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June 2008

FIREWALKERS INC

As fuel prices touch the stratosphere, airlines owners get edgy. It’s like walking on hot coals: they are cutting costs, dropping routes and wondering what to do next

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EDITOR-IN-CHIEF’S NOTE

Kane and Abel of Indian aviation

I

f Jeffrey Archer were to ever visit India again, he could well find his real life Kane and Abel in Vijay Mallya and Naresh Goyal. One a savvy, blood-and-gore street fighter who has made it on the dint of his own hard work and a few lucky breaks along the way, another who was literally born with a golden spoon in his mouth.

Both have sharply contrasting views, hate each other’s guts, believe they have the better product and are willing to fly the last mile to tell the other what he thinks of him. As they battle each other, the Indian aviation business is bleeding like never before. The others too are worried, but they are looking for leadership at this crucial juncture The other day, Mallya was elected to be the President of the Federation of India Aviation (companies). It is a tough job at this point in time when the industry needs to get together for solutions. Just the week before, Naresh was re-elected to the Board of IATA (International Air Transport Authority). He is, incidentally, the only Indian on the Board.

Inspite of personalities with such formidable credentials, the industry has been waiting for the Ministry of Civil Aviation to lobby on their behalf.

Individual airlines may strategise on their plans for the next 12 months or even have a five-year blueprint, but collectively there is nothing going for the industry. Simply because it is in Kane and Abel mode.

Talk to any state government official and they will tell you that the travel and tourism industry has a far better track record than the aviation business when it

CRUISING HEIGHTS June 2008

comes to buttonholing officials and getting their point of view across. One reason for this is that the aviation business big shots per se consider it passe to lobby for their good health. They think that’s a job best left to the Johnnies in the travel business.

Well, this below-the-dignity attitude is going to cost them a cool Rs 6,000-8,000 crore this year in losses.

This should be no surprise. For an industry that relies so much on hype, glamour, glitz and fizz, the aviation business has one of the most insulated leaderships — at least in India. You can see Mallya at the Chidambaram Stadium in Bangalore or the Formula One track in Monte Carlo or shooting with a bevy of beauties in the Andamans, but you can’t catch him dead with a Chief Minister pleading for relief for a business that he says he has plenty of passion for. Well, Naresh with his more rustic Haryanvi genes may not prefer Monte Carlo, but he has his own priorities and heartaches in life. And when indeed they do lobby, it is purely for Kingfisher or Jet, as the case may be.

If the airline business has to regain its health, Messers Goyal and Mallya and company will have to reach out to the others in the industry, carve a united front and convince the state governments and other stake-holders that indeed they are in serious trouble.

Good photo opportunities and interesting sound bytes are one thing, getting things moving is another thing. For the moment at least, not everyone believes that Kane and Abel is just a best seller by Jeffrey Archer.

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Simply shocking!

It is a bit shocking that the customs department wants to be paid for doing its duty.

It's a bit like the Punjab Police asking the Punjab cricket association to pay for the IPL matches at the stadium. Once the matches were cleared by the district authorities, it was the sovereign duty of the state government to provide security at Mohali (it’s another matter that the Finance Ministry wanted the BCCI and the IPL to pay taxes because it was a commercial event. Maybe, Chidambaram has a point there).

By the same yardstick, Customs is a sovereign function and no airport (they were all run by the state owned AAI) has had to pay for it in the past. For the first time ever, the Greenfield airports at Hyderabad and Bangalore are being asked to pay for customs.

At the moment, customs, security (CISF) and immigration are all functions undertaken by the state. That's the existing policy.

And no airport can function without these services!

It is understandable for the Customs to ask for expenses of their shift to the new airport or the cost incurred in interiors to be underwritten by the developer. But why should GHIAL or MIAL pay for the housing or the transportation to the new location?

The Civil Aviation Ministry has lodged a strong protest with the Finance Ministry, but the two developers have gone ahead with the services “under protest”. It remains to be seen whether the FM reverses what is patently an unjustified demand or does it now ask the AAI to pay for something that was provided ‘gratis’ all these years.

After all, how can you differentiate between one airport and another?

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TESTING TIMES FOR AIRLINES p24 Fuel prices are rising by the day and it has been singeing the domestic carriers. Reeling under heavy losses, Indian airline owners have been trying every trick in the trade like dropping routes and raising fares. What will they do next?

OFF THE RECORD

p6

There are many takers for the post of Chairman, Airports Authority of India.

Lobbying is on but who gets the prized post still remains open.

All the shuttling between Delhi and Mumbai added to the million other chores has brought health problems for Air India chief Raghu Menon.

Plus: What has Captain Beri been up to and who is Daddy Number One? CRUISING HEIGHTS June 2008

NEWS DIGEST

p13

The recent spat between Planning Commission Deputy Chairman Montek Singh Ahluwalia and Aviation Minister Praful Patel has come as a boon for the Kolkata airport.

Its modernisation programme has been given the green signal.

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

CRUISING HEIGHTS Editor-in-Chief

K SRINIVASAN Managing Editor

TIRTHANKAR GHOSH Consulting Editor

CHOCKS OFF FOCUS

p34

IATA has ushered in 100 per cent e-ticketing and replaced paper tickets from June 1, 2008. While GDS providers are optimistic about the future, the travel agents are not.

p32

Most airlines believe that if allowed by the ministry, they could save costs through self-handling. It sounds reasonable enough, but will it not lead to a free-for-all situation at airports with all those GH employees running haywire?

R KRISHNAN Associate Editor

BIPIN SHARMA Copy Editor

AALOK SRIVASTAV Copy Desk

BIRENDRA KUMAR Layout Artists

RUCHI SINHA PRADEEP JHA Art Director

BHART BHARDWAJ Co-ordinating Photo Editor

H C TIWARI Subscription

JAYA SINGH Gen. Manager (Admn.)

SPECIAL REPORT

p18

Deccan is offering free holidays to its guests. Why is number three special for Spicejet? Lufthansa looks to hire more young Indians as crew members and Korea Tourism starts a base in India.

Airlines cannot deliver unless their efforts are supported by government actions on issues such as security, regulation of monopolies, the environment and liberalisation. So says IATA Director General Giovanni Bisignani.

GLOBETROTTING

BACK PAGE

SNIPPETS

p42

p40

Be careful when you are flying next. If there is an unhappy cabin crew on board, there could be chances of the plane being burnt mid-air. That’s what happened in Canada.

p48

Where are the world's most ontime airports? Certainly not in India! But Asia has some of the leaders.

CRUISING HEIGHTS June 2008

RAJIV SINGH Executive Director

RENU MITTAL Editorial & Marketing office: Newsline Publications Pvt. Ltd. C-15, Sector 6, Noida 201 301 Telefax: +91-120-4145555, 4145500 All information in CRUISING HEIGHTS is derived from sources we consider reliable.

It is passed on to our readers without any responsibility on our part. Opinions/views expressed by third parties in abstract or in interviews are not necessarily shared by us.

Material appearing in the magazine cannot be reproduced in whole or in part(s) without prior permission. The publisher assumes no responsibility for material lost or damaged in transit. The publisher reserves the right to refuse, withdraw or otherwise deal with all advertisements without explanation. All advertisements must comply with the Indian Advertisements Code. The publisher will not be liable for any loss caused by any delay in publication, error or failure of advertisement to appear.

Owned and published by K. Srinivasan 4C Pocket-IV, Mayur Vihar Phase-I, Delhi 110091 and printed by him at Nutech Photolithographers, B-240, Okhla Industrial Area, Phase-I, New Delhi 110 020 Vol III No 2

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Getting them on board

PERISCOPE

“

“Employees across all sections should be made to feel part of the (merger) process. We will renegotiate with the worker unions, the terms and conditions of employment, so that employee productivity goes up and expenditure is reduced.”

Air India Chairman RAGHU MENON on the merger process.

LETTERS TO EDITOR

THE COVER STORY, on air cargo (Up, up but still not away... May ’08) presented some startling facts about the evolution of the air cargo industry in India. No doubt, the air cargo industry is going great guns and is being touted as the “next big thing” to happen to the Indian airline industry. With the coming of new players, the MDLR’s Gopal Goyal wants to reach for the skies air cargo industry would surely get a major push. The Ministry of Civil Aviation also should take drastic steps to provide impetus to the air cargo industry. Only then would the air cargo industry be able to achieve great heights. Is the Ministry of Civil Aviation listening?

Ram Sahay, Chandigarh May 2008

Illustrations: Rajeev Kumar

“India has one of the largest GDP in the world, but we don’t have an integrated air cargo service in our country. There is a huge demand, and I don’t need a McKinsey to tell me that.”

Rs 60

The column by R Krishnan (When will the shadow be cast off? May ’08), unveiled some of the darkest secrets behind the ailing airline industry in India. Over the years, the private airline industry has seen a phenomenal rise. This can be attributed to the fact that Ministry of Civil Aviation, of late, has given the go-ahead to the private airlines without any reservations. The columnist is forthright when he says that the main reason behind the mushrooming of private airlines is active political support and a helping hand from a compliant bureaucracy, without which, it could not have been possible? It is high time that Ministry should take drastic steps to curb the hegemony of private airlines.

Vijay Goel, Ranchi

4

No Mckinsey for me

The special focus story (MDLR plans to soar high, May ’08) made interesting reading. It’s nice to read that another private airline has come up. Good news for the industry. Also good news for vegetarians. It would possibly be the world’s only only-vegetarian carrier. The airline industry is brimming with private airlines. And they are coming with lucrative offers for the customers, thus giving even aam aadmi a chance to travel by air. AAI has done a great service to the nation by issuing licenses to the new private airlines.

Vibha Godse, Pune

Captain G R GOPINATH on his new plans.

A minor fee “Some companies retained their surcharge for different booking channels, like call centres. We decided to reintroduce Rs 50 surcharge for website and Rs 100 for call centre bookings for each ticket.”

IndiGo CEO BRUCE ASHBY on reintroducing surcharge on bookings.

Ego problem “At UB Group, we build brands, we don’t destroy brands for ego purposes.”

VIJAY MALLAYA on retaining Deccan as a brand.

Not selling “(Saroj) Datta is a respected man and whatever he says makes a lot of sense, but there is nothing of the sort on the ground right now. We are not in talks with Jet on any such move. But if it happens, it has to happen through the current stakeholders in SpiceJet.” Spicejet Chairman SIDDHANT SHARMA on the news that the airlines is ready to be soldto Jet or others.

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

CRUISING HEIGHTS June 2008

Waiting for Godot “At the moment, it’s 80 per cent, but I will definitely dilute. We are waiting for the right time and when the market situation improves, I will divest 5-10 per cent stake.”

Jet Airways Chairman NARESH GOYAL on diluting his stake in Jet.

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Starring: Tourists and the Taj

Foreigners at the Taj:

2005-06: 425637 2006-07: 532328 2007-08: 573577 Domestic visitors to the Taj: 2005-06: 1860657 2006-07: 2071243 200-08: 2742041

COLD STATS

Like the boom in the economy, the Indian tourism sector has been having a good time. Foreign tourist arrivals have risen year on year. And, so has the foreign exchange earnings. The figures are supplied by the Press Information Bureau and are estimates for 2007 and 2008.

Foreign tourist arrivals up to May: 2006: 1853804 2007: 2076783 2008: 2315811 Foreign exchange earnings upto May: 2006: Rs16,341 cr (or US$ 3,653 mn) 2007: Rs 18,925 cr (or US$ 4,376 mn) 2008: Rs 21,963 cr (or US$ 5,479 mn)

The Taj Mahal has remained the top attraction with both foreigners and domestic tourists. Over the years, even that number has gone up: from 425637 foreign tourists in 2005-06 to 573577 in 2007-08 and from 1860657 Indian visitors in 2005-6 to 2742041 in 2007-08.

LOOKING GLASS

Courtesy: thebreakthrough.org

Why are you angry? “A flight may be delayed for technical reason or ATC problems and passengers get understandably angry. If at this time, they see a public figure boarding the flight, they vent their ire at him or her.�

Former Rajya Sabha Deputy Chairman NAJMA HEPTULLAH on the woes of airline travel.

CRUISING HEIGHTS June 2008

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OFF THE RECORD

W

Kanu Gohain

Naseem Zaidi

DGCA

UPDATE

ell, there was plenty of speculation that Naseem Zaidi’s candidature for the top job at the DGCA had been shot down. His file was sent back, but that was purely on technical reasons. UPSC had no objection to his candidature, but wanted that the guidelines in the advertisement for the job be followed. So the job was readvertised and Zaidi’s candidature now fits the bill. In other words, he is the man for the job. Well, there is a move to give him a further four months with the approval of the PM to ensure continuity. However, in case that fails, the odds are that either Joint Secretary Arun Mishra (who handles DGCA at Rajiv Gandhi Bhawan) or R K Singh (who handles bilaterals and Air India, and has already been granted a three-month extension for overseeing the great IA-AI merger) will get the job temporarily. If Mishra gets the job. No surprises. If R K Singh does, still no surprises. Isn’t he the man for all seasons?

W

ell, it was a three-in-one trip. One portion official work, one portion sports administration and one portion pleasure. Makes for the perfect receipe.Well, the official portion of Praful Patel’s trip Down Under saw him hold talks in Canberra with Australia’s Minister for Infrastructure, Transport and Regional

MANTRI

DOWN UNDER Development, Anthony Albanese. A high-level aviation and infrastructure Australian delegation to India is planned later this year or early in 2009. That portion of the trip over, Mantriji travelled to Sydney and Melbourne and attended a meeting of FIFA (the international Football Federation). He is the senior vice-president of the Indian Football Federation (headed by the redoubtable Priya Ranjan Das Munshi

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who was also there in Australia) and was there with other officials for the FIFA jamboree. Das Munshi must be a happy man.

His vice-president hardly ever bothers him and backs his each move to the hilt.

No wonder, it’s a mutual admiration society. Business and official work over, Praful travelled to Australia’s fabled Gold Coast for a spot of relaxation. Keeping him company was wife Varsha and a few close friends. Good he decided to let his feet down. Fuel prices zoomed as he flew between Sydney, Melbourne and Canberra. There was plenty to do by the time he landed back home.

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S

Photo: H C Tiwari

o, who will emerge at the top of the sweepstakes when the interviews for the Chairman’s post at Airport’s Authority of India are held on June 17? Twelve candidates have been short-listed for the top job and five of them are insiders: Member (Finance) S C Chatwal, Member (Planning) V P Agarwal, Executive Director S R Raghvendra Rao, Airport Director Dinesh Kumar and ED P K Nagpal. Amongst the outsiders, those in the race include two formidable candidates: A R Chowdhary, CMD, NBCC and Amitabh Kant, former JS (Tourism), who is now a Principal Secretary with the Kerala Government. Others in the race are A L Shanmukh, Director, BEL, Shakeel Ahmed from IRSME, S Krishna, Principal Secretary in Karnataka, Raghav Chandra who is a Principal Secretary in Madhya Pradesh and A K Jain member (Finance) at Prasar Bharati.

Interestingly, the interviews were scheduled by the Public Enterprise Selection Board (PESB) suo moto, without taking the Ministry of Civil Aviation into confidence. And when the Ministry turned around and asked them as to the tearing hurry, the answer was that it would take six months for the process to be completed and, therefore, it would be perfectly in time for the selected candidate to take over on the

AAI Chairman K Ramalingam: Who will take over after him?

WHO WILL

GET THE JOB? Amitabh Kant

S C Chatwal

superannuation of the present Chairman K Ramalingam.

The problem with the superannuated civil servants at the PESB is that they can do what they like because there is no one to write their ACRs (Annual Confidential Reports). Having been servile ‘yes masters’ all their lives, they now suddenly want to assert their authority. In the same Civil Avi-

V P Agrawal

ation Ministry, the PESB has conveniently overlooked the superannuation at Air India on two occasions in the past and a selection panel chose the CEOs. Much worse, the panel was rejected and the Ministry decided who would be the next CEO and the PESB demurred. So why this fuss suddenly?

Anyway to cut a long story short, the interview has been scheduled and the jury is CRUISING HEIGHTS June 2008

out on who will be the next Chairman. The odds are that one of the four will make it to the top job: S C Chatwal, V P Agarwal, A R Chowdhary and Amitabh Kant. Both Kant and Chowdhary are formidable outside contenders — well connected, smooth and successful. The two insiders — Chatwal and Agrawal, too — have their backers. Chatwal is a relative outsider having come into the AAI just two years ago. Agarwal, however, has a long track record at AAI, having served in various capacities.

With the Chairman away in Portugal to attend the annual CANSO conference, it is evident that the issue is really out of his hands. The Civil Aviation Secretary Ashok Chawla will represent the Ministry at the interviews. Who is his candidate or shall we say Mantriji’s choice? There are no easy answers. The safe answer from knowledgeable sources is always the same: “Mantriji has an open mind on these issues.”

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OFF THE RECORD

NAMASTE

AIR INDIA TALES

CAPTAIN

TAKE IT EASY,

RAGHU!

T

he last time one remembers a senior government servant being felled by spondylosis and a bad bout of sciatica was when former Secretary to the President, P Murari spent weeks in bed with a severe pinched nerve. While Raghu Menon doesn’t have a pinched nerve, its spondilities that’s got him. Is there a cure to the wretched condition? Plenty of rest and no pressures of any kind.

The Air India Chairman who has taken on a Herculean task to nurse the ailing Maharaja back to health has been shuttling between Mumbai and Delhi to get things going. Naturally, the stress of the high-pressure job has got to the low key Menon and he has now got to take it easy for some time. Its not easy considering there are a millon chores to be done, particularly when the losses are mounting, routes need to be rationalised and the unions are baying for their pound of flesh.

One doesn’t know if it is his ill health that saw Air India unrepresented at this year’s IATA meeting. Menon’s predecessor, Vasudevan Thulasidas was on great terms with Giovanani Bisignani and hosted him in India some years back. He was also on the IATA board of governors. With his exit, there is only one Indian in the IATA Board: Jet Airways’ Naresh Goyal.

Captain Naresh Beri

R

BERI!

emember Captain Beri? The 747 Commander who made the rounds of Rajiv Gandhi Bhawan and the PMO has finally been shown the door as Resident Director in the capital. Beri was appointed to the job during the tenure of V Thulasidas.

