Ch may 2006 by Newsline

May 2006

Rs 60

Why the merger is no–no as far as they are concerned. And why they are ‘nervous’ at the ‘undue haste’ of Messers Praful Patel and Co.

PLUS

CAPA DIARY

News Digest

The ‘easy’ way to low costs and high profit!

Globetrotting IPO and annual results Yeh Hai Duniya

FLYING TO BANGKOK DURING THE THAI NEW YEAR—off the record

EDITOR’S NOTE

Has he figured it out?

ome time back on a trip to London, I was delighted at the ease with which one could go to an Internet café and browse for hours with speed unheard of back home. You could order for a coffee or a cold drink and continue with your Net adventure. Most times, I used the Oxford Street outlet, but during late evenings, I preferred the excitement of Piccadilly Circus. However, I always wondered why the hell was it called easyInternet. Wasn’t it a strange sort of name, I wondered. Those memories came back to me the other day when I met Stelios Haji-Ioannou in Mumbai. It was difficult to believe that the stocky gentleman sitting in the last row at the CAPA seminar, in a crumpled cotton trousers, was the man who had virtually changed the face of air travel across continental Europe. Stelios launched his airline in 1995 and today you get zip into Paris from London (take your pick from Stansted,Gatwick or Luton) and back on one of the A319s or 737s that easyJet flies at close to £50. Together with Ryanair, Stelios has brought fares down to an unbelievable low and is constantly at the cutting edge of innovation. Ryanair has launched what it sees as the next wave in low-cost travel, removing overhead storage bins, getting rid of window shades, offering cheaper tickets for passengers without baggage (the presumption is that if you aren’t loaded, you will take less time to board and get off) and looking at a variety of ways to prune costs and improve operational efficiency. Stelios dismisses it off hand—easyJet too has a money making ‘tatkal’ service that lets you get in first and select a seat of your choice for an extra £5—and feels this isn’t really going to be the innovation of the future. But easyJet is waiting a watching the innovations.He believes that the next big revolution in air travel ought to be a breakthrough like the Internet that really helped the LCCs flourish and

CRUISING HEIGHTS May 2006

build their business blocks in Europe. The question is how soon will that come. Meanwhile, Stelios has decided finally that the easy presence in India must be established. So he is launching eight top-quality budget hotels in the country in a venture with Dubai’s pot of gold, Ishtitmar. Will this be the beginning of the cheap hotels revolution that we have all being waiting for in India? The motels that sprung up all over America at the end of World War II were seen as one of the greatest catalysts in the evolution of the American Midwest and the hinterland in the 1950s and 1960s. They fuelled the automobile revolution because middle-class families could afford to travel long distance, stay comfortably in reasonably priced rooms and have as good a quality holiday as those who could afford the up-market inns and hotels. Imagine Delhi and Mumbai providing a 100 different three-star and two-star properties that offered a functional room, clean toilet and reasonably priced food for a room rent under Rs 1000 per day. The traffic would explode. But that isn’t likely to happen soon, considering four-acre plots are being sold for Rs 400 crore and above, and textile mills are being converted into swank apartments, multiplexes and malls in Mumbai. It’s the same story elsewhere in India. You have either the five-star culture or at the other end of the spectrum you have the Paharganj or Mumbai Central variety of hotels, where the room stinks and the toilets can make you retch. The reason they are in business is because there is no alternative. Which brings me back to Stelios. Where is he going to find the land to develop his properties and how is he going to make money on them. Frankly, I don’t have a clue and Stelios’ isn’t telling, either. But knowing his long history of success, his humility and his no-nonsense approach, I suspect he has figured it all out. I am eagerly looking forward to the first easyHotel in India.

Off the cuff

Missed opportunity Last month tourism and culture minister Ambika Soni went to Pakistan on a historic trip. An Indian culture minister in Pakistan has been a no-no for long. Cultural exchanges are discouraged by our friends on the other side of the border, and it’s only now that the winds of liberalisation are blowing positively. So far, the cultural traffic has been, more or less, one way-from Pakistan to India. Our doors and windows have been open (thank god for that), and the enduring popularity of Adnan Sami and Joonie and their ilk only shows that when it comes to remixes and rap, boundaries doeth no harm. Anyway, to get back to Ambika, she was there as head of the Indian delegation of Khans and friends, who had gathered for the release of Akbar Khan’s magnum opus, Taj Mahal. It’s the first time a film from Bollywood was finding a formal release on screens all across Pakistan. Apart from Taj Mahal, the magnificent Mughal-e-azam was also being screened in Pakistan at the same time. It was the sort of once-in-alifetime opportunity for the ministry of tourism’s media department. Not just to introduce Pakistanis to Incredible India, but also to highlight Soni’s visit in the Indian media and reflect our position on culture and tourism. Alas, none of that was done. What to talk of flogging an agenda, there isn’t a single picture available in the ministry of this historic visit. In fact, if you don’t see any picture in this edition of Cruising Heights of Soni’s Pakistan sojourn, it’s because there is no picture available. Some months back, when Renuka Chowdhury went to Afghanistan, it was the same state of affairs. Great visit, but no play. What a pity, policies need to be sold as much to the people as governments. Just great images and destinations won’t do.

contents

THE INDIAN PERSPECTIVE

p24

The country’s domestic carrier is lukewarm to the idea of a merger with the Maharaja. An in-depth perspective.

