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VISION 2020 A LOOK AT PROPOSED AVIATION POLICY

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YourGatewaytoUSA Enjoytheultimateflyingexperience TheNonStop B777-200LR DailyMumbai-NewY orkeffective1stAug2007

www.airindia.in

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EDITOR-IN-CHIEF’S NOTE

Hum hain na!

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am not for a moment doubting the abilities of Praful Patel. After all, the man is a businessman, knows how to read a balance sheet, is worldly-wise and is smart enough to separate the phonies from the achievers. But does it give him the right to decide who will fly abroad and who will not?

Frankly, this ‘case by case’ basis that Praful has been so fond of quoting time and time again is nothing but a certain recipe for favouritism. It will give Mantriji the opportunity to tell friends that they can fly to the first world (London, New York, Singapore, etc.) and the rest of the pack can, by an application of the case-by-case formula, decide that they can take their aircraft to Burkino Faso or better still Papua New Guinea. If that’s not the implication then why not let whoever wants to go wherever they want to.

If that’s not enough, Praful is still not clear if the five-year regime that is in place for airlines to fly overseas will be modified any time in the near future (the matter is pending with a GoM at the moment). In a recent interview, Captain Gopinath of Air Deccan was critical of the Ministry of Civil Aviation for allowing Tiger Air (Singapore) and Nok Air (Thailand) with a mere four or five aircraft to come into India but not allow his own Air Deccan that has more than 45 aircraft to fly foreign routes.

And, both these airlines are less than five years old. Etihad from Abu Dhabi, for example, has been given a string of routes into India but has only completed four years this July. So, why this double standard?

CRUISING HEIGHTS July 2007

If this case-by-case business is illogical and smacks of a dangerous discretion in favour of Rajiv Gandhi Bhawan, the FDI regime is much worse. One has the case where investments in cargo airlines will be allowed up to 70 per cent, but the same will not be available for domestic airlines. What is the logic? If security issues are the core of the argument then surely cargo can’t be an exception. Just the other day, the DGCA said no to a Chinese cargo company for security reasons, but no airline has been denied permission to operate on security grounds!

If market forces are dictating the pace of Indian aviation today, then it is for these very forces to tell us the way forward. So far, this year the story has been that of consolidation. As airlines merge and get together they are looking at every aspect of the business very carefully. If they can think of expanding into ground services, MROs and a host of allied businesses, surely they have the capacity to decide whether they need to fly overseas or not. They can also decide whether they need airline companies as their investors at least.

What the Ministry of Civil Aviation needs to do is put the policy in place, get the regulatory mechanism into action within reasonable limits and get out of the way. But that is easier said than done. The reason is simple.

Mantriji is a great friend of Shah Rukh Khan’s and like King Khan he, too, likes to say: Hum hain na!

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Off the cuff

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Problem with emissions Europe’s plan to include aviation in its emissions trading scheme has raised a variety of legal issues and has the potential to distort the market. The European Union’s emissions trading scheme (ETS), the world’s largest multi-country, multi-sector emissions trading system, covers about 12,000 installations in energy, metals, minerals and paper industries. The European Commission’s proposal to integrate aviation activities into the ETS will, if adopted in its present form, will affect commercial flights between airports in the EU from 2011.

Firstly, total allowances will be based on “historical aviation emissions”—the average of the total annual emissions in the years 2004, 2005 and 2006. This formula could have a detrimental effect on an industry that displays differences from other sectors. The rapid growth in aviation will result in fewer allowances being allocated to operators than they need. As improvements in technology and efficiency are hard to achieve and have a long lead-in time, aviation operators will be net purchasers of allowances.

With market prices at very low levels, the effectiveness of the ETS is being questioned. The likely impact on passenger ticket prices (and on freight costs) is also generally estimated to be relatively low. However, integration into the ETS part way through the second phase of the scheme, with aviation operators likely to be net buyers, could be one of several events that may cause allowance market prices to rise. The real impact could turn out to be a lot higher than many commentators expect. The prospect of potentially high costs may act as a further incentive for airline and airport operators to consider the scope for influencing the EC’s proposal.

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contents THE TIE-UP AND BEYOND p24 Brushing aside media talk about Vijay Mallya moving to take over Air Deccan, Capt G.R.Gopinath, in his first-ever major interview, speaks about why he was prompted to shake hands with Kingfisher and why he feels optimistic about the future.

PARIS AIR SHOW CARGO

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With a fairly high level of growth, the country’s civil aviation must look beyond the realm of passengers to include cargo and logistics CRUISING HEIGHTS July 2007

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This year’s Paris Air Show once again saw Indian players, specifically Vijay Mallya, in the limelight with his order for more airplanes. It also saw the battered Airbus’ fortunes rising considerably.

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ARTICLES NEWS VIEWS EDITS INTERVIEWS CLIPPINGS TRAVEL & TOURISM PROFILES NEWS DIGEST

INTERVIEW

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Captain Rahul Puranik has chalked out plans to launch the first intercontinental LCC, which will fly from the USA to India

CRUISING HEIGHTS K. SRINIVASAN Editor-in-Chief

TIRTHANKAR GHOSH Managing Editor

R. KRISHNAN

Consulting Editor

SUNIL BHASIN Editor (Quality)

CAPA SUMMIT

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SHIVANGI SHARMA Editorial Coordinator

The annual Aviation and Tourism Summit organised by the Centre for Asia Pacific Aviation saw the release of two studies: Indian Aviation—Market Overview and Outlook and the Aviation Investor Poll

RUCHI SINHA PRADEEP JHA Layout Artists

BHART BHARDWAJ Art Director

H.C. TIWARI

Consulting Photographer

RAJIV SINGH

Gen. Manager (Admn.)

RENU MITTAL Executive Director

GLOBETROTTING NEWS DIGEST

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A report on how Jet Airways has fared over the last year, the Cooperation MoU with the US, and the new greenfield airport near Chennai

An air ambulance Chetak helicopter has been ferrying grooms to wedding processions and even showering flowers on VVIP statues

BACK PAGE PERSPECTIVE

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The new civil aviation policy is clear in its focus.

Aptly titled Vision 2020, it seeks to bring about more liberalisation and more transparency.

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The world watched as Boeing’s star airplane, the Dreamliner, made its first appearance.

Hyped as the first green airplane, the 787 promises luxury and speed.

CRUISING HEIGHTS July 2007

Editorial & Marketing office: Newsline Publications Pvt. Ltd. C-15, Sector 6, Noida 201 301 Telefax.: +91-120-4257701-03 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.

Published by K. Srinivasan 4C Pocket-IV, Mayur Vihar Phase 1, Delhi 110091 and printed by K. Srinivasan at Nutech Photolithographers, B-240, Okhla Industrial Area, phase-I, New Delhi 110 020 Vol II No 3 Cover Photo: CH Archives

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Want that oomph “A course from IATA is of no help if one fails to have the kind of personality required for the cabin crew post. We take students from training institutes only when there is an urgent need. Otherwise, we prefer direct recruitments, after which the candidates go through our specialised training course.”

GoAir managing director JEH WADIA on the worth of airhostess academies.

Scope unlimited “Though tax and legal restrictions remain, we want to be a part of the India development story. There is much scope for transporting perishables and refrigerated goods by air from smaller towns, especially with more airport capacity coming up in second-tier cities.”

LETTERS TO EDITOR

THE STORY ON the Air Deccan-Kingfisher deal (Dingfisher—A Bold Gamble, June 2007), made interesting reading. CRUISING HEIGHTS provided a ball-by-ball commentary as it were of what went on behind the scenes. More interesting than that were your analyses of the whys and whats of the deal. After all, Kingfisher had a bigger objective in mind when it got into the deal. Everyone in the aviation industry is keenly watching how the marriage progresses. These are early days and the situation could change dramatically in the coming months.

R. Dutta, New Delhi June 2007

Lufthansa Cargo’s vice-president for Asia Pacific region MARTIN SCHLINGENSIEPEN on Lufthansa’s eagerness to launch cargo operations in India.

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YOUR COVER STORY (Merger Blues, June 2007), rightly termed as the brand-new saga of the Indian aviation sector, brought into sharp focus the glitches that will constrict the successful tie-up of the country’s two major airlines—Air India and Indian. A whole lot of creases have to be ironed out before the new Air India starts flying as an airline that represents India, both domestically and internationally. However, now that the move has been taken to join hands, here’s wishing the civil aviation minister and everyone concerned the best of luck in their new venture.

R.K. Singh, on email

THE COVER STORY (Merger Blues, June 2007) would indeed have been incomplete without your review of the important functionaries who will head the various departments in the merged set-up. You have posed a number of questions, and rightly so, because the last thing that the new Air India would want would be a conflict of interests among the bureaucrats. Thank you for highlighting those facts.

Nirmal S. Sandhu, Mumbai

Rising pink travellers “Thirty years ago, Asian women mainly holidayed with their husbands or their family. Now more women are choosing to travel with other women than with a male companion such as their husbands or boyfriends.”

Abacus CEO and president DON BIRCH on the rising number of women travellers in Asia.

First impression…

“We spend millions of pounds in doing up flat beds on the aircraft and making special cabins and the passengers experience their first evil experience at the airport before boarding a flight.”

Virgin Atlantic CEO STEVE RIDGWAY, on the need for greater coordination between airlines and security enforcement agencies to mitigate passenger troubles.

Just what we need “Transparent and simple rules on transfer of traffic rights and airport infrastructure would play a key role in facilitating airline M & As. This is very significant, especially in the case of international routes.”

IndusView director RISHI SAHAI on civil aviation minister Praful Patel’s decision to support mergers & acquisitions (M & As) in the sector with industryfriendly norms.

All correspondence may be addressed to Editor, Cruising Heights, C-15, Sector 6, Noida 201 301 OR mail to newslinepublications@rediffmail.com

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Alas “Two years ago Airbus was at the top, we were the best. We are no longer in the same situation.”

Airbus chief executive LOUIS GALLOIS before the Paris Air Show.

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More Indians visit Singapore

Airport land across the country faces the threat of encroachment, with illegal occupants having control of 788 acres in the high-security area near runways.

Mumbai airport: 247 acres.

Satna (in Madhya Pradesh): 150 acres.

Hyderabad: 97 acres.

Amritsar: 83 acres.

Kolkata: 75.7 acres.

In May 2007, Singapore welcomed 8,20,000 visitors, registering a growth of 7.1 per cent compared with May 2006, of which 98,000 were Indians. The 98,000 visitors from India in May 2007 is a new record for visitors arriving from India in any month. This is 20.9 per cent higher than the previous record of 81,000 visitor arrivals from India set in May 2006.

In April 2007, Singapore welcomed 8,18,000 visitors, of which 59,000 were Indians.

COLD STATS

Grabbed by encroachers

Courtesy: flightglobal.com

Only on paper “Those (unused) airports sound impressive on paper, but at most of these places they exist in name. These are existing strips from the days of World War II and are not really viable for sustained operations.”

Civil aviation secretary ASHOK CHAWLA making it clear that AAI airports will not be privatised.

Not in good taste “It’s sheer callousness. Jet Airways or JetLite is so scared that they are refusing to admit that the lapse has happened... They are trying to use the name of Air Sahara when the world knows Jet Airways owns it.”

Convenor of Disabled Rights Group, JAVED ABIDI, on Rajiv Rajan, a man suffering from cerebral palsy, being denied permission to fly Air Sahara.

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NEWS DIGEST

Jet Airways A report card

J

ET AIRWAYS INDIA registered a 93.8 per cent fall in net profit, at Rs 27.94 crore, for the fiscal ended March 31, 2007, as compared with a massive profit of Rs 452.04 crore in the previous fiscal.

Total income rose by 21.5 per cent, to Rs 7,401.31 crore, from year-ago figure of Rs 6,087.57 crore. At its board meeting in Mumbai, on June 26, 2007, it was announced that during the fourth quarter, ending March 31, 2007, the airline recorded a 61.24 per cent fall in its (stand alone) net profit to Rs 88 crore compared with Rs 227.12 crore net profit registered in the fourth quarter ending March 31, 2006. The Q4 results were really encouraging for Jet, as in the previous three quarters it made a loss of Rs 60 crore.

It may be stated here that part of the fortunes came from the sale and lease back of four Boeing aircraft. Although analysts have interpreted Jet results differently, the fact remains that despite the bloodbath in the domestic skies and being a fresher in international routes, Jet has put up a commendable show. While domestic operations remained profitable and might have been more but for the drag effect of the first instalment of Air Sahara takeover, its international operations appear to be promising. On a stand alone basis, as stated, Jet’s net profits fell

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by 93.82 per cent, to Rs 27.94 crore, notwithstanding the rise in its net sales by 23.95 per cent, to Rs 7,057.70 crore from Rs 5,693.70 crore in the previous fiscal.

The total income also grew by 20.63 per cent as against Rs 6,135.54 crore a year ago. The domestic operations in Q4 accounted for 76 per cent of the revenues as against 87 per cent in the Q4 of the previous year. This reflected the growing contribution of international operations of Jet Airways, which proposes to fly to the US beginning August 5, 2007, and soon to Canada and other parts of Europe besides Africa and, if permitted, to the Gulf as well.

A slow down overall capacity addition by the industry as a whole had some kind of salutary effect on various players.

Against an industry capacity growth of 36.7 per cent in Q4 of 2006-07, the growth was as much as 48 per cent, 40.8 per cent and 44.4 per cent in the previous three quarters Q1, Q2 and Q3, respectively. Jet Airways’ total employee strength rose from 8,727 in fiscal 2005-06 to 10,950 in 2006-07 and much of it was accounted for by pilots, engineers and cabin crew. The private carrier’s international operation is likely to account for 50 per cent of its overall revenue by 2010 or earlier. Overall, an estimated five per cent increase in blended yields, savings made on commission payouts, advertisements and marginally a better passenger load factor of 72.6 per cent helped Jet turn in better performance by the turn of the fiscal 2006-07.

Jet Airways will incur a capital CRUISING HEIGHTS July 2007

expenditure of $2.6 billion till October 2008. Nearly 85 per cent of the capex, meant mainly for funding aircraft acquisition, is likely to be raised through debt.

The aircraft expects to take delivery of 19 aircraft before October 2008. According to Jet Airways General Manager K.G. Vishwanath, “We are not completely out of the woods yet; on pricing things are looking better”. Nearly $400 million are being raised by Jet through a rights issue.

A committee of the board would determine the timing and pricing of the issue.

This particular fund raising comes soon after Jet Airways took over Air Sahara and rechristened it as JetLite, which, it is now expected, may even fly international routes.

According to Jet Airways CEO Wolfgang Prock-Schauer, Jet Airways requires immediately Rs 200 crore to revive JetLite. As Vishwanath put it, only 17 of JetLite’s 24 aircraft are flying. As per the airline’s schedule, two more aircraft will start flying by the first week of this month and five more by October. Significantly, when the tug-of-war continued between Jet and Air Sahara, many employees of the latter quit and as on date its employee strength has come down from 4,100 to 2,100. At present JetLite has two-class configuration, which will be converted soon into a single-class economy configuration. Perhaps the likes of SpiceJet, GoAir and even the every optimistic Gopinath of Air Deccan better watch out. Vishwanath said the yields of JetLite are slightly rising.