His claim to fame was his proximity to T K A Kutty Nair, Principal Secretary to the Prime Minister. But there were scores of people he rubbed the wrong way and complaints went right up to the Civil Aviation Minister who finally ordered that Beri shouldn’t be seen lobbying in Delhi but focus on his career as a pilot. But Beri ignored this well-meaning advise and continued to hover around in the capital. He was also caught in a big controversy when he was accused of spending hundred of dollars of AI revenue to buy gifts for the high and the mighty. A speedy enquiry absolved him of any wrongdoing although many believe that an indulgent Thulasidas let go off a favourite. Now with Raghu Menon having disbanded that office, Captain Beri, the former BSF pilot, is back to doing what he should have always done: fly a 747.

SANJAY IS DADDY

NUMBER ONE

T

his month, we offer full marks to Sanjay Sharma for being Daddy Number One. AI’s PR pointsperson in the capital took time out to entertain his two sons in Mumbai and what better way than the semis and the finals of the Indian Premier League (IPL). And then to cool down after all the excitement of the grand treat, Sanjay was off to Lonavala. Lucky bloke was able to take off time amidst all the hustle and bustle. Tabhi to mamu, he is Daddy Number One. Samajh gaye na!

WOMAN POWER TO

THE RESCUE

T

he ATF crisis has burnt every carrier and most are taking the short route out: cut down on unviable routes. That is not so with aircargo. The two ladies riding high on the optimistic wave are: Air India’s Director, Commercial (Cargo) Anita Khurana and Blue Dart’s Managing Director Tulsi Mirchandaney. The two believe that cargo will continue to rise.

Each one has her own reason: Khurana feels that AI’s operation from the new hub of Nagpur will be immensely successful and Mirchandaney sings the “Time is money” song. That’s some cheer in these troubled times.

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NEWS DIGEST

A sigh of relief for

AAI! T

he Praful-Montek spat over airport modernisation has proved to be very useful to the state-owned Airports Authority of India (AAI). While Planning Commission Deputy Chairman Montek Singh Aluhwalia woke up to the literally massive passenger traffic congestion outside Delhi’s Indira Gandhi International Airport (IGI is being modernised by GMR) when he went there to see off a relative and pulled up GMR for what he believed was their fault, its fallout, at the end of the day, has been good.

The long pending modernisation plan of Kolkata airport by AAI which received

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CRUISING HEIGHTS June 2008

Sitaram Yechuri

K Ramalingam

went to IMG, the minutes said the city side would actually begin with the terminals.

According to the RFP, O&M of building, including terminal or rather the commercial use of the space therein would be done by the private part of the PPP. Usually AAI sub-contracted the terminal work for say five years. But the distorted RFP made it obligatory for AAI to farm out terminal to the successful private bidder for 30 long years by when AAI would have died and deeply buried somewhere in the airport land.

Therefore, AAI will only be responsible for the air side and as for the terminals it would be developed by it but its management would be handed over to the private party that successfully bid for the city side development of the concerned nonmetro airport. This was sure shot recipe for destroying the AAI and robbing the AAI employees of their jobs. Where would they go if they were not going to work in the terminal and manage it.

Photos: H C Tiwari

Praful Patel

the go-ahead from the Central Government in early 2007 could not take off because of numerous objections raised by the Planning Commission. Thanks to the PrafulMontek clash, the imbroglio over Delhi airport ended with the Kolkata airport modernisation plan receiving the approval of the Public Investment Board (PIB) early in June 2008 with an approved investment of Rs 1945 crore.

While AAI has selected Aeroport du Paris of France and RMJM of Hong Kong as consultants to the modernisation and expansion project, the Authority is expected to finalise the design as well as the construction company in June itself. A further by-product of the duo’s fight has been the clarification once and for all as to who will call the shots in the modernisation of the 35 non-metro airports. Though the Union Cabinet had decided that these 35 nonmetro airports would be upgraded by AAI, there was plenty of confusion over the modus operandi. Some believed the confusion was deliberate?

For instance, it was earlier believed that AAI would be responsible for the modernisation and expansion of these non-metro airports — both the air side as well as the terminal side. As for the private parties, it was expected that the PPP partner would be responsible for development of the city side, which literally meant across the terminal and the kerb and the real estate towards the car parking area onwards. An inter-ministerial group that went into these issues, however, came out suddenly with a brilliant idea, totally negating what actually had been decided at the meeting.

It was decided in the internal meeting of the AAI and the Ministry of Civil Aviation that private parties would be engaged for the development of the city side as stated above.

But when the matter

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airports. It may be recalled that the earlier RFP attracted response from Anil Ambani’s Reliance Energy, Tata-Changi, L&T, Fraport Consortium, Lanco Infratech, GMR and Maytas Infra Consortium.

According to sources privy to that RFP, Anil Ambani’s Reliance Energy was reportedly the T-1 (Technically Number 1 bidder) even as the AAI was waiting to open the financial bid. However, its reluctance to open the financial bid was due to the distortion of the very idea of AAI modernising the non-metro airports.

Now, with the air cleared by no less than the Civil Aviation Minister himself, it is believed that AAI will move fast.

But, will the deal continue to enthuse the private parties is the bigger question?

There was one clause in the tender document that led to the modernisation of Delhi and Mumbai airports. It was the clause that airlines cannot own more than 10 per cent equity in the companies being set up to modernise airports earlier controlled by AAI. Seen in that perspective, the speculation that Anil Ambani is bidding for a controlling stake in SpiceJet after he lost Deccan to Mallya earlier, assumes new significance.

Even more interesting will be the reaction of the Tatas and Ishtithmar who

Bengaluru airport becomes finally operational The swanky Bengaluru International Airport was thrown open on the night of May 24, 2008, with the first flight taking off to Singapore. The airport was inaugurated by Prime Minister Manmohan Singh.

It was a no-frill opening as the model code of conduct is in force for the just-concluded Karnataka Assembly elections.

The state-of-the-art airport, which saw its launch date being deferred three times, can handle over 12 million passengers annually.

“We will have celebrations (in a grand ceremony) next month”, an official of Bengaluru International Airport Limited (BIAL) said.

The earlier airport, run by state-run Hindustan Aeronautics Limited, was closed down with the commissioning of BIA, spread over 4000 acres.

The terminal building of BIA is spread over 71000 sq mts and built to accommodate 2733 passengers at peak hour. The airport is equipped with 53 common use counters and 18 self check-in counters.

The first phase of the airport has been built with an

Montek Singh Ahluwalia

Photo: H C Tiwari

So, the spat between Praful-Montek inadvertently raised that issue but before the main battle as a sort of dress rehearsal.

For instance, it was CPM leader Sitaram Yechury who, as the Chairman of the Parliamentary Standing Committee on Tourism and Transport, wrote to the Prime Minister that the ongoing tender process for the PPP of non-metro airport was against the letter and spirit of the government decision of modernising these airports by AAI and mentioned specially this terminal issue.

Yechury said how could Montek do it when as a member of the PM’s Infrastructure Committee, it was clearly decided that the non-metro airports would be managed and maintained by AAI and the city side development would be through a JV. Seizing this opportunity, Civil Aviation Minister Praful Patel called the press to say it was the Planning Commission which had done that at IMG even as the Ministry of Civil Aviation opposed it. Fortunately for AAI, this helped its cause and it got back its job to modernise the air side as well as terminal side of the non-metro airport.

For once, the Left was right. With this clarification, AAI has now decided to retender its original RFP, floated earlier this year, for the PPP of Udaipur and Amritsar

hold stakes in SpiceJet. As for AAI retendering Udaipur and Amritsar airports, there should be nothing wrong with it. It has the right to do so. After all, did Air India not re-bid its need for widebody aircraft — like Boeing 777s, 787s, Airbus A340s, A350s, A330s etc, after the earlier bid led to the selection of Airbus A340s against Boeing 777s -- after the change of regime from NDA to UPA? The only difference this time is, the rebid is happening when the same ruling coalition/Minister are in power.

investment of Rs 2,470 crore.

BIAL officials said the new airport can handle up to 720 aircraft movements a day (30 an hour in peak hour).

The greenfield airport is situated at Devanhalli, about 40 kms from Bangalore.

Kolkata airport development plans get PIB clearance The development plans of Netaji Subhash Chandra Bose International (NSCBI) Airport, Kolkata has got an unconditional Public Investment Board (PIB) clearance.

It will now go for the approval of the Government (CCEA approval) and work is expected to begin in two-months time. Last year, the Government decided that the Kolkata airport would be developed to international standards by the Airports Authority of India (AAI). In August 2007, the AAI submitted the proposal for PIB approval. In October 2007, an Inter-Ministerial Group (IMG) cleared the proposal and in December 2007, Planning Commission accorded in-principle approval for the development of NSCBI airport, Kolkata. The Ministry for Environment gave approval to the project in March, 2008. Meanwhile, AAI has prepared

CRUISING HEIGHTS June 2008

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A spicy

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hat not everything is rosy with the Indian aviation has been known for some time now.

SpiceJet has been trying to raise $ 100 million in capital to not only keep itself in the sky, but also pay for the new acquisition of Boeing 737 NGs (Next Generation) it had ordered. It was not able to get too much from the Sale Lease Back (SLB) route and whatever it would have got was not enough to meet its capital requirement.

So it went knocking again at the doors of Tatas and Ishtithmar who hold about seven per cent and 15 per cent, respectively, in SpiceJet. The SpiceJet management has sought to increase the stake of these two companies to 15 per cent and 30 per cent, respectively. Tatas have already said that they are in it as only investors and not keen to run an airline. But, with the proposed, or should we say speculated, entry of Anil Ambani, who is frustrated at his unfulfilled airport dreams and hence keen to get into

the airline business directly, this could well see a battle royale between the presently non-existent but potential heavyweight players: Ratan Tata and the Anil Ambani-led ADAG. They are already competing in every other area, be it telecom, power, financial services, etc. It may be recalled that Anil Ambani does not believe like elder brother Mukesh Ambani, in acquiring only part of a company, even if it is 51 per cent. For him, it has to be cent per cent control — that means, a majority held by him and the rest widely held. He also doesn’t believe in any other company’s representative being on the board of his company and that could well be the story in l’affaire SpiceJet, too.

But in the case of SpiceJet, the other main stakeholder, besides Tata and Ishtithmar, is Bulu Kansagra, the Kenyan-born British of Indian origin. He was reportedly and, perhaps, still is the biggest dairyman in Kenya. He holds 13 per cent of SpiceJet. But with its stock prices just around Rs 30,

as against an earlier high of Rs 56 at which Tatas bought, Kansagra has already disclosed that he will not quit for nothing.

Now, if Anil buys out Kansagra, then he will have to buy out Ishtithmar and later Tatas if they now decide to take their stake to above 10 per cent, thus warranting a seat on the airline’s board. It could become a spicy dogfight on the ground.

Meanwhile, as far as acquisitions go, SpiceJet wanted to exchange its aircraft slot with some other airline but Boeing said it was against the company policy to allow such inter-changes. Once the aircraft was delivered, it was left to the company what it would do with it. SpiceJet currently has 17 Boeing 737NGs including 900 ERs. It is likely to get another five 737s delivered this year. With the latest fuel price hike creating thick layers of cloud that are proving difficult to shear through, SpiceJet is in a bit of a quandary. Last heard, SpiceJet might even consider to wetlease its aircraft or simply rent it out.

detailed estimate and tendered documents. The date for opening of tenders for PMC is May 30, 2008 and the date for opening of tender for construction is June 16, 2008.

3. To acknowledge the support of passengers and employees, DIAL organised various activities for its Anniversary Celebration.

Singapore inks agreement with AAI

Companies line up for private airstrips

The Civil Aviation Authority of Singapore (CAAS) has inked an agreement with the Airports Authority of India (AAI) to promote mutual cooperation in civil aviation between the two organisations. The Memorandum of Cooperation (MoC) was signed by Lim Kim Choon, Director-General and Chief Executive Officer, CAAS, and Dr K Ramalingam, Chairman, AAI. Under this collaborative arrangement, CAAS and AAI can tap on each other's experience in airport operations and learn from each other's best practices. Both organisations will share knowledge in areas of airport management and operations, and exchange information on civil aviation programmes and projects. The agreement will also pave the way for coordination in training, research and development programmes.

With government allowing setting up of private airstrips and airports, corporates are lining up with projects for getting approvals.While Gwalior Sugar has applied for a private airport near Gwalior, aluminum major Vedanta has applied for an airstrip in Orissa and Sahara India is awaiting nod for a heliport at their Amby Valley project near Lonavala. The Adani Group wants a private airstrip and a public one at their SEZ in Mundra. A number of hospitals like Escorts in national capital region want a heliport.

These applications could be cleared shortly under the new policy.

In Delhi, the AIIMS wants a rooftop helipad. Government is keen to start this along with a heliport in Delhi before the 2010 Commonwealth Games. The hospital has been asked to get a structural safety certificate of their building along with no-objection certificate from local agencies like the police.

DIAL completes two years of operations Delhi International Airport (P) Limited (DIAL), a joint venture consortium mandated to modernise and restructure the Indira Gandhi International Airport (IGIA), its second year of operations on May

Juhu runway to be extended There is a proposal to extend the Juhu runway in Mumbai to the beach so that the airport, which currently accommodates only light helicopters, can be used for corporate and regional carriers and turbo-prop aircraft.

Extending the Juhu runway is expected to free 10 to 15 per cent of Mumbai airport's current capacity, which is more than 700 air traffic movements per day.

CRUISING HEIGHTS June 2008

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NEWS DIGEST

K

ingfisher Airlines, the very nice product that it is, may find its foreign flight ventures not so heady. Its Executive Vice President Hitesh Patel is reported to have told some people that his airline will rethink the deliveries of five each of Airbus A340-500 and Airbus A330-200, besides seven ATRs. As for the big birds, it is planning to connect Bangalore with SFO/LA (San Fransisco/Los Angeles) and also New York for which it proposes to use its 340-500s. But, even those within Airbus have serious apprehensions about the fuel economics of A340s on such long non-stop routes.

It may be recalled that Singapore Airlines was the first airlines to start non-

pouring whisky over it — be it single malt or otherwise.

Just two months before the proposed launch of his flights to world IT capital SFO from Indian IT capital Bengaluru in August 2008, competition has already come to his doorsteps. For instance, Cathay Pacific flew in its Airbus A330200 from Hong Kong to Chennai, early morning on June 3, carrying 381 passengers in a plane configured to carry 386 passengers in three classes. The return flight from Chennai, an hour and 45 minutes later, had nearly 386 passengers. The flight was primarily meant for carrying Chennai-based passengers as well as those from other cities in South India.

With four weekly flight frequencies,

Kong to proceed to SFO. Mallya may offer direct non-stop flights between Bengaluru and SFO/LA with his A340-500s.

It is rumoured that he will have an open bar even for economy class passengers. This was the idea six months ago when he was supposed to get his A340s and A330s. But, will it be the same today as well! For one thing, he has not taken delivery of the big birds that are reportedly parked in Toulouse. Company executives informed that it was earlier believed that Mallya would offer his aircraft on wet lease as the market for big birds as well as small narrowbodies were tight.

But, with the repeated fuel hike, it has become a little easier now. Therefore, why did he not take delivery earlier and

Will the non-stop dream

work?

direct flights between Singapore and LA with it’s A340-500. For this flight, not only was there a payload penalty but also a premium fuel surcharge. But today, when fuel prices are four times more than what they were four years ago (SIA has since abandoned its non-stop A340-500 flight to LA), it makes no sense whatsoever for Mallya to fuel the fire further by

16

Cathay Pacific said it would take in all 21 hours to reach SFO from Chennai via Hong Kong with a two-hour stopover.

Soon, it will also launch its sister airline DragonAir for flights between Hong Kong and Bangalore and this again would offer a prime choice to a lot of passengers, including Bengaluru-based IT personnel to switch over to Cathay Pacific in Hong CRUISING HEIGHTS June 2008

deploy them to earn revenue? No one makes money by keeping planes on ground. Market speculation is that even Mallya has problems of finance. For instance, his officials say that Kingfisher Airlines may not go in for all the A320s ordered jointly by it and Deccan into which it is merging shortly, to form a new Kingfisher Airlines.

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SPECIAL STORY

Basta, please BASTA! Giovanni Bisignani

In a hard-hitting speech delivered at the IATA AGM in Istanbul on June 3, 2008, the IATA Director-General and CEO warns that the fuel hike is the bad news that will send the international airlines industry in a downward spiral

U We are pushed back because fear drives decisions; the infrastructure cannot cope; governments are not cooperating; and nobody is taking leadership.

Passengers are suffering because they face a maze of duplication, bureaucracy and hassle. In Italian I would say BASTA! 18

S$5.6 BILLION was last year’s bottom line: our first profit since 2000. With oil averaging US$73 per barrel, delivering even a 1.1 per cent margin was an amazing achievement. Since 2001, your hard work improved fuel efficiency 19 per cent and reduced non-fuel unit costs 18 per cent. But just as we started to recover, we face another crisis of potentially even greater dimension. Our industry is like Sisyphus — after a long uphill journey, a giant boulder of bad news is driving us back down.

It’s another perfect storm. The spreading impact of the US credit crunch is slowing traffic growth. At best, we expect 3.9 per cent this year.

After enormous efficiency gains since 2001, there is no fat left and skyrocketing oil prices are changing everything. If the consensus of experts is correct and oil averages US$ 107 per barrel, the fuel bill will be US$176 billion, US$40 billion more than in 2007. This would push us back into the red with a loss of US$2.3 billion in 2008, US$7.9 billion less than 2007.

For every dollar, the price of oil goes up, costs go up by US$1.6 billion. If oil stays at US$135 for the rest of the year, losses will be much worse at US$6.1 billion. The situation is desperate and potentially more destructive than our recent battles with all the Horsemen of the Apocalypse combined. September 11 brought enormous changes to the industry, making us tougher, leaner and more efficient. Now, even more massive changes are needed. IATA is at your side, fighting the crisis and leading change.

We are most successful when we control our destiny in projects like simplifying the Business or where government and industry are aligned such as on safety. We struggle when governments do not cooperate with issues such as security, regulation of monopolies, the environment and liberalisation.

SAFETY: We can be proud of our record on safety, our number one priority. Last year, 2.3 billion people and 44 million tonnes of cargo flew safely. This is the result of government and industry working together with global standards. But the hull loss rate took a step backwards in 2007 from 0.65 (8) to 0.75-hull losses per million flights. So, we must work harder to make a safe CRUISING HEIGHTS June 2008

industry even safer.

SECURITY: Unlike safety, security is an uncoordinated mess. Since 2001, airlines and their customers have paid over US$30 billion for security measures. For this, we get more frustration than value. We are pushed back because fear drives decisions; the infrastructure cannot cope; governments are not cooperating; and nobody is taking leadership. Passengers are suffering because they face a maze of duplication, bureaucracy and hassle. In Italian I would say BASTA! This must change. We developed Simplifying Passenger Travel to make security effective, efficient and convenient. Now, governments must do their part. They must focus on risk management, harmonise global standards, use technology and intelligence effectively and take responsibility for the bill.