THE ‘easy’ SAGA It is easily one of the biggest success stories in the world of aviation. An exclusive interview with Stelio Haji-Ioannou, founder of easyJet. CRUISING HEIGHTS May 2006

p32

CAPA DISPATCHES

p16

There were presentations, there was networking and there was plenty of colour, but the fizz was missing. A special report.

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

NEWS DIGEST

p10

Off the record

What was Praful doing in Bangkok with Vijay Darda?

APAMA holds its first meeting.

CRUISING HEIGHTS K. SRINIVASAN Editor

R. KRISHNAN Consulting Editor

ANAMIKA VERMA Editorial Coordinator

DUSHYANT PARASHAR Creative Director

News Report

Jet breathes easy as it gets the Sahara slots

p36

NEWS SNIPPETS

p42

The travel agents are travelling!

BHART BHARDWAJ Art Director

RAJESH KUMAR BHOLA Designer

RAJIV SINGH Gen. Manager (Admn.)

RENU MITTAL Executive Director

Deccan’s IPO

Yeh Hai Duniya p22 News Report Back page Mallya’s first class offering

Lab on flight

p40 p48

Editorial & Marketing office: Newsline Publications Pvt. Ltd. D-11, Nizamuddin (East) New Delhi-110 014 Tel.: 41825251/50, Fax: 41825250 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.

Globetrotting p30

Published and edited by K. Srinivasan 4C Pocket-IV, Mayur Vihar Phase 1, Delhi 110091 and printed by K. Srinivasan at Kaveri Print Process, 114, Patparganj Industrial Area, Delhi.

Some Aviation this...

Vol 1 No 1

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Up and down “I

don't see how long these new airlines can keep lowering fares when costs all around are rising.” DINESH KESKAR Senior Vice President—Sales & President—Aircraft Trading, Boeing On Indian aviation’s performance

Oily problem

LETTERS TO EDITOR

I read with great interest the Special Report (Getting Ready to Land, April 2006). Although the topic is a technical one, the writer has presented it in a very lucid style. I really appreciate the article as well as look forward to more such articles in the forthcoming issues. Keep up the good work. Mahesh Tripathi, Jaipur

“Globally, high oil prices have fuelled cooperation among airlines. This trend will continue in India.”

V. THULASIDAS CMD, Air India

No money, loud cry “Profitability

Vijay Mallya’s views (Guest Column, April 2006) are real eye-openers. He has tackled some real ticklish issues head-on. Although I may not agree with a few of them, yet they forced me to rethink. Only time will tell who is right. Ajay Shivdasani, Delhi

is not possible for the next 18 to 24 months as competition has eroded yields.” KAPIL KAUL CEO, CAPA, Indian Subcontinent and Middle East On Indian aviation’s performance

Praful Patel has made a dramatic move, indeed. The writer has analysed the situation in a crystal-clear and enlightening manner. I fully well agree with the statement that ‘we have a funny situation where the stateowned carriers are competing with each other unmindful of the threat posed by foreign and domestic carriers’. May good sense prevail. Shabana Qazi, Vadodara I simply wrote in to say that I read with particular interest the Cold Stats, Quotes and Back Page, when the copy is delivered. All other articles are too high for me to understand. Still I make an effort to read them. Anshul Mahajan, Class IX, on email All correspondence may be addressed to Editor, D-11, Nizamuddin East (basement) New Delhi - 110 014 OR mail at newslinepublications@rediffmail.com

Jai Bharat “We

are a young country, why should we fly old aircraft? We could consider reducing the age of aircraft being imported from the existing 15 years to 10 years.” PRAFUL PATEL Civil Aviation Minister

‘J’ woes “Ground

handling, engineers and security personnel contribute to a major part of our operating expenses. In the present system, security handling can only be outsourced to approved authorities like AirIndia and Indian Airlines. However, they charge much higher than a normal security agency would charge.” JEH WADIA, MD, GoAir

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Steady rise in airline passenger traffic

In terms of market share… Jet Airways bettered its position to 36.1 per cent in February, as compared with 34.7 per cent in January. Indian dropped to 23.8 per cent in February, as compared to 25 per cent in January. Air Deccan improved its position to 14.2 per cent in February, as compared to 13.3 per cent in January. Air Sahara declined to 9.7 per cent in February, as compared to 11.7 per cent in January. Kingfisher bettered its position to 7.8 per cent in February, as compared to 7.6 per cent in January.