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Cooperation MoU INDIA AND THE US have signed an MoU in Washington DC on June 21 to establish an Aviation Cooperation Programme that will assist India’s aviation infrastructure. It was signed by the Civil Aviation Minister Praful Patel on behalf of India and Mary Peters, Secretary US Dept of Transportation. Under the agreement, USTDA, MOCA, FAA, public sector undertakings of both the nations will partner with the US industry to identify and support modernisation of India’s civil aviation sector.

The programmes to be covered will include those relating to safety, increasing air service quality, operational efficiency, flight security, airspace management and system capacity. USTDA will provide funding for training and technical assistance programmes, while the FAA and US avia-

tion companies will extend support. Before the signing event, at a ceremony organised by the US-India Joint Business Council, Patel said the primary focus of the Indian government was to work actively on the infrastructure front. A major problem India faced was it did not have airline hubs and also did not fully utilise all of its airports.

Most of India’s international air traffic flew in through Singapore and Dubai, which needed to be corrected immediately. Similarly, he was also keen that India have more cargo facilities and distributed widely. He invited FedEx, UPS and others to look seriously at India. He proudly said the cargo hub coming up in Nagpur will do to cargo what Memphis had done to the US. India was looking at creating eight to ten mega hubs.

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Air France’s ‘380’ plans

NEWS DIGEST

MODERNISATION OF DELHI and Mumbai airports may lead to change in flight plans of mega carriers. Air France has recently announced that it may become the first international airline to fly the super jumbo A380 connecting Delhi and Mumbai to Paris by early 2010. The announcement came

at a recent conference addressed

by Air France-KLM combo, which has 42 flights a week out of Delhi, Mumbai, Hyderabad, Bangalore and Chennai. Two years ago, it had only 30 flights a week.

The combo has now proposed to fly two additional flights from Chennai and Hyderabad by the

S’perumbudur in doubt THE COMMITTEE ON INFRASTRUCTURE, headed by the Prime Minister himself, has decided that the existing airport at Chennai be modernised by AAI, while the fate of who will build the new greenfield airport has been left open. It is estimated that 4,820 acres will be required for the new greenfield project, expected to come up in Sriperumbudur—Tiruvallur taluks. The committee has asked for details and possibly a feasibility report before it gives a final decision.

But the Tamil Nadu Chief Minister M. Karunanidhi, who got a unanimous resolution passed by the state assembly, is still keen that it should be done only by AAI. When asked about it, the civil aviation minister had earlier said, “There is no question of AAI building the new greenfield air-

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port (second airport) near Chennai.”

Meanwhile, the modernisation and expansion work at Kolkata airport—Netaji Subhash Chandra Bose International Airport—is likely to start in January next year. According to Civil Aviation Secretary Ashok Chawla, who personally apprised West Bengal Chief Minister Buddhadeb Bhattacharjee that AAI will undertake the modernisation job, which is expected to cost Rs 1,500 crore and completed in 30 months. The job will include construction of an integrated terminal to handle nearly 16 million domestic and four million international passengers. The two existing runways will be extended and an additional hangar will be built as part of the project. West Bengal government has been requested for additional land to build a third runway.

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end of 2007 and add one more from Kolkata next year. AF-KLM together connect 240 destinations worldwide with 2,400 flights a day. It has a fleet size of 569 aircraft, the largest in the world and Air France has also ordered 12 more A380s and their deliveries will begin in 2009.

New airport at G.Noida GREATER NOIDA on the outskirts of Delhi would soon have its own airport. The Ministry of Civil Aviation has put the airport project at Greater Noida in Uttar Pradesh on fast track and the in-principle approval of the central government would be granted in three months.

The proposed airport project will be spread out across 1,500 hectares and would cost over Rs. 3,500 crore. The proposal for the airport project was first received by the ministry of civil aviation from the state government in 2001 and technical approval for the selected site was conveyed to the ministry in 2003.

The purposed site, which is about 72 km from Delhi and 120 km from Agra, forms part of the U.P. Government’s Taj International Aviation Hub project.

As per the feasibility report of the State Government, the site has been selected keeping in mind all strategic points so as to have the least environmental impact. The Taj Expressway Authority will be appointed as the ‘sponsor of the project’ and will be responsible for land acquisition in accordance with the policy of the UP government.

Evidently, the Noida airport will be the country’s second largest airport in land size—next only to the existing Delhi airport —at 3,700 acres. According to plans, the airport will attract more revenues from non-aviation activities, including hotels and malls, and will be built through a public-private partnership.

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CAE gets a firm handshake

QUEBEC-BASED Canadian Aviation Electronics (CAE), which provides simulators and pilot training solutions, has proposed to invest between $15 million and $20 million in India’s aviation training centre, which is being located inside the Bangalore International Airport Limited. While the training centre is likely to become operational by November, an Indian equity partner for the project is still being identified. Independent of this development, the state-owned AAI has

signed an MoU with CAE to establish the National Flying Training Institute (NFTI) at Gondia, in Maharashtra.

Besides, the ministry of civil aviation has also signed an MoU with CAE for managing Indira Gandhi Rashtriya Uran Academy (IGRUA).

Both MoUs were signed during the Paris Air Show. As per the CAE-AAI MoU, a JV will be floated, in which CAE would hold 51 per cent stake and the rest would be with AAI. NFTI is expected to cost Rs 115 crore and provide ab initio training to civil pilots in fixed- and rotary-wing aircraft. As for the IGRUA MoU, CAE will assume responsibility of IGRUA, including maintenance of aircraft, flying operations, ATC, runway maintenance, NAV aids, firefighting facilities, etc.

Accordingly, the capacity of IGRUA to train new pilots will increase from 40 cadets to 110 cadets. The contract will be initially for 10 years.

CRUISING HEIGHTS July 2007

Aviation row ends INDIA AND KUWAIT reached an agreement recently and resolved the dispute on air traffic rights, over which the Gulf state had threatened to stop Indian national carriers flying there.

The points in agreement include additional 4,000 seats taking the total to 12,000 seats in each directions.

India agreed to allow Kuwait carriers to operate flights to Hyderabad and Kolkata and later Bangalore from the winter 2008 schedule.

The problem began when Kuwait decided to stop Indian carriers from flying into the country from July 1. In a bid to break the deadlock, a highlevel Indian delegation comprising civil aviation ministry joint secretary R K Singh and representatives of Air India and Indian were in Kuwait for the talks.

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PERSPECTIVE

Praful Patel’s bold MOVES FOR THE FUTURE

In tune with the fast-changing global scenario, the new civil aviation policy is clear in its focus. Aptly titled Vision 2020, it seeks to bring about more liberalisation and more transparency.

A close look at the new policy.

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T IS VERY difficult for us to say whether Civil Aviation Minister Praful Patel is happy or unhappy when the Union Cabinet, in midJune, referred his new policy formulation, wrapped up in a document titled Vision 2020, 2007, to the all-pervasive Group of Ministers (GoM).

But considering the fact that serious thinking had gone into its making, the minister certainly deserves to be complimented for cleverly burying his bold intention in an otherwise harmless looking document. The Vision 2020 document, or should we say the New Civil Aviation Policy (NCAP) on the face of it, only seeks to replace the various notifications, circulars, etc., issued at different times by the ministry of civil aviation. But in terms of focus, it specifically aims at ushering in an even more liberal era in the fast growing Indian civil aviation industry, which has grown by over 30 per cent in terms of

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The Vision 2020 document on the face of it only seeks to replace the various notifications, etc.

But in terms of focus it aims at ushering in an even more liberal era in the civil aviation industry.

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passenger growth in the last three years and is likely to post at least 22 per cent in terms of compounded annual growth rate (CAGR) till the year 2020.

It wants to clear the way for all stakeholders, particularly the investor community, by laying down transparent rules governing start-up airlines, funding M & As, financing aircraft purchase or lease, etc. It has also dealt with other related areas, such as airport development, induction of new technology, corporatisation of the state-owned Airports Authority of India (AAI) by seeking to separate its ATM (Air Traffic Management) responsibilities.

According to the policy, the strategy to be adopted and implemented would result in doubling the capacity of international traffic to and from India in the next three to four years. At the same time, greater liberalisation in international services would have immediate impact on tariff levels and

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globally competitive fares would directly benefit consumers in India. In the domestic sector, the new policy initiative would increase capacity and connectivity by facilitating entry of more carriers. Indian carriers may acquire more than 450 aircraft in the next five years. The new policy also encourages regional connectivity to remote regions and operations on commercially unviable routes by providing explicit subsidies to airlines. At present it is mandatory for domestic carriers to fly a minimum number of flights to socially important, but commercially unprofitable, routes like the Northeast. With the introduction of explicit subsidy scheme, to be delivered to the airline that bids successfully for an unprofitable route, current mandatory clause of must-fly to some socially important routes may be abolished.

As per Vision 2020, the Indian aviation sector has the potential to absorb $120

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billion of investment. The outlook for the year 2020 is as follows:

The new policy also encourages regional connectivity to remote regions and operations on commercially unviable routes by providing explicit subsidies to airlines CRUISING HEIGHTS July 2007

The fleet size in commercial airline sector will be approximately 1,000 aircraft, requiring aircraft orders of $80 billion or more.

The domestic passenger numbers could reach 150 million to 180 million, with international traffic of 100 million.

The general aviation fleet will be approximately 500 aircraft, and the helicopter fleet is expected to be another 500.

The air cargo movement is expected to reach 9,000 million metric tonnes combined for international and domestic sector.

The airport system may be handling over 400 million passengers, requiring an investment of approximately $30 billion.

Significant investment will continue to

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PERSPECTIVE

meet the requirements of allied services, such as ground handling, cargo facilities, training and maintenance.

The civil aviation sector has the potential to absorb three million jobs directly by 2020, which would be further supplemented by direct growth in tourism and related industries.

Vision 2020 seeks to address the requirements of the sector over the next 15 years.

Government through appropriate initiatives, would address issues of greater affordability and connectivity in the domestic aviation sector, development of regional air connectivity within the country and promotion of general aviation and aviation training.

The government will undertake measures aimed at lowering the overall systemic costs of the civil aviation sector, instituting a liberal fiscal regime and improving coordination between various agencies.

The government will encourage investments, including foreign investments, induction of advanced technology and best industry practices.

Through appropriate policy initiatives, the government would address the requirements of the airline industry to consolidate and achieve the optimum economies of scale of operations.

The government would focus primarily on policy making and regulatory functions. Private participation in civil aviation will be encouraged to promote competition, add capacity, ensure optimum efficiency, and facilitate investment. The government would provide a stable and predictable policy and regulatory environment for attracting competitive private investment to accelerate orderly growth of the Indian civil aviation sector.

The NCAP has stated that the basic legal framework for regulating air transport services in the country is provided in the Aircraft Act 1934 and Aircraft Rules made there under. The substantive rules under the Aircraft Act 1934 were promulgated in 1937, which have been revised from time to time. But with various developments taking place in the aviation sector, both in India and at the global level, it would be necessary to bring about a comprehensive legislation to replace the existing Aircraft Act and Rules made there under.

But, as if inserting a rider, the NCAP simultaneously notes the following on domestic services: “Permission to start scheduled passenger and cargo transport services is given through a transparent mechanism after assessing a company’s

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The NCAP has stated that the basic legal framework for regulating air transport services in the country is provided in the Aircraft Act 1934 and Aircraft Rules.

But with developments taking place in the sector, it would be necessary to bring about legislation to replace the existing Aircraft Act and Rules.

CRUISING HEIGHTS July 2007

capability to provide safe and reliable services. For an orderly growth of the Indian civil aviation sector and to protect user/investor interest, ministry of civil aviation will regulate such permissions in an appropriate manner.� By stating this, the ministry has tried to retain all the discretionary powers, instead of letting the market decide. The ministry has already changed some basic requirements for entry by private players intending to start new airlines.

Till now airlines needed minimum five aircraft and Rs 30 crore (for airlines operating aircraft with take-off mass exceeding 40,000 kg) or Rs 10 crore (for airlines operating aircraft with take-off mass less than 40,000 kg) paid-up equity for domestic scheduled operations. Stating that since civil aviation sector is highly capital intensive and requires high technical and safety standards, infusion of additional capital would be a pre-requisite for any addition in the fleet size. Accordingly, the new rules that have been introduced and implemented include the following: Airlines operating aircraft with take-off mass exceeding 40,000 kg: for five aircraft, the paid-up equity capital will now be Rs 50 crore and for each addition of up to five more aircraft the additional equity investment of Rs 20 crore will be required.

Airlines operating aircraft with take off mass not exceeding 40,000 kg: for five aircraft, the paid-up equity capital will now be Rs 20 crore and for each addition of up to five aircraft additional equity investment of Rs 10 crore will be required.

All existing private players/operators have also been instructed to comply with the above requirements and wherever necessary raise their paid-up capital to prescribed minimum levels within a maximum period of one year. This deadline will end very shortly.

To improve regional connectivity and develop regional hubs, the civil aviation ministry has proposed that airlines having a fleet of only less-than-80-seater aircraft and which operate exclusively on regional routes from any one metro airport (Delhi, Mumbai, Kolkata, Chennai, Bangalore and Hyderabad) or any other airport will be exempt from payment of all airport and navigation charges for the first five years.

A non-lapsable Essential Air Services Fund (EASF) will be established to provide explicit subsidy support to essential, but uneconomical, domestic air services and commercially unviable airports. The idea is to provide regional connectivity and ensure development of uneconomical airports through the EASF. A cess levied on both domestic and international air travel will constitute this fund. Priority will be given to

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Northeast India, Jammu and Kashmir, Andaman and Nicobar and Lakshadweep islands.

The ministry also proposed the establishment of an appropriate ground structure for cargo operations, including that of cold-chain facilities at airports and provide fiscal benefits to dedicated cargo airlines. Civil Aviation Minister Praful Patel has taken personal interest in actively promoting Nagpur as a cargo hub, which is physically in the centre of India, if one looks at the map of India. Nagpur has been chosen as the hub and spoke for cargo operations, both domestic and international. The new policy proposes to grant a five-year holiday from payment of airport and navigation charges by all airlines that undertake cargo operations to and from Nagpur in the domestic and international sectors.