ENVIRONMENT: The environmental crisis is also a catalyst for governments to deliver results on environment that reduce fuel burn. Even before the fuel crisis, our vision to address climate change set the benchmark for all industries — carbon-neutral growth, leading to a carbon-free future. IATA’s four-pillar strategy is driving progress to deliver real reductions in CO2, by investing in technology, flying planes effectively,

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building efficient infrastructure and implementing positive economic measures. Governments endorsed our strategy at the ICAO assembly, along with our target to improve fuel efficiency 25 per cent by 2020.

LIBERALISATION: We will have no future without financial sustainability. The world’s most global industry is the most fragmented. Over a thousand airlines compete for rare profits. In the last 60 years, airlines made US$11 trillion in revenues but net profits of only US$32 billion, an average profit margin of just 0.3 per cent. Even at the peak of the cycle, margins were less than three per cent (35) and the industry is US$190 billion in debt. Like Sisyphus we are always recovering ground.

Today, the oil crisis makes it clear that we must find solutions urgently. Re-regulation or renationalisation is not the right answer but it may be the only one unless governments can keep pace with the urgent need for change. Governments must stop treating us and our passengers as cash cows and they must control monopoly suppliers who do the same. Taking a more responsible look at the impact of oil speculation should also be on the agenda. Thinking even bigger, it is clear that we must redefine the structure of the industry. The Chicago Convention and its technical standards are not the issue. The bilateral system is the problem. The so-called freedoms of the air are really restrictions on our business. We cannot fly to new markets without an international agreement. We cannot look beyond national borders to try new ideas, grow our business, access global capital, or merge and consolidate. We fight crisis after crisis with our hands tied because flags, not brands define our business. This must change.

Thirty years after deregulation began, we must complete the task. Let’s rip up the 3500 bilaterals and replace them with a clean sheet of paper without any reference to commercial regulation. Airlines would be free to innovate, free to compete, free to grow, free to disappear, and free to become financially healthy.

I N N O VAT I O N : Some signs of this future are visible today. Consolidation in domestic markets was the starting point. JAL with JAS, Air India and Indian Airlines are recent examples and if regulators approve, we hope to see Delta with Northwest. But the fuel crisis means that we must think more globally and act more quickly.

Cross-border mergers are delivering shareholder value. Look at Air France-KLM or

Lufthansa/SWISS. International brands can work safely. Look at BA’s franchise in South Africa, LAN across Latin America, or the many Virgins: Atlantic, Nigeria, Blue and America.

Customers don’t care about the flag. Look at Ryanair and Easyjet in Europe or Tiger and Jetstar in Asia.

SIMPLIFYING THE BUSINESS: Crises are opportunities to drive bold changes. Four years ago, in the wake of a crisis we had a vision to modernise our business with technology, improve convenience, and save US$6.5 billion. Today, that vision is a reality. E-freight operates at six locations and three more are about to start and our target is a total of 14 countries by the end of the year. 135 airlines use bar coded boarding passes and millions of passengers use CUSS Kiosks at 94 airports. We are moving ahead with a new revolution, Fast Travel, to meet customer demand for more self-service options from check-in to baggage tracing and re-booking.

But the star of the show is e-ticketing. IATA’s involvement in ticketing began in 1930 when the first ticket standards were agreed. In 2004, when this Assembly decided to go for 100 per cent e ticketing, our task was to convert over 235 million tickets to ET. Nobody knew how to achieve it. Many thought it was an impossible dream.

Over the last four years, we worked together with speed, passion and commitment to eliminate paper: from a remote island airport in Kenya with no electricity or access road to the fast growing markets of China and India and the mega-hubs on every continent.

Today, it is time to celebrate a great achievement: US$3 billion in cost savings; Ladies and gentlemen, together we made 100 per cent e-ticketing a reality.

DECLARATION: The celebration is short lived. Twenty-four airlines went bust in the last six months and US$130 per barrel oil is reshaping the industry even as we speak. In the next 12 months, we could face US$99 billion in extra costs from oil-In advance of the Agenda for Freedom Summit we must sound the alarm with an Istanbul Declaration to governments, industry partners and labour. Airlines are struggling for survival and massive changes are needed. Governments must stop crazy taxation, regulate monopolies effectively, ensure that the cost of energy reflects its true value, fix the infrastructure and change the rules of the game. Labour must understand that jobs disappear if costs don’t come down. And to our partners, a simple message —we are in this together, so don’t bite the hand that feeds you. Airlines transport 2.3 billion passengers safely and efficiently. US$3.5 trillion of business and 32 million jobs depend on our success. Our responsibility is to fight together with common goals; to survive this perfect storm; return to profitability; and build a sustain able future.

(Giovanni Bisignani is Director General of International Air Transport Association).

CRUISING HEIGHTS June 2008

Over the last four years, we worked together with speed, passion and commitment to eliminate paper: from a remote island airport in Kenya with no electricity or access road to the fast growing markets of China and India and the mega-hubs on every continent 19

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CAPA DIARY

Aviation Outlook 2008 was held in Mumbai as usual, early in June. A few vignettes from the two-day conference.

I

F THE AVIATION business is in doldrums, how can the conference business be any better? No surprise, therefore, when the Sydney-based Centre for Asia Pacific Aviation decided that the outlook wasn’t too good for them to handle Aviation Outlook 2008.

They were simply participants this year and it was the Singapore-based agency Terrapin that handled the whole show! And there were a lesser number of participants from Capa. Of course, Peter Harbison was there with Kapil Kaul, but that was about it.

One great mystery is: why doesn’t the conference move elsewhere? After the first one in Delhi, subsequent shows have all been held at Mumbai. And frankly, is enough happening in 12 months to warrant an ‘outlook’ each year. This year, for example, there was no one from the government.

A N Shrivastava who was to be the keynote speaker on day one, cried off citing pressing engagements in Delhi. In any case, all the action was in the national capital with all the major players congregating in the capital for a meeting with Praful Patel.

CAPA is today pretty well-known in most aviation circles. For one, their south Asia head, Kapil Kaul has made sure they are in the news with his pithy quotes and pronouncements in all aviation matters. No surprise, he is fondly called ‘Rent a quote Kapil’. And Peter Harbison too, enjoys a formidable reputation. But that won’t be enough, unless the outlook is tweaked and moves say, to Delhi or Bangalore or Hyderabad in the coming years. As someone rightly said: “Who wants to go to Farnborough each year?”

Harbison’s pronouncements CAPA Executive Chairman Peter Harbison, in his opening address said in the past four years, India has seen a truly remarkable expansion and restructuring of its airlines. But hereon, perhaps, it will become difficult to accelerate the Indian aviation sector to achieve the levels it should be achieving. This was because a decade or more of neglect and stagnation had left the Indian airline industry illequipped to deal with the growth in good times, let alone when the external factors turn ugly. Notwithstanding all this, India has barely even scratched the surface of its

20

What’s the India has seen a truly remarkable expansion, said Peter Harbison, and restructuring of its airlines. But hereon, perhaps, it will become difficult to accelerate the aviation sector CRUISING HEIGHTS June 2008

air travel growth potential that remains massive.

As for the present problems of the aviation industry, it is not just Indian carriers but the entire global airline industry has entered the critical times in 2008 and in a way, the year may turn out to be the formative year where the global airline business will change irreversibly. Harbison said a large part of the current problem was global and largely beyond the control of any airlines — namely fuel prices.

In 2007, fuel prices have alone added 10 per cent to 20 per cent to the total cost of operations. (Though Harbison did not say so, at least in the Indian context, one is aware that fuel prices added nearly 25 per cent on top of the already high fuel cost because of various government imposts.)

Had there been no fuel price rise, there would have been no crisis. In the 1970s, airlines, when faced with fuel price rise, had the governments (that mostly owned

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outlook? airlines all over the world) to subsidise it.

Thus with fuel price increase, the subsidy also was hiked along with air fares, even if it meant falling loads and lower traffic.

However, that is not the way the airline business is conducted today. For one, most airlines are privately-owned and government has virtually withdrawn from running airlines in most important aviation countries. There is private domination today, bringing with it waves of competition both from within and outside India. Thus, the best way the government could help would be by getting itself out of the airline business. For instance, government has been insisting on its presence through regulation and taxation. It should immediately cease to tax. Because of this, even during the good times, the airlines have not been able to ensure returns on their cost of capital.

Harbison said airlines must have freedom of action like other industries and the government must remove (though he did not

What we need is: continue to give top priority to infrastructure; address important aviation issues like taxation, input costs, etc urgently and restructure airline industry CRUISING HEIGHTS June 2008

say so explicitly) ownership restriction, allow FDI, M&A (mergers and acquisitions) across borders, etc. Airlines should not be taxed at every turn, as in India.

The present crisis is such that some in the government may want to go back to the good old days of control and command.

Therefore, India must guard against reemergence of protectionism and negative government intervention. Or else, it will convert the crisis into a disaster!

On the low fares, he said, even though there is a future for low fares, on short hauls, it may not be possible to offer it and it is more or less over. It was in the short haul that there was a significant contribution to the overall growth of airlines in India. Airlines would soon have to cut services on many routes. The story of metro routes seems to be a little more positive.

While the fares are low, they are often unviable like on the Delhi-Mumbai or the Delhi-Bangalore sectors. Sometimes, the fares on metro routes are even lower than on short-haul routes. Therefore, unless there is major correction in the capacity and fleet rationalisation, the current problems will continue.

Overall, Indian airline industry will lose $ 2 billion in 2008-09. As for LCCs, their valuation has already halved and they will continue to remain under pressure.

There will be another 12 months of bloodletting and only after, perhaps, capacity reductions, cancellations and fleet plan reductions should one expect any change.

The industry may change fundamentally and if the fuel prices continue to rise, there could be consolidation. This, in all likelihood, may happen once the traffic peak ends and cash earnings dry up. As on date, none, including the once bullish PE firms want to put in money in this sector.

Notwithstanding all these, international airline operations in India seem to be a bright spot.

So, what we need in India is: continue to give top priority to infrastructure construction; address important aviation issues like taxation, input costs, etc. urgently; liberalise FDI; restructure airline industry but without distorting the industry like allowing different set of rules for state owned airlines but not for others.

There should be no distortion of competitive process in moving towards a post-crisis market place. At the end of it all, Harbison said, on the positive side, if one is looking through a tunnel, a year or so later, the industry could emerge much more viable and consolidated.

Optimistic Ramki Despite the turmoil within Air Deccan and the almost complete ‘swaha’ of the

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CAPA DIARY airline by Kingfisher, Ramki Sundaram, CEO and COO of Air Deccan, has a serenity and equanimity about him that is appealing. Yes, it was optimism personified, despite the rising chart of fuel prices? Yes, there is a great potential, be it infrastructure issues, deregulation, etc. Unfortunately, we are in the costliest environment —high fuel prices, airport infrastructure including congestion, inefficiency charges, etc. From an operational perspective, 75 per cent of the cost is beyond expectation and has obviously affected the airlines performance.

In the last few months, there has been a runaway oil price increase that has questioned the entire growth story of airlines.

The carriers have to pass on the increase by way of higher fares to the passengers which in turn has had its effect by way of single digit growth compared to very high growth and high demand in the last three to four years. It must be understood that airline industry is a necessity and not a luxury. At the same time, the airline industry is also sensitive to rising costs and, therefore, cannot absorb all cost increases. We need to talk to the Government of India to take the industry forward.

When Harbison interjected to talk of fuel hedging, Ramki replied that Indian prices were 80 per cent higher than the fuel prices in Dubai and other places. As regards hedging permitted by the RBI, Ramki said there were two aspects: a) we get fuel on the basis of non-transparent formula from oil companies, which tell us about fuel prices for a month and then hedge, and, b) we are at the initial stage of hedging policy and as markets turn volatile, a question arises: is it the right time to hedge? That is why we are not going head-on into hedging.

Notwithstanding all these, the roadmap till 2020 seems to show that we can see the infrastructure improving. However, in the short and medium term, there is need to alter the structure of the airline industry as, in India, there are additional burdens that are fiscal and physical. We are looking at traffic thinning out. For example between Bangalore and Chennai, people are looking at other avenues, mainly railways and road transport.

Though Ramki may not say it, but the fact is, many in Bangalore have begun to prefer rail travel as it is shorter and takes less time to reach Bangalore railway station and travel to Chennai than travel from within Bangalore city to Bangalore International Airport at Devenahalli, an hour-and-a-half before the flight time and then reach Chennai and again travel back to the city from the airport. At present, it has become next to impossible to get train tickets or even bus tickets, unless you book in advance. In a way, the advance booking system that air-

22

PHOTO OP: (L-R) CAPA Executive Chairman Peter Harbison with Etihad’s James Hogan, Ramki Sundaram and Kapil Kaul at the Aviation Outlook 2008 conference in Mumbai.

lines introduced in the recent years has been caught on by rail and road but, without the variable fares! Yes, the railways always had advance booking but had also come out with Tatkal. That Tatkal is now under pressure. And there are no takers for the airline’s Tatkal!

The roadmap till 2020 seems to show that we can see the infrastructure improving.

However, in the short and medium term, there is need to alter the structure of the airline industry as in India there are additional burdens that are fiscal and physical CRUISING HEIGHTS June 2008

Taking your breath away But the man who took the cake and literally, one’s breath away was Ng Tim Peng of Changi Airports International. Peng who was making a presentation on the aerotropolis that they are putting together at Durgapur, came down heavily on the government for not opening Chennai and Kolkata to private developers and letting it be with the AAI. It didn’t augur well for the airport business, he argued. That was a remarkable bit of faffing. When Peng was reminded of the fact that Changi had left the Tatas midway (it’s another matter that the Tatas have teamed up with Changi again) and later leaving Bharti in the lurch by withdrawing halfway from the Delhi Airport privatisation bid (one of the preconditions was that the local partner had to have a foreign collaborator. When Changi withdrew, Bharti was forced to withdraw) he had no reply.

Later, when asked if Changi would still be interested in the modernisation of the nonmetro airports considering that the government had decided to let the airside remain with the AAI, Mr Peng had no answer.

As they say silence is golden!

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COVER STORY

FIERY ORDEAL

By R KRISHNAN

H.C.Tiwari

With global oil prices touching a new high each passing week, one of the worst hit sectors is the aviation business. Over two dozen airlines have folded up and in India, companies are preparing for large swathes of red in their balance sheet.

But how long can they continue to bleed?

One could describe the ATF price rise phenomenon like a multiple warhead missile which is simultaneously destroying airlines all over without distinguishing between legacy carriers and LCCs. 24

CRUISING HEIGHTS June 2008

D

R DINESH KESKAR, Senior Vice President Sales, Boeing Commercial Airplane company has described the recent jet fuel price (its called Aviation Turbine Fuel-ATF in India) increase of having caused more disturbance to the global aviation industry than 9/11, which was largely localised, first in the US and spread to other countries thereafter.

Airbus COO John Leahy said the phenomenal fuel price hike was driving the airlines towards a collective loss of $ 40 billion.

(This seems to be at serious variance with the recent IATA loss estimate of US $ 6.4 billion.) The airlines around the world, faced with losses are capping or revising their orders or seeking to exchange their slots with like-minded customers of the same manufacturer. John Leahy said, India was among the weakest airliner market and carriers here were likely to cancel or delay air plane contracts over the next 12 months. Airbus has even then forecast an airplane order of 700 worldwide for 2008, the lowest

CRUISING HEIGHTS June 2008

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COVER STORY

FIERY ORDEAL

By R KRISHNAN

H.C.Tiwari

With global oil prices touching a new high each passing week, one of the worst hit sectors is the aviation business. Over two dozen airlines have folded up and in India, companies are preparing for large swathes of red in their balance sheet.

But how long can they continue to bleed?

One could describe the ATF price rise phenomenon like a multiple warhead missile which is simultaneously destroying airlines all over without distinguishing between legacy carriers and LCCs. 24

CRUISING HEIGHTS June 2008

D

R DINESH KESKAR, Senior Vice President Sales, Boeing Commercial Airplane company has described the recent jet fuel price (its called Aviation Turbine Fuel-ATF in India) increase of having caused more disturbance to the global aviation industry than 9/11, which was largely localised, first in the US and spread to other countries thereafter.

Airbus COO John Leahy said the phenomenal fuel price hike was driving the airlines towards a collective loss of $ 40 billion.

(This seems to be at serious variance with the recent IATA loss estimate of US $ 6.4 billion.) The airlines around the world, faced with losses are capping or revising their orders or seeking to exchange their slots with like-minded customers of the same manufacturer. John Leahy said, India was among the weakest airliner market and carriers here were likely to cancel or delay air plane contracts over the next 12 months. Airbus has even then forecast an airplane order of 700 worldwide for 2008, the lowest

CRUISING HEIGHTS June 2008

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Taxing tax

T

he bane of the Indian taxation system is tax everything which is productive and which can create further employment—production through the well known multiplier effect.

By milking ATF, it has ensured that the multiplier chain is snapped at the very first joint. On the basic price is loaded the customs and excise duty, besides administrative costs. Somehow, this gets to be called as the Base Price and on it is levied the famous States Sales Tax. Thus, ATF prices per KL go through a cascading effect. The Base Price of ATF per KL in Delhi was Rs 30,124.17 in April 2007 and with Sales Tax of Rs 60,24.83, the actual cost to the domestic airlines was Rs 3,6149.00. In April 2008, the Base Price rose to Rs 44,424.40 and with Sales Tax of Rs 8,884.88, the delivered price to airlines in Delhi was Rs 53,309.28. This, on June 1, 2008 rose to Rs 70,000 per KL inclusive of Sales Tax. The story is worse in Kolkata, Chennai and Mumbai. The Ministry of Civil Aviation has been pleading for a uniform four per cent Sales Tax,

but only AP, Kerala and Rajasthan have agreed till date. Others have not.

The revenue from ATF to States has been rising both on account of rise in Base Price of ATF and its consumption by the airlines in a hurry to connect more destinations. This unleashed demand for more aircraft, more airport infrastructure, and consequent PPP for both metro and non-metro airports. Nearly Rs 40,000 crore is riding on the success of airlines. Closely related to it is the construction of hotels and other tourism-related activities and facilities. All this would create numerous job opportunities.