COLD STATS

There has been a close to fifty per cent increase in airport usage in February, according to the Airport Authority of India. About 4.85 million passengers used Indian airports during February 2006. This is an increase of about 45.8 per cent over February 2005 when 3.33 million used the airport. Ahmedabad recorded a growth of 109.1 per cent. Coimbatore registered 90 per cent. Pune and Amritsar recorded 88.3 per cent each.

LOOKING GLASS

Arre, oh Samba... “Mein nahin hatoonga, jao CISF ko bulao (I will not move, call the CISF).” —On Air Sahara's cancelling his flight “Sab khaoonga (Everything).” —On Air Sahara’s staff asking about what he wished to eat. After persistent cajoling by the airline staff, Singh went to the airport restaurant and sat down to eat. “Had I been informed a couple of hours in advance, it would not have created a problem. I had to shout at the airport staff until they agreed to give me accommodation in Sahara Star. I shall take up this matter with the civil aviation minister and lodge a formal complaint.” —On being contacted about the incident.

GIRIRAJ SINGH, Bihar BJP General Secretary

CRUISING HEIGHTS May 2006

OFF THE RECORD

WALTZING WITH PRAFUL IN BANGKOK W

hy on earth did Praful Patel want to flag off the NagpurBangkok inaugural flight during the Thai New Year? That’s the time when the country is on a long, long weekend, people are having a ball and few have time for official functions. In fact, the Indian ambassador to Thailand is believed to have conveyed through the Ministry of External Affairs that it would be better to come post the new-year-week hoopla. But our friend, PP, would have none of it. The inauguration, he insisted, must take place on the weekend of the 15th [April], as he had planned. The Thai authorities said they wouldn’t be able to offer major protocol formalities because of the holidays, and Mantriji said, “No sweat, I don’t need any of it.” So, everybody gave in reluctantly and the launch happened as desired. Among those on the flight were Airport Authority of India Chairman, K. Ramalingam, and member (planning), A.K. Mishra, who were directed to visit the Swarnabhoomi Airport, which Thailand has been building for the last so many years, and study the latest trends.

Indian CMD, Vishwapati Trivedi, who was to return to Delhi after the flag-off, was ordered to join the Bangkok-bound delegation and he had to get his family to send his passport to Nagpur. The celebrations at Nagpur, an hour’s drive from Praful’s hometown, Gondia, were aplenty, with the gathering consisting of MLAs, party loyalists and faithfuls. There was Vijay Darda, who edits the respected Lokmat, and is a Rajya Sabha

CRUISING HEIGHTS May 2006

Clockwise from left: Praful announcing the MRO in Nagpur, flagging off the flight, with Durga Jasraj, and lighting of the lamp

Bzz.Zzz.zzz.

•

AFTER MANY weeks of up and down, Kanu Gohain can finally rejoice. The Director General has got ACC approval and the Prime Minister’s signature was obtained by the CabSec close to ten days after the file was sent to South Block. Just goes to show that even an efficient man like Dr Manmohan Singh can be saddled with files if he is out of Delhi for a couple of days. THAT K.K. SHARMA, Indian’s Director (Vigilance), has finally got the routine two-year extension on his term. Sharma, who is regarded highly by Central Vigilance Commissioner, P. Shankar, has already spent three years on the job. Vigilance officers usually get three years plus an extension of two for a total of five years. Sharma is a Rajasthan cadre IPS officer.

•

MP. The entire event was conducted by Durga Jasraj, who flew down from Mumbai with her team. The patrakars (journalists), aamdhars (MLAs) and the khasdaars (MPs), as they are known in Marathi, are all back. They were happy and delighted with the two days in funfilled Bangkok. Now we don’t know what

they did in Silom Road and Sukhmvit Soy. But they seemed pleased as punch. As for messers Ramalingam and Mishra, we are still to find out what they ‘discovered’ at Swarnabhoomi. We are also dying to find out why Mantriji was so insistent on April the 15th. Kya khaas baat thi, bhai?

CRUISING HEIGHTS May 2006

•

THAT TOURISM MINISTER Ambika Soni mighty impressed her hosts in Pakistan with her common-sense talk in a gentle mixture of Punjabi and English. Ironically, after Amrinder Singh, she is the big heavyweight from the state to get a rousing reception on that side of the fence. And the two don’t see eye to eye on plenty of issues.

OFF THE RECORD

Bzz.Zzz.zzz. •

THAT THANKS to a Lok Ayukta case in Madhya Pradesh, Rajiv Gandhi Bhawan’s choice for a Joint Secretary to replace Naseem Zaidi is still pending. If reports are to be believed the next choice for the job is likely to be from the south of Vindhyas? Did someone say Karnataka or Kerala? We really don’t know. The proposal is still to formally move?