Another proposal in the yet-to-beapproved NCAP is the recommendation to lower the cost of aviation turbine fuel (ATF). The ministry of civil aviation has stated that the existing incidence of excise duty/taxes, import duty and sales tax, besides other levies, imposed on ATF need to be rationalised and ATF notified as ‘Declared Goods’ under the Central Sales Tax Act in consultation with state governments. It will also simultaneously dismantle monopolies in the supply of ATF by state-owned oil companies and throw open the doors to the private sector oil companies as well. Reliance Industries, India’s biggest private sector and which owns the world’s second largest refinery, already makes ATF, but is unable to sell directly to airlines. Earlier this month the central government gave permission to Essar and oil major Shell to directly import and market ATF. The problem, however, is that the hydrant through which ATF is taken to the aircraft is owned and operated by state-owned oil companies in metro airports for historic reasons. The move to demonopolise ATF supply assumes importance in this context. The ministry has proposed to rationalise airport user charges that include passenger service fee collected

by AAI, which is used for airport security and providing passenger facilities at various airports. The ministry has stated that any shortfall will be made up by the centre.

In the area of providing ground handling services, the ministry got clearance of the Union Cabinet earlier this year. But it has not been notified because of objections.

Earlier only state-owned Air India, Indian and Airports Authority of India were allowed to provide ground-handling services, while private domestic carriers were allowed self-handling. In the new policy, all private Indian carriers have been barred from providing ground handling

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To improve regional connectivity, the ministry has proposed that airlines be exempt from payment of all airport and navigation charges

CRUISING HEIGHTS July 2007

including self-handling. On the contrary, it has been made mandatory that there will be three types of ground-handling agencies.

These include Air India-Indian combine (as they will be merged in another month), Airports Authority of India, the private promoter modernising the particular airport in India, say, GMR in Delhi and Hyderabad, GVK in Mumbai, Swiss Port-Siemens-led consortium in Bangalore, etc. The ministry of civil aviation made it mandatory for each one of the ground-handling agencies to mandatorily have a JV partner, which should either be a foreign ground-handling company or a foreign airline experienced in providing such services. The selection of two ground-handling agencies, other than the promoter of a particular airport, would be done through bidding process. The

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PERSPECTIVE

Vision 2020: The moves within WHILE THE New Civil Aviation Policy (NCAP) is based on various discussions that evolved over the last four to five years, its crystallisation into a single document—Vision 2020—failed to pass muster in the Union Cabinet meeting of June 14, with various shades of political opinions within the ruling UPA coalition government. Both Patel and his NCP boss Sharad Pawar, if insiders are to be believed, have been allegedly accused of taking sides.

For instance, it was earlier believed that the two were close to Jet Airways’ promoter Naresh Goyal. But, of late, their detractors say, they have moved closer to Jet’s competitor Kingfisher and its promoter, Dr Vijay Mallya. Interestingly, Mallya has been campaigning since he launched his airline two years ago, in May 2005, that the existing rule of being in the domestic airline business and continuously flying for five years with a minimum jet fleet of 20 aircraft needs to be dumped and Kingfisher should be also allowed to fly foreign routes. In anticipation of such permission, he even booked wide-body aircraft and expects to start his non-stop Bangalore-San Francisco service.

The main point of difference that resulted in the proposed NCAP being referred to GoM was a specific clause that sought to reduce the period for domestic private carriers to fly foreign routes from the present five years to, say, even startups. Had the policy been cleared, it would have enormously benefited Kingfisher, SpiceJet and even Air Deccan and in the process brought in untold competition to Jet Airways as well as state-owned Air India and Indian?

A week after the Union Cabinet sent his policy to GoM, Patel told the media in Paris, on the occasion of the bi-annual Air Show, that “it was likely that the policy would be approved”. Praful, who steadfastly rejected the request of others earlier, softened his stand when the request from Mallya became unbearable. Praful Patel said in the Paris Air Show that his ministry was only proposing that the decision to fly foreign routes be based on the capabilities of the airline and not just track record, like how many years it has flown inside India.

What a classic turnaround? While Patel has made 14 new airline start-up

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applicants to wait for more than two years on the plea that the government needs time to study their business plan and also to declog the airport infrastructure, he never shuts the door on the existing airlines to merrily import as many aircraft they want.

This is a classic case of crony capitalism, which, luckily, a few in the Union Cabinet were able to read between the lines. While addressing a meeting of the US-India Joint Business Council in Washington on June 21, Patel said when the five-year rule was introduced by the Indian Government in December 2005, carriers such as SpiceJet and Kingfisher did not exist. So if we go by the same logic, the more-than-a-dozen new applicants that are waiting also did not exist, but they are being denied to even start domestic operations, on which there is no Union Cabinet ban.

To protect state-owned Air India and Indian and facilitate their merger, the policy also seeks to extend the Gulf route reservation to two official carriers till 2010.

As per the earlier deadline, the reservation is to expire on December 31. This expiry clause led to a demand to further liberalise and allow more Indian carriers to fly foreign routes even if they did not fulfil the mandatory five-year criteria.

When the policy allowing private Indian carriers to fly foreign routes was introduced in December 2004, besides stateowned Air India and Indian, only two private carriers qualified: Jet Airways, set up in May 1993, and Air Sahara, also started in 1993. Many private carriers, including UB, parent company of Kingfisher, were launched when the government of India allowed the private sector to enter the civil aviation business, first as air taxies and later as scheduled domestic carriers. Among the casualties was also Dr Vijay Mallya’s UB Air. The second round of new players started entering from 2004 onwards when Air Deccan, India’s first LCC, got a licence, followed by IndiGo, GoAir, SpiceJet, Paramount and Kingfisher. A number of smaller players were also allowed to enter domestic aviation business. The virulent competition that was set off resulted in yields/fares falling and the players getting into the red, including the first entrants.

After lobbying for relaxing the rules governing the permission to fly foreign

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routes for private domestic carriers, he believed that with policy change he would make Air Deccan his hub and spoke within India and his own Kingfisher’s A340-500 (to be delivered from February 2008 onwards), besides A330s, would begin international operations, including IndiaUS non-stop. Later on, his operations would be fortified by the induction of A380s and A350-XWB: a prime reason for his buying into Air Deecan.

Dr Mallya’s lobbying was perhaps equally matched by Naresh Goyal’s. The latter, according to industry sources, explained to some in the UPA government that the minimum five-year rule in airline business and minimum 20 aircraft should not be changed. Even though Kingfisher has on date over 45 aircraft, of which 22 are brand new A320s, he has been in the domestic airline business for only a couple of years.

He launched Kingfisher Airlines on May 7, 2005, and still has three years to go.

But the ministry of civil aviation argued that “in order to enhance international connectivity and optimally exploit the traffic potential in the international sector, scheduled Indian carriers with a proven track record or operating in the domestic sector and with a minimum specified fleet strength have been permitted to operate on international routes. On commencement of international operations, the carriers are not permitted to reduce their operations in the domestic sector. These requirements need to be reviewed in the light of connectivity to new stations and liberal bilateral exchange of traffic rights with the foreign countries. Ministry of civil avation will review these guidelines from time to time keeping in view the evolving needs and growth of the sector.”

It was this decision to review the current guidelines governing permission to domestic carriers to fly foreign routes that apparently led to lobbying, resulting in the reference to the Empowered Group of Ministers. In anticipation of clearance, Mallya announced at the recently concluded Paris Air Show that he would buy up to 50 Airbus wide-body aircraft and some narrow body as well. But it was only an MoU and as such did get included in Airbus Industrie’s total firm order tally. However, it is worth waiting for both.

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ministry of civil aviation capped the FDI in ground handling at 49 per cent.

The NCAP had also stated that air traffic control functions, currently vested with the state-owned Airports Authority of India, should be separated or hived off as a separate company. It could be something like the NATS in the UK, where ATC functions of some airports have been outsourced. Besides it also wanted the use of defence airports for use by civilian aircraft for take-off, etc., during peak times.

But much to the disappointment of many, ministry of civil aviation refused to hike the existing 49 per cent FDI limit in domestic airlines of India and retained the bar on any FDI directly or indirectly from a foreign airline. Even foreign equity funds in which airline firms have stakes are barred from investing in domestic carriers. Civil Aviation Minister Praful Patel, while inaugurating the cargo services of Air India in Mumbai on June 27, announced that the ministry was framing a policy to hike FDI in cargo carriers to 74 per cent. But what is inexplicable is the continued resistance to allow higher FDI, including from foreign airlines in domestic carriers. After all, every airline worth its salt in India, particularly those that have taken over weaker cousins, are looking everywhere for more money.

Even Air India and Indian will be looking for more dough, as otherwise the seniors of the ministry would not be saying that the merged official carrier will come out with an IPO next year or so.

These aspects of NCAP have naturally evoked strong reactions from other ministries.

The ministry of finance has apparently disapproved certain aspects of NCAP. It has not taken kindly to suggestions of the ministry of civil aviation wherein the latter recommended rationalisation of taxes and levies imposed on ATF besides redefining it as a ‘Declared Good’. The finance ministry has also disagreed with the idea of providing exclusive subsidy to regional carriers from the Consolidated Fund. The finance ministry feels it is its prerogative to frame proposals for rationalising taxes and levies, including on ATF. The ministry of home affairs has expressed serious reservation on making it compulsory for Indian ground-handling agencies to include foreign groundhandling/foreign airline companies as JV partners. The home ministry said this had serious security implications and hence be rejected outright. The home ministry had already rejected the application of Dnata, a subsidiary of Emirates, to team up with Air India to provide ground-handling services at the upcoming Shamsabad airport in Hyderabad.

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Praful Patel, while inaugurating the cargo services of Air India in Mumbai on June 27, 2007, announced that his ministry was framing a policy to hike FDI in cargo carriers to 74 per cent. But what is inexplicable is the continued resistance to allow higher FDI including foreign airlines in domestic carriers.

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The ministry of defence, midst of mega fighter-aircraft acquisition programme, has objected to some aspects of NCAP. For instance, it expressed opposition to freeing up the Indian air space the way it has been demanded by the ministry of civil aviation for greater movement of civilian aircraft and thereby also enable foreign flights by few more domestic private carriers. Serious apprehension has also been expressed at the suggestion to ATC functions of AAI, which may not be just in terms of potential revenue loss, but also possible security violation.

The planning commission and the ministry of commerce have their own objections. While the planning commission, the chairman of which is the Prime Minister of India himself, has objected to waiver of landing and navigations charges for start-up regional carriers, including at the proposed Nagpur cargo hub, the commerce ministry feels the move by civil aviation ministry to make only one cargo hub in Nagpur will be inadequate. Besides, there is also need for evacuating agricultural produce for exports through more cargo services. Perhaps Praful Patel’s observation in Mumbai, while launching Air India’s cargo airline, that he favoured 74 per cent FDI in cargo carriers, should partially meet the request of his cabinet colleague and commerce minister, Kamal Nath.

Thus the present 49 per cent cap on FDI in domestic airlines and also barring foreign airlines from directly or indirectly picking stake in domestic airlines remains, though the commerce ministry has reportedly decided that NRIs be allowed 100 per cent FDI through the automatic route and also permit 100 per cent FDI in ground-handling business, which security agencies often prevented in the past. Thus FDI by foreign airlines in domestic airlines may have to wait for some more time. This may also

apply to ground-handling business.

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GLOBETROTTING

AT A GLANCE

Viagra cures jetlag

Blasted by bees

n an unusual discovery, scientists say, taking Viagra could help flyers recover from jetlag. But it will work only if they travel from west to east. Patricia Asgostino and researchers in Argentina gave hamsters Viagra at night before switching on the lights six hours earlier than usual. Experiments revealed that they recovered 25 to 50 per cent faster after consuming the drug. The drug works by interfering with an enzyme that regulates the body clock. Airline crews regularly crossing time zones may now be able to perform better.

Palmair Boeing 737 flight to Faro, Portugal, had to return to Bournemouth airport an hour after take-off because of a power surge. On inspection engineers discovered thousands of dead bees in the engines—the holiday jet carrying 90 passengers had flown right into a huge swarm of bees. They, then declared the aircraft unfit for flying. The holidaymakers were delayed for eleven hours before making the trip on another aircraft. The drama came two days after a swarm of 30,000 bees caused panic on Bournemouth beach.

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Air ambulance flies

grooms

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he rule book of the Director General of Civil Aviation— responsible for implementing, controlling and supervising airworthiness standards, safety operations, crew training in India—has made an air ambulance do everything except carry out medical duties.

The air ambulance, built by Hindustan Aeronautics Limited (HAL) two years ago using a second-hand Chetak, has been flying bridegrooms to their wedding processions, showering flowers over VVIP statues and for temple functions in Bangalore. The reason: the rulebook does not permit helicopters to fly in areas not designated for landing, and there are not many designated areas in the state. So of what use is an air ambulance if it cannot land at the spot of emergency;

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A

Cargo hub sparks off tonsuring spree

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after all emergencies do not confine themselves to any location or time.

Further, who bears the cost of the service—the patient, treating hospital or insurance company? So its logbook entries include only a few medical sorties, notable one being when it once ferried a Japanese woman with a broken spine from Badami House to a private hospital. Others are when it dropped a wedding party in Tumkur, and showered flowers on occasions.

In a heartening move, the Army has asked HAL to build 12 Advanced Light Helicopters, and all Command Hospitals in the country will be equipped for take-off and landing of these choppers. These are much superior to Chetaks and can be used in difficult conditions.

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n Shivangaon village, Nagpur, over 300 men tonsured their heads to protest against the cargo hub project. Not to be left behind, two days later, a group of around 40 women, led by a 16-year-old college student, Shrutika Ambhore, came forth to have their heads shaven. They had to drop the idea after being convinced by the village elders that the tonsuring of the womenfolk would be a matter of disgrace for the entire village.

Rasika, the elder sister of Shrutika, is a science graduate and desired to make a career in the aviation industry. However, she was rejected in an interview for the post of a ground duty staffer in Kingfisher Airlines on the ground that she was too nervous. She feels the well-dressed city girls, who undertook training from various institutions, were preferred over her and probably it was because of her dress and background that she was rejected. Shrutika, due to take her HSC examinations, aspires to become an innovative farmer, but fears she would be left with no land due to the takeover. Her father Bapu Ambhore says the family originally had 12.5 acres of land, of which four acres were taken away by the IAF while another four acres were reserved for the cargo hub project, leaving hardly four acres with them.

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PIA fined for breaking noise limits

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he Pakistan state carrier, Pakistan International Airlines (PIA), has been fined £13,300 for breaking noise limits 20 times at Manchester Airport in 2006. One of the breaches happened at night, others in daytime. The planes operated by PIA broke noise limits more than those of any other company’s for the second consecutive year. A total of 13 companies were fined for noise breaches in 2006. The second worst offender was Sweden’s Viking Airlines, fined £9,750 after it broke the limit 15 times, and Excel Airways was third and was fined £8,000 for 13 breaches. In 2005, PIA was fined £24,500 after it broke the limit 34 times.