Can we afford to kill all by holding on to unhealthy Sales Tax on ATF? If this Government can write off Rs 73,000 crore loans of farmers and spend thousands of crores on NREGs, can’t it just force States to waive off or tell them to impose only 4 per cent sales tax on ATF? As for States, if they cut back on sales tax, the consequent losses will be far outweighed by gains in other sectors including by way of new investment, domestic and foreign.

Ashok Chawla Secretary, Civil Aviation

“At the moment industry is reeling under heavy losses, which could cross Rs 4,000 crore during 2007-08 and double to Rs 8,000 crore in the following years.

Rising cost of fuel and the low yields that airlines are reporting are two major factors for losses. Every possible step is being taken for handling the situation, but it’s a similar situation across the world” in the last four years.

One could describe the ATF price rise phenomenon like a multiple warhead missile which is simultaneously destroying airlines all over, without distinguishing between legacy carriers and LCCs. Airline promoters are wondering if they did right by ordering too many aircraft and paying up-front the advance money to remain in the queue. Till about six months ago, it was widely discussed in aviation circles how difficult it would be to get a narrow body A320 or B737 NG or the widebody B777s and 787s or the Giant A380 or its smaller sisters, the A340 and A330. Manufacturers took pride in saying that they were booked till 2014 or 2016, depending on the versions. Their refrain was, ‘Please

26

CRUISING HEIGHTS June 2008

don’t call us, we will call you’. Lease rentals shot through the roof. We don’t know at what levels they are today!

The sky-rocketing aviation fuel prices have completely paralysed the industry as no one knows why the prices are rising so disproportionately to consumption. In this entire drama, India’s airlines could well end up being the “Best In Show”. The government knows that it needs to do something drastic but sees no compulsion to do so. After all, there are many pressure groups that are competing for the same fiscal cake. Who cares for aviation?

Globally, 24 airlines have closed shop.

Four airlines each in the US and Hong Kong went out of business and it was widely believed before the latest round of suicidal ATF price hike in India that some of the Indian carriers could get those pilots to meet their need and fly to new destinations. Now, given a choice they would want to return the plane or stagger their induction indefinitely. The business model of airlines in India based on certain ATF prices and load factors have failed completely, following the unexpected but serious distortion. All the loads, which used to fly short-haul are now shifting back to railways and it is next to impossible to get a train ticket. Passengers are also shifting to road transport notwithstanding the petrol price hike.

Airlines in India have reported a combined loss of Rs 4,250 crore in 200708 or year ending March 31, 2008. After the latest 19.2 per cent ATF price hike on May 31, the cascading effect would be fatal. There is a real possibility of airline insolvencies in the Indian aviation industry, driven by ever-increasing operating costs. As per latest estimates, the Indian airline industry could well lose Rs 8,000 crore in the current financial year (April

Praful Patel Minister, Civil Aviation

Vijay Mallya Chairman, Kingfisher Airlines

“I’m looking at importing fuel.

This will bring down our fuel costs by Rs 800 crore annually.

What is compounding the issue is the high domestic price. The killer is the high sales tax by state governments, on top of an already high fuel price. Our fuel price is 60 per cent more than prevailing international rates”

2008 to March 2009).

ATF, which used to account for already high 40 per cent of the total operating cost of airlines in industry, is now set to rise sharply both in absolute terms and as a percentage of the total operating cost.

It will not be surprising if it could reach as high as 60 per cent in coming months.

This is because world oil prices are expected to rise to $ 150 per barrel, soon after the July 4 Independence Day holiday in the US. This is one of the reasons why the domestic carriers refused to bring down fares after the oil marketing companies slashed base prices by Rs 3,000 per KL after the Finance Ministry cut customs duty on ATF from 7.5 per cent to 2.5 per cent on June 4, 2008. This is not even a drop in the ocean, as a senior airline executive meaningfully explained.

Actually, the situation in India need not have been so serious. ATF price is hugely steep as against the international ATF price. In April 2008, according to a presentation made by the Ministry of Civil Aviation to the Empowered Committee of State Finance Ministers at Thiruvananthapuram on May 5, 2008 (26 days before the latest price hike), the ATF price in Delhi was Rs 53,309/KL as against the international price of Rs 32,367/KL at Singapore, Rs 32,630/KL in Bangkok, Rs 33,203/KL in Tokyo and Rs 34,929/KL in Frankfurt. ATF prices for domestic operations in India are unduly higher than the international prices affecting the operational viability of domestic airlines.

Today, the ATF price is nearly Rs 68,000 per KL. Before the customs duty cut, it had crossed Rs 70,000 per KL. Bang on May 31, 2008, the heavily losing oil marketing PSUs following another increase in global crude oil prices sharply hiked the ATF prices in India by

“Sales tax varies from three per cent to 30 per cent around the country and States garner close to Rs 5,000 crore annually from taxes levied on ATF. On the other hand, the domestic industry is expected to post a loss of about Rs 4,000 crore during the current year, mainly on account of high cost of ATF... While fares have fallen from the average Rs 6,000 to Rs 3,950 over the past few years, the cost of ATF has risen from Rs 21,000 in 2002 to Rs 70,000 now... Air travel is now no more a luxury but a necessity, and the hike would have a cascading impact" CRUISING HEIGHTS June 2008

27

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COVER STORY

Taxing tax

T

he bane of the Indian taxation system is tax everything which is productive and which can create further employment—production through the well known multiplier effect.

By milking ATF, it has ensured that the multiplier chain is snapped at the very first joint. On the basic price is loaded the customs and excise duty, besides administrative costs. Somehow, this gets to be called as the Base Price and on it is levied the famous States Sales Tax. Thus, ATF prices per KL go through a cascading effect. The Base Price of ATF per KL in Delhi was Rs 30,124.17 in April 2007 and with Sales Tax of Rs 60,24.83, the actual cost to the domestic airlines was Rs 3,6149.00. In April 2008, the Base Price rose to Rs 44,424.40 and with Sales Tax of Rs 8,884.88, the delivered price to airlines in Delhi was Rs 53,309.28. This, on June 1, 2008 rose to Rs 70,000 per KL inclusive of Sales Tax. The story is worse in Kolkata, Chennai and Mumbai. The Ministry of Civil Aviation has been pleading for a uniform four per cent Sales Tax,

but only AP, Kerala and Rajasthan have agreed till date. Others have not.

The revenue from ATF to States has been rising both on account of rise in Base Price of ATF and its consumption by the airlines in a hurry to connect more destinations. This unleashed demand for more aircraft, more airport infrastructure, and consequent PPP for both metro and non-metro airports. Nearly Rs 40,000 crore is riding on the success of airlines. Closely related to it is the construction of hotels and other tourism-related activities and facilities. All this would create numerous job opportunities.

Can we afford to kill all by holding on to unhealthy Sales Tax on ATF? If this Government can write off Rs 73,000 crore loans of farmers and spend thousands of crores on NREGs, can’t it just force States to waive off or tell them to impose only 4 per cent sales tax on ATF? As for States, if they cut back on sales tax, the consequent losses will be far outweighed by gains in other sectors including by way of new investment, domestic and foreign.

Ashok Chawla Secretary, Civil Aviation

“At the moment industry is reeling under heavy losses, which could cross Rs 4,000 crore during 2007-08 and double to Rs 8,000 crore in the following years.

Rising cost of fuel and the low yields that airlines are reporting are two major factors for losses. Every possible step is being taken for handling the situation, but it’s a similar situation across the world” in the last four years.

One could describe the ATF price rise phenomenon like a multiple warhead missile which is simultaneously destroying airlines all over, without distinguishing between legacy carriers and LCCs. Airline promoters are wondering if they did right by ordering too many aircraft and paying up-front the advance money to remain in the queue. Till about six months ago, it was widely discussed in aviation circles how difficult it would be to get a narrow body A320 or B737 NG or the widebody B777s and 787s or the Giant A380 or its smaller sisters, the A340 and A330. Manufacturers took pride in saying that they were booked till 2014 or 2016, depending on the versions. Their refrain was, ‘Please

26

CRUISING HEIGHTS June 2008

don’t call us, we will call you’. Lease rentals shot through the roof. We don’t know at what levels they are today!

The sky-rocketing aviation fuel prices have completely paralysed the industry as no one knows why the prices are rising so disproportionately to consumption. In this entire drama, India’s airlines could well end up being the “Best In Show”. The government knows that it needs to do something drastic but sees no compulsion to do so. After all, there are many pressure groups that are competing for the same fiscal cake. Who cares for aviation?

Globally, 24 airlines have closed shop.

Four airlines each in the US and Hong Kong went out of business and it was widely believed before the latest round of suicidal ATF price hike in India that some of the Indian carriers could get those pilots to meet their need and fly to new destinations. Now, given a choice they would want to return the plane or stagger their induction indefinitely. The business model of airlines in India based on certain ATF prices and load factors have failed completely, following the unexpected but serious distortion. All the loads, which used to fly short-haul are now shifting back to railways and it is next to impossible to get a train ticket. Passengers are also shifting to road transport notwithstanding the petrol price hike.

Airlines in India have reported a combined loss of Rs 4,250 crore in 200708 or year ending March 31, 2008. After the latest 19.2 per cent ATF price hike on May 31, the cascading effect would be fatal. There is a real possibility of airline insolvencies in the Indian aviation industry, driven by ever-increasing operating costs. As per latest estimates, the Indian airline industry could well lose Rs 8,000 crore in the current financial year (April

Praful Patel Minister, Civil Aviation

Vijay Mallya Chairman, Kingfisher Airlines

“I’m looking at importing fuel.

This will bring down our fuel costs by Rs 800 crore annually.

What is compounding the issue is the high domestic price. The killer is the high sales tax by state governments, on top of an already high fuel price. Our fuel price is 60 per cent more than prevailing international rates”

2008 to March 2009).

ATF, which used to account for already high 40 per cent of the total operating cost of airlines in industry, is now set to rise sharply both in absolute terms and as a percentage of the total operating cost.

It will not be surprising if it could reach as high as 60 per cent in coming months.

This is because world oil prices are expected to rise to $ 150 per barrel, soon after the July 4 Independence Day holiday in the US. This is one of the reasons why the domestic carriers refused to bring down fares after the oil marketing companies slashed base prices by Rs 3,000 per KL after the Finance Ministry cut customs duty on ATF from 7.5 per cent to 2.5 per cent on June 4, 2008. This is not even a drop in the ocean, as a senior airline executive meaningfully explained.

Actually, the situation in India need not have been so serious. ATF price is hugely steep as against the international ATF price. In April 2008, according to a presentation made by the Ministry of Civil Aviation to the Empowered Committee of State Finance Ministers at Thiruvananthapuram on May 5, 2008 (26 days before the latest price hike), the ATF price in Delhi was Rs 53,309/KL as against the international price of Rs 32,367/KL at Singapore, Rs 32,630/KL in Bangkok, Rs 33,203/KL in Tokyo and Rs 34,929/KL in Frankfurt. ATF prices for domestic operations in India are unduly higher than the international prices affecting the operational viability of domestic airlines.

Today, the ATF price is nearly Rs 68,000 per KL. Before the customs duty cut, it had crossed Rs 70,000 per KL. Bang on May 31, 2008, the heavily losing oil marketing PSUs following another increase in global crude oil prices sharply hiked the ATF prices in India by

“Sales tax varies from three per cent to 30 per cent around the country and States garner close to Rs 5,000 crore annually from taxes levied on ATF. On the other hand, the domestic industry is expected to post a loss of about Rs 4,000 crore during the current year, mainly on account of high cost of ATF... While fares have fallen from the average Rs 6,000 to Rs 3,950 over the past few years, the cost of ATF has risen from Rs 21,000 in 2002 to Rs 70,000 now... Air travel is now no more a luxury but a necessity, and the hike would have a cascading impact" CRUISING HEIGHTS June 2008

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Bruce Ashby President and CEO, IndiGo

“IndiGo consumes 21000 kl per month.

Therefore, around five per cent, or Rs 3,000.42 per kl, decrease will result in savings of Rs 6.3 crore per month. However, this is equal to less than a third of the 18-19 per cent ATF price hike, which resulted in monthly cost increase for IndiGo at Rs 22 crore” as much as 19.8 per cent. Within two days Civil Aviation Secretary Ashok Chawla called airlines, airports and others connected with the aviation industry for his quarterly review meeting. At the end of the meeting Chawla told newsmen that the airline industry in India would lose Rs 8,000 crore in the current fiscal 2008-09: double of what they lost last year. He added that the Ministry, after consulting the industry, would meet the Prime Minister as well as the Finance Minister to impress upon them the need to reduce the Sales Tax on ATF which ranged any where between four per cent to 34 per cent in the 30 states and Union Territories (see box).

It is becoming a strange phenomenon.

Airline industry losses are doubling every year. From Rs 2,000 crore in 2006-07, it rose to Rs 4,000 crore in 2007-08 and is now estimated to go up to Rs 8,000 crore

28

What happened at the meeting?

S ome things can never change.

Vijay Mallya, for example, arrived close to 40 minutes behind schedule. No surprise, the King of Good Times is his own timekeeper and the rest of the aviation industry waited for the good man to arrive.

They were all there: Naresh Goyal, Vijay, Thiagarajan, Jeh Wadia, Bulu Kansagra and the inscrutable Rahul Bhatia in one of his rare public appearances. There was one exception, though. Air India’s Raghu Menon, felled by a severe attack of spondylolysis was recuperating at home and was represented by the airline’s Director (commercial) Anita Khurana.The sarkar was represented by Minister Praful Patel, Secretary Ashok Chawla and that man for all seasons: R K Singh.

The highlight of the meeting was, perhaps, the speech made by Naresh Goyal who said in a dramatic fashion that “if things continued as they are, there could well be no Jet Airways by this time next year”. Naresh said that everyone around the room was making losses and there was no way the industry can recoup from the present situation unless there was drastic action both in terms of cooperation between airlines and more enlightened government policies.

It was almost the same thing that was repeated across the table as industry leaders spoke turn by turn, on the issues that confronted them. Mallya, of course, also had a few biting words for his favourite subject: LCCs. Anita Khurana rationalised that while the tax relief on fuel would shave a portion of the losses, in real terms the airlines would continue to bleed and bleed under the present conditions.

Praful, of course, spoke about the presentation made to the apex group of state Finance Ministers (the fine presentation put together by Joint Secretary Arun Mishra is a graphic recall of the fuel crisis and how we compare with other regions of the world and a what a drop in sales tax would mean in terms of price differential) and how he was

CRUISING HEIGHTS June 2008

making a similar presentation to the PM and the FM (actually, the presentation was made when the whole meeting trooped off to see the Prime Minister at Race Course Road).

Mantriji’s thrust was simple. Aviation was a deregulated sector. There could be little government intervention in areas that did not concern them like pricing. But he was willing to use his good office to persuade airports to keep charges frozen for the time being (both Mumbai and Delhi have been asked not to enhance the 10 per cent annual increase in usage charges and AAI too, has frozen its fees).

The meeting with the Prime Minister was a brief affair with the Ministry represented just by the Minister and the Secretary.

They made the presentation to both Dr Manmohan Singh and P Chidambaram while the rest of the delegation waited for the train to return. Praful returned with the PM and FM in tow.

Speaking on behalf of the industry was Naresh Goyal and Vijay Mallya. And they had their points ready: In the past six months alone, fuel surcharge has increased from Rs 1,650 to Rs 1,950 (for short sector domestic flights) and Rs 2,350 for medium haul ones.

Considering a basic fare of Rs 2,500 and other charges, cost of flying has gone up by anywhere from 12 per cent to 18 per cent.

But despite these hikes, airlines are still reporting huge losses and are considering another fare hike.

Sales tax varies from 30 per cent in Gujarat to Tamil Nadu (29 per cent), Madhya Pradesh (28.75 per cent); and Andhra Pradesh (four per cent) and States mop up Rs 5,000 crore annually from taxes on ATF. The domestic industry is expected to post a loss of about Rs 4,000

GRIM FACES ALL AROUND: Airline top brass (L-R) M Thiagarajan, Naresh Goyal and Vijay Mallya in consultation with Civil Aviation Minister Praful Patel

crore during the current year, mainly on account of high cost of ATF. As usual the PM was ‘sympathetic’ to the industry and promised them all help. As a first step, the Government will set up an inter-ministerial group headed by the Union Cabinet Secretary to find solutions to combat price rise in aviation turbine fuel (ATF), which is affecting the profitability of the domestic airline industry.

Meanwhile, relief from the FMs is likely only after the June 21-23 meeting of the Empowered Committee of the State Finance Ministers on Value Added Tax in Srinagar. The Committee has asked the Ministry of Civil Aviation to provide more details on how ATF price is

“If things continued as they are, there could well be no Jet Airways by this time next year” Naresh Goyal Chairman, Jet Airways doing some plain speaking at the meeting with Praful Patel CRUISING HEIGHTS June 2008

fixed around the country and what options are available for the Committee to consider on this matter.

In another twist to the tail, Kerala has decided to renege on its promise to lower tax on ATF to four per cent. This was proposed in the State Budget 2008-09.

“The State planned to lower the sales tax on the condition that airlines lower their fares. This has not happened so we will review the decision to lower sales tax rate. No decision has yet been taken on what level sales tax on ATF should be raised to, but Kerala will go with whatever is the floor rate that is decided by the Empowered Committee of State Finance Ministers,” said the State Finance Minister T M Thomas Isaac.

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Bruce Ashby President and CEO, IndiGo

“IndiGo consumes 21000 kl per month.

Therefore, around five per cent, or Rs 3,000.42 per kl, decrease will result in savings of Rs 6.3 crore per month. However, this is equal to less than a third of the 18-19 per cent ATF price hike, which resulted in monthly cost increase for IndiGo at Rs 22 crore” as much as 19.8 per cent. Within two days Civil Aviation Secretary Ashok Chawla called airlines, airports and others connected with the aviation industry for his quarterly review meeting. At the end of the meeting Chawla told newsmen that the airline industry in India would lose Rs 8,000 crore in the current fiscal 2008-09: double of what they lost last year. He added that the Ministry, after consulting the industry, would meet the Prime Minister as well as the Finance Minister to impress upon them the need to reduce the Sales Tax on ATF which ranged any where between four per cent to 34 per cent in the 30 states and Union Territories (see box).

It is becoming a strange phenomenon.

Airline industry losses are doubling every year. From Rs 2,000 crore in 2006-07, it rose to Rs 4,000 crore in 2007-08 and is now estimated to go up to Rs 8,000 crore

28

What happened at the meeting?

S ome things can never change.