WHAT A CEREMONY

•

THAT THE Kerala government’s desire to have a private carrier of its own may get a fillip with the arrival of Marxists at the helm of the state government. They have been vociferously talking about the welfare of Keralites in the Gulf and this agenda of the airline that Kochi airport MD, V. Kurien, hopes to float with the backing of the state sarkar. Now how will Praful Patel say no to Yechury and Karat. Particularly when he has said no on the airports issue.

•

THAT THE tourism ministry is keen to revive the regular interaction with the civil aviation ministry to help upscale Incredible India before the Commonwealth Games gets into the fast inner track. Now the two ministers had regularly interacted when Renuka Chowdhury was the minister. Apparently, Ambika Soni is keen to keep the momentum going, but R.G. Bhawan has so much on its plate that it can’t find the time.

AGREEMENT SIGNED: Praful Patel with the GMR and GVK big guns at the airport privatisation ceremony

OW, IT was one hell of a ceremony. The Resistance, as the French underground was known during World War II, would have gladly offered a prize to messers Patel and Prasad for the cloak-and-dagger manner in which the airport privatisation signing ceremony took place recently. For starters, AAI Chairman, K. Ramalingam, and his team were asked to come down to the minister’s wing for a quick, final-minute chat with Praful before the signing ceremony, which was expected to take place in the ministry’s conference hall. When they came down, they discovered that Praful Patel was nowhere to be seen and actually the call downstairs was to tell them that they better rush to Hotel Ashok for the ceremony. If the AAI didn’t know the final programme, then the media was equally in the dark. They kept pestering Moushmi, the livewire information officer to the minister, on the details of

CRUISING HEIGHTS May 2006

the ceremony. Poor lady, she was as much in the dark as the rest. Well, she came to know virtually at the last minute about the shift to Ashok and rushed there with the media brigade. There were others, too, who were out and were frantically looking to connect with their bosses. But that’s a story better left for some other day. The reason doled out for the last-minute subterfuge was that AAI employees were there in full strength, in and outside Rajiv Gandhi Bhawan, and the powers that be didn’t want any flap in the full glare of the media. Now, Mantriji, when you are so determined and gung-ho about the modernisation process, why be wary of a few black flags or angry slogans? Isn’t that part of democratic process? For the record, Mr Ramalingam was fasting on the day the signing ceremony was held. Appropriately, he told his hosts, messers GMR and GVK, no thanks for a bit of the food and drinks piled on the table. Deed over, he went back quietly to his perch at the AAI.

Letter from Buddha NOW THIS is one letter that Praful is maha thrilled with. In fact he told his officer that he was going to show the letter to the PM. And sure he did show it to him. Well, the communication from the West Bengal chief minister was simple—“When are you going to begin the modernisation process of Kolkata airport?” Now, Praful, there is a difference between privatisation and modernisation. What Buddha is asking is a gleaming modern Netaji Subhash Chandra Bose terminal. Not a private operation in Kolkata. What you are translating it into is an invitation to start the privatisation process at Kolkata. You better ask your party colleague, D.P. Tripathi, and his Left friends about whether your interpretation is the right one. And don’t forget, Kolkata had a hundred per cent result on this issue when the AAI workers went on strike about it. But one thing is clear, modernisation or privatisation, Kolkata airport will get a face lift in the next few months. That’s not just to pleae Buddha baba. It’s part of a larger NCP strategy to keep the Left happy. As they say in politics, ‘You never know: today’s comrades could be tommorow’s close comrades’. Samajhe gaye na!

Hello, Mr Kant

IT LOOKS like yesterday when Amitabh Kant took over as the Secretary (tourism) in the ministry of civil aviation. That was at the height of the Vajpayee government, when a greatly impressed PM wanted God’s Own Country to be translated to the rest of India. In two months’ time, Kant, who was drafted

for the chore and who transformed Kerala’s backwater industry into a tourism goldmine, will end his five-year tenure in the Capital. In Delhi, Kant has been at the helm of a paradigm shift in the country’s tourism outlook. He was a key member of the team that designed and unveiled Incredible India and sold it globally. There are many who have reviled and badmouthed him. It could well be a case of sour grapes. Others have quietly admired him. No one has ignored him. The man himself smiles and states that he has never ever planned his future. “It only leads to grief,” he states as matter of fact. But that still doesn’t tell us what his plans are. But of one thing he is certain—one must move on in life to keep the excitement sand interest alive. Some believe he will return to Kerala and wade straightaway into another exciting adventure. Others believe he could take a sabbatical and put his feet up. Still others are waiting for a signal from the inscrutable Mr Kant. Arre bhai kuch signal to do!

CRUISING HEIGHTS May 2006

Bzz.Zzz.zzz.