Airhostesses turn shopping consultants

No munching own stuff

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he airhostesses of Nok Air, which recently began flights into India from Bangkok, will now assist passengers with their shopping and that, too, for just Rs 10,000 (return ticket cost, including taxes) on a Bangalore-to-Bangkok flight. They will guide passengers about the exchange rate and public transport as well, so that they don’t feel lost. Patee Sarasin, CEO of the Thailand-based LCC says that to survive, only offering low fares is not enough. It seems the airline has learnt its lesson from Jetstar Asia, an LCC, which stopped its operations from India last year when Singapore Airlines dropped its fares to match the low fares.

Positioning itself as ‘shoppers airline’, passengers flying on Nok Air can also avail of a 10 per cent discount on brands such as Esprit, Mango and Timberland at Bangkok’s famous Siam Paragon shopping mall.

Airline staff convicted for redirecting flight

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Shilpa Shetty, too, not spared

B

ollywood diva Shilpa Shetty blew her lid when she, accompanied by her mom, dad and sister, landed in the UK recently. However, her rage was not unjustified.

The 32-year-old actress had a fair ground for being angry at the Indian Film Academy Awards in Sheffield, London, as all her luggage disappeared on the flight from India. Consequently, she put off the interviews she was supposed to give while in Sheffield.

Catch me if you can

S

hu Shi turned up at Beijing Capital International Airport, fully dressed and equipped like a pilot is, and boarded the flight to Guizhou, in China. He also possessed various identification documents. Nobody suspected he was pulling off a fast one, like Leonardo DiCaprio did in the 2002 Steven Spielberg flick, Catch Me If You Can, until the plane’s pilot noticed his aviation knowledge to be at odds with reality. The 23-year-old found police waiting for him on his arrival. Incidentally, DiCaprio, too, was discovered. Shu was detained for 10 days and fined 500 yuan (65 dollars).

CRUISING HEIGHTS July 2007

Illustrations: Mita Roy

t was July 2004. All the passengers had boarded the latenight flight of AirOne, an Italian airliner, flying from Milan to the Sardinian city of Cagliari. Everything was going off smoothly when the crew broke the news that they would land in Alghero, instead of Cagliari, on the other side of the island. The reason given was that because the flight was delayed, it could not land in Cagliari, where the runway was closed at night for maintenance. Not everyone was happy with the change, but a few passengers decided to not take things lying down. The next day they sued AirOne. In a first for Italy, they were found guilty of aggravated fraud for not alerting passengers about the change of destination, and a Milan court handed out suspended jail sentences to two managers and a pilot at the airline. The proscutor told the court that passengers are thinking human beings and not merchandise; they are people whose rights have to be respected.

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n a bid to earn some extra moolah, Flybe, an LCC, which operates 24 routes from Scotland, has banned its passengers from eating their own food aboard flights, and only items bought on board may be consumed there.

The Air Transport Users’ Council, the passenger watchdog, condemned the Flybe restriction and called it a mean move to make money. The airline, on its part, claimed that the ban was aimed at foods such as peanuts, following complaints from passengers with allergies about other people eating them; therefore, as a result of allergens and potential allergies, it was sought to control and discourage passengers from bringing their own food on board.

Flybe, which took over British Airways’ nonLondon routes from Scotland this year, claims to be Europe’s largest regional airline.

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Airbus, Boeing fly high The Paris Air Show saw the traditional trans-continental rivalry between the two top airplane manufacturers in the world. While Airbus made up on lost ground as far as the order books were concerned, Boeing did not do too badly either. A close look at what went on at the show.

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Vignettes from the Paris Air Show (clockwise from left, top): Spectators watch as a A380 flies overhead: Qatar Airways chief Al-Baker (left) signing the deal for the purchase of 80 A350XWBs; Japan showed off its aerial might when Mitsubishi Heavy Industries, Ltd. exhibited a full-scale mock-up of the Mitsubishi Regional Jet (MRJ), a nextgeneration regional jet, at the show; Airbus COO Fabrice Brégier speaking to reporters; Air AsiaX placing the order for 15 A330300s; and, FAA Administrator Marion Blakey tries the pilot’s seat of the A380

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HE WORLD’S biggest air show was bigger and better this year but the main story was the same: the rivalry between Boeing and Airbus dominated the 47th edition of the Paris Air Show.

According to The Wall Street Journal, the European planemaker had received 680 new airplane orders through June 30, a healthy 131 aircraft over Boeing’s announced year-to-date totals. Airbus received a significant boost from the air show where it racked up 748 orders and commitments from customers.

What a change! The announcement was a marked reversal of fortunes for Airbus compared to last year, when Boeing led Airbus through early July: 480 orders to 117.

Boeing went on to accumulate a record 1,044 orders for 2006, compared to 824 for Airbus. Airbus also leads Boeing on the number of planes delivered to customers -a significant tally, as that’s when the manufacturer gets most of the money for the aircraft. Over the first six months of this year,

If Airbus continues the pace it set for the first six months of the year, 2007 could go down as the year Airbus reclaims the sales crown, which it relinquished to Boeing last year for the first time in five years.

CRUISING HEIGHTS July 2007

Airbus delivered 231 aircraft, compared to 220 for Boeing.

If Airbus continues the pace it set for the first six months of the year (more accurately, in the past month) 2007 could go down as the year Airbus reclaims the sales crown, which it relinquished to Boeing last year for the first time in five years.

Ironically, US leasing/financial companies and a major airline contributed to the large Airbus business volume announced at the 2007 Paris Air Show, which totalled 425 firm orders plus commitments for a total of 303 additional aircraft.

US Airways said it would make Airbus aircraft a key element of its future fleet renewal needs, including the all-new A350 XWB. The airline agreed to terms with Airbus to buy 92 jetliners, composed of 22 A350-800s, 10 A330-200s and 60 A320family aircraft (in a mix of A319s, A320s and A321s). In another important transaction, GE Commercial Aviation Services (GECAS) signed a firm contract for 60 additional A320 Family aircraft. “With this

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order, we are bringing over 100 Airbus aircraft in our fleet,” said Henry Hubschman, President and CEO of GECAS. “We have leased out all the Airbus aircraft of our previous order.”

Boeing too, also did well overall. The manufacturer got a lift as International Lease Finance Corp., the world’s largest airline leasing company, ordered 63 aircraft with a total list price of $8.8 billion. Of the 63 orders, 50 were for the 787 Dreamliners.

That made IFC the biggest customer for the first commercial jet made of light, sturdy, carbon-fibre composites instead of aluminum. Sales of the 787 have far outstripped those of rival Airbus’s A350 after the European company — responding to customer complaints — decided to redesign its jet and pushed back its delivery date until 2013. The first deliveries of the Dreamliner are due in May 2008.

Overall, it took orders for 70 Dreamliners in the April to June period. Airlines also ordered 22 777 mini-jumbos and 136 sin-

20

Boeing too, also did well overall.

The manufacturer got a lift as International Lease Finance Corp., the world’s largest airline leasing company, ordered 63 aircraft with a total list price of $8.8 bn.

CRUISING HEIGHTS July 2007

gle-aisle 737s. Boeing’s tally of 544 for the year so far puts the company on track to exceed last year’s company record of 1,044 net orders. That allowed Boeing to reclaim the title of world’s biggest-selling planemaker from Airbus, but the race this year was be tight.

Airbus, a unit of European aerospace group EADS, had 201 orders at the end of May, and snagged a massive 425 firm orders at the Paris Air Show. Its overall figure, however, will be reduced if Airbus eliminates what are essentially duplicate orders for its new A350 XWB (extra wide body), which is replacing an earlier version of the A350 that some airlines had already ordered. Airbus is set to update its online order book.

Boeing also said it delivered 114 commercial planes in the second quarter of 2007, making a total of 220 deliveries so far this year. That was an 18 per cent increase on the 97 deliveries it made in the same quarter a year ago. At this time last year, Boeing had delivered 195 planes. Boeing is on track to hit its forecast of 440 to 445 plane deliveries this year.

That apart, there were several other milestone orders at Paris.

EMISSIONS ALERT: Airline manufacturers should aim for 40 per cent cuts in CO2 emissions from present levels, thanks to new technology available by 2015, the European Commission said. The ambitious target is part of the commission’s campaign against climate change and its recently announced €1.6 billion public-private “Clean Sky” plan to help the air transport industry develop environmentally friendly technology for planes.

IN-FLIGHT CELLPHONES: Airbus said it received the green light from European aviation authorities for an onboard mobile-phone system, allowing airline pas-

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Indian carriers show exclusivity and class

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NDIA was there in full strength.

Civil Aviation Minister Praful Patel, Jet’s Naresh Goyal, Kingfisher chief Vijay Mallya and a host of other airline stalwarts were seen at the airshow. After all, airlines from India, considered the fastest growing by passenger volume in the world, were wooed by aircraft manufacturers at the show. But no major purchases took place primarily because the major budget carriers have been struggling to manage costs and move to profitability. In 2005, budget carrier Indigo ordered 100 A320 planes from Airbus worth about $ 6 bln while fullservice Jet Airways bought 10 A330 airliners for around $1.65 bln.

Full-service Kingfisher Airlines, however, ordered up to 50 aircraft from Airbus. The Memorandum of Understanding (MoU) was signed by Dr Vijay Mallya, UB Group Chairman, and John Leahy, Airbus Chief Operating Officer Customers. The agreement is for 15 A350-800 XWBs in addition to the five converted from the original order for the A350, 10 A330-200s, five A340-500s and 20 A320 family aircraft. “Our strategy at Kingfisher is to open new long haul routes and expand existing ones. With the A340-500 and then the A350 XWB we will be able to offer direct routes between India and the United States for example. The A330 will allow us to expand services to Europe and the A320s will help us to meet demand in our home region”, said Dr Vijay Mallya.

Naresh Goyal’s Jet Airways had a top-of-the line jet for those who are fed up of travelling in economy class.

On show was a Boeing 777 in the Jet livery, which will be operated on transatlantic flights. Instead of just seats for top travelers, it had eight first class suites. Each could be closed off for privacy with sliding doors and was equipped with a bed, cupboards for clothes, bookshelves and a big screen TV. In addition the ceiling changed colour mimicking a starry sky.

There were other business transactions, too. Rahul Bhatia, group managing director of InterGlobe Enter-

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Mallya: More orders to Airbus

prises, announced the agreement between his InterGlobe General Aviation Private Limited and the Hawker Beechcraft Corporation, to provide sales and service support in India as the exclusive representative of the Hawker Beechcraft Corporation for its Hawker products — Hawker 400XP; the Hawker 125-series including the Hawker 750, Hawker 850XP and Hawker 900XP; and Hawker 4000 model aircraft — in India, Nepal, Sri Lanka, Bangladesh, Maldives and Myanmar.

Rockwell Collins, a pioneer in the development and deployment of innovative communication and aviation electronics solutions, announced an expanded strategic relationship with HCL Technologies Ltd., the country’s leading global IT services company and a world class partner in delivering product engineering and enterprise IT services to the aerospace industry.

Under the terms of this renewable, HCL will serve as an extension of Rockwell Collins’ engineering centers, delivering high value services such as software, hardware and mechanical engineering for full product lifecycle development. Approximately 300 HCL engineers, professionals and experts will be dedicated be Rockwell Collins’ offshore design and development centres in Chennai and Bangalore.

CRUISING HEIGHTS July 2007

sengers in Europe to use mobile phones and BlackBerry devices on flights for the first time. Air France-KLM SA would be the first airline to test the technology in the next few months, on a short-haul Airbus A318 aircraft. Portuguese state-owned carrier TAP Air Portugal and the U.K.’s British Midland Airways Ltd. would test onboard mobile-phone use before deciding whether to roll out the technology across their fleets.

Ryanair Holdings PLC is planning a fleet deployment later this year and would install OnAir technology on its 737 aircraft.

U.S. regulators currently ban cell phone use aboard planes because of potential interference with the aircraft’s electronics.

NEW TOYS: Many of the fanciful technologies and programmes unveiled at Paris may not survive their first contact with the real world of budget cuts and customer demand. But if history is any guide, at least a handful of the most outlandish technologies on display — from sub-orbital passenger space flights to unmanned helicopters — will eventually become as mundane as in-flight movies.

EADS unveiled its Astrium space jet, designed to ferry passengers into the upper reaches of the atmosphere for an exhilarating three minutes of weightlessness. Each ticket will cost about $250,000, but EADS says it believed the venture could be profitable, and the first rocket plane could take off in 2012. Virgin Galactic (that name might be a tad ambitious) claimed it wouldbegin launching sub orbital jaunts next year for the bargain price of $200,000.

A little closer to the ground, dozens of interesting airplane designs were on display, but the huge number of unmanned vehicles was particularly striking. Besides the nowfamous Global Hawks and Predators, there was a variety of intriguing concepts, such as Dassault Aviation’s nEUROn, a stealthy, unmanned combat plane that looked a lot like the B-2 stealth bomber.

LUXURY PLUS: Catering to wellheeled travellers was a booming business and companies like Cessna, Gulfstream and Dassault delivered a record 885 business jets last year. Yves Robins, Senior VicePresident with Dassault Aviation explained who was buying them. As he told Euro News: “Three quarters of our clients are Fortune 500 companies, who have offices all over the world, and who must be able to get from one to another as quickly as possible and 20 per cent of our customers are governments, many heads of state and ministers who travel in our Falcon planes. President Putin does. The other 5 per cent, they are the jet set.” With customized interiors, the ultra-rich travel in the finest style and soon may be able to travel even faster than

the rest of us.

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“I AM GIVING THE MERGER A FAIR TRY.

VIJAY MALLYA HAS TRUSTED ME...”

Captain G.R. Gopinath bares his soul in his first-ever major interview after Air Deccan’s tie-up with Vijay Mallya’s Kingfisher Airlines with K. Srinivasan and R. Krishnan

One of the stories in the media is about many of your own people being alienated from you?

Absolute and total rubbish. I took a decision sometime ago that the company had become very large and it can't be run as a one-man show by me. In three-and-half years we had grown from one to three thousand three hundred, one aircraft to 43 aircraft, one destination to 65 destinations. What it really means is 65 destinations for ground handling, logistics, engineering and security. It is difficult to replicate your passion and your entrepreneurial spirit across the country. All this requires systems and processes in place and I felt a group of professionals should come into the company. That’s why I brought some people on board.

Are you suggesting there were no murmurs of protest?

Well if you are referring to Mohan Kumar and Warwick Brady, here is my take on it.

Warwick was brought in as the COO (chief operating officer), on a four-year contract, to run the operations. He got the same offer from Bill Franke (managing director, Indigo Partners), whom he met at an LCC conference and with whom he was pleading Air Deccan’s case for investments. And Bill Franke made an offer to him to join Mandala Airlines, which he [Franke] had taken over.

Brady came back and said he had got an offer to become the CEO of an airline. I asked, “where?” He replied, “Indonesia.” I told him that being the COO of a large company like Air Deccan is much better than being the CEO of a small company with sixseven aircraft. You are globally known. I told him we are 43 today and in a matter of time we will cross 50, we are the second largest airline today, but we will be Number One. It is inevitable.