Vijay Mallya, for example, arrived close to 40 minutes behind schedule. No surprise, the King of Good Times is his own timekeeper and the rest of the aviation industry waited for the good man to arrive.

They were all there: Naresh Goyal, Vijay, Thiagarajan, Jeh Wadia, Bulu Kansagra and the inscrutable Rahul Bhatia in one of his rare public appearances. There was one exception, though. Air India’s Raghu Menon, felled by a severe attack of spondylolysis was recuperating at home and was represented by the airline’s Director (commercial) Anita Khurana.The sarkar was represented by Minister Praful Patel, Secretary Ashok Chawla and that man for all seasons: R K Singh.

The highlight of the meeting was, perhaps, the speech made by Naresh Goyal who said in a dramatic fashion that “if things continued as they are, there could well be no Jet Airways by this time next year”. Naresh said that everyone around the room was making losses and there was no way the industry can recoup from the present situation unless there was drastic action both in terms of cooperation between airlines and more enlightened government policies.

It was almost the same thing that was repeated across the table as industry leaders spoke turn by turn, on the issues that confronted them. Mallya, of course, also had a few biting words for his favourite subject: LCCs. Anita Khurana rationalised that while the tax relief on fuel would shave a portion of the losses, in real terms the airlines would continue to bleed and bleed under the present conditions.

Praful, of course, spoke about the presentation made to the apex group of state Finance Ministers (the fine presentation put together by Joint Secretary Arun Mishra is a graphic recall of the fuel crisis and how we compare with other regions of the world and a what a drop in sales tax would mean in terms of price differential) and how he was

CRUISING HEIGHTS June 2008

making a similar presentation to the PM and the FM (actually, the presentation was made when the whole meeting trooped off to see the Prime Minister at Race Course Road).

Mantriji’s thrust was simple. Aviation was a deregulated sector. There could be little government intervention in areas that did not concern them like pricing. But he was willing to use his good office to persuade airports to keep charges frozen for the time being (both Mumbai and Delhi have been asked not to enhance the 10 per cent annual increase in usage charges and AAI too, has frozen its fees).

The meeting with the Prime Minister was a brief affair with the Ministry represented just by the Minister and the Secretary.

They made the presentation to both Dr Manmohan Singh and P Chidambaram while the rest of the delegation waited for the train to return. Praful returned with the PM and FM in tow.

Speaking on behalf of the industry was Naresh Goyal and Vijay Mallya. And they had their points ready: In the past six months alone, fuel surcharge has increased from Rs 1,650 to Rs 1,950 (for short sector domestic flights) and Rs 2,350 for medium haul ones.

Considering a basic fare of Rs 2,500 and other charges, cost of flying has gone up by anywhere from 12 per cent to 18 per cent.

But despite these hikes, airlines are still reporting huge losses and are considering another fare hike.

Sales tax varies from 30 per cent in Gujarat to Tamil Nadu (29 per cent), Madhya Pradesh (28.75 per cent); and Andhra Pradesh (four per cent) and States mop up Rs 5,000 crore annually from taxes on ATF. The domestic industry is expected to post a loss of about Rs 4,000

GRIM FACES ALL AROUND: Airline top brass (L-R) M Thiagarajan, Naresh Goyal and Vijay Mallya in consultation with Civil Aviation Minister Praful Patel

crore during the current year, mainly on account of high cost of ATF. As usual the PM was ‘sympathetic’ to the industry and promised them all help. As a first step, the Government will set up an inter-ministerial group headed by the Union Cabinet Secretary to find solutions to combat price rise in aviation turbine fuel (ATF), which is affecting the profitability of the domestic airline industry.

Meanwhile, relief from the FMs is likely only after the June 21-23 meeting of the Empowered Committee of the State Finance Ministers on Value Added Tax in Srinagar. The Committee has asked the Ministry of Civil Aviation to provide more details on how ATF price is

“If things continued as they are, there could well be no Jet Airways by this time next year” Naresh Goyal Chairman, Jet Airways doing some plain speaking at the meeting with Praful Patel CRUISING HEIGHTS June 2008

fixed around the country and what options are available for the Committee to consider on this matter.

In another twist to the tail, Kerala has decided to renege on its promise to lower tax on ATF to four per cent. This was proposed in the State Budget 2008-09.

“The State planned to lower the sales tax on the condition that airlines lower their fares. This has not happened so we will review the decision to lower sales tax rate. No decision has yet been taken on what level sales tax on ATF should be raised to, but Kerala will go with whatever is the floor rate that is decided by the Empowered Committee of State Finance Ministers,” said the State Finance Minister T M Thomas Isaac.

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W

ith capacity deployment increasing by 17 per cent in the last 12 months and passenger growth being comparatively sluggish, it is no surprise that most airlines are bleeding due to severe hike in fuel prices. The allround belief in the industry is that there could be a 20 per cent reduction in capacity across the board with airlines trimming their schedules in keeping with their loads and yields.

“I expect more postponements and some cancellations, but very few cancellations. There will also be some rescheduling from (customers in) India.” That was Airbus Senior Vice President for global sales and marketing John Leahy giving the bad news to journalists at the Berlin Air show late last month.

Few companies are cancelling deliveries of new aircraft but actually looking to sub-lease them to other carriers. Leading the pack is Kingfisher. The King of Good Times had ordered aircraft left, right and centre when the going was good and now the chickens are coming home to roost. They have 28 aircraft — including 10 wide-bodied — due for delivery in 2008. One of the options they are looking at is to take delivery of their wide-bodied planes (considering their ambition to go overseas) and completely revise their order book with respect to the A-320s (in the wake of the merger with Air Deccan).

Among others looking at the sublease model is Spicejet, which has cut close to 20 flights and is likely to opt for the lease route for the six Boeing aircraft due in 2008. Simplifly Deccan has four deliveries this year, but is not clear what they would do with them. Lease seems the clearest option, considering the airline has announced a huge rationalising of routes programme.

But will the sub-leasing work out?

After all, each growing market — be it West Asia, South East Asia or parts of Europe — are feeling the effects of the cascading fuel crisis. Experts, however, believe some sub-leasing could be possible.

Jetlite, meanwhile, is looking at trimming short haul flights from Hyderabad and Bangalore. The airline calculated that yields are down 30 per cent, thanks to the new airports and the idea is to free that capacity.

Jet Airways is believed to be considering pulling out two Boeing 777 aircraft (on the Delhi-New York sector and replacing them with the much smaller Airbus 330s). The Delhi-Hong Kong launch has also been postponed. Also, they are planning chopping over six routes from July, not just to metros but Tier II cities as well. The idea is to reduce capacity by five per cent — akin to grounding six aircraft.

The Ministry on its part has said that in regions like the North-East, if an airline was getting load factors less than 10-15 per cent, they were free to opt out of that route, provided the route dispersal guidelines (RDGs) are not hampered. In other words, in classic bureaucratese, they are suggesting that one loss-making route be replaced by another loss-making one!

Also, to ease the unhappiness at the higher fuel burnout due to congestion, it has been announced that the Performance Based Navigation would be in place at the Delhi, Mumbai and Ahmedabad airports from August 1.

Finally, the Airports Authority of India (AAI) has announced its decision to put a freeze on all fees it charges from passengers and airlines. The freeze will remain in place till the situation improves.

To cope with the crisis, Spicejet has cut close to 20 flights and is likely to opt for the lease route for the six Boeing aircraft due in 2008.

Jetlite, meanwhile, is looking at trimming short haul flights from Hyderabad and Bangalore. The airline calculated that yields are down 30 per cent.

30

CRUISING HEIGHTS June 2008

“We are trying to reduce costs at every level but four private airports — Delhi, Mumbai, Hyderabad and Bangalore — are adding new service charges and increasing our operations costs. We are in no position to absorb them as the high aviation fuel has already spiralled our operating costs and we will have to pass on the burden to passengers. We have sought government's intervention to restore some parity on airport charges to Wolfgang Prock Schauer keep the aviation industry afloat... Most of the domestic CEO, Jet Airways routes have lost their viability. The losses have severely impacted our domestic expansion plans and now we are being very cautious about expanding our network in the domestic market” business. So what does it do? Just replace one bureaucrat by another and pack the board with the same bureaucrats. After all it is “Baap ka maal kya farak padta hai”.

But Mallya who is also on a similar loss overdrive (not his F1 formula car racing) is getting to pad his losses but from where we do not know. The only silver lining is the reduction in the losses of his recently-acquired Deccan Aviation. Jet Airways has postponed its decision to announce its financial results for 2007-08, which is widely believed to be in losses.

JetLite is in serious trouble and is reported to have incurred a loss of Rs 400 crore.

SpiceJet has lost massively, its market cap also shrunk sharply to Rs 755 crore on June 4, 2008 and a day later, rose marginally on the news of Anil Ambani acquiring it. This is one of the strangest stories of Indian aviation that an efficient and well managed airline like SpiceJet with all new 15 Boeing 737 NGs should have a market cap which is just about half of what Naresh Goyal paid for a virtually dead airline Air Sahara. Even the change in its

Siddhanta Sharma CEO, SpiceJet

“Something has to be done or else we will be back to the level of connectivity that we had in 1993-95 when only metro cities were linked by air. If the costs keep escalating, carriers will cancel flights to Tier II cities... Every fuel — petrol, diesel, kerosene, etc — is being subsidised by the government but there is a mark-up on ATF. We are asking the government to rationalise taxes on jet fuel”

Courtesy: Businessline

name to JetLite and change of colours including the livery, JetLite — slotted in the LCC space — failed to make any money.

GoAir, as an industry wag described it, is becoming Gone Air. Its fleet has shrunk to five from six 30 months after commencing operations. IndiGo is also not healthy. Its owner Rahul Bhatia reportedly demanded at the meeting with

Courtesy: Businessline

Coping with the crisis

in 2008-09. What do you do with an industry where the losses (of say, Rs 8,000 crore) is nearly 40 per cent of the industry turnover of Rs 20,000 crore?

According to official sources, Air India (combined AI and IA) has reportedly made a huge loss of Rs 2,761 crore in the fiscal ending 2007-8 or March 31, 2008. Though insiders claim that nearly Rs 900 crore was on account of interest payment, the fact remains that whichever head it is under, the airline is not making it to cover its costs. An internal committee has been appointed to decide on which routes to cut internationally and which routes to withdraw domestically. And if it were to raise tariffs, it will go out of

CRUISING HEIGHTS June 2008

Ashok Chawla and industry representatives that the five-year international flying rule should be abolished so that they could make up for the losses sustained in India.

Paramount Airways has become something like Rishi Markandeya who remained 16 years all his life. Paramount’s fleet has not grown beyond five Embraers and its CEO has been talking of flying to all places for more than one year but nothing has come of it yet.

It is believed that Jet Airways CEO Wolfgang Prock Schauer told the industry in the presence of Ashok Chawla that domestic airlines may have to cut 20 per cent of their flights in order to contain losses. He said in the last one year, the fuel bill of the industry had gone up by $ 1.2 billion. Prock Schauer’s suggestion was reportedly ignored by IndiGo’s Bruce Ashby who said he would watch the free market for some more time before doing anything. SpiceJet has already withdrawn from 16 stations but which according to its Director Ajay Singh, this was only a

temporary phenomenon.

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ith capacity deployment increasing by 17 per cent in the last 12 months and passenger growth being comparatively sluggish, it is no surprise that most airlines are bleeding due to severe hike in fuel prices. The allround belief in the industry is that there could be a 20 per cent reduction in capacity across the board with airlines trimming their schedules in keeping with their loads and yields.

“I expect more postponements and some cancellations, but very few cancellations. There will also be some rescheduling from (customers in) India.” That was Airbus Senior Vice President for global sales and marketing John Leahy giving the bad news to journalists at the Berlin Air show late last month.

Few companies are cancelling deliveries of new aircraft but actually looking to sub-lease them to other carriers. Leading the pack is Kingfisher. The King of Good Times had ordered aircraft left, right and centre when the going was good and now the chickens are coming home to roost. They have 28 aircraft — including 10 wide-bodied — due for delivery in 2008. One of the options they are looking at is to take delivery of their wide-bodied planes (considering their ambition to go overseas) and completely revise their order book with respect to the A-320s (in the wake of the merger with Air Deccan).

Among others looking at the sublease model is Spicejet, which has cut close to 20 flights and is likely to opt for the lease route for the six Boeing aircraft due in 2008. Simplifly Deccan has four deliveries this year, but is not clear what they would do with them. Lease seems the clearest option, considering the airline has announced a huge rationalising of routes programme.

But will the sub-leasing work out?

After all, each growing market — be it West Asia, South East Asia or parts of Europe — are feeling the effects of the cascading fuel crisis. Experts, however, believe some sub-leasing could be possible.

Jetlite, meanwhile, is looking at trimming short haul flights from Hyderabad and Bangalore. The airline calculated that yields are down 30 per cent, thanks to the new airports and the idea is to free that capacity.

Jet Airways is believed to be considering pulling out two Boeing 777 aircraft (on the Delhi-New York sector and replacing them with the much smaller Airbus 330s). The Delhi-Hong Kong launch has also been postponed. Also, they are planning chopping over six routes from July, not just to metros but Tier II cities as well. The idea is to reduce capacity by five per cent — akin to grounding six aircraft.

The Ministry on its part has said that in regions like the North-East, if an airline was getting load factors less than 10-15 per cent, they were free to opt out of that route, provided the route dispersal guidelines (RDGs) are not hampered. In other words, in classic bureaucratese, they are suggesting that one loss-making route be replaced by another loss-making one!

Also, to ease the unhappiness at the higher fuel burnout due to congestion, it has been announced that the Performance Based Navigation would be in place at the Delhi, Mumbai and Ahmedabad airports from August 1.

Finally, the Airports Authority of India (AAI) has announced its decision to put a freeze on all fees it charges from passengers and airlines. The freeze will remain in place till the situation improves.

To cope with the crisis, Spicejet has cut close to 20 flights and is likely to opt for the lease route for the six Boeing aircraft due in 2008.

Jetlite, meanwhile, is looking at trimming short haul flights from Hyderabad and Bangalore. The airline calculated that yields are down 30 per cent.

30

CRUISING HEIGHTS June 2008

“We are trying to reduce costs at every level but four private airports — Delhi, Mumbai, Hyderabad and Bangalore — are adding new service charges and increasing our operations costs. We are in no position to absorb them as the high aviation fuel has already spiralled our operating costs and we will have to pass on the burden to passengers. We have sought government's intervention to restore some parity on airport charges to Wolfgang Prock Schauer keep the aviation industry afloat... Most of the domestic CEO, Jet Airways routes have lost their viability. The losses have severely impacted our domestic expansion plans and now we are being very cautious about expanding our network in the domestic market” business. So what does it do? Just replace one bureaucrat by another and pack the board with the same bureaucrats. After all it is “Baap ka maal kya farak padta hai”.

But Mallya who is also on a similar loss overdrive (not his F1 formula car racing) is getting to pad his losses but from where we do not know. The only silver lining is the reduction in the losses of his recently-acquired Deccan Aviation. Jet Airways has postponed its decision to announce its financial results for 2007-08, which is widely believed to be in losses.

JetLite is in serious trouble and is reported to have incurred a loss of Rs 400 crore.

SpiceJet has lost massively, its market cap also shrunk sharply to Rs 755 crore on June 4, 2008 and a day later, rose marginally on the news of Anil Ambani acquiring it. This is one of the strangest stories of Indian aviation that an efficient and well managed airline like SpiceJet with all new 15 Boeing 737 NGs should have a market cap which is just about half of what Naresh Goyal paid for a virtually dead airline Air Sahara. Even the change in its

Siddhanta Sharma CEO, SpiceJet

“Something has to be done or else we will be back to the level of connectivity that we had in 1993-95 when only metro cities were linked by air. If the costs keep escalating, carriers will cancel flights to Tier II cities... Every fuel — petrol, diesel, kerosene, etc — is being subsidised by the government but there is a mark-up on ATF. We are asking the government to rationalise taxes on jet fuel”

Courtesy: Businessline

name to JetLite and change of colours including the livery, JetLite — slotted in the LCC space — failed to make any money.

GoAir, as an industry wag described it, is becoming Gone Air. Its fleet has shrunk to five from six 30 months after commencing operations. IndiGo is also not healthy. Its owner Rahul Bhatia reportedly demanded at the meeting with

Courtesy: Businessline

Coping with the crisis

in 2008-09. What do you do with an industry where the losses (of say, Rs 8,000 crore) is nearly 40 per cent of the industry turnover of Rs 20,000 crore?

According to official sources, Air India (combined AI and IA) has reportedly made a huge loss of Rs 2,761 crore in the fiscal ending 2007-8 or March 31, 2008. Though insiders claim that nearly Rs 900 crore was on account of interest payment, the fact remains that whichever head it is under, the airline is not making it to cover its costs. An internal committee has been appointed to decide on which routes to cut internationally and which routes to withdraw domestically. And if it were to raise tariffs, it will go out of

CRUISING HEIGHTS June 2008

Ashok Chawla and industry representatives that the five-year international flying rule should be abolished so that they could make up for the losses sustained in India.

Paramount Airways has become something like Rishi Markandeya who remained 16 years all his life. Paramount’s fleet has not grown beyond five Embraers and its CEO has been talking of flying to all places for more than one year but nothing has come of it yet.

It is believed that Jet Airways CEO Wolfgang Prock Schauer told the industry in the presence of Ashok Chawla that domestic airlines may have to cut 20 per cent of their flights in order to contain losses. He said in the last one year, the fuel bill of the industry had gone up by $ 1.2 billion. Prock Schauer’s suggestion was reportedly ignored by IndiGo’s Bruce Ashby who said he would watch the free market for some more time before doing anything. SpiceJet has already withdrawn from 16 stations but which according to its Director Ajay Singh, this was only a

temporary phenomenon.

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Mishandling

GROUND HANDLING R Krishnan

The new Ground Handling policy comes into effect on January 1, 2009. But will it be able to solve the problems it has already created vis-à-vis Air India?

G Air India has tied itself in knots — all in the name of Ground Handling.

Much before BIAL and GHIAL began to identify the designated GH service provider, Air India — as a divine right earlier and backed

by Cabinet decision later — invited limited bids to choose a partner...

32

ROUND HANDLING (GH) is a profitable business and in order to provide it, you need to carry your facilities to various airports where passenger and cargo carriers need GH services. The size of GH operations varies from airport to airport, depending upon the traffic, both passenger and cargo and the turn around time of the aircraft. This is unlike an MRO that is based at a particular place and to where the various carriers — passenger or cargo — fly to for airframe checks and engine overhaul, depending upon the kind of MRO it is. Thus, you could have a number of MROs: one for airframe and another for engine or two for airframe and one for engine, etc.