•

That Jammu and Kashmir Chief Minister Ghulam Nabi Azad is determined to see that the state’s tourism and civil aviation infrastructure is world class. He wants more flights from more destinations and is lobbying for direct connections from Bangalore, Hyderabad and elsewhere. He wants more budget hotels and more tourists. If GoAir’s Mumbai-Srinagar flight is anything to go by, then Gullu bhai is on the right track.

•

This smiling gentleman above is the indefatigable company secretary at Airport Authority of India. He has recently been elevated as the Executive Director with responsibility that includes, amongst other things, the media and PR. Here is wishing Kishore and S.C. Chhatwal,who recently took over as Director (Finance) on the superannuation of Prasad Rao, all the best for the coming years. They are in key positions and will have a huge role to play in turning around the fortunes of AAI.

NEWS DIGEST

National Cargo Hub at Nagpur

GUESS WHAT’S the fourth revolution confronting India? If you will take it from Praful Patel, it’s the infrastructure revolution, of which airlines, cargo and airports are a major chunk. Addressing the CII India Cargo Summit in its closing session, the minister for civil aviation said each of the earlier three revolutions—the Green Revolution, the Telecom Revolution and the Knowledge Revolution—had transformed India’s economic landscape significantly; and the Infrastructure Revolution,

Get it Right and Fast THE UNION CIVIL AVIATION SECRETARY Ajay Prasad has told airport developers in Delhi and Mumbai, besides other cities and smaller towns, that getting the task right and fast will be the major challenge before them. Speaking at a seminar organised by the Foundation for Aviation and Sustained Tourism (FAST),

too, would transform the physical asset base in the country. Patel announced a well-known secret that his home base, Nagpur, would be the country’s national cargo hub; and the aviation policy, which would come into effect soon, would provide significant concessions for air-freighter operations out of Nagpur. Global and domestic freighters using Nagpur will enjoy cost benefits due to user-charge benefits that will be offered. Nagpur, he said, offered an all-weather Prasad said, “The biggest challenge is not only to get these airports ready on time but also to ensure that these airports are able to handle the new generation of large aircraft like the A380.” Against the backdrop of none of the metro airports seemingly capable of handling aircraft like A380, he said the first challenge would be the physical and technical one of handling new generation passenger jets. Besides there was also need for more technologically advanced aircraft navigation systems so that airports could handle more traffic as well as the need for flexible use of airspace. Singapore Airlines and Lufthansa have already informed the

CRUISING HEIGHTS May 2006

operation. Indian Airlines’ freighters would also be based out of Nagpur, he announced. The minister mentioned that there was a need for creating a national grid for cargo hubs, with cold storage and warehousing availability, at various airports in India. Civil Aviation Secretary Ajay Prasad announced that a 3300-hectare plot of land in Nagpur would be developed into a multi-modal passenger and cargo hub. The cargo hub would have world-class cargo handling facilities, rail and road connectivity and a special economic zone. He added that the ministry was inviting private parties to take up land on lease or through JVs to create and develop cargo terminals for facilitating faster movement of freight by air. Dr Peter van Laarhoven, Director, Corporate Strategy and Business Development, TNT, said most recent research and studies have shown that India was going to be a world leader, in its size of GDP. He added that his company was preparing to have a fully integrated transportation system in place in India and replicate the success story of Europe in Asia in years to come. At the same time, he said that his company was also taking its social responsibilities seriously by collaborating with the World Food Programme, collaborating with governments, and becoming a stakeholder in advocacy and treatment of HIV/AIDS. Robey Lal, Country Manager, India International Air Transport Association (IATA), announced that IATA and its constituent airline partners were committed to an e-freight system, thereby eliminating 95 per cent of the airfreight paperwork by 2010. He said that this was a huge task involving 16,000 stakeholders, 270 carriers and 15,000 freight forwarders, but they were committed to this task by tackling the business, legal and the technical streams of the industry. Cyrus Guzder, Chairman, CII, Transportation and Logistics Council, and Chairman, AFL Pvt Ltd, stated that huge investments were needed in the infrastructure sector if India wanted to reach a growth rate of 9 to 10 per cent GDP. government that they would bring A380s into Delhi. Moreover, the new aircraft will fly over India on the Europe-Southeast Asia route or Australian sectors and in case of emergency Indian airports should be ready to receive them. According to sources, Delhi airport’s main runway is 45 metres wide and 3,810 metres long and belongs to E category. While the runway’s length is fine, it needs to be at least 60 metres wide all through. Land is available and modifica-

tions will have to be done on war footing. However, the problem will arise on the taxiway, as even the taxiway will have to be widened by additional 15 metres. On top of this, the super jumbo A380 is expected to carry anywhere between 555 and 800 passengers, depending upon the class and seat configuration, thus throwing up a new challenge to passenger terminal, requiring it to have double-decker aerobridges. Most airports in the Gulf have already begun work. CRUISING HEIGHTS May 2006