But he said that as far as his personal career was concerned, he felt it was better because he was going to be CEO today even though of a much smaller airline. He said Franke had promised him that after he fixed

Warwick Brady said he had got an offer to become the CEO of an airline. I asked, “where?”

He replied, “Indonesia.” I told him that being the COO of a large company like Air Deccan is much better than being the CEO of a small company with six-seven aircraft.

CRUISING HEIGHTS July 2007

Mandala they would take him elsewhere (Indigo Partners are major investors in four airline groups worldwide). Obviously, I was not in a position to make him CEO straightaway. I felt I had brought him for the COO’s job and he must fix that operation first. Making him the CEO straightaway would mean operations falling apart without a second line [of leadership].

Also, I had a lot of issues with him in terms of fixing operations. He had done a good job up to a point, but still many things remained to be fixed in terms of depth in the company. I told him I would make him the CEO at the end of 12-18 months provided he does A, B, C, D, E… But I realised he wasn’t willing to wait that long. So it was a choice of making him CEO or letting him go. Somehow, I felt that Indians make better CEOs with the ex-pats reporting to them. So I let him go.

What about Mohan Kumar?

Well, he was an integral part of Air Deccan.

He joined us without any formal arrangement because he was my auditor and consultant. And since he was part of the initial Air Deccan start-up team and one day one of our investors said that why can’t he continue till you find a CFO. So he resigned from his company, of which he was the founding managing partner. I requested him to come on board for a short time. He resigned and came on board for a year as CFO. He was also attached to Air Deccan and the task was overwhelming… There was the dilution of equity, then the IPO and he was just in no position to go back. He was indispensable; he was the one holding the company together. A few times he mentioned the fact that his own company was being neglected. Like pilots, the people almost impossible to get today are chartered accountants. Bangalore has an explosion of new industries and his specialty is setting up start-ups. So I told him that on a set time frame he could move and I would get somebody else. I was also thinking that in the phase that we were in, I need-

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Kingfisher’s Vijay Mallya

ed to get somebody who was abroad, an Indian who had exposure to aviation and understood all the nuances and new kinds of funding. So I told him to continue till we found a new guy. Of course, one does have differences of opinion. But that happens all the time between husband and wife.

And this new guy was Ramki [Ramakrishna Sundaram]?

Ramki has known Air Deccan for close to three years. He had done most of our funding. He funded our ATRs; he put together the Airbus funding. He also did the $100 million funding. He is a bright sharp guy … IIT, IIM … and then he went off to London, where he was for the past four-five years. He had done a lot of aviation related deals, deals with Jet Airways and in other parts of the world. He was unique in that he knows finance, he knows the aviation industry and he knows my company backwards. So I asked him if he could head the finance division when Mohan left, and he agreed.

Two things in the context of Mallya acquiring 26 per cent in your company.

Looking back, do you blame yourself for this or would you think you expanded too fast?

You always do things at a given point of time that you think is the right thing to do at that point in time.

But you were going into it like a 100metre race …?

Let me tell you why it was like a 100-metre race. Take GoAir, for example. It has four aircraft; from seven they have become four.

What is it? Nothing. Is it in profits? No. Who wants to pick up a four-aircaft company? SpiceJet has got eight or ten aircraft…

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Vijay Mallya said, please give me one chance, I want to talk to you. So I spoke to him. And he said that, ‘Look if you go with others, they are going to pump money, I am going to pump money.

Whatever you are giving others, give me that. I will give you a better deal’.

”

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But its business plan wants it to go slow.

Is it in profit? No. Is one man holding the company? How many people are holding the company now? One man started the company, then he gave a little equity, he then gave a little more equity to Goldman Sachs, then he gave a little to Ishtimar and now he has given to the Tatas and he is again trying to raise money. He has only $30 million left in his account. What does that mean? You have to dilute your equity.

But it is not diluting its equity to the extent of being taken over?

Unlike me in Air Deccan, in SpiceJet there is no entrepreneur who is upfront. Like in Jet you have got Naresh Goyal, in Kingfisher you have Vijay Mallya, in Infosys you have Narayana Murthy, here it is I. Narayana Murthy has only four per cent, but he is running the company. That is because the others are all five per cent, six per cent, seven per cent, eight per cent. In the Air Deccan scenario, we took a decision, basically it was my decision, which obviously the board supported, because the board had the power to veto what I did, but it did not because it believed I was doing the right thing. And there are large investors on the board, like ICICI Capital (Renuka Ramnath), all with veto rights. Now the choice was either you remain a small company, in which case you would have died right in the beginning.

Look at what Indian and Jet tried to do to us? I started Mumbai-Ahmedabad at Rs 2,500 when the fare was Rs 4,000. At Rs 2,500, I would have been in profit because my break even is at about Rs 2,100. But the moment I started with Rs 2,500, Indian brought down its fare to Rs 1,800, and increased its fare in the evening flight. I had one flight Mumbai-Delhi and Jet Airways put a flight half an hour before mine, and it said ‘Check Fares’.

But these things will happen...

So I said if you are going to have one aircraft or two aircraft, they will never let you rise, because they are going to raise the fares in the other sector. In India you do not have a predatory pricing policy, where an established player cannot put a fare below his cost, like they have in America…

And you have been making these points repeatedly at two of the CAPA meetings.

Yes, that is exactly why I said that the only way out is to expand so that they will go out of business before I go out of business. That is exactly what I have proved. So, I had to expand. There was no way I could have been in the business without expanding in the manner I expanded because of the compulsions of the business. Because if you want to attract talent, you will not get it if you are a two-aircraft company.

I am a first-generation entrepreneur. I am not Reliance or Tata starting an airline. If

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tomorrow, Tata starts a new airline, it will get talent. If you, as Gopinath from some small village, start a new business, you are not going to get business. It’s a huge amount of money. You know how much salary we were paying to Warwick Brady? The rent of his house was Rs 3,75,000. You cannot afford these things unless your scale is big.

Only when you have top talent, you will be able to run a company; you will be able to get private equity.

If I had gone in 2004 and given the presentation to investors at that point in time when the low-cost airline concept was new in India, it would have been tough to raise money. It isn’t easier for others now, it is still difficult, but in a different sense, because airlines are losing money now and a start-up is tough. I was the first to beg. If I would have gone to ICICI Capital and said, “I have got a business plan and this is how it will work”, it would not have put the money in the first place. You need to give them a picture where there is growth. You need to have a vision for the company, and say, “Look this is what the company is going to be five years down the line”. I said this company would be the largest airline in the next four-five years. But of course it would also have been in profit. It is a different story that the profit did not come because nobody had anticipated then that this is going to turn out this way—five airlines starting in one year. It happens only in India, it did not happen in Europe.

So I went with a particular plan, and I am glad I did that, because the alternative would have been that we would have been small and we would have perished and people would not have given us funds. So, only when you have a larger fleet, a larger game plan, you will amortise these costs, you need a spare engine, and you cannot keep a spare Go Air’s Jeh Wadia

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Let me tell you why I was going into it like a 100metre race. Take Go Air, for example. They have four aircraft, from seven they have become four. What are they? Nothing. Are they in profits? No. Who wants to pick up a four-aircaft company?

” CRUISING HEIGHTS July 2007

engine because you need air-conditioned space to keep a spare engine, because a spare engine costs ten million dollars, and you require a spare engine for one aircraft and you require a spare engine for ten aircraft. You require an inventory.

Today, my aircraft are going from here to Guwahati and in Guwahati if an aircraft is grounded, you need inventory in Kolkata.

So, if you have ten aircraft and all are going to ten different places, not standing in Bangalore, you need to build up a huge inventory right across the country. You have to invest in IT. Take the reservation system, for example. You cannot have a reservation system for a two-aircraft company. You cannot do any of these things on a smaller scale because aircraft fly extensively.

All these prompted me that I must have growth. The downside to all this was that we did not anticipate that we are going to get into a financial crunch. We thought we will turn round the corner, but we did not, so we had to raise the equity. One choice was to raise the equity from two-three people, where the concern is whether you are always in control, and the other choice was that you raise equity from a large number of people.

This company, the nature of the industry being what it is, unlike in software where ten different people come and give you small amounts of money, here we had to look at strategic investors and, importantly, ensure that the airline’s integrity is maintained, the business model is maintained that I leave behind a great airline for the country, see that jobs are preserved, see that the investors who have invested in my company are secure and not leave a trail tomorrow where the company collapses.

The interesting thing is that though we were losing money, there were too many people who wanted to invest. I cannot name them right now. Finally, we arrived at a situation where we thought we are going to close. We were putting together our documents when Vijay Mallya called me. I had not been taking his calls. Then somebody close to him came to my home and met me.

He just came and said that he wanted to talk to me. He said I am from Karnataka, you, too, are from Karnataka, and we are very proud of you as you have done such a great job for the country. He said that, as I wanted to disinvest a little, why don’t I do it with Mallya. I said that he [Mallya] wants to merge the airlines, and the merger will not work, because when you merge the company then under one equity it will not work. I said it will never work because we are a different business model, different cost structure, different culture.

Mallya said, please give me one chance, I want to talk to you. So I spoke to him. And he said that, “Look if you go with others,

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they are going to pump money, I am going to pump money. Whatever you are giving others, give me that. I will give you a better deal. I will let this company be separate. You maintain the company, you have the integrity of the company, and you run it. But I will have the rights any investor will ask for. Can we agree on that?” So he called me at about twelve in the night and said that can you give me this opportunity. I said that there is no time. He asked how much time can you give me. I said three days.

He asked what are the terms. I said we can discuss the terms, but tell me if you can do this deal in three days’ time because I am not going to wait as I already have a deal in hand and we need the funds. And I said I had been going with others for the last four months and had to close the deal somewhere. So, then he said that he will call me at three o’ clock. He called me back. We closed the deal in exactly 45 minutes. It is not that I took his proposal, called a board meeting and put all the people to discuss; the deal would never have happened.

The last thing I said was I cannot give you more than three days to close the deal.

He asked what do you mean by that. I said I want a serious amount of money and if you don’t pay before I go to the board they will not believe me. They will think that you have just come to sabotage or you don’t have the money and you are interested and this will drag on for another three months. I said I want two hundred crore rupees. He said I will give you seventy-five. Then he said hundred. I said no. Then we agreed upon Rs 150 crore. And I said I want Rs 150 crore three days from now if you want me to call a board meeting to get the approval. He said fine, I will give you Rs 150 crore. I thought that it was a fair deal, others were

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SpiceJet has got eight or ten aircraft... Are they in profit? No. One man started the company, then he gave a little equity, he then gave a little more equity to Goldman Sachs, then he gave a little to Ishtimar and now he has given to the Tatas and he is again trying to raise money. He has only $30 million left in his account.

”

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taking three months, there were lawyers from their sides, lawyers from our side, KPMG from their side and Price Waterhouse, aviation consultants, IT consultants, and three weeks I spent sitting out of office.

At the end of three weeks, we went back and forth, negotiating and negotiating.

So you were tired of the whole thing?

What I mean is that this was done in exactly forty-five minutes. He said, call the board meeting on Thursday, I will give the money.

So, on Thursday morning by 4.45, we finished the documentation. We signed the deal.

In the future, if Mallya’s share crosses 50 per cent, will he run both the airlines the way it is? Will he raise the fares, as he is totally anti-LCC? He is not a fool. He is a shrewd business guy. I don’t think he will do any such thing.

People are under the impression that I do not want profits; all I want is growth, which is nonsense. Even before I appointed a CEO, I never interfered. I had largely the vision and was driving the company and even today nobody in my company gets a call to say that appoint so and so or do this or do that because this is what I want, which happens in every other company. Even as an exception, I have never asked somebody to be appointed because he is my relative or she is my girlfriend.

But how long will Air Deccan continue to be independent? His reputation is that he will swallow you. Are you prepared for that?

The inevitable happens. We have had a shareholding agreement. I am sure he knows that it will be stupid and foolish for him, as a partner, to increase my costs. He can increase the revenue. Increasing the revenue is something I am anyway going to do even if Vijay Mallya did not come. We have to be in profits to run the company.

As far as Mallya’s style is concerned, I don’t think many of his CEOs survived… They ran away because he has his own style of doing things.

You don’t think of such things from Day One of the marriage that what happens if my husband does this to me or what happens if my wife becomes unfaithful. I am giving it a fair try. He has trusted me. It is a question of who trusted whom more.

Others did not want to do this. He said I am the executive chairman of the company. There is a shareholding agreement.

This cannot happen unless there is a bloodbath in the company.

Was Ladhani also a pressure point for you? Did he lose confidence in the fact that his investment could go down the drain? What is his position now?

Everybody wants the company to

survive.

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Report on Indian Aviation

CAPA

projects promising future This year’s aviation and tourism summit was different from the previous two: there were fewer attendees.

More important than the participants were the two exclusive studies released at the summit. R Krishnan’s first-hand report.

T

HE THIRD ANNUAL AVIATION and Tourism Summit, organised by the Centre for Asia Pacific Aviation (CAPA), at Mumbai (June 11 to 13), was not like the ones organised in the previous two years. If Year One was very good, Year Two was fair to good.

Compared with past two years, when attendance was really large and interactions both intellectual and useful from investor point of view, the recent summit attracted much smaller gathering.

But the difference may need to, perhaps, end there. The June summit had two important participants—Tony Fernandes, of AirAsia, and his plans for a long-haul low-cost carrier (LCC) and

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Patee Sarasin, of Nok Air, which recently began flights to India, offering exclusive shopping in Bangkok. While Tony used his presence in India to fly to New Delhi to meet Civil Aviation Minister Praful Patel with a request for rights to fly to India, Nok Air has already got permission to connect three more Indian cities beginning this winter.

But most important was the release of two exclusive studies by CAPA. One related to the Indian aviation—Market Overview and Outlook and the other titled Aviation Investor Poll.

Market Overview and Outlook India’s aviation sector holds great promise. The potential is huge, trips per capita are low even by developing

India’s aviation sector holds great promise. The potential is huge, trips per capita are low even by developing countries’ standards...

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countries’ standards, and the economy is racing to grow to at 10 per cent annually. But major challenges, in the form of poor airport infrastructure and availability of skilled human resources, are present. Notwithstanding these, the market is expanding rapidly, but airlines are still far away from the black, as pricing or fares remain too low by all standards. It is in this context, the new civil aviation policy may assume importance and, as is indicated in different quarters, there may be a policy on new entrants over the next two months and a special focus on regional connectivity with possible fiscal incentives.

Despite bullish traffic growth projections, it appears, according to CAPA studies, it may be extremely difficult for the market to absorb many new entrants, particularly in a short span.

This is to be seen in the context of the glitches mentioned before.

According to CAPA, India is potentially a 10-airline market, comprising two to three full-service carriers, two to three large national LCCs (operating fleets of 70-plus aircraft) and three to four niche, regional operators with aircraft of less than 80 seats.

But why is it appropriate for CAPA to number and cap the players at 10?