But no MRO can have the number of outlets like a GH service provider. It must be clarified here that minor line checks are always done at most airports by AMEs of the concerned airline.

In a similar vein, it could be argued that airlines could also do self-handling. Yes, true, and that is what all of them are doing today and which will end with effect from January 1, 2009. After this date, GH services will be provided by designated JVs as per the new GH policy. (Cruising Heights has reported about the GH policy in earlier issues.)

Even before this date, Bangalore International Airport Limited (BIAL), in an imperious fashion, decided that no airline that has a market share of below 25 per cent would be allowed to do self-handling. The late May 2008 BIAL circular hit IndiGo, an LCC, which protested to the Ministry of Civil Aviation including DGCA. When the matter came up at the review meeting taken by Civil Aviation Secretary Ashok Chawla on June 4, 2008, an official of BIAL at that meeting reportedly, first feigned ignorance and later denied what they had done.

DGCA by then, wrote to BIAL that, should it continue with this apartheid policy, then its airport license would be withdrawn. BIAL made a hasty retreat and all ended well. Even the BIAL representative attending the Delhi meeting got to know about the withdrawal only on his return to Bengaluru that evening.

Is this incident a forerunner of the continuance of self-handling by domestic airlines, even CRUISING HEIGHTS June 2008

after the expiry of the deadline in January 2009?

The Ministry of Civil Aviation would like it that way as all domestic airlines have complained that outsourcing GH services to designated companies (three in all but at any time not more than two at an airport) will enormously increase their costs, which already are under severe pressure due to hike in fuel prices, lease charges, rising dollar, etc. and the resultant fare increase.

Most airlines believe they could save costs by self-handling. But, there is very little the Ministry of Civil Aviation could do, as the policy was finalised and approved by the Union Cabinet with vital inputs from Home Ministry and Security agencies. Thus, there is no way the policy can be changed by the Ministry of Civil Aviation unilaterally. It can be changed only by another Cabinet decision. Thus, we may have to wait for some more time and may be even wait for yet another round of the continuing spat between (Praful) Patel and Montek (Singh Ahluwalia).

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If this were not enough, Air India the Great Maharaja has tied itself in knots — all in the name of Ground Handling. Much before BIAL and GHIAL began to identify the designated GH service provider, Air India — as a divine right, earlier and backed by Cabinet decision, later — invited limited bids to choose a partner to form a JV as part of its GH SBU (special business unit). It then zeroed in on SATS. Once finalised, Air India set up a 60-40 equity JV with SATS where Air India held 60 per cent equity and SATS 40 per cent.

Now, we find yet another twist in Air India’s GH tale. As per its RFP, inviting JV partner for providing GH in Delhi, Mumbai and other airports including those that were being modernised by AAI, it is laid down that the JV will be 50-50 each. That is, Air India will hold 50 per cent stake and the likely foreign JV partner, the remaining 50 per cent equity in the new JV that would provide GH in the abovementioned airports.

In less than one year, we have had three types of GH JVs. The first in a 60-40 equity pattern with Air India holding 60 per cent and foreign JV partner (SATS in this case) 40 per cent. The second, again, by Air India and SATS with 51-49 equity pattern, respectively, and now the third, between Air India and would-be JV partner in 5050 partnerships. Not only that. The RFP also stipulated that the new 50-50, JV would have three members from each partner as members on the Board. The post of CEO would be rotated between the two partners. So, we have a 60-40; 51-49 and now 50-50 all from the same Air India.

I don’t think the Ministry of Civil Aviation would have approved of it or their representatives

on Air India board would have okayed it, had they known it. Is it not strange that all the members of the Air India board including its CEO are and were representatives of the Ministry of Civil Aviation and erstwhile bureaucrats? After all, the present CMD was at Rajiv Gandhi Bhawan till the other day and has been on the AI board virtually without a break for close to six-seven years.

How is it that he overlooked this? After all, JVs go right to the board for approval? That one is out and the next one from the Ministry has moved into the Nariman Point headquarters of Air India.

And how did his predecessor overlook it? He was a seasoned civil servant who had been Chief Secretary for a dozen years?

This is no different from what happened in the past. It must be stated here that during the NDA days, Indian Airlines got an okay from the CVC to go ahead with its plans to form a single JV with SATS to provide GH nationwide. This was earlier frozen by the NDA Civil Aviation Minister Rajiv Pratap Rudy and later quashed by the incoming UPA regime. Now, what we see is even more bizarre with multiple partnerships and multiple CEOs of JVs reporting to the head of the GH that has been designated as one of the six SBUs. How will the Air India management reconcile various interests and pressure groups including that of its own employees? It is true that the GH JVs are not directly under Air India but under another subsidiary, AI company, with right to recruit people on contract as was done in the Bengaluru GH project. So, we have one SBU under AI that will have a number of GHJVs with different partners which makes no sense whatsoever for good governance, or should we say management.

Sounds strange that after the recent meeting of Air India Board, it was decided to refer the issue of the MRO equity, split between Boeing and Air India, to the Ministry of Civil Aviation.

A similar decision has also been taken on the MRO JV of AI with EADS and Jupiter.

Strangely, there is no clause on “experience” as no RFP was ever circulated, unlike GH which is also a different business altogether. And this, at a time when GH brought in more revenue to AI than MRO. The question is: Should the government succumb to the somewhat justified pressures exerted by the airlines wanting to cut costs and, therefore, allow self-handling? In that event, we may find airports crowded, not with passengers but employees and equipment moving in all directions to provide GH services. And if it happens, what will the much-awaited AERA (Airport Economic Regulatory Authority) do? And as far as GH tariffs in India go, at least on the aeronautical side of the designated international airports, IATA has already complained of very

high tariffs.

(Veteran journalist and long time aviation watcher R. Krishnan is Consulting Editor at CH. He can be reached at rkrishnanji@yahoo.com) CRUISING HEIGHTS June 2008

In less than one year we have had three types of GH JVs. The first in a 60-40 equity pattern with Air India holding 60 per cent and foreign JV partner (SATS in this case) 40 per cent. The second, again, by Air India and SATS with 51-49 equity pattern, respectively, and now the third...

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Welcome to the brave new

WORLD OF ET IT WAS COMING AND EVERYONE — WELL, ALMOST EVERYONE — KNEW ABOUT E-TICKETING. AS OF JUNE 1, 2008, THE COUNTRY'S AIRLINES HAVE STEPPED INTO A NEW HI-TECH WORLD BUT THERE ARE SOME STAKEHOLDERS WHO FEEL THAT WE SHOULD HAVE TAKEN SOME MORE TIME TO STEP INTO THE NEW REGIME. OTHERS, FROM THE INDUSTRY, BELIEVE THAT THE MOVE IS A STEP IN THE RIGHT DIRECTION.

T

HIS IS THE chronicle of a death foretold. In one fell swoop — that would do a medieval beheader proud — paper tickets have been kicked out. Welcome to the brave, new world of ET or e-tickets. The Genevabased International Air Transport Association (IATA) has spearheaded the mandatory move.

No longer would air passengers be required to flout colourful booklets

34

(Above) Airlines representatives with Giovanni Bisignani, Director General and CEO of IATA (exteme right), hold framed large-sized paper tickets, which were given to five museums

CRUISING HEIGHTS June 2008

proclaiming to the world your preferred airline and often the class you are flying in. Instead, all you would need to remember is the PNR number of your flight.

The rest is taken care of by the airline’s computer.

Electronic tickets, with all the details of a passenger’s reservation and payment that are now stored on the airline’s computer network as of June 1, have supplanted a large share of paper tickets in the country. The journey to a paperless ticket

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has been bumpy. A few deadlines were missed earlier and even today the chances of every airline in the world changing over to the electronic system are nil. But the average Indian air traveller will possibly never see a paper ticket again.

A salutary move, it will not only see the airlines around the world saving huge amounts of money but it will also ensure cutting down on the usage of paper. The move towards ET started in June 2004 when the IATA’s board of governors and its annual general meeting — which represents 250-plus airlines — asked the association to get on with its ‘Simplifying the Business Programme (StB)’. The four year ET project has been the flagship of the StB programme ever since its start. It promises to offer the airline industry savings of US$ 3 billion and huge benefits of convenience to passengers, agents and airlines as IATA’s Amitabh Khosla, Galileo’s Bruce Hanna and Amadeus’ Ankur Bhatia pointed out (see interviews).

Indeed, the cost savings, if IATA is to be believed, would be enormous. The savings could prompt airlines to offer cheaper tickets to passengers, Add to that the benefits to air passengers, like increased flexibility and ease of use, no fears of losing tickets, easier refunds, cancellations and updates and it is a win-win situation for everyone: passengers, travel agents and airlines.

Take, for example, the savings for the industry. The amount of paper saved would be around five billion A4 sheets per year and twice that amount in back office operations. In addition, traditional tickets were difficult to destroy because of the special carbonised paper they used. E-tickets — even if they are printed out, as is being done in India — can be recycled.

In fact, the day is not far off when all that international air travellers from India would need would be their passports, which they would have to show at the check-in counter. Ankur Bhatia pointed out that in the near future, air travellers would not even need a printout of their tickets, as is prevalent now in the country.

He went on to say that the system of only displaying the passports had to start in India. That way, passengers would be allowed to visit designated areas of airports without being stopped by security agencies.

The ET saga started way back in August 2003. Early that month, Galileo India and Thomas Cook India issued the first e-ticket. For Galileo India, it was a milestone since it saw the GDS not only successfully completing its certification process with IATA but also ending a

“A change of this size and significance is bound to create nervousness” » Your response to the IATA decision for 100 per cent etickets?

Let’s be clear: 100 per cent e-ticketing was a mandate that the Amitabh Khosla IATA airline industry set for itself. In 2004, the IATA Board of Governors, at its Annual General Meeting — which represents 230 airlines across the world including our Indian members, Air India, Indian Airlines and Jet Airways — tasked IATA to lead its Simplifying the Business programme. The top priority project was 100 per cent e-ticketing, which will save the industry US $ 3 billion, annually.

100 per cent e-ticketing represents the end of an era and a great moment in history. When the project was launched four years ago, the industry was in crisis.

We needed to urgently reduce costs, improve efficiency and better serve the passenger. At that point in time, nobody believed this could be achieved. But, we worked together with our Board of Governors, our 230 member airlines around the world and our 150 experts. Today, we have eliminated paper tickets at remote island airports and at mega hubs; indeed, an incredible achievement for the travel industry. In just four years, the industry has achieved what many thought was impossible. ET has been an integral part of an industry programme to make travel more convenient and more cost-efficient.

So, the global switchover to 100 per cent ET is clearly a momentous occasion. » The key areas of disagreement?

There has been some anxiety amongst

The ET saga started way back in August 2003.

Early that month, Galileo India and Thomas Cook India issued the first e-ticket CRUISING HEIGHTS June 2008

travel agents regarding the implementation of 100 per cent ET. This is understandable. A change of this size and significance is bound to create some nervousness.

The IATA travel agent network has been a critical vehicle for the industry achieving 100 per cent ET. The switchover from paper tickets to electronic tickets has been a programme that has clearly taken the travel agents along.

The airlines and the IATA team has partnered closely, communicated and stayed engaged with our travel partners in our journey towards 100 per cent ET. There is no ambiguity or disagreement in respect of e-tickets. The airlines, the travel agents and the passengers are aligned on the benefits that e-tickets bring about. But we do, however, understand the anxiety of some travel agents in the final run-up towards 100 per cent ET. A change of this size and significance is bound to create some nervousness. » How long will it take before India is 100 per cent compliant?

In April 2008, 95 per cent of transactions on IATA’s Billing and Settlement Plan (BSP) for India were ETs. Today, the IATA neutral paper ticket is no longer being issued. We are at 100 per cent ET on the BSP. BSP India (IATA Billing & Settlement Plan) is already at 100 per cent ET, effective June 1, 2008.

Nonetheless, airlines can, for various reasons, still choose to print and issue their own paper tickets. The airlines are addressing the few non-ET transactions that may exist currently on some sectors or for some stations. system that went back to as early as the 1920s.

Those were the early days of the paper tickets. Each airline had its own rules.

Soon, however, a standardisation came about and by 1930, the IATA Traffic Committee developed the first rules for a handwritten ticket for multiple trips. These standards remained in vogue till the early 1970s. In 1972, when automation started, the IATA Billing and Settlement Plan (BSP) for travel agents began in Tokyo.

That led to the IATA neutral paper ticket.

The IATA logo began to be printed on each ticket from then on till June 1, 2008.

Between the Seventies and this year,

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FOCUS some other moves took place. The most significant among them was the placing of a magnetic strip on the back of the ticket.

The strip contained all the travel information. Incidentally, such a ticket could be used as a boarding pass too.

It was in 2004, with the world going through terror strikes and hike in fuel prices among other factors, that the IATA decided to initiate the StB programme.

Since then, IATA has been toiling to bring about e-ticketing. Amitabh Khosla, Country Director, IATA, put it rather matter-offactly when he told Cruising Heights that June 1 signified “the end of an era and a great moment in history”. Four years ago, he said candidly, “Nobody believed this could be achieved” but now that the global switchover to 100 per cent ET has been completed, it was “clearly a momentous occasion”.

The IATA had carried out a survey in 2007 that revealed significant figures. It said that 88 per cent passengers preferred electronic tickets to paper tickets. Among the reasons given out by these passengers were: “Do not need to bring my airline ticket(s) when I check-in” (71 per cent), “I immediately receive my e-ticket confirmation by e-mail” (64 per cent), “I can access my e-ticket anywhere and at anytime” (49 per cent) and “I receive a receipt of my booking by e-mail” (34 per cent).

The cause of the IATA’s momentous occasion, however, has brought about mixed responses from the airline industry stakeholders. While the GDS providers —

e-Tickets vs Paper Tickets Paper and e-Ticket Proportion 2008

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

E-Ticket Paper Ticket

Jan 2008 91:9 April 2008 95:5

Jan

Mar

May

36

Sep

Nov

All data is based on bookings & ticketing on Amadeus Systems

Galileo and Amadeus — look forward to 100 per cent ET, there are others who think otherwise. One such stakeholder is the Travel Agents Association of India (TAAI). Association President C V Prasad said that the IATA decision to implement ET was a rushed one (see interview).

Terming the move as “unwarranted and self-defeating,” Prasad pooh-poohed the idea of saving paper and reducing the costs for airlines. Such savings cannot be achieved by getting rid of paper tickets.

Instead, 100 per cent ET has to be brought about across the board. Unfortunately, all the airlines are not ready to implement ET.

“We are almost 97 per cent e-ticketable” » Your response to the IATA decision for 100 per cent e-tickets?

E-ticketing capability has been around at a global level since 1998.

For the next four years Ankur Bhatia Amadeus after the first e-ticket was issued, Amadeus has been leading the way in providing the technology to make it happen. Obviously, e-ticketing has several benefits to airlines, travel agents and the customer so IATA's intentions to phase out paper tickets are noble and by establishing a mandate and a deadline that was twice revised, the entire industry had a date to focus towards. At the same time, I think IATA have been very realistic in saying that around four per cent of tickets will still remain non-e-ticketable after the deadline, mainly due to lack of interline agreements, country-specific regulations

July

and special circumstances around a small proportion of tickets. » The key areas of disagreement?

Only one: If the ticket is not e-ticketable, it is difficult to explain to the customer and is a complicated issue as it cannot be ticketed on a GDS or online and needs to use the archaic process of calling each airline and filling in the necessary paperwork manually, usually delaying the entire ticketing process. » How long will it take before India is 100 per cent compliant?

I think India has come a long way from the first ticket issued (incidentally on Amadeus) in 2003 and today, we are at par with e-ticketing percentages across the world’s developed airline markets.

We are currently almost 97 per cent eticketable ex-India, which is due to a dependency on other routes and airline interline agreements and no destination in India is not e-ticketable.

CRUISING HEIGHTS June 2008

Electronic ticketing will result in: Eradication of frauds Faster realisation of funds for airlines No extra charges in case of loss of ticket Cost cutting benefits: $1 for e-ticket to a $10 for a paper ticket (a profit or Rs 360 approx.)

Integrated itinerary for different travel needs in a single plan Saving paper, consequently, being environment friendly; Galileo alone saves 17 acres of forest reserves in a month Making a travel agent's office free from the stock of ticket jackets and ticket printers No physical location to store tickets and coupons, all data is stored in soft copies.

Logistical savings in time and money to agents as the need of physically delivering the tickets to corporate clients and passengers is not required.

The passengers can get tickets while sitting in India or abroad and they do not have to pay anything extra as airline charges, while collecting tickets on mail.

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He also pointed out that in such a situation, airlines would have to issue traditional paper tickets and that would in turn mean extra cost since these tickets would have to issued outside the IATA BSP system.

Despite Hanna’s optimism that “India has been ranked No 1 in long-term travel growth by the World Travel and Trade Council, in its global report for 2008” and that was “a clear indicator of the exciting times that await the Indian travel industry”, the TAAI chief or other travel agents do not think so.

The travel industry would have to face problems because agents in Europe would not encourage tourists to visit India since they would have to go through the whole process of making separate tickets at higher costs. The higher cost would mean higher outflow of foreign exchange (especially for interline travel). TAAI has gone so far as to project that inbound travel would only be in single digits. In addition, the Gulf sector will also see a slump since job seekers would not be able to buy high fare tickets.

In fact, Prasad was forthright when he said that the new ET regime was very selective: there was no ban on paper tickets in the US since it did not suit the US carriers. In Canada, travel agents had taken the matter to court.

Prasad also pointed out that a passenger from the hinterland of India buying a ticket to South American or African destinations — according to TAAI, Africa is only 60 per cent e-ticket enabled while countries in the Eastern bloc are 50 per cent e-ticket enabled — would find it most frustrating since interline issues were involved. He felt that instead of

“India as a market has evolved itself completely for e-ticketing” » Your response to the IATA decision for 100 per cent e-tickets?

Galileo has pioneered the concept of e-ticketing in India Bruce Hanna Galileo and to the world! We are happy that we have been able to render our support to IATA’s 100 per cent e-ticketing initiative in making this a success. Implementation of e-ticketing has numerous benefits to the travel agents, airlines as well as the passengers.

As pioneers of e-ticketing worldwide, we believe India as a market has evolved itself completely for e-ticketing and airlines have become 100 per cent e-ticket compliant.