Mallya’s Plans WHERE DOES this leave India? Most decisions we take in India are either to directly benefit someone or to hurt someone. The beneficiary or the loser merely retain their silent-observer status! Kingfisher Airlines signed a deal with Airbus Industrie to buy five A340-500 ultra long distance aircraft worth one billion US dollars for nonstop flights between the US and India. It also has an option to buy five more. The deal was signed by UB Group Chairman, Dr Vijay Mallya, who owns Kingfisher Airlines, and the CEO of Airbus Industrie, Gustav Humbert, on the occasion of the inauguration of Hanover Fair by Prime Minister

Dr Manmohan Singh. The planes will be delivered in 2008 through a fully vendor-financed deal. Although Kingfisher does not have the permission to fly foreign routes, it expects that the current rule, which stipulates five years of continuous operation and a minimum 20 aircraft fleet as eligible conditions to fly foreign routes by domestic private carriers, might be relaxed. It may be recalled that Kingfisher had been working towards a possibility of flying to the US for a while, and had, last year, even set up an airline in the US to connect American cities with India’s. Reports suggest that Kingfisher is in talks with an unnamed US carrier for a strategic tieup that will explore the possibility of kicking off its international operations from the US to India, as such conditions do not apply to foreign carriers and in the context of the Indo-US open skies agreement, signed last year. Kingfisher is keen to connect the original Silicon Valley, in San Francisco, with the Indian Silicon Valley, in Bangalore. Rolls Royce made Trent 500 engines will power the A340-500 aircraft. Kingfisher Airlines started its domestic operations in India in May 2005.

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NEWS DIGEST

APAMA Brings Aviation Media and Industry Closer INDIA CHAPTER of the Asia Pacific Aviation Media Association (APAMA), at its first workshop, entitled Crisis—Is the Media Reporting with Responsibility?, held recently, mutually agreed on the need for transparency in reporting during aviation crisis. K. Gohain, India’s recently appointed Director General of Civil Aviation (DGCA), was the keynote speaker. The workshop highlighted the need for transparency and faster inflow of information to the media by the industry. At the same time the industry is keen to see more balanced and transparent reporting by the media. Gohain spoke on issues related to crisis and the need for accurate reporting. He further elaborated on the technical aspects related to crisis incidents in aviation. The India Chapter will soon compile and circulate a fact sheet of

Aerospace Commission Mooted AIR CHIEF MARSHAL S.P. Tyagi, Chief of Air Staff, Indian Air Force, wants the setting up of an Aerospace Commission to deal with the various challenges and opportunities in this key sector. He was delivering the inaugural address at an international conference on ‘Energising Indian Aerospace Industry: Challenges, Opportunities and Strategies’, recently organised jointly by the Indian Air Force, Confederation of Indian Industry (CII), Centre for Air Power Studies and Society for Aerospace Studies. The Air Chief said that the commission would provide a road map for the aerospace industry and not be a controlling authority. He stressed on the involvement of the private sector in R & D and production as essential to keep pace with global technological advances in defence equipment, and that India had the brains and capability. He said the private sector should be involved in this sector in a big way and even international companies with competence

frequently used technical terms in the aviation industry. It will also hold a series of events around India, including an annual address by an international airline CEO, towards the yearend. APAMA’s objective is to develop a strong chapter in India of specialist aviation media and also all segments of the aviation industry. The workshop brought together 50 aviation journalists, representatives from International Air Transport Association (IATA), Federal Aviation Agency (FAA), aircraft manufacturers and the airline industry, including Air India, Jet Airways, Air Deccan, SpiceJet, Lufthansa and British Airways. APAMA has chapters in Singapore, Bangkok, Kuala Lumpur and Hong Kong. It is also affiliated with the Australian National Aviation Press Club and has associate members in China, Japan, New Zealand and India.

should be asked to set up joint ventures with Indian companies to tap the Indian aerospace market. He said that any kind of joint venture was welcome provided it led to productivity. He added that the absence of innovation in the aerospace industry in India was due to lack of competition and over zealousness to import technology, which had killed the initiative to improvise and improve the manufacturing sector, resulting in frequent cost and time overruns. Air Chief Marshal Tyagi called for the implementation of the Kelkar Committee Report and capitalisation of the globalisation and IT revolution to energise the aerospace industry in the country. Speaking on the occasion, Shekhar Dutt, Defence Secretary, stated that the aerospace sector required a lot of investment not only in aircraft but also in the support system, and this was a huge opportunity for the private sector. He said that tremendous scope for development of infrastructure was available in the smaller towns, which were going to become the manufacturing hubs of India in the coming years. “As of now, most of the aircraft are flying only between metros and important cities, and there is no air connectivity with smaller towns that were going to get all the attention of investors as the big towns were getting saturated,” he pointed out. He said that international business in the aviation sector was to the tune of US $1,300 billion and it was time for the private sector in India to share the pie in this sector where there were huge opportunities, particularly in R & D so that products that are suitable to Indian conditions are designed and produced.