The Indian story has just begun and has a long way to go. Nearly half the Indian population is estimated to be staying in urban areas, notwithstanding their poor quality. Recently, Finance Minister P. Chidambaram told in a meeting organised by Euromoney, in London, that in the next 10 years the very face of India’s infrastructure would change dramatically and it would be as good as world class.

Despite China’s much faster growth over a longer number of years, private equity funds are keen to invest in India, whose polity in the last 15 years has undergone a dramatic churning resulting in minimum opposition to private sector participation in infrastructure.

Therefore, had CAPA stated that there may not be potential for more than 10 players after, say, 15 or 20 years, it might have sounded plausible. But CAPA has sought to fortify its prediction by stating that its prediction for 2007-08, made last year, that it would be a year of consolidation, has been borne out by the actual turn of events—Air India-Indian merger, Jet Airways taking over Air Sahara and Kingfisher’s strategic buying into Air Deccan. In the same breath, it says the entry of Air India Express and

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HOLDING STAGE: Vijay Mallya (Centre) with Peter Harbison at the CAPA conference

JetLite into the domestic market could alter the marketplace even more significantly.

The CAPA study said that both domestic and international traffic have seen an acceleration of growth in recent years. In the twelve months to March 31, 2007, airlines carried 35 million domestic passengers (up 38.5 per cent year on year) and 25.7 million international passengers

(up 15.1 per cent). CAPA research projects domestic traffic will grow at 25 to 30 per cent annually and international traffic at 15 per cent until 2010. It may be possible, the centre said, that the international sector could experience an even higher growth due to aggressive overseas expansion planned by Indian carriers, especially Jet Airways and Air India. Pending the announcement of new civil aviation policy, which would permit more private Indian carriers to fly foreign routes, airlines, like SpiceJet and Kingfisher, besides Air Deccan, have already announced they will take off virtually the next day after the announcement.

In the context mentioned, CAPA estimates that India’s fleet will reach approximately 500 to 550 by the end of 2010, and the general aviation aircraft fleet will rise to 300-plus, from 177 today. Despite the bloodbath in the Indian aviation market and gulping of smaller airlines by bigger ones, CAPA has stuck to its earlier prediction that Indian LCCs will retain a domestic market share of 70 per cent by 2010, possibly the highest in the world. Should we accept this prediction or even premise, it appears that more LCCs will enter the fray and the cap of 10 stated before may not hold after all.

“Only sky is the limit” Kjeld Binger, CEO, DAE Airports, Dubai, speaks about Dubai Aerospace Enterprise’s India venture Have you tied with any Indian entity?

Not yet. We are in consultation with many different bodies to see what would suit us.

So we are looking around; we are in the middle of doing due diligence for that.

Q: You said you have interest in this great Indian. What are you looking at?

A: We are looking at all the major, macro big projects coming up in Mumbai, Chennai and others that are coming up.

Chennai and Kolkata are out of the picture; Delhi and Mumbai are already done. In that sense aren’t you a little late?

We are not late because we are only four months old. I think we are here in due course. We are looking at the greenfield projects, we are looking at any new projects that are coming up and we are looking at all the non-metro airports.

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So you are doing due diligence in order to identify partners who will go with you in the process of taking up a project in India. Any particular areas you have identified amongst the non-metros?

No, right now, we have the entire list. We are looking at each one of them and we understand that an advisor has to be hired by the government to come up with concepts for each of them and we are waiting to see what the government will come up with. However, there are some of these non-metro airports that are more interesting than the others. But I will not mention any names.

But considering that the government is not very clear yet as to whether it is

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going to be only cityside development or is it also going to be aeronautical?

That, in my view, is still an open question. I think it would be the government, and the regional governments would be better off if they combined the terminal operations with the landside developments. Because they go hand in hand and we appreciate the fact that the Airports Authority wants to operate the airside operations, but we believe that the right thing to do would be to combine the landside and the terminal operations, because that is really what embraces the passenger and where real improvements are needed and I think we could contribute to that.

How do you look at the process of modernisation in Delhi and Mumbai?

I think to some extent this is a learning process. It is always difficult for the first one, the second one and probably also the third one. It is a learning process for any participant, any stakeholder...

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“We will be strong contenders” Says Shashi Kapur, Customer Care and Head—Business Development (Airport Retailing), Shopper’s Stop Ltd

Q: How many major contracts do you have now?

A: Three. We have got Mumbai domestic (airport), which is about 9,000 sq feet, which is under Shopper’s Stop, because it is the domestic side of the business, out of which three formats have already started— Shopper’s Stop’s scaled down version called Stop and Go, which is an airport version of Shopper’s Stop by having the same category of products as in Shopper’s Stop. These are already operational... plus three more coming up in the domestic side. Then we have got Bangalore, which is a complete master concession for the complete retail area, except food, for both domestic and international.

In this entire JV, the sourcing of goods is going to be worldwide or it will be predominantly Indian?

No. For the international duty-free it will be worldwide. Domestic will be domestic operations of Shopper’s Stop. So whatever Shopper’s Stop does in downtown, in Bangalore and Hyderabad and Mumbai, we will try to replicate it in the airports.

No, it will be confined to the Indian market.

But there is another scope that we are looking at within India. It is called retail service and distribution. We would provide distribution avenues for major brands through this format. So, if somebody wants to distribute liquor or tobacco or perfumes and cosmetics any where, not only at airports, within the Indian subcontinent, we would do it.

What are the other airports you are looking at?

Whenever bids come up, we will be strong contenders at all airports because we hold the best marks at the moment.

How did you miss out on Delhi?

We did not bid at all for Delhi, because unfortunately the contracts were short. The contracts wanted us to move the retail areas because of the modernisation of the airport.

And we felt that within such a short time we would not be ready to deliver. The formation of the company was at the time when the contracts came up, so there was a very limited period.

Are you also looking at non-metro airports like Ahmedabad and others?

Yes. For us, to pursue an activity of domestic business, we will move it on, because we have formats for domestic airports also.

Are you also thinking of taking this JV elsewhere?

Aviation Investor Poll CAPA Capital Aviation Investor Poll starts its report by saying, “In the long term history of aviation in India, we have barely arrived at the threshold. The face of Indian aviation will be unrecognisable in just five years time.” However, in the meantime, much will have to be done, which will require huge consensus and strong leadership.

CAPA Capital conducted a survey of 2,000 domestic passengers at India’s major airports, including Delhi and Mumbai, arriving from points all over the country.

Despite the remarkably low airfares, which make it possible for a rapidly increasing portion of the population to buy, less than one in ten passengers were travelling for the first time by air—less than 10 per cent. It means most of them were repeat passengers. Maybe it will take a little more time for people to change their travel habits. CAPA lists, among other factors, difficulty to reach airports a reason. But if only 10 per cent are first-time travellers, it also means that the potential is really huge.

After tracing India’s tryst with aviation industry in terms of progressive, but halting, liberalisation, CAPA detailed the lessons for the future. A combination of

After tracing India’s tryst with aviation industry in terms of progressive, but halting, liberalisation, CAPA detailed the lessons for the future CRUISING HEIGHTS July 2007

What sort of money are you going to spend?

I am not in a position to disclose that. ingredients in the first two stages created (between 1990 and 2003) a dysfunctional aviation industry with underemployment, loss of massive economic benefits and outdated aviation and related infrastructure.

These ingredients included dominance of vested interests; lack of any coherent plan; absence of leadership; lack of transparency in policy formulation and planning; disregard of world trends, allowing international competition to dominate; and with the sector dominated by government, little private sector investment, unfortunately accompanied by negligible government investment.

But in the third stage, from 2004 till mid-2007, India attracted global attention as the fastest metamorphosis of a national aviation industry in history. This entailed recognition that the airline industry is a means to an end. Also the government recognised that a healthy airline sector does not mean protecting the incumbents.

Nearly 83 per cent of respondents of CAPA survey said their primary concern about investing in India’s airport sector was uncertainty—either transparency of selection [process], uncertainty about regulation or competing airports policy.

Chennai airport being an important example in this context of unstable policies.

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INTERVIEW

“Budget Capt Rahul S. Puranik, chairman and founder, Sapphire Airways, is a man possessed.

The former Delta pilot is all set to start his unique budget airline that will fly non-stop from the US to India, as he told K. Srinivasan

Q

What prompted you to set up this airline?

A: Aviation has always been my passion.

That kind of got me into it. I saw a niche in the market that would make business sense.

What niche did you see in the market?

Actually for an airline based out of US, we would look at a budget carrier, that will provide all that plus a little better in-flight service that most of the Asian carriers do have. So we would try to flare up the US carrier model in performance, maintenance, operations and bring in an in-flight service, a total customer service package.

Isn’t it contradictory that on one hand you want to duplicate the efficiency of the US carriers and you want to win the warmth of the Asian carriers, and also be a low-cost model?

Low cost would be more from the operational standpoint—the corporate structure would be a little more skinnier than you

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carrier with service would normally see in a legacy carrier.

When you mention low cost you would also look at not having a ten-course meal in business class. We will probably have a three- or four-course meal. We could provide the service that is not the bare essential but little much up on that. At the same time we would make sure that the fares are affordable.

What are the aircraft types you are looking at?

We are looking at A330-200s and 777s for operations, but we would run a single-type aircraft. We would choose either or. We are looking at the market for the leases of next year. We are also talking to both the manufacturers. We will see whatever long-term plan we settle for.

Are you looking for new aircraft?

We would like to limit the leasing to the number of years, which would be around five. We would not want to take any aircraft that is older than five years, because of the durability, reliability of their ontime performance.

So essentially you are now seeing at two aircraft. Will you be finalising it in the next couple of months?

Yes, within the next 60 days. We will finalise one of the two types of aircraft.

Have you worked out at what sort of load factor are you likely to break even?

With our business model, if we get 60 per cent of the load factor we will have positive cash flow. This includes cargo. Our business plan basically includes cargo also in these numbers, which we are depending on for the break even. We are looking for about eight tonnes of cargo per flight.

“

With our business model, if we get 60 per cent of the load factor we will have positive cash flow. This includes cargo. Our business plan basically includes cargo also in these numbers, which we are depending on for the breakeven.

“

When you say affordable can you sort of give me, say, LA-Mumbai or a LADelhi fare?

Say, for an SFO (San Francisco)Bangalore flight they would normally look at 1,200-1,300 dollars in economy travel. We will try to discount it to 20-25 per cent, and still make money. We would not undersell ourselves. Our business model will not support that. So everything that we do will definitely have to have a positive cash flow. And right now what is happening in the Indian market is bloodbath and we definitely don’t intend to do that. Secondly, the contradictory part you mentioned. Now if you had to take this model into domestic travel, where the number of frequencies is a critical criterion of operations in US carriers, it would be very difficult and contradictory to support this many number of frequencies and in-flight services. When you are talking of the overseas model, you can have a daily flight and turnaround and so it is very doable. At least on paper. It all depends on the execution team. It does not matter what you have on the drawing board, it is the execution team that matters. And we are really looking forward to deploying a very professional management team that would run the airline. Definitely, these are not my expertise. I am more of a founderchairman, an entrepreneur businessman, giving the broad vision, but that’s not my baby, as far as operations are concerned.

It would entirely be a professional management.

”

CRUISING HEIGHTS July 2007

How are you going to achieve that?

With the demand right now in the USEurope as well as Europe-India, filling up the belly should not really be a problem.

We will have to be very aggressive in performing, deliveries and keeping tight schedules. But most of the US airways don’t focus on cargo. Most of their business has gone to Asian carriers. Look at the case in Atlanta. You have a 747 freighter flying everyday from Hong Kong to Atlanta. It does not have a passenger flight, but it has a Cathay Pacific that flies everyday with a 747 freighter into Atlanta. Even Alitalia, it doesn’t have code-share with Delta, but flies direct— Rome-Milan-Atlanta—on an MD-11 freighter. So there is tremendous cargo business and most of the legacy US carriers have to this point ignored that.

Why have they, historically, ignored it?

It’s a very complex way of thinking when it comes to the airline business for the US carriers. I am not an expert, not a guru, but just looking into the industry, they follow a pattern of first being a very intensive domestic operation. For example, after going into bankruptcy, Delta has kind of realised that there is money to be made in foreign routes, and it is expanding heavily into Europe. Currently it is the Number One airline flying into Europe. And all

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INTERVIEW but it is very close. This whole project is close to 130 million dollars. We have 30 million dollars and we are looking for around 100 million.

That takes you how long?

It should take us over two years of operation.

SAPPHIRE’S CHOICE: The Airbus 330 that the carrier plans to use for its flights

these years it was they were focusing on the core domestic product. And that is pretty much the story of every airline. If you look at the Asian routes, Delta hardly has two or three Asian routes. If you look at Far East, it comes only as far as Japan.

It does not have anything in Singapore, Malaysia or Hong Kong. That has never been in its strategic planning. It focused only on domestic routes. And there is huge business. It is the Number One market in the world. A regular coach fare from Atlanta to New York or Atlanta to Orlando in the last days is 700-800 dollars, which is almost the international fare to Europe.

So, it is a big difference. And now the recent changes, in the last decade, in the travel patterns in the US have certainly called on for to revise its plan. And that is why it is are going more international.

With the Southwest Airline, Airtran, Jet Blue, some of these LCCs have dominated. Southwest has been there for the last 30 years, but Airtran, Jet Blue are the airlines of the 1990s, which dominated the 1990s and 2000s.

You are bringing in about 30 million dollars of your own money into it?

Our promoters’ money. Apart of me and our high net worth individual US investors.

And are you talking to several investors in the Middle East and elsewhere?

We are looking at Middle East and India for some debt financing. We have looked into some European banks for debt financing. And we are looking for some private equity placement for about 30-35 million dollars, which is already in the pipeline.

We haven’t signed confirmed deals yet,

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How long will you take to amortise this money?

In an operation of less than break even, say, we don’t break even in the first year, we don’t break even in the second year, we don’t break even in the third year, it would still last us. Our ideal situation is we should be able to complete our Phase I, which is two years, and start into Phase II, with expanding the market, and making money. When you talk about international routes, it takes some finite time to develop the routes. You cannot start flying and expect to make money the next day. It’s going to take time for people to realise it is a new airline and the routes that we are choosing are sort of virgin routes for now.

And it will take a little time for us to establish them and really start making some cash flow.

You are going to do Munich or Madrid?

We would be doing both. We will have one flight from SFO to Munich and the other flight coming from SFO to Madrid. We will be doing daily flights six days a week.

We are looking at A330-200s and 777s for operations, but we would run a single-type aircraft.

We would choose either or. We are looking at the market for the leases of next year. We are also talking to both the manufacturers. We will see whatever long-term plan we settle for.

CRUISING HEIGHTS July 2007

So you will be doing three to Madrid and three to Munich?

No, we would have six days SFOBangalore through Munich and six days SFO-Delhi via Madrid.

How are you going to go about distribution?