The fact that India has been ranked No 1 in long-term travel growth by World Travel and Trade Council, in its global report for 2008, is a clear indicator of the exciting times that await the Indian travel industry. » The key areas of disagreement?

We have not come across any disagreement as a GDS so far. Among the airlines operating on 100 per cent e-ticketing, we have 71 carriers associated with us, which is the largest in any GDS. Moreover post-IATA’s compulsory mandate on e-ticketing, a sum of Rs 11.25 crores was saved as a

Top 10 e-ticketers in India AIRLINE KINGFISHER AIRLINES BRITISH AIRWAYS SINGAPORE AIRLINES SRILANKAN AIRLINES AIR FRANCE JET AIRWAYS LIMITED LUFTHANSA GULF AIR EMIRATES JET LITE Over 50 airlines have had e-ticket percentages in excess of 95 per cent 70 of the 77 carriers sold in India last year are e-ticketable.

No carrier selling over 500 tickets is not e-ticketable CRUISING HEIGHTS June 2008

whole, out of which Galileo’s contribution lies in Rs 4.5 crores.

Also, from 1 June ’08, IATA has permitted all agents to process credit card refunds through the GDSs. Refund of tickets issued in BSP India against credit card using the passthrough arrangement, can be routed through the Global Distribution Systems. Galileo is up and ready with this functionality. However the agent would need to check with the airline before they process credit card refunds on the GDS since it is up to the airline whether they would allow the same or not. » How long will it take before India is 100 per cent compliant?

The Indian travel industry, as well as travellers, have been quite receptive to this initiative and are completely ready for the transition. India can be looked upon as a pioneer as far as eticket usage is concerned. 96 per cent of tickets issued in India in April were e-tickets which is a fair reflection of the state of readiness of the industry. A majority of passengers in India are already using e-ticket without any difficulty.

Also, there has been an extended four-year transition period that has prepared all the stakeholders, adequately.

All the airlines in India with Galileo are 100 per cent e-ticket compliant. rushing into the ET regime, India should have taken a position similar to the US and deferred the whole move. Prasad emphasised, “This (deferring the whole move) is exactly what we are asking for.

Of the more than 60 airlines operational in India, less than 10 have policy and procedure in place. As for these 10 airlines, they have told us (travel agents) that we should approach them directly for paper tickets. They have warned that it may take between five and seven days to issue these tickets.” He went on to point out that there were “many issues” that needed to be looked into. The issues, according to Prasad, were: Do airlines have the manpower to issue the 1.5 million tickets that are issued on paper every year; Airlines offer time limits of less than one week. “How do we meet time limit conditions if the airlines delay ticketing and take seven days to issue

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“Why the urgency to ban paper tickets?” » Your response to the IATA decision for 100 per cent e-tickets?

IATA's move is both unwarranted and self-defeating. Ostensibly, it is to save C V Prasad President, TAAI paper and reduce costs for airlines. This cannot be achieved by banning paper tickets but by genuinely implementing 100 per cent e-ticketing.

Sadly, airlines are not fully prepared.

This means paper tickets will continue to be issued by airlines and the only difference will be an extra cost as now these tickets have to issued outside the IATA BSP system. » The key areas of disagreement?

We welcome e-ticketing and eagerly look forward to 100 per cent e-ticketing as it will save costs and be passenger friendly too. Unfortunately, everything has yet to set in place for 100 per cent e-ticketing. There are a few areas of specific concern since etickets cannot be issued on: infant tick-

ets; interline tickets; and, group travel tickets and tickets involving more than 16 sectors.

Interestingly, the 100 per cent paper ticket ban does not apply in the US. This means that the central agency managing the BSP (ARC) will allow agents to issue paper tickets and that also means that the IATA clearing house will continue to process paper tickets. One fails to understand what the urgency was to ban paper tickets in India. » How long will it take before India is 100 per cent compliant?

We believe that we are at least a year away, if not more, from 100 per cent e-ticketing in India.

Of the more than 60 airlines operational in India less than 10 have policies and procedures in place. Even these 10 airlines simply state that we travel agents should approach them directly for paper tickets. They have also warned that it could take between five and seven days to issue these tickets.

a ticket?” the TAAI chief questioned.

Fuel prices were increasing everyday and YQ charges were being raised without notice. “Who bears the cost of fare and YQ charges that are effective in the 7-day window needed by the airlines to issue tickets?” he asked.

“What happens if the agents issue a voucher for a short amount of, for example Rs 100, due to foreign exchange fluctuations or wrong computation? Will the airline issue the ticket? Will the airline ask the agent to revise the voucher amount and send a fresh voucher? When will the airline make such a request: on the first day or the seventh day?” questioned Prasad.

He also mentioned that travel agents need to factor in three more days to the time sought by the airlines for the courier to deliver the ticket. In case of groups, the consignment of passports to be couriered to the airline would be bulky and there would be a great risk of losing or misplacing passports at either end.

IATA was well aware of the protests from the travel agents fraternity. Said IATA’s Amitabh Khosla: “TAAI had raised some concerns about ET like interline travel, infants and trips exceeding 16 segments. Interline travel,” he pointed out, “is about 10 per cent of the total business.

“

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With 100 per cent e-ticketing, we are in a better position to provide services. E-tickets are good but paper tickets too, are equally important in today’s scenario — B S Arora MD, Lords Travel

”

CRUISING HEIGHTS June 2008

Interline ET agreements covered about 90 per cent of interline travel by May 31, 2008. So, approximately one per cent of travel would be affected by the lack of interline ET agreements.” He also said that a travel agent can issue “a multipurpose document which can be exchanged for a paper ticket at the airline office”. As for e-tickets not exceeding 16 segments, Khosla said, “It is not a show-stopper. Airlines are redefining fares to keep these below 16 segments or are instructing agents on how to ticket by effectively combining two e-tickets into a single fare.

Another alternative would be to issue a multipurpose document (MPD),” he said.

The whole ET regime then would take time to settle down. Khosla pointed out, “Let’s look at the facts: in April 2008, the ET penetration for India was 95 per cent.”

Some of the airlines that have achieved total e-ticketing are Air India, Jet Airways, Kingfisher and JetLite. Low-cost carriers, in fact, started the trend because e-ticketing reduced their costs. In such a situation, the IATA chief said that “India was progressing well in terms of ET. And today we have achieved 100 per cent ET on the BSP.” He mentioned that “airlines are prepared to address or will soon find solutions for the very miniscule per centage of non-ET transactions that continue to exist. There has, though, been exceptional progress made by the airlines in their Interline ET agreements, which will facilitate travel.”

It is not only IATA that has an optimistic outlook. So do Amadeus’ Ankur Bhatia and Galileo’s Bruce Hanna. Bhatia, for example, said that more than 50 airlines have e-ticket percentages in excess of 95 per cent while 70 of the 77 carriers sold in India last year were e-ticketable. According to Amadeus, there has been around 60 per cent increase in e-tickets versus last year as opposed to a 17 per cent increase in total tickets issued till the June 1 deadline.

Hanna, on the other hand, heading the Galileo Global Distribution System (GDS), which has more than 70 airlines in its fold, was ecstatic: “The airline companies in India have managed to save around Rs 15 cr within a week of shifting from normal paper ticket to e-ticket.”

The last word, however, came from a travel agent. B S Arora, the Managing Director of Lords Travel said, “Agents are happy with 100 per cent e-ticketing because we are in a better position to provide services to customers virtually 24 hours without keeping our offices open till late. E-tickets are good but paper tickets too are equally important in

today’s scenario.”

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AT A GLANCE

Bats better than birds

Stop cursing, we are flying!

McCARRAN International Airport has become a home for Brazilian freetailed bats, which reside in the facility’s employee parking garage.

It was originally thought that the bats stopped off in Las Vegas on the migration home, but some just decided to stay. The airport sees the bats as the lesser of two evils, such as birds, because bats stay away from passengers and aircraft.

A NORTHWEST Airlines flight was cancelled after the pilot allegedly locked himself in the lavatory and started cursing and talking to himself. He also dropped the “F” word to a passenger who asked him about his behaviour in the lavatory

Can’t you see I am busy

A

BUSINESSMAN was charged with disorderly conduct after he allegedly refused to stop using his mobile phone on a flight. Joe David Jones, 50, president of an Austinbased environmental start-up company called Skyonic Corp was charged by the Dallas police with ‘Class C’ misdemeanor, punishable by a fine of up to $500. The incident occurred as a Southwest flight from Austin began its descent into Dallas. “After multiple requests, the flight attendants were not successful in getting the passenger to get off the phone,” Southwest spokeswoman Brandy King said.

According to the police report, Jones was asked to turn off his cellphone and responded, “Kiss my ****.”

When asked again, he said, “Kiss my ****.

Not happening.” According to the police report, Jones remained on the phone about 20 minutes. When officers met Jones at the gate, he continued to exhibit disorderly con-

duct. The businessman had apparently received a message that his father’s heart had stopped beating and tried several times to reach officials in the cardiac unit where

Dude, where’s my car?

NEW ORLEANS International Airport still has 10 cars parked in its short-term parking lot and another 12 in the long-term lot since Hurricane Katrina hit back in August 2005. On the one hand, the cars are taking up precious spaces in the airport’s lots, costing it thousands of dollars in potential revenue. But on the other hand, the airport may lose thousands in late fees from the owners, who they have had trouble locating. Some cars have racked up more than $8,000 in fees.

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his father was being treated. Beth Harbin, a Southwest spokeswoman, said that although the carrier sympathises with Jones’ situation, “it was a safety regulation that we’re required to enforce, and we're simply not in a position to make exceptions.”

Southwest has recorded 26 incidents of mobilephone abuse so far this year, and only one of those escalated into a report to the FAA. While there have been high-profile examples of people using mobile phones during a flight — such as during the September 11 attacks — studies have shown some potential for interference with an airplane’s navigation and communications systems.

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Why me? I am not overweight!

These are just lobsters!

IF YOU are slightly wellbuilt, take care for your preferred airline may start asking your weight to determine ticket costs. The culprit, as you’ve probably guessed: high fuel prices.

The price of jet fuel has tripled since 2000, so airline executives are starting to get creative in order to save

A MAN posing as a chef was arrested at Italy’s Verona Airport after he tried to smuggle almost 40 pounds of cocaine in a box of lobsters.

Customs agents caught Giovanni Care, 51, after a computer search found he was on a list as a

their industry. While passenger weigh-ins are unlikely in the near future, it could happen. While attractive frequent flyers can welcome the idea, what about those who are a bit more prosperous-looking? Well, let us leave it to creative airline CEOs to find out what they can do.

known drug dealer.

No McCain greeting

Crazy attendant

COLORADO’S Aspen/Pitkin County Airport may halt public address announcements featuring GOP presidential candidate John McCain. That comes after officials there received a complaint that the announcements could possibly give McCain an unfair advantage in the upcoming presidential campaign. McCain is among the list of notable visitors who have recorded messages for the Pitkin County Airport.

In separate recordings, the Arizona senator warns travellers about security regulations and welcomes them to ‘one of the most beautiful places on Earth’. The airport asked McCain and it’s other list of recognisable figures to do the airport spots as a way “to capitalise on the area’s A-list commuters”. If pulled, McCain's voice would return to the airport's PA rotation after the election, airport officials say.

Meanwhile, election junkies travelling through Washington, D C area airports can now stock up on presidential gifts.

Among more unusual items found in America stores at Reagan Washington National and Dulles airports: life-size cutouts ($42) of the three remaining presidential candidates — Hillary Clinton, John McCain and Barack Obama — bobble heads of the three candidates ($20); and a key chain that counts down the number of days left in the Bush administration ($16). In March, the stores placed the cutouts near the entrance as a way to draw attention from travellers.

Whose cutout sells the most? “Obama. About five to one”.

A FLIGHT attendant who was apparently unhappy about being assigned to a flight to Saskatchewan (Canada) has been accused of lighting a fire in the aircraft lavatory of that flight. The fire forced an emergency landing of the flight and the attendant was arrested. The attendant told authorities he was upset at the airline for making him work the route.

The flight, which was carrying 72 passengers, was operated by Northwest regional subsidiary, Compass Airlines.

The flight’s pilot told authorities that an indicator light signalling smoke near the rear bathroom came on about 35 minutes into the flight. The pilot contacted the attendant assigned to the rear of the plane, who confirmed the fire. Investigators said a lighter was eventually found in the bathroom where the fire started, and added that the attendant later confessed while being interviewed by authorities. A maximum sentence of 20 years in jail can be handed down for setting a fire on a civilian aircraft.

Illustrations by Rajeev Kumar

after he came out.

The police were called, but after talking with him, they determined that a sobriety test was not needed.

The Boeing 757 had 180 passengers and five crew.

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There’s a stranger next to me A crisis broke out when a Dutch man seated next to a headscarf-wearing Turkish woman on an airplane was removed from his seat. The crisis occurred aboard a KLM plane flying from the Dutch capital Amsterdam to Istanbul. After takeoff, the woman asked that the man seated next to her be moved to another seat, arguing that it would be a sin under Islam for her to be sitting next to a man who was not her relative. As a result, the man, Lex van Drooge, who is a member of the Amsterdam Municipal Council for the Dutch governing party, the Christian Democratic Appeal, or CDA, was removed from the seat. Upon landing, van Drooge complained about the situation. In a statement to the press, he said the airline did not seem to know how to deal with this kind of situation. On its part, KLM issued a statement saying that such a practice was unacceptable.

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DOMESTIC AIRLINES Jet introduces new services JET AIRWAYS launched three new flights in the month of May 2008.

Mumbai-San Francisco via Shanghai: Jet Airways has commenced its daily services from Mumbai to San Francisco via Shanghai. With this, Jet Airways has become the first Indian carrier to operate daily non-stop flights to Shanghai from Mumbai and onward to San Francisco. Jet Airways will become the first private Indian airline to connect the financial heart of India, Mumbai with “Everybody’s Favourite City,” San Francisco, which has a large concentration of Indian IT professionals.

Mumbai-Bangkok: Jet Airways has also launched its third service to Bangkok from India with its Mumbai-Bangkok daily service.

Chennai-Pune: In addition to its daily service between Chennai and Pune via Bangalore, Jet Airways has introduced a daily direct flight between the two cities. With the introduction of this flight, the airline has enhanced its frequency on this sector. Now, Jet Airways’ passengers from Pune enjoy convenient connections to Kuala Lumpur and Toronto, via Chennai.

Jet holds Blood Donation Camp: Jet Airways organised a blood donation camp on Friday May 9, 2008 from 1230 hrs to 1700 hrs at the Jet Airways Ahmedabad city office, in association with Prathama Blood Centre. The Staff and Management of Jet Airways participated in this noble cause. Prathama Blood Centre is India’s largest and most modern blood centre. It is a non-profit organisation recognised by the Central and Gujarat State Governments.

Jetprivilege is partners with All Nippon Airways: Jet Airways’ JetPrivilege has entered into a frequent-flyer partnership with All Nippon Airways (ANA). With this partnership, JetPrivilege members will have additional opportunities to earn and redeem their JPMiles on ANA marketed and operated flights to over 50 destinations in Japan and 27 cities throughout Asia, Europe and the United States. JetPrivilege members will also earn JPMiles while travelling on the Jet Airways codeshare flight between Mumbai and Tokyo Narita, on the ANA operated daily business jet flights. This partnership will also allow ANA’s Mileage Club members to earn and redeem their miles on Jet Airways’ over 385 daily flights to 43 destinations in India and 17 international destinations.

Now Web-Check-in at Jet: Jet Airways has introduced a web check-in facility on its flights to six major international destinations — Singapore, Hong Kong, Kuala Lumpur, Bangkok, London and Brussels, enabling passengers travelling on these sectors to check-in on the web, select their seats and print their boarding passes. Jet Airways’ passengers will need to report at

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the check-in area for document verification and to check-in their baggage, not later than 75 minutes prior to the departure of their respective flights.

Jet gets new aircraft at Berlin: Jet Airways has taken delivery of its latest Airbus A330-200 aircraft. Naresh Goyal, Jet Airways Chairman, formally accepted the aircraft at a ceremony at the Berlin Air Show in the presence of German Chancellor Angela Merkel and Airbus President and CEO Tom Enders.

Jet Airways takes the delivery of its latest Airbus A330-200 aircraft at a ceremony at the Berlin Air Show on May 27, 2008.

Jet is the “Best Cargo Airlines of Central Asia”: Jet Airways has won the ‘Best Cargo Airline of Central Asia’ award at the prestigious Cargo Airline of the Year Awards, held at the Royal Lancaster Hotel, London. This Award is widely acknowledged in the air cargo industry. The winner is determined on the basis of votes cast by the readers of Air Cargo News. These votes are then checked by a neutral body, BIFA (British International Freight Association) and winners in various categories determined.

Jet’s eCommerce:.Being claimed as the first time by an Indian carrier, the airline has implemented Bar-Coded Boarding Passes (BCBP), an IATA standard solution. These BCBP can be automatically scanned at the boarding process, avoiding manual boarding and thus enabling multiple flights to be handled at a single gate. Having introduced BCBP at Singapore airport, Jet Airways plans to introduce the same at Hyderabad and Brussels airports in the near future. In an effort to improve customer satisfaction, the airline has re-launched its website — jetairways.com. — with a new look, enhanced usability and performance. The revamped website now also includes a Simplified Chinese and Traditional Chinese language site.

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World’s second largest aircraft at Delhi airport THE ANTONOV An-124 ‘Ruslan’ made a special visit at the Indira Gandhi International Airport, recently. The aircraft was here to pick up a special shipment bound for Afghanistan.

Measuring 68.9 m in length and 73.3 m across the wings, it is used for carrying super-heavy or outsize cargo which cannot be carried by normal freighters. Indira Gandhi International Airport is among the very few airports in the country with a runway and other facilities that can cater to such a large aircraft.

IGI Airport was also the first airport in the country to host the world’s largest aircraft, the Airbus A380 in May 2007. Delhi International Airport (P) Limited is currently constructing a brand new runway measuring 4430m. This Code F runway will be operational later in the year and will be equipped with CAT IIIB Instrument Landing System, allowing compatible aircraft to land in runway visibility upto 50m.

Free holidays — its on Deccan SIMPLIFLY DECCAN has announced its Summer Special Bonanza for online bookings through its website. The Deccan website is an important ticketing window and guests booking tickets online can look forward to receiving more value on their Deccan ticket. Nalin Gagrani, Head Marketing Deccan said “Deccan offers not only great connectivity and fares but also attractive value adds at every touch point, including our website. We are focussed on leveraging our website for stimulating air travel. The present holiday season is a busy travel period and our online promotion will give our guests yet another reason to fly with us.”

Three is Spicejet’s lucky number this year Spicejet is three: SPICEJET completed three successful years in the Indian skies on May 23, 2008. From three aircraft, flying to five destinations, to 17 aircraft to 17 destinations, the airline has flown over eight million happy SpiceJetters across its network. It boasts of a Technical Dispatch Reliability of 99.6 per cent — said to be better than the world average — and an On-Time Performance of over 80 per cent. Passenger survey has revealed that over 40 per cent of its passengers are business travellers, 45 per cent are repeat travellers and over 90 per cent of the SpiceJetters have recommended the airline by word of mouth.

Commenting on the occasion, Siddhanta Sharma, Executive Chairman, SpiceJet Limited said, “We are happy to be three years young today. I am delighted that we connected over eight million passengers to their chosen destination. Our fleet comprising 737-800 and 737900, has the average age of one and a half years. This year, we will take delivery of five more aircraft to embellish the fleet strength, in fact, we take the delivery of our 18th aircraft on our anniversary day. We will continue with our strategy of adding more frequency to the airports already served by us.”

Three lakh tickets @ Rupees three: SpiceJet has announced a unique offer of 300000 tickets at a special price of Rupees three per ticket. This special offer flags off the third anniversary celebration of the airline.

Booking for this special promotion opened on May 9, 2008 and will continue till the tickets are sold out. Tickets bought will be valid for travel from July 1 to September 21, 2008, on all flights covering all destinations. This offer is available on tickets booked with SpiceJet call centre, SpiceJet booking counters and SpiceJet website — www.spicejet.com.

More luxury coaches for Delhi Airport DIAL HAS commissioned more luxury coaches to run within Domestic Terminals and between Domestic and International Terminals for the convenience of transit passengers.

Two more coaches have been added and have started plying between the Domestic and International Terminals. This will help improve the frequency of these shuttles from international terminal to domestic terminal and back from ‘every hour’ to every ‘half an hour’. At present, a coach runs between Terminal 1A and Terminal 1B for connecting domestic passengers from five am to 12 midnight, every 20 minutes. The service is available free of cost to all passengers.

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INTERNATIONAL eBP boarding for Emirates passengers FLYING HAS just become simpler for Emirates passengers following the introduction of an innovative new facility at the carrier’s Dubai International Airport hub. From now on, Emirates passengers carrying only hand luggage can bypass check-in and proceed directly through passport control and security to their boarding gate. This development has been facilitated by the introduction of a new, homeprinted e-boarding pass (eBP). Passengers with check-in baggage may also use the eBP, in conjunction with the “Quick Bag drop” counters. Dale Griffith, Divisional Senior Vice President, Emirates Airport Services, said: “Emirates is one of the first airlines in the Middle East to launch eBPs. The objective of this initiative is to provide customers with more control of their trip, more flexibility and value-added services that enhance the journey.The eBP was developed by Emirates Airport Services, and is launched in collaboration with Dubai Police, Immigration and Security”.

Gold for Air Arabia AIR ARABIA RECEIVED the prestigious gold award in the best airline category at the recent MENA Travel Awards, 2008. This marks the fourth consecutive year that Air Arabia has received an official accolade at this annual awards ceremony, which is held on the sidelines of the Arabian Travel Market.

Winners of the MENA Travel Awards are selected on the basis of extensive online polling of the opinions of customers and industry peers from across the Middle East and North Africa region.

The results, which are audited by PricewaterhouseCoopers, represent clear acknowledgement of leadership status in a range of travel-related categories, including airlines, hotels and leisure facilities.

Profits soar for Air Arabia: Air Arabia has released its financial results for the first quarter of the year ending March 31, 2008. The airline’s net profit for the first quarter of 2008, stood at AED 78 million, an increase of 81 per cent compared to AED 43 million for the first quarter of 2007. Adel Ali, Board Member and Chief Executive Officer of Air Arabia, said: “We are immensely proud of our long record of profitability and high achievement, and we look forward to continued positive returns and high profits in the time to come. The uncertainty of oil prices as well as increasing inflation rates puts additional challenge on air transport sector across the globe, but the rapid and strong economic growth of this region contributes to a sustained and subsequent market and travel growth.” The first quarter of 2008 was an eventful one for the region’s leading LCC. In addition to purchasing two new Airbus A320s aircraft, which increased the company’s fleet size to 13 planes, Air Arabia also added

Lufthansa seeks more crew from India LUFTHANSA HAS FURTHER enhanced its flight connectivity for passengers and now it offers 55 flights per week from India. Lufthansa is serving seven destinations, with the latest introduction being Pune. The success of the Indian routes, a strategic growth market for Lufthansa, and the recent increase in services has increased the requirement for young and aspiring crew from India. The airline is currently seeking 40 flight attendants from India to fly on the seven routes, in order to provide services for the individual needs of its Indian passengers. Lufthansa presently employs approximately 15000 flight attendants from more than 45 countries around the world and employs close to 200 Indian flight attendants.

For Asia-Pacific, around 700 Asian flight attendants exclusively service the flight routes of their native country. Nationalities of these cabin crew include Japan, Korea, China, Thailand and India. With the recent Mumbai-Munich thrice weekly flights, Lufthansa has also expanded its services to five weekly flights to Kolkata.

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two new destinations in India: Kozhikode (formerly known as Calicut) and New Delhi. The carrier now flies to 39 destinations throughout the Middle East, North Africa, South Asia, Central Asia and Eastern Europe.

New flights by Air Arabia To Dhaka: Air Arabia recently launched a service to Dhaka. The flights will initially operate four times per week between Dhaka and Air Arabia’s hub in Sharjah.

Dhaka marks Air Arabia’s second destination to Bangladesh, the other being Chittagong, which was introduced in June of last year.

To Kozhikode: Air Arabia, has also introduced a daily service between Kozhikode and the company’s main hub in Sharjah, UAE. Air Arabia became the first Middle Eastern airline to offer flights to Kozhikode, when it introduced a service in February of this year, providing flights three times per week. Now customers can choose either morning or evening flights between Sharjah and Kozhikode. “The increase in the number of flights to Kozhikode demonstrates our commitment to the Indian market and our desire to offer expatriates from this Indian city working in the Middle East, competitively priced fares,” said AK Nizar, Head of Commercial Department, Air Arabia. “Kozhikode is the third city within the state of Kerala to be an Air Arabia destination, giving residents there access to the extensive destination network of our carrier and the highest quality service possible.” With direct flights to Ahmedabad, Bangalore, Chennai, Coimbatore, Delhi, Jaipur, Kochi, Kozhikode, Mumbai, Nagpur and Thiruvanathapuram, Air Arabia has the most comprehensive Indian destination network of any Middle East-based airline.

Keating to lead Public Policy BOEING HAS named Timothy J Keating, Senior Vice President for Public Policy. He succeeds Tod R Hullin, who earlier this year, announced his plans to retire from Boeing by the end of 2008.

Keating, 46, currently serves as senior vice president, Government Relations, for Honeywell. At Boeing, he will lead company-wide public policy efforts, including all US federal, state and local government liaison operations. He will report to McNerney from Boeing’s Washington DC office and join the company’s Executive Council.

Boeing and Jeppesen expand China market A CHINA EASTERN Airlines (CEA) Boeing next-generation 737-700 completed a flight into China’s Lijiang Airport to validate the capability and

Hawker selects Indian parts distributor DUE TO SIGNIFICANT growth in demand throughout the Middle East and India, Hawker Beechcraft Corporation (HBC) has selected India-based Arrow Aviation Services Pvt Limited as an authorised parts distributor for Rapid Aircraft Parts Inventory and Distribution (RAPID), HBC’s factory-direct source for aircraft parts.

Arrow Aviation Services will distribute parts for all Hawker and Beechcraft aircraft throughout the Indian subcontinent, Middle East, Morocco and Algeria. To support an increasing demand for HBC products worldwide, Arrow Aviation Services will use two facilities in the region — Arrow Aviation Services Pvt Ltd, located in Kolkata, and Arrow Aviation Services, FZE, located in Dubai, UAE.

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benefits of an advanced navigation method known as Required Navigation Performance (RNP). RNP uses globalpositioning satellites and onboard flight-management systems to guide airplanes along precise flight paths with pinpoint accuracy. RNP flight procedures provide operators a highly effective tool to enable safe and efficient operations in challenging terrain and weather conditions, such as those at Lijiang, in the foothills of the Himalayan Mountains. Advanced arrival procedures like RNP will allow airlines to significantly save on fuel and reduce flight delays by enabling airplanes to fly the most direct route to the runway. Boeing, Jeppesen, the Civil Aviation Administration of China (CAAC), the US Federal Aviation Administration, and CEA have been working together to expand new air traffic routes in China, using this sophisticated technology. The RNP arrival and departure procedures for Lijiang were designed by Jeppesen, a wholly-owned Boeing subsidiary.

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TRAVEL & TOURISM Malaysian food enthralls Delhi TO POPULARISE destination Malaysia and promote the country’s culture, a food festival was held recently in Delhi. Speaking at the inaugural of the festival, Dato’ Tan Seng Sung, Malaysian High Commissioner said that the aim is to promote Malaysian culture in India: “We want to promote Malaysia as a food destination. We hope that they will go to Malaysia for their holidays,” said Seng Sung.

The food festival turned out to be a gourmet’s delight as people got to savour ethnic Malay dishes prepared by chefs flown in specially from Malaysia. The evening proved to be a cultural extravaganza as Malaysian dancers dressed in traditional attire enthralled the audience. According to the latest tourism data provided by the Malaysian authorities, India is rated amongst the top ten tourist-generating source

Setting up heritage hotels in Madhya Pradesh TOURISM IN Madhya Pradesh is on an upswing. The tremendous richness and diversity of its tourist destinations is finally getting exploited and also recognised. The receipt of four national tourism awards this year, including the award for the best tourism performing state, is a proof of the commitment of the Govt of Madhya Pradesh in giving tourism sector the thrust and direction it deserves. Shortage of hotel rooms continues to be a major constraint area. This situation is being addressed with the setting up of a tourism land bank and auctioning of land parcels for setting up hotels and resorts. Another major step is facilitating the setting up of heritage hotels by bringing together potential investors and owners of private forts and palaces that are suitable for conversion into heritage hotels. The first such meet that was held at Bhopal on the 17 Dec, 2007 was a big success with the participation of over 70 investors and around 60 heritage property owners.

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Malay dancers at the food festival and (inset) one of the dishes that was on display

for Malaysia.

Meanwhile, the coveted Sarawak Cultural Village is all set to host the 11th edition of Rainforest World Music Festival from July 11 to 13,

2008. The festival is a unique platform that brings, on a same stage, renowned world musicians from all continents and indigenous musicians from the interiors of the mythical island of Borneo.

Authorities satisfied with Taj Mahal security arrangements MEMBERS OF STANDING Committee of Security of Taj Mahal visited and inspected the entire Taj Mahal Complex, including the security equipment installed recently. They were satisfied with the security arrangements. According to the Central Industrial Security Force (CISF), responsible for the Taj Mahal Security, there is no security threat to Taj. All CCTV Cameras installed in 2005 at East, West, South and Main Gate of Taj Mahal are intact and working properly, as on date. Cameras are also kept in the store as spares.

India and Brunei sign MOU: Memorandum of Understanding (MoU) on cooperation in the fields of culture, arts and sports between India and Brunei was signed in New Delhi. Minister of The Union Minister of Tourism and Culture, Ambika Tourism and Culture, Ambika Soni Soni (R) and the Minister for Foreign Affairs and signed the MoU from the Indian side Trade of Brunei, Pehin Dato Lim Jock Seng (L) signing the Cultural Exchange Programme between and Minister for Foreign Affairs and India and Brunei, in New Delhi.

Trade-II, Pehin Dato Lim Jock Seng signed the document from the Brunei side. India’s cultural interactions with Brunei have remained somewhat limited in the past as there was no agreement/ MoU with Brunei. It is hoped that with the signing of the MoU the bilateral cultural relations will get an impetus and there will be many cultural exchanges between the two countries.

Development of tourist destinations and circuits: Identification and development of tourist destinations and circuits will continue to remain the central plank of tourism development strategy in the country. The Ministry of Tourism has identified mega destinations/ circuits of national importance and already sanctioned projects for Nalanda-Bodhgaya-Rajgir, Varanasi-Sarnath, Agra, Delhi and Kurukshetra.

According to the annual report of the Ministry of Tourism, development of world class infrastructure in these destinations and circuits is going to remain a key area of focus in tourism development strategy. The Ministry’s support to such infrastructure projects takes two forms: financial assistance to the States/ Union Territories; and financial assistance to projects to be implemented on public-private partnership basis. Each of the CRUISING HEIGHTS June 2008

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schemes has a separate ceiling of maximum assistance. In the latter case, the scheme is meant to assist Large Revenue Generating Projects to be implemented in public-private partnership as well as in partnership with the semi-government agencies.

North-East tourism: The Tourism Ministry has been according top priority to development of tourism in the North East, since tourism has great potential for employment generation and economic growth. This was stated by the Union Tourism Secretary S Banerjee, recently, while reviewing the progress of projects sanctioned to the State Governments for development and promotion of tourism in the North-Eastern region.

ITDC records profit THE INDIA TOURISM Development Corporation (ITDC) has declared a dividend of 20 per cent on paid up capital amounting to Rs 13.50 crore for the year 2006-07. This is the first dividend declared since 1998-99. At a function, Chairman and Managing Director, ITDC Parvez Dewan, presented a cheque of dividend to Tourism and Culture Minister Ambika Soni.

During 2006-07, ITDC made a profit of Rs 105.18 crore before tax as against Rs 51.57 crore during 2005-06, which represents a 104 per cent increase in profits over previous year.

Korea Tourism establishes base in the Indian market IN A BID TO TAP the growing Indian outbound travel sector, Korea Tourism Organisation announced the launch of its first-ever National Tourism Office in South-West Asia. This office will be located at Select City Walk, Saket District Centre, New Delhi. Positioning itself as a key gateway to the East, Korea Tourism Organisation (KTO) aims to attract more than 75000 arrivals from the Indian Market for the year 2008. Ju Min Hong, Vice President, KTO is leading a highlevel travel trade delegation, comprising travel agents and tour operators, to further explore busi- ( L to R), Jumin Hong (Vice President KTO) and Rajinder Rai (Vice ness and networking President, TAAI), after signing the MoU. opportunities with the Indian travel trade fraternity. India currently figured amongst the leading tourism source markets in South-West Asia, contributing to 68276 numbers of arrivals in the year 2007, registering the overall growth of 9.2 per cent.

Unique chefs conclave APEEJAY INSTITUTE OF HOSPITALITY (AIH), in association with The Park Hotels, organised a first of its kind Chef Conclave between June 4-6, 2008, at the AIH premises in Navi Mumbai. The highlight of the conclave was the exciting lineup of group discussions, dialogues and sessions focussed on the gourmet trends in India with specific focus on Italian, Indian, Mediterranean and spa cuisines.

The conclave began with tree plantation by the chefs on the eve of World Environment Day. The highlight of the day was the session on innovation and future of Indian cuisines by Chef Sharad Dewan, Executive Chef, The Park, Kolkata who has served international guests such as Bill Clinton and Pervez Musharraf. The other sessions saw chef teams from across New Delhi, Navi Mumbai, Chennai, Kolkata, Bangalore and Vizag vying for the top spot in Chefs’ Conclave inaguration by Lemuel Herbert, serving different varieties of Associate Vice-President, Education and Organisational Development, Apeejay Surrendra Park Hotels. cuisine.

CRUISING HEIGHTS June 2008

Thomas Cook India launches travel portal THOMAS COOK (India) Ltd, an integrated travel and travel related services company has launched www.thomascook.in, a travel portal offering end-to-end travel solutions for its customers.

The new website will target the internet savvy leisure travellers, corporate travellers, travel agents and partners who will be integrated with the robust offline business of Thomas Cook India.

Speaking at the launch, Udayan Bose, Chairman, Thomas Cook (India) Limited, said “Today, 75 per cent of e-commerce spend is attributed to online travel booking. An average young entrepreneur, travelling for work or holiday uses the internet for addressing most of his travel needs and we want to tap into this large market and cater to their needs effectively.”

Amadeus’ 20/20 campaign receives award AMADEUS, A GLOBAL leader in technology and distribution solutions for the travel and tourism industry has won three awards for its 20/20 campaign in the Internet Advertising Competition (IAC) established by the US-based Web Marketing Association. Competing within the International Business category, Amadeus was awarded Best International Business Online campaign for 20/20 online campaign, Best International Business Email message campaign and Best International Business Rich Media online campaign for the 20/20 Rich media advertisements.

Ankur Bhatia, Managing Director, Amadeus India

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Narita airport

Changi airport

Icheon airport

Hong Kong airport

On time, everytime!

Where are the world’s most on time airports located?

America, Europe… No, no, no, you got it all wrong! Six of the top ten are based in Asia and two are in Japan.

The list put together by Forbes has won wide approval from transcontinental travellers. Here it is: Japan’s busiest airport, Haneda, tops the chart (more than 93 per cent of flights departed within 15 minutes of the scheduled time and 87 per cent arrived on time). For the travel industry, within 15 minutes is on-time. Believe it or not, just one per cent of departures at Haneda were rated “very late”— within 30 to 44 minutes of the scheduled take-off time. This record is believed exceptional, considering that Haneda is the fourth busiest airport in the world, behind Atlanta Hartsfield Jackson, Chicago O’Hare and London Heathrow.

Narita in Tokyo, that took over the bulk of Haneda’s international traffic when it opened in 1978, saw 86 per cent of carriers taking off and 82 per cent arriving as scheduled. At Narita, the “very late” designation was applied to only two per cent flights.

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Sydney’s Kingsford Smith International, Australia’s number one and busiest airport, tied for third spot with Taiwan’s Taoyuan International. They had an 80 per cent on time record.

The other Asian airports in the top six include Hong Kong Airport, Icheon Airport in Seoul and Changi at Singapore.

Orlando is at spot 10 and just nudged LAX (Ronald Regan airport at Los Angeles) to number 11.

And the two worst?

As we had mentioned in an earlier edition, at New York City’s La Guardia airport, not even 60 per cent of commercial flights departed on time last year; the average wait time was 58 minutes.

And, only 58 per cent of arrivals were considered punctual.

The second worst, believe it or not, was Dubai International, where more than 10 per cent of both arriving and departing commercial flights were tagged “excessively late”. A mere 57 per cent of flights departed on time, while 63 per cent arrived at the time they were scheduled.

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