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FAST’s Focus on Airport Modernisation ports to GMR and GVK, respectively. He also talked about flexible use of air space under the control of defence. Dr. S.S. Sidhu wondered as to why the aviation policy was pending finalisation for the last 12 years? He suggested setting up of an independent airports regulatory authority to act as a watchdog on airports that are monopolistic in nature. In the technical session, Gurcharan Bhatura, Director & Secretary-General of FAST, set the tone by listing out the challenges faced by the airport sector. Quoting reports and surveys, he opined that the airport sector for the next five years will need an investment to the order of Rs 40,000 crore every year. Ansgar Sickert talked of trends in airport development and explained the new concepts, with the help of diagrams, adopted by number of developed airports. A.K. Misra presented the development plans of AAI, saying that it proposes to spend Rs 1200 crore every year to develop non-metro airports. Kiran HELLO: FAST Secretary-General, Gurcharan Bhatura, greets Manipur Governor, Dr S.S. Sidhu THE FOUNDATION for Aviation and Sustainable Tourism (FAST) organised a well-attended day conference, entitled Modernising Indian Airports—the Challenges Ahead, recently in the Capital. Dr S.S. Sidhu, Governor, Manipur, former Secretary General ICAO, substituted Praful Patel, Minister of State for Civil Aviation (who was promoting cricket in Abu Dhabi) ,and inaugurated the event presided by Lt Gen K.M. Seth, Governor, Chhattisgarh, who is also president of the foundation. Ajay Prasad, Secretary, Civil Aviation, delivered the keynote address. A technical session chaired by Sanat Kaul, CMD, DTDC, was held in the afternoon. Earlier Kaul was India’s representative on the council of ICAO. Welcoming all present, Lt Gen Seth talked about the exceptional growth registered in air traffic, leading to congestion at Indian airports. He opined that the country should develop a AUGUST GATHERING: Civil Aviation Secretary Ajay long-term (at least 20 years) perspective for airports. Of late, Prasad, Dr Sidhu, Chhattisgarh Governor, Lt Gen K.M. with the joining of a number of professionals, FAST has devel- Seth, and Airport Authority Chairman, K. Ramalingam oped into a truly research body on which the government and industry can rely upon. Kapila, Chairman, ICT, suggested integrated development of all Ajay Prasad spelled out the challenges faced by the civil avia- transport sectors, be it air or rail or road or shipping. Sonia Dutt, tion sector, in general, and airports, in particular. He looked satis- airline expert, appreciated the recent efforts by the Foundation in fied with the pace of work at Bangalore International Airport Lim- flagging industry issues for consideration of government. T.R. ited and Hyderabad International Airport Limited. Prasad Kesharwani, ICAO expert, was also happy with the quality of informed of the steps taken to hand over Delhi and Mumbai air- technical papers presented in the conference.

SC hears Reliance

CIVIL AVIATION MINISTER Praful Patel has said that his ministry will talk to state governments to develop a ‘national grid’ for aviation by re-activating the 400-odd airfields and airstrips lying disused in different parts of the country for decades. This is being done to meet the needs of the burgeoning air traffic in the country. The state governments concerned will be encouraged to upgrade these airports and airfields, and for this purpose they could look at public-private partnership or go in for private sector alone. Many of these airstrips and airfields had been constructed during the World Wars, and others by industrialists for private use. Most of these airfields are not functional.

CHIEF JUSTICE Y.K. Sabharwal and Justice C.K. Thakkar have admitted a petition filed by Anil Ambani-owned Reliance Airport Developers challenging the Delhi HC verdict that upheld the government’s decision to allot Delhi and Mumbai airport modernisation work to GMR and GVK-led consortia and have fixed First of June to hear the matter for final disposal. The court said the various issues, including the lowering of standard as well as giving choice in the opening of financial bid for airport modernisation, needed to be examined in detail. Reliance has challenged the award of Delhi and Mumbai airport modernisation contracts to GMR and GVK-led consortia on the ground that the government and the AAI had deliberately amended tender norms to favour the rival bidders.