We would have a very strong search engine on our website, which typically is what a new-generation travel needs, I guess. We will also look at some GSAs. At the end of two years, what is in Phase II? In Phase II, we would be looking at connecting Newark-Mumbai and NewarkDelhi through a European gateway. We will be connecting, I think, ChicagoMumbai and Chicago-Delhi through a European gateway, more than likely it would be London-Stansted. There will be a very aggressive plan of connecting US into Europe and then Europe into India.

So, we are not looking at a US-India market by itself, but of course it will be a very dominant player. We are looking at a Europe-US as well as India-Europe. We

are looking at a whole synergy.

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CARGO

Up, up but STILL FAR AWAY The country’s civil aviation sector has been experiencing a fairly high level of growth: 35 per cent to 40 per cent annually.

To maintain the tempo, the sector must look at cargo and logistics.

That is hardly possible, reports Tirthankar Ghosh, with eight transport aircraft currently in operation in India, as opposed to the 600 that express major UPS has.

D

URING A CONFERENCE of the Air Cargo Agents Association of India (ACAAI) in Bangkok two years ago, Werner Schuessler, managing director of Lufthansa Consulting (LCG), was asked what he would consider the three most urgent problems of the aviation industry in India. His answer was simple: “First, infrastructure; second, infrastructure; and, third, infrastructure.” Since then a lot has happened in the Indian aviation scene. With all the changes and improvements on their way, today Schuessler has brought down the number of problems to two: “First, infrastructure; and, second, speed.” He goes on to explain that the “customer potential—passengers and cargo—is there to make not only 2007 another success, but also to cope with the challenges beyond 2007.”

As an industry insider, Werner Schuessler could not have been more direct. The country’s civil aviation sce-

The country’s civil aviation scenario needs to go through a makeover.

Change is absolutely critical...it appears that India’s air transport infrastructure is out of date.

CRUISING HEIGHTS July 2007

nario needs to go through a makeover.

“Change is absolutely critical,” said Schuessler, and “It appears that India’s air transport infrastructure is out of date.

In fact, the overall situation is critical.

Without massive change, infrastructure will not be able to handle growth and will be drowning in its own success.”

Nowhere is this more apparent than in the air cargo sector, and Praful Patel, the civil aviation minister, is more aware of these shortcomings than anyone else.

During his recent visit to the US, he made it a point to emphasise that while “we need more pilot training facilities, we need more engineering facilities and we need more technical people... Thrust should be given to cargo facilities, i.e., more cargo airlines and hubs.” In fact, the Vision 2020 document, which could be finalised in the very near future, speaks of 400 airports by 2020. Patel believes that “there should be at least 500 cargo planes in India in the next 10 years” and that cargo operations remain

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CARGO “high on government’s agenda”. If all goes according to plans, by 2020 the country would be one of the world’s fastest growing air cargo markets.

Earlier, most airlines regarded cargo as a stepchild, to be filled up only after passenger baggage is loaded in the belly.

But now, with also every big retail outfit needing cargo space, big business opportunities are waiting to be exploited.

Obviously, it would be worthwhile for carriers to establish cargo fleets.

To begin with, Patel has proposed opening up the FDI limit in cargo from the present 49 per cent to 74 per cent.

The proposal is under consideration by the Foreign Investment Promotion Board (FIPB) and the ministry of commerce. In his blueprint to boost the air cargo sector, he would like to see the completion of the cargo hub at Nagpur by 2008. His grand vision: “to see that Nagpur becomes ... something like Memphis, a major hub for cargo in India”. The vision apart, if the civil aviation sector wants to cash in on the present economic boom, establishment of new airports will not provide any relief to the creaking infrastructure.

However, that has not deterred airlines to start or ramp up their cargo businesses in domestic as well as international sectors. To begin with, there is Air India. After a long hiatus, its freighters have starter flying, and the first aircraft has been deployed on the Europe route, flying from Mumbai and Bangalore via Dammam to Frankfurt. The aircraft has a capacity of 34 tonnes. Air India’s current market share in the export segment is in the range of 9 to 11 per cent and between 5 and 7 per cent in the import segment.

Air India said it would complement the present twice-weekly flights to five weekly flights by the end of summer, to destinations including Mumbai, Chennai, Bangalore and Dammam, in Saudi Arabia. The company will also convert another A310 shortly to meet that demand. According to Wolfgang Scholinz, cargo manager of Air India in Germany, with additional freighter flights, Air India could meet the strong demand for capacity to and from India.

The dedicated freighter service would be complementing Air India’s 14 weekly passenger flights from Frankfurt to India—six of which run 747-400s—that see strong demand for belly capacity.

The country’s international carrier has long-term plans to establish a freighter fleet for Asia and South Pacific routes.

By the end of next year, Air India expects to have a combined freighter fleet of 14 to 16 aircraft.

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Earlier, most airlines regarded cargo as a stepchild. But now, with every big retail outfit needing cargo space, big business opportunities are waiting to be exploited.

CRUISING HEIGHTS July 2007

On the domestic front, Indian will soon have its cargo fleet, while others like GoAir, Air Deccan and Kingfisher are keen to set up dedicated cargo subsidiaries. Not too long ago, for instance, Air Deccan chief Captain G.R. Gopinath said that his greatest desire was to see apples from Kashmir being made available to customers in the south of India.

In fact, before Air Deccan’s ti-up with Vijay Mallya’s Kingfisher, Captain Gopinath told CRUISING HEIGHTS that he had “already appointed a CEO [for the cargo venture]. He has been with FedEx for twenty years. I have asked him to evaluate the set-up. I have asked him to consider what is the right type of aircraft for Indian cargo.” The Air Deccan cargo airline would start with three jets—Boeing or Airbus—and five ATRs. Competitor of sorts, Jet Airways, too, has gone into overdrive to set up its cargo business. With the appointment of India-born Jay Shelat, who was a senior executive at American Airlines Cargo, to head the cargo division in March 2007, Jet hopes to emerge as an exciting new international air cargo player. According

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to Shelat, India is on the threshold of emerging as among the top three world economies during the next decade and air service will be key in the development of that movement.

There are others waiting in the wings. Among them is AFL, which was once DHL’s business partner in the country. A pioneer in air cargo business, AFL has tied up with Dascher of Germany to promote air cargo business. The company also wants to enter freighter operations, which, incidentally, will be separate from the joint venture.

Mukesh Ambani, who is spearheading the Reliance Fresh retail initiative, feels that the air cargo business in India would boost his business. He has plans ready to launch his cargo service to take fruits and vegetables to all parts of the country and has thought of inducting a whopping 50 freighters by the end of this year or early next year.

Other than Ambani, there are others, too, like the Aditya Birla Group and even the Tatas, who are seeking a tie-up with the French Carrefour. However, no one else in the retail business has planned out induction of freighters or setting up a cargo airline. Perhaps, the next few months will see a lot of tie-ups taking place between retailers and existing airlines.

Even the Cochin International Airport (CIAL) is planning to launch a dedicated international cargo service. The airport management has started talks with a leading international player and a domestic partner for launching the freighter service that will connect West Asian destinations from Kochi. The cargo services will be operated under the brand name Air Kerala, which was floated to launch an international low-fare carrier to the Gulf destinations. According to S. Bharath, managing director, CIAL, the cargo airline would complement the proposed perishable cargo centre, which would be handling 40,000 metric tonnes a year.

In such a situation, foreign air carriers are doing good business. Cathay Pacific has increased the number of freighter flights to India; Cargoitalia, the Milan-based Italian cargo carrier, is thinking of flying from Chennai to Vietnam and China, and Qatar Airways has already planned its freighter operations to Chennai and Ahmedabad. Just a few months ago, Finnair also declared that it wants to boost cargo from India.

The country has only a handful of freighters in operation now. By 2015, there could be more than 160 freighters.

CRUISING HEIGHTS July 2007

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CARGO

Despite constraints, cargo growth is unstoppable

I

T CANNOT BE denied that the major constraint for the air cargo sector in the country is, peculiarly, its rapid growth. The growth of cargo from India is slowly but surely changing global trade and naturally most airlines are keen to be at the centre of action.

While the growth in world air cargo for 2007 is predicted to be anywhere between four and five per cent, in India it could be around 20 per cent. Providing the big thrust are expendable incomes. Result: an increased demand for goods. This has led to intense competition between the providers of goods to meet the high demands as quickly as possible. For the air cargo industry, this has seen the earlier directional imbalance—more exports than imports—evening out.

The biggest hurdle, then, is the need for improved infrastructure in the country. The country has historically focussed on export-based economic growth. Naturally, carriers desirous of starting freighter operations to Indian destinations found it unviable simply because imports could not substantially offset the cost of operation. In fact, the Open Skies policy did little to augment freighter operations. In turn, the growth of belly capacity was witnessed. But even for that there was a problem, because

What, then, ails the fast-forward movement of air cargo transportation in the country? Echoing Werner Schuessler, the only cry could be for infrastructure. Forget the condition of the airports, what the country requires urgently are temperature-controlled storage places that can keep perishables fresh and prevent wastage. Add to that the lack of aircraft parking spaces and what one has is a fiasco.

The silver lining is the fact that the civil aviation ministry is improving 35 non-metro airports and also gearing up a few smaller ones. The scenario will change when in the next five years there will be 100-odd freighters and 450 passenger aircraft. A study by Drewry and APL has projected that the Indian air cargo business would see an annual growth rate of 8-10 per cent over the next ten years. It is no wonder, then, that existing players are getting into the act.

While Blue Dart, the only private freighter owner in the Indian skies till now, is all set to boost its fleet, the Hyderabad-based Flyington Freighters has ordered an additional six A330200F, taking its total order to a dozen.

According to Deepak Parasuraman, managing director, Flyington Freighters

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with restricted passenger access rights, valuable cargo capacity was affected and over a period of time restrained exports. In any supply chain, time is a critical factor and hence the great demand for more airfreight capacity.

A couple of factors over the last few years have seen a slow and steady change in the situation, helping to streamline the industry. While on one hand, more passenger rights have been allowed, trade barriers have been dispensed with. Also, today there are more FDIs (foreign direct investments) taking place. These developments have hastened growth of trade. However, in the short term, the relaxations have created a few challenges: over capacity and in turn a downward pressure on yields. The feeling in the industry is that these are temporary and in the long term would help the country to become a global hub for air cargo.

There are many factors in India’s favour: the geographical location as well as the huge amount of international trade that the country is engaged in now. Unlike Dubai, where there is not much of manufacturing or exports, but is, nevertheless, a successful destination, there is no reason why India, with all its growth in manufacturing sector and exports and imports, cannot become another global hub.

What could encourage Praful Patel is the fact that foreign direct investment has started flowing into the cargo sector. Temasek has acquired a 27.74 per cent equity stake in courier and express delivery firm First Flight.

CRUISING HEIGHTS July 2007

Ltd, the order for the A330-200F was raised from six to 12 aircraft because the company saw a huge cargo potential in the region.

What could encourage Praful Patel is the fact that foreign direct investment has started flowing into the cargo sector.

Temasek, the investment arm of the government of Singapore, has acquired a 27.74 per cent equity stake in courier and express delivery firm First Flight, the second largest domestic courier company in the country. The acquisition is the largest domestic private equity deal in the courier and logistics space, and it will see expansion of First Flight’s aviation—it has three ATP aircraft—and warehousing businesses.

The potential is there and the country’s air cargo sector is ready. Perhaps, what is needed is a big push from the government. The neglect that the air cargo sector has suffered all these years would be made up by that huge push. It is one thing to create a network of stateof-the-art cargo facilities, but with demand and room to grow in abundance, building the means to make room for the boom and service India’s business will unlock a broader gamut of possibilities

and opportunities for all.

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CARGO NEWS management and construction, and running shopping malls”.

Ong took over the airline’s cargo operations on January 15, 2001, and was credited for turning MASkargo into a profitable unit.

Shahari Sulaiman, assistant general manager, cargo, is being elevated to Ong’s position.

Air India resumes all-cargo flights

Schenker India turns ten

AIR INDIA RECENTLY re-entered, after 11 years, the global freighter market with the launch of its first all-cargo aircraft. A converted passenger A310, acquired in 1990, has been pressed into service for this purpose. Hopeful of taking on international majors, such as FedEx, UPS, DHL, Lufthansa Cargo and Cathay Pacific, the state-owned carrier hopes to regain the 30 per cent slice of the air cargo pie it had in the 1990s.

Further, Air India is converting six A310s into freighters at an estimated cost of $7 million each. The remaining A310 fleet will be converted to freighters in the next three years. The airline also plans to lease freighters.

The airline will initially operate to Gulf and European destinations from Mumbai, Chennai and Bangalore. Mumbai will be the hub for wide-body aircraft and Nagpur for narrow-body aircraft (B737s). Air India will form a subsidiary, called AI Cargo, for this purpose.

Air Canada ceases freighter flights to China AIR CANADA IS calling it a day for its freighter operation between Shanghai and Toronto. It will return a leased MD-11 freighter to ACMI provider World Airways, terminating its all-cargo service. The airline has cited capacity glut and declining yields as the reasons behind the decision. Over the past year, US carriers, such as UPS and Polar, have boosted their Shanghai operations. On the Chinese side, Shanghai Airlines and Yangtze River Express commenced US flights, and Jade Air Cargo was poised to start a B747-400ERF operation from Shenzhen via Shanghai to Vancouver and Houston.

Air Canada’s decision to cancel the Shanghai freighter comes eight months after the airline scaled back its activities at Pudong airport. A year ago the Canadian carrier was using two leased MD11Fs to operate five weekly runs between Shanghai’s Pudong and Toronto. At the end of October, right in the middle of the peak season, the airline handed one freighter back to the leasing company and reduced the frequency to three flights a week.

The carrier still has daily passenger flights with A340s on the Pudong-Toronto route, which gives some 90 tonnes a week to market, besides A340 flights from Pudong to Vancouver.

Ong quits aviation to join property MALAYSIAN AIRLINES’ SENIOR general manager, cargo, J.J. Ong is all set to leave the carrier on August 31 to become CEO of a property company. While denying rumours that he had been invited to run the cargo operations of troubled Transmile, Ong said the firm he was going to join is “a property company that is owned by a Chinese and a Malaysian, dealing with property

SCHENKER INDIA IS celebrating its 10 years in India now. It started its operation in India in 1996 and the journey incorporates inclusion of various services in its portfolio. With the growth of logistics in India, Schenker India has grown manifold— with a network of five offices in 1996, today it has 28 locations (including five regional offices) and more than one thousand employees. With a turnover of more than 85 million euros, Christian Nebel (second from the company is now one of right), managing director, the leading logistics service Schenker India, along with Walter Stechel, consul general of providers in India.

The company now Germany/Mumbai, and Bernhard Steinruecke, director general of offers more standardised Indo-German Chamber of integrated logistics solu- Commerce, celebrating the tions, ranging from air- occasion freight to ocean freight, supply chain management and dedicated or shared warehousing to cross docking and value added services from a single source.

DTDC associates with AWWA DTDC, an air express and cargo company, along with the help of Army Wives Welfare Association (AWWA), recently opened a courier collection centre at the Army Headquarters, New Delhi, exclusively for empowering people who are physically challenged. The centre is the first of its kind under ‘Ability beyond Disability’ mission, opened for enhancing the opportunities for productive and gainful employment for the physically challenged. The Army has large number of physically challenged soldiers due to their exigencies in the services.

The company plans to open such collection centres in other parts of India as well.

Ron Cesana passes away THE PROJECT DIRECTOR of the air cargo quality initiative Cargo 2000 passed away on June 8, at age 66, while vacationing in Italy. He had devoted his career to improving the quality of air cargo during a long and distinguished career with Air Express International (AEI) and in recent years with Cargo 2000.

Mick Fountain, chairman of Cargo 2000, said, “Ron was one of the nicest and most impressive men I have ever met and I know this opinion is widely shared by so many other people that had the pleasure to work with him and to know him. Ron’s passion for his work and endless energy has left a lasting impression on all of us, along with his ever-present beaming smile. At the time of his death, he was also developing proposals for small and medium-sized forwarders that want to join Cargo 2000 but lack the technical infrastructure. We will ensure this next important step is realised.”

CRUISING HEIGHTS July 2007

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SNIPPETS

NATIONAL

Kingfisher collaborates with Lufthansa Technik THE AIRLINE recently signed a contract with Lufthansa Technik for an exclusive technical support of the new A320 fleet—an extension of an existing contract of initially 17 aircraft. The MRO service provider will serve the airline’s A320 family fleet via a Total Component Support TCS® with the provision of components at the carrier’s hub, Mumbai. The arrangement enables Kingfisher Airlines to participate in one of the world’s largest pools for aircraft components. Based on the

GALILEO NEWS

To provide e-tickets for Air India: Galileo India has announced that Air India will now offer e-ticketing as its default ticketing option on the Galileo CRS. Users will be able to issue e-tickets for all the routes of Air India in sectors covering domestic, the US and the UK sectors. However, if required they can also obtain paper tickets on Galileo.

Galileo has a total of 166 airlines offering e-ticketing in 91 countries. In India alone 54 carriers are currently offering eticketing on Galileo.

Appoints new general manager: The global travel and technology distribution company has announced the appointment of Anesh Kavle as its general manager, west region. He will be responsible for leading the west sales, including Maharashtra, Goa, Gujarat and Madhya Pradesh. He will also be in-charge of the services team to ensure achievement of the set business goals of the region.

Prior to this, Kavle was associated with Destination of the World as regional sales head, west.

Launches Galileo Desktop 2.0: The company has announced the launch of Galileo Desktop™ 2.0, the latest release of Galileo’s suite of access products, which enable travel agents to access

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increased volume of components, Lufthansa Technik’s Indian subsidiary, One Stop Airline MRO Support, will set up a regional component pool to support existing customers, such as Kingfisher Airlines, as well as future customers within India.

The additional Total Engine Support TES® contract will cover a complete service for the IAE V2500-A5 engines of Kingfisher Airlines Airbus A320 family fleet.

The engines will be exclusively served on power-by-thehour terms over the next ten years. Lufthansa Technik will also provide access to spare engines when required.

450-plus airlines, 66,000 hotels and 23 car suppliers. In addition to the provision of access, the Galileo Desktop™ conducts fare searches, bookings and ticketing. The latest release includes enhancements to both desktop user interfaces—Focalpoint™ and Viewpoint™.

GoAir to have four CEOs GOAIR RECENTLY announced that it would have four CEOs. While one CEO will look after the overall operations of the airline, one each will be appointed for expansions into other business segments such as engineering, ground services and cargo. Mr Jeh Wadia will continue to be Managing Director as part of GoAir’s overall business strategy and expansion plans. All the CEOs would report to the Managing Director.

As part of the expansion and business plans, GoAir is currently planning to expand its fleet size to 18 by 2009 and 35 by 2011 that would be fully funded internally, Mr Wadia was quoted as saying.

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AIR DECCAN NEWS Takes delivery of its 20th A320: The LCC has recently added 20th brand new Airbus A320 to its fleet, taking the airline’s total fleet strength to 44.

The new Airbus, with an all-economy seating with a seat capacity of 180, has been based in Kolkata. It will be inducted into the schedule on the 10th of this month with introduction of new flights out of Kolkata.

The new aircraft would increase frequency from Kolkata to Visakhapatnam, Hyderabad, Bangalore and Bhubaneswar.

Kolkata-Visakhapatnam will be a new sector introduced by the airline. This city pair is not serviced by any other airline and Air Deccan is the only airline connecting Kolkata to Visakhapatnam.

Records increase in traffic: The airline announced that it had recorded a 32 per cent increase in the number of passengers it flew in May 2007 as against May 2006. It carried 7,04,043 passengers in May 2007, as compared with 5,33,376 in May 2006.

The average load factor in May 2007 remained high at 85 per cent and also witnessed an increase over May 2006, when the

IndiGo inducts its tenth A320 THE LOW-FARE domestic airline has recently inducted its tenth brand-new A320 aircraft, and will operate the aircraft to connect Nagpur to Delhi and Pune, with same aircraft continuing service to Bangalore.

With its tenth aircraft, the airline will operate 70

loads averaged around 82 per cent. In the same period last year the airline had 250 daily flights and today the figure has risen to 350 flights a day registering a 40 per cent growth. This year, too, the airline recorded 95-100 per cent load factor on several sectors, like Kolkata-Hyderabad, Delhi-Bhopal, ChennaiThiruvananthapuram, Ahmedabad-Mumbai, etc. Unconventional sectors, like Bhopal-Jabalpur, Mumbai-Kolhapur and Hyderabad-Rajahmundry, which are not serviced by any other airline also witnessed above 90 per cent loads in May.

daily flights, flying to 14 destinations, including Agartala, Bangalore, Chennai, Delhi, Goa, Guwahati, Hyderabad, Imphal, Jaipur, Kolkata, Mumbai, Nagpur, Pune and Vadodara. IndiGo will take delivery of five additional brand-new A320 aircraft this year, taking the fleet size to 15 by the end of 2007. It plans to serve approximately 30 Indian cities by 2010, with a fleet of approximately 40 A320s.

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INTERNATIONAL Singapore Airlines launches its 50th flight to India THE AIRLINE has announced its 50th service to India with the launch of its eighth weekly flight to Chennai. A Boeing-777-200 aircraft with a two-class configuration—30 business and 293 economy class seats—will be pressed into service.

AIR ARABIA NEWS Increases connectivity between Mumbai and Sharjah: The low-cost carrier has added two weekly flights between Mumbai and Sharjah, thereby taking the number of flights in a week between the destinations to nine. The new flights will operate till September 15.

Wins Airbus Operational Excellence Award: The Sharjahbased LCC has been named winner of the award for Operational Excellence 2005-2007 by Airbus from among all global airlines operating fewer than 50 A320 aircraft. This is the second time this year that the LCC has been recognised by Airbus for its operational excellence. In January, it received a special certificate from

EMIRATES NEWS

Sets up operations in Venice: The airline has opened a new office in Venice Marco Polo Airport, ahead of the Venice-Dubai route launch on July 1. The route will provide the only direct air link between Venice and the Middle East. The five-times-a-week service supplements Emirates’ existing flights into Milan and Rome. The new service will connect the catchment area around Venice, including the Italian cities of Verona, Trieste, Florence

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Airbus for achieving the highest average level of A320 fleet utilisation between 2005 and 2006.

Idris Jala elected to IATA board of governors DATUK IDRIS Jala, the managing director and chief executive officer of Malaysia Airlines, has been elected a member on IATA board of Governors. He was elected to the 30-member board for a three-year term (2007-2010) at IATA’s annual meeting this year, held at Vancouver.

Amadeus appoints VP Amadeus has appointed Karun Budhraja as vice-president, corporate marketing & communications for Asia Pacific.

He will be based in Bangkok and will take up this appointment in mid-August. He will be responsible for all communication and marketing activities for the region, including media and public relations activities, events, internal communications, advertising, and marketing programmes.

and Bologna, as well as the neighbouring country of Slovenia, with Emirates international hub in Dubai. It will become a daily service from September 1.

Unveils massive investment: The Dubai-based airline has announced a multi-million dollar programme to introduce an enhanced version of its first class private suites; lie-flat massage seats in business class; economy class seats with extra legroom; and the industry’’s largest personal TV screens in all classes; across its long-haul Boeing 777 fleet. Over the next 18 months, Emirates will receive 24 new aircraft fitted with this new product.

Signs for more A380s: The airline has signed for eight additional A380s, bringing its total order of the double-decker aircraft to 55. Sheikh Ahmed bin Saeed Al-Maktoum, chairman and chief executive, Emirates Airline and Group, signed the letter of intent with Airbus president and CEO Louis Gallois, at the Paris Air Show. The deal is worth an estimated $2.6 billion in list prices. Emirates will take delivery of its first A380, powered by GP7200 engines, in the third quarter of 2008. The eight additional aircraft ordered today are expected to be delivered over 16 months, starting from July 2011.

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TRAVEL & TOURISM

BERGGRUEN ENLARGING PRESENCE IN INDIA ACQUIRES TEN NEW sites for hotels: Berggruen Hotels, which launched its brand of boutique budget hotels, Keys, in India in January this year, has acquired ten new sites in the country and is actively pursuing twenty more. The first resort—Keys Resort—will launch in Goa in September with a 150-room resort and will be located in Candolim.

Pondicherry is another location where a seven-and-a-half acres beachfront property is being acquired, which will be developed into a 100-room resort.

In Kerala, a 100-room hotel is being constructed in

Thiruvananthapuram; the 120-room hotel in Kochi is located next to a flowing river close to MG Road, while the Kovalam property is near the pristine beaches of Chowara.

In Bangalore, Keys has a hotel on Hosur Road and two projects in Whitefield. In Gujarat, a 100-room hotel will be built in Vadodara, while in Maharashtra, a site has been acquired near Pimpri, in Pune. In Ludhiana, the hotel will be built overlooking the City Center project.

Keys is actively pursuing twenty other sites in the country, which include Kolkata, Chennai, Hyderabad, Delhi/NCR, Surat, Ahmedabad, Mumbai, Nashik, Nagpur, Aurangabad and Jaipur, amongst others.

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SNIPPETS A battlefield of tomatoes LA TOMATINA happens every year in Buñol, 30 miles from Valencia, in Spain, on the last Wednesday in August (this time on August 29) and is the highlight of a weeklong local festival in honour of the town’s patron saint, San Luis Bertràn, and the Virgin Mary.

When the day of the great battle dawns, trucks loaded with around 1,25,000 kilos of ripe ammo roll into the Plaza del Pueblo.

Between 11 am and 1 pm, the streets are awash with juice, pavements are spattered with pulp and the participants transformed into walking, talking Bloody Marys. The actual tomato throwing lasts for only two hours between 11 am and 1 pm.

As soon as the siren signalling the end of La Tomatina is sounded, a massive cleanup operation gets under way. Water is pumped from a nearby Roman aqueduct and by mid-afternoon there’s barely any trace left of the messy melée that has taken place, much less the stench of fruit lingering in the streets.

The first Tomatina took place in 1945,

but no one seems to know exactly how it all started. Some say it began as a fracas between a group of friends, others claim the tradition was started at an anti-Franco rally.

One of the most likely accounts is that brawling bystanders at a carnival parade seized the contents of a nearby vegetable stall and began throwing tomatoes at their opponents. Initially the authorities did their best to ban what quickly became an annual battle, but in 1959 they eventually entered into the spirit of the event and it became an institution.

THE PARK HOTEL NEWS CHOOSES ITG Sales & Marketing as UK partner: The hotel growth has appointed ITG Sales & Marketing to handle its sales, marketing and representation in the UK. This partnership is specifically aimed at increasing the number of visitors from the corporate, leisure and MICE markets to India.

This is the hotel group’s second marketing tie-up in the UK, after the Design Hotels that has been marketing The Park Hotels in Europe and the UK for over four years now. After USA, the UK is the biggest overseas room nights and revenue producer for The Park Hotels.

Amongst top 12 great workplaces around the world: The Park Hotels is the winner of 2007 Gallup Great Work Place Award, by the Gallup Orgnisation USA. The Gallup Great Workplace Awards are based on the most rigorous workplace research ever conducted. A panel of workplace experts evaluated the 12 award-winning organisations. The Park Hotels is among the winners because their results demonstrate they have one of the most productive and engaged workforces in the world. The Park Hotels achieved a Grand mean score as high as 4.21 against a qualifying score of 4.15.

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Crowne Plaza appoints resident manager CROWNE PLAZA TODAY GURGAON announced the appointment of Barun Jolly as the resident manager. Located in Gurgaon, the brand defining property is set to open its doors mid this year. Jolly has been associated with the hotel industry for almost ten years, and in his new assignment, he will be the direct link between the general manager, the guests and the staff.

Situated in Gurgaon, Crowne Plaza Today Gurgaon is part of the InterContinental Hotels Group (IHG). The 234-room hotel will also launch the country’s first specialty Brazilian restaurant—Wildfire, a Club Lounge and Bar called Connexions, and Café G, an all-day live-cooking buffet-restaurant, along with personalised spa and health facilities.

Shopping festival kicks off in Hong Kong THIS YEAR the festival is from June 30 to August 31, and coincides with a host of celebrations marking the 10th anniversary of the establishment of Hong Kong as a Special Administrative Region of China.

Among the must-see events is the nightly multimedia extravaganza—A Symphony of Lights, when more than 30 buildings lining Victoria Harbour erupt in a choreographed display of coloured lights, laser beams and searchlights.

Crowned as the ‘World’s Largest PermaCRUISING HEIGHTS July 2007

nent Light and Sound Show’ by Guinness Book of World Records, the show will be complemented by pyrotechnic displays from July 1-8 and on all subsequent Saturdays during the Shopping Festival.

Other attractions include Hong Kong Disneyland (July 14 to August 31), Ocean Park Wet ‘n Wild Panda Mania (July 1 to August 31) and Food Expo 2007 (August 16-20).

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Glitzy launch

A

RUNAWAY sales success even before its first flight later this year and planned entry into service with All Nippon Airways in May 2008, Boeing’s Dreamliner is like a dream come true for Boeing. It brought the company back from the brink, helped it wallop European rival Airbus for the first time in years and racked up a record number of orders. The first of the three planned 787 models, made of carbonfibre reinforced plastic for large parts, such as the fuselage and wings, can carry 250 passengers for 8,200 miles and is 20 per cent more fuel-efficient than its predecessors while pumping out fewer greenhouse gases. At the official debut on the eighth of this month at Boeing’s sprawling Everett Field plant, outside Seattle, an excited gaggle of employees, airline executives and dignitaries were guided by well-known TV anchor Tom Brokaw through the glitzy product launch.

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