable components of staff salaries,” said Forshow. SIA has already started to trim its network and may cut the number of flights on high-frequency routes. But it also plans to stimulate demand by having more promotions next year. It will also look for new routes that are opening up. It has just added Riyadh to the radar because of growing demand from the Middle East. Kuwait will be added later in March.
BIS partners with Mihin Lanka BIRD INFORMATION Systems has announced its strategic partnership with, Sri Lanka’s leading low-cost airline, Mihin Lanka for the use of its Airline Inventory and Reservations System (AIRS). Under the terms of the contract signed between the two entities, Bird Information
Emirates looks at India market expansion The Dubai-based Emirates plans to increase its weekly flights to Indian cities from the existing 150 to 163 by February 2009. By doing so, India will become the largest station within the Emirates Airline network in terms of daily operations. This was disclosed in a newspaper interview by Emirates President Tim Clark. Clark disclosed that Emirates Airline will add 31 weekly flights to India between now and February 2009. From February 2009, Emirates will serve Mumbai with a fifth daily operation, while in New Delhi it will launch seven additional frequencies with immediate effect, bringing the total to 25 flights
Systems will provide Mihin Lanka the booking technology for the Airline Inventory Hosting, reservation at city and airport offices, call centres and the internet booking engine. For airport operations, a unique state-of-the-art departure control system will be made available. Travel agencies would benefit from a distribution interface and a unique integrated application within using AIRS. AIRS, a revolutionary web based application solution offers airlines a state-of-the-art, user-friendly solutions from the bookings stage to the check-in process. A unique feature of AIRS is its user friendly GUI (graphical user interface) which will enable Mihin Lanka partners - be it travellers or travel agents - to make online reservations quickly and easily.
Relax with Yoga on Qatar flights QATAR AIRWAYS has introduced a new onboard yoga guide and tips to help passengers stay relaxed and rejuvenated in flight. The airline’s district sales manager Suneer P.C. Mohammed Ali said a four-page ‘Fly healthy, fly fit’ guide has been prepared by Qatar Airways, in association with ‘The Chopra Centre for Wellbeing’ and its founder, lifestyle guru Deepak Chopra. Simple relaxation techniques have been specially created by Deepak Chopra for the passengers. per week. The Dubai-Bengaluru operation will be strengthened with the start of five additional flights bringing it to 20 weekly flights. From Chennai, it will introduce four additional flights per week and in the next phase of expansion in February 2009 one more flight will be added, bringing the total weekly count to 19 flights. In Kochi, Emirates will introduce a double-daily operation by launching four additional flights per week by February 2009, while in Hyderabad triple-daily services have been introduced. Hence, the total seats per direction per week on February 1, 2009 will stand at 48,753 compared to 44,393 in end October 2008. On the Dubai-India sectors, the airline operates at over 75 per cent load factors.
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TRAVEL & TOURISM Travel portal crashes MAKEMYTRIP.COM, a travel-related portal, crashed recently for a day due to unprecedented surge in traffic following a reduction in fares by Air India and JetLite. “Our website can take around 100,000 hits per day but, we received more than 150,000 hits”, said Keyur Joshi, COO, Makemytrip. Travel agents and portals say airlines bookings have surged by 20 per cent after aviation companies have cut fares. Air India has announced between 35 and 82 per cent cut in fares while Jet Airways has slashed basic fares by up to 40 per cent, giving the tourism industry a much-needed impetus. Reflecting the positive sentiments in airlines, hotel bookings also rose by about 10 per cent as travel accounts for about 40 per cent of holiday cost. “A lot of domestic travelers were anticipating airfare cuts. Air ticket bookings have now jumped 20 per cent,” said Dhruv Shringi, CEO and co-founder, Yatra.com. “The rise in the number of hotel bookings has been up to 8 per cent.”
will not only ensure a better future but also good business prospects, the theme for the awards this year was climate change and responsible tourism. The Galileo Express Travel World Awards recognise the best in the industry every year. The winners are chosen through a transparent process, which is certified by leading management consultants — Deloitte Touché Tohmatsu India Pvt. Ltd.
In memory of the Mumbai hotel staff THE SIXTH edition of the annual Galileo Express TravelWorld Awards, organised by The Express Group, on December 10, 2008 in New Delhi was dedicated to to the hotel employees of Taj Mahal
Yatra.com is ‘Best online travel agency’ YATRA.COM was declared the ‘Best Online Travel Agency’ of the year 2008 at the Galileo Express Travel World’s awards on December 10, 2008 in New Delhi. In line with the Galileo Express Travel World belief that excellence and responsibility must go hand in hand and that responsible action
DLF Golf & Country Club awarded DLF GOLF & COUNTRY Club has been awarded the best golf course in India for a second year in succession. The honour came at the recent Asian Golf Monthly Awards held in Shenzhen, China. Akash Ohri, the Director of DLF Golf and Resorts, was conferred the second runner-up title for
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Palace and Tower and the Oberoi-Trident, Mumbai who risked their lives while on duty thereby displaying the true ethos of hospitality. The winners under 29 categories were selected. ITC Hotels was awarded Best Premium Hotel Brand while Jet was awarded Best Domestic Full Service Carrier along with IndiGo Airlines which bagged Best Low-Cost Carrier in the airline category. the best club man of the year. Ohri accepted the honour saying: “There is tremendous prestige and honour attached to the awards as they acknowledge the best of the best in the Asian golf course industry. We are proud to be presented with this award as it signifies the excellence of our Golf Course.”
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The President cutting the ribbon to inaugurate the 23rd Surajkund Crafts Mela. On her right is Kiran Choudhry and on her left is Ambika Soni.
Surajkund Mela highlights works by top craftspersons
Foreign visitors to the Mela take a look at the artistic creations in one of the stalls at the Mela.
Husbandand-wife duo, both national award-winners, show off the saris they created at their stall.
PRESIDENT PRATIBHA DEVISINGH PATIL inaugurated the 23rd Surajkund Crafts Mela at Surajkund on February 1, 2009. The President commended the efforts of the Haryana Tourism Department, and appreciated the new initiatives taken by the Haryana Minister of State for Tourism Kiran Choudhry, for providing an international platform to craftspersons belonging to the rural areas of the country and for the participation of foreign countries. Patil took a keen interest in all the exhibited handicraft products at the Mela. She spent a lot of time amidst the craftspersons and interacted with them. The President also appreciated the handicraft items exhibited at the stalls of Egypt, Thailand and the SAARC nations, and said that it would further help to strengthen relations between the various countries. The need of the hour in the present times, she said, was to strengthen the bonds of brotherhood amongst the people of the world. Speaking on the occasion, Kiran Choudhry said that Haryana Government had made all possible efforts to provide a better platform for the craftspersons of the country at the fortnight-long Surajkund Crafts Mela. The minister also said that the Surajkund Crafts Mela had achieved an international stature with the participation of about 400 national and state awardee craftspersons from all over India, and 24 craftspersons from SAARC nations — eight from Thailand and five from Egypt. Union Tourism Minister Ambika Soni, who was also present at the inauguration, said that the Ministry of Tourism had started setting up replicas of the Surajkund Mela in four other parts of the country. Soni said such events would encourage and motivate the craftspersons from around the country. Also present on the occasion were Haryana Power Minister Randeep Singh Surjewala, Haryana Minister for Labour and Technical Education AC Choudhary, Madhya Pradesh Tourism Minister Tukoji Rao Puar, and officers from the Centre, as well as Haryana and Madhya Pradesh governments.
Egypt, the partner country, attracted the maximum number of visitors with its display of carpets and handiwork in glass and buffalo horns.
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ROYAL JOURNEY: Royal Rajasthan on Wheels is set to track a new course in luxury train travelling in India.
Where luxury moves on wheels! WITH SAND DUNES whispering into your ears through fine silk and velvet draperies, and arid landscapes standing majestic along the tracks, it’s all about luxury on wheels. Moving luxuriously through the desert state of Rajasthan on a journey that takes you on a 7-day royal holiday, the ‘Royal Rajasthan on Wheels’ has taken off to a stupendous start. Another joint collaboration between the Rajasthan Tourism Development Corporation (RTDC) and the Indian Railway, ‘Royal Rajasthan on Wheels’ is the second luxury train launched in the desert state. Set amidst regal opulence, seeped in the history of the bygone splendours, the train left on its maiden journey from
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Delhi’s Safdarjung station on January 11, with 23 passengers from the US, UK, Belgium and India, along with 29 media persons. The train was flagged off in the presence of Union Tourism and Culture Minister Ambika Soni, Union Minister of State for Railways Naranbhai J. Rathwa, Rajasthan Tourism Minister Bina Kak and other dignitaries. With a total capacity of 82 persons, the train has 13 deluxe coaches, one super deluxe salon, four service cars and two restro bars. The train is scheduled to leave Delhi every Sunday evening, traversing through Jaipur, Jaisalmer, Jodhpur, Sawai Madhopur, Chittorgarh, Udaipur, Bharatpur and Agra, before returning to Delhi.
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More luxurious than luxury itself. More splendid than splendour itself. And much more lavish and comfortable than the hugely successful `Palace on Wheels’, it has deluxe suites named after such precious gems as Ruby, Sapphire and Pearl, while the superdeluxe saloon is Taj Mahal with Emerald and Diamond suites. The 13 deluxe coaches have been named after the famous palaces of Rajasthan. The two restro lounges are aptly named Sheesh Mahal and Swarn Mahal. Comparable to the best trains in the world, such as the Orient Express of Europe and the Blue Train of South Africa, ‘Royal Rajasthan on Wheels’ is the magnificent outcome of a Rs. 40 crore investment.
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Sarovar to open hotel in S Delhi SAROVAR HOTELS & Resorts announced the signing of its ninth property in Delhi & NCR, Sarovar Portico, Green Park, thus adding to the present Delhi NCR portfolio of Park Plaza, Gurgaon and Noida. It is scheduled to open Optus Sarovar Premiere, Gurgaon; Park Inn, Gurgaon; Mahagun Park Inn, Shahdara; Sarovar Hometel, Hari Nagar (Janakpuri); Park Plaza, Faridabad and Sarovar Portico, Faridabad. The proposed 45- Signing of Sarovar Portico, Green Park. room hotel will be located at Green Park Extension in the commercial district of South Delhi. The hotel is 11 kms from the Domestic Airport and 17 kms from the Indira Gandhi International Airport, and is also conveniently located near Delhi’s prominent shopping hubs. Sarovar Portico, Green Park, will offer all amenities and facilities to its guests conforming to the standards of a 3-star international hotel.
influenced therapies combined with holistic lifestyle guidance. The spa menu ranges from single treatments to half and full day sensory journeys.
Penang voted among ‘World’s Best Islands’ PENANG ISLAND has been voted as one of the top Asian islands in Travel + Leisure’s 2008 World’s Best Awards. A firsttimer on the list, Penang is popular for its lively beaches, interesting architecture, and amazing Asian-fusion cuisine. The World’s Best Awards are voted on by Travel + Leisure’s readers, selecting their favourite hotels, spas, airlines, cruise liners, outfitters, cities, and islands around the globe. For the island category, readers were asked to rate islands according to five characteristics, i.e. natural attractions, activities/ sights, restaurant/food, people and value.
MICE is new India ‘mantra’
Hollywood, Bollywood stars descend on Dubai
INDIA IS BEING promoted as a multi attraction tourism destination including MICE through the tourism offices in India and abroad. Literature and CDs on conference tourism are being distributed in potential markets for promotion of Meetings, Incentive, Conference and Exhibitions (MICE) tourism to India. This was stated recently by Minister of Tourism and Culture Ambika Soni in a Ambika Soni written reply in the Lok Sabha. Soni said India has successfully hosted the PATA Travel Mart 2008 in Hyderabad, India in September 2008. The PATA Travel Mart is the leading international Travel Mart in the Asia Pacific Region and hosting the event has given an opportunity to project India not only as a tourist destination, but as an important destination for Conferences and Conventions as well, thereby giving a boost to business travel to the country.
STARS of Hollywood, Bollywood and Arab cinema descened on Dubai for the 5th Dubai International Film Festival (DIFF). The city dazzled with star power as the big screen’s most talented actors and filmmakers arrived to promote their latest film, or just to grace the red carpets in support of their contemporaries’ latest Priety Zinta & Deepa Mehta in Dubai. cinematic efforts. Emirates cabin crew provided glamorous additions to the red carpet on the occasion.
Six Senses Spa to open at Pan Peninsula
Springtime in Spain
SIX SENSES is all set to expand now to the Pan Peninsula residential development in the heart of London’s Canary Wharf. This will the first Six Senses Spa in the UK. The Six Senses Spa at Pan Peninsula introduces a fresh interpretation of the urban spa, aboun-ding with natural light and with a vast airy terrace. Architectural finishes include the warmth of natural stone and wood, and exotic eco-friendly materials. The spa occupies a spacious area of more than 7,000 square feet, or 650 square metres, and offers a comprehensive range of Six Senses Spa signature treatments and rejuvenating Asian-
SPAIN’S CARNIVAL celebrations have drawn tourists from world over, with fancy dress processions, float parades, jokes etc. making it a memorable and musttravel destination. There has been a lot of partying, dancing, singing etc, giving tourists an experience to remember and cherish. Among the famous places for carnivals in Spain are Sitges, Vilanova i la Geltrú, Tarragona and Las Palmas de Gran Canaria (in Gran Canaria), Cádiz, Badajoz, Laza (an ancestral carnival celebration), Xinzo de Limia (the longest carnival in Spain), among others.
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‘ESCAPE IN THE FLYING CAR’ ajkot baron Subhash Shihora is flying high, quite literally. As probably the first Indian to have booked the flying car, Shihora is set to create a history of sorts. CEO of Urok International, a consultancy firm, Shihora is among a select few across the world to have booked ‘Terrafugia Transition’, a two-seater car that can transform itself into a plane in 15 seconds. The Rs. 1.5 crore ‘car that flies’ will be out on the roads sometime in 2010, courtesy Terrafugia, a Massachusetts-based firm. But Shihora, who is not new to the world of `aviation news’ (he recently sued Deccan for Rs. 21 crore for not being allowed to
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board their plane despite having tickets), is not waiting. He has already taken some flying lessons and intends to go to Bengaluru for further training, that will help him get a licence to fly the car. The flying car’s design allows the aircraft to fold its wings and drive on any surface road after it lands at the airport. An earlier flying car — the Aerocar of the 1950s, which is still flying today and featured recently on James May’s programme ‘Big Ideas’ —requires the wings to be removed and stowed separately when not flying. The petrol-run ‘Terrafugia Transition’ , equipped with a 100 bhp engine, will be able to fly up to 500 miles at a stretch at 115 mph.
For Shihora, that would mean just a threehour ‘drive/flight’ from Rajkot to Mumbai, whenever he wants to. Frequent traveller that he is, it would also mean no more long waiting or driving. And since the ‘flying car’ can be parking in the garage of his house, he also does not need to book a hanger at the airport. Carl Dietrich, who runs Massachusettsbased Terrafugia, said: “This is the first really integrated design where the wings fold up automatically and all the parts are in one vehicle.” The company’s name is derived from the Latin for “escape from the Earth”. And this is one escape that a lot of people around the world would be avidly looking for!
Rajkot’s Subhash Shihora (inset) is all set to become the proud owner of the flying car (left).
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