CRUISING HEIGHTS May 2006

EXECUTIVE DIGEST

Develop unused airports

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NEWS DIGEST

China All Set to Soar

EXECUTIVE DIGEST

he World Travel and Tourism Council (WTTC) has predicted that China will become the second largest travel and tourism market in the world, after the United States, over the next decade. As per WTTC forecasts, investment and government spending in tourism will grow by 14 per cent in China, to touch US $353.7 billion in the current calendar year. And over the next one decade the travel and tourism industry is expected to grow at 8.7 per cent annually, making China the world’s second fastest growing travel and tourism market. Spending by inbound international tourists is expected to total US $75 billion in 2006 and accounting for nearly eight per cent of the country’s exports. Travel and tourism has already contributed 2.9 per cent to the country’s total GDP and 2.3 per cent of total employment. China received 120 million foreign tourists in 2005, and also saw 31 million outbound tourists, which was a new record and over 10 per cent more than the previous year’s. In the current year, China expects 130 million inbound tourists. None needs to tell the Chinese that such an explosion in its tourism and travel industry would call for major efforts to provide the supporting infrastructure. In this context, China is going in for a massive building of less expensive hotels and vastly increased air connectivity, which will also be absolutely essential considering China is hosting THE GREAT the 2008 Olympics. The late-April visit to the US by Chinese President Hu Jintao and his delegation saw the signing of the deal by the Chinese for buying 80 Boeing 737 aircraft, valued at US $4.6 billion. This was one of the 100 contracts, valued at US $16.2 billion, signed by Chinese firms with their US counterparts. Unlike India, where the airlines sign individual deals, the China Aviation Supplies Import and Export Group signed the deal on behalf of Chinese carriers. Of the 80 Boeing 737s, Air China will get 15. Its fleet strength at the end of 2005 was 176 aircraft and is also quoted on the HK stock exchange. Considering the international tourist rush to China, the new giant on the international scene is on its way to

WALL: A panoramic view develop Beijing as a global transportation hub. The seriousness with which the American firms have taken China has become even more evident when the US-based High-Tech Suppliers Council was granted observer status at the bilateral aviation talks between the US and China in Washington as part of wider trade discussions. Usually such talks are restricted to government officials and representatives from the air transport industry. But after the members of the HighTech group, among others like Intel and IBM, complained of inadequate air transportation connections between the US and China, they were also invited to the talks, with observer status.

Equal treatment

Keep your cool

COMMERCE MINISTER KAMAL NATH has said the decision to treat supply of stores, including beverages and food, as also refuelling of long-distance flights, on an equal footing with other exports would enable India to offer fuel at competitive prices and attract mid-route stops of international airlines. “Currently, most airlines replenish supplies or fuel in Thailand, Malaysia or Singapore, since these supplies were not treated as exports in India,” said Nath. There was, however, a division among the domestic industry on who would benefit from today’s policy announcements. There is a mixed reaction to the move. Some believe it will help traffic, while others are lukewarm about the decision.

IF THE aircraft you are flying in develops a hydraulic problem, just don’t panic. Instead, just relax and enjoy the rest of the journey. Kanu Gohain, Director General of Civil Aviation, assures there are at least three other systems on an aircraft that will take over if one fails or malfunctions. He went on to clarify that landing under emergency conditions did not necessarily mean an emergency landing. Further, if fear of ‘air-misses’ keeps you on the edge of your seat, Gohain says that, after the crash of two aircraft near Delhi, the government has mandated that each aircraft above a particular weight have an aircraft avoidance system. That is to say, when two aircraft are about 10 nautical miles from one another, the aircraft avoidance system will inform the pilot, who is trained to interpret these signals and take action.

CRUISING HEIGHTS May 2006

CAPA DIARY

Centre for Asia Pacific Aviation (CAPA) held its Asia Middle East investor conference in Mumbai in the last week of April. A diary on the two-day event and the personalities that held the spotlight.

Nothing

ne of the statements that CAPA’s India Chief Kapil Kaul heard more often than not in Mumbai was the refrain, “Last year was better.” Well, his friends were referring to the summit in October as opposed to the April affair. To use a phrase used more often to describe a mindless draw in a cricket Test match, CAPA (April) was ‘a tame affair’. “This meet was thinly attended, suggesting some kind of fatigue both in the minds of investors as well as airline participants. In fact, they did not have anything new to tell. However, the highlight of the meet was the presence and scintillating speech and presentation by the founder-chairman of easyGroup, Stelios Haji-Ioannou. Stelios brought forth an energy, easy informality and breath of fresh air to the podium and had plenty of insights and experiences to offer. That he had his India plans known at the CAPA meeting should come as a feather in the cap for CAPA. The serial entrepreneur, who heads the easyGroup, had an easy informality and humility that was arresting.

CRUISING HEIGHTS May 2006

new to tell

ANIMATED ACTION: (clockwise) Gopi in discussion with Warwick Brady and Ajay Singh; a view of the CAPA exhibition centre; Patel and Mallya in the Kingfisher lounge; Jeh Wadia makes a point; a panoramic view of the Grand Hyatt ballroom where the CAPA conferency was held Praful Patel, who missed the last CAPA summit in the city, was there for this year’s edition. Peripatetic with a capital P, the man from Gondia is virtually in air most of the time and touches down only for policy pronouncements and some networking. He arrived around noon from London and was at the Grand Hyatt around teatime to regale the audience with a long, rambling, informationpacked presentation. So confident is he of his facts that he doesn’t use any notes to bolster his arguments. He took all questions from all corners, was confident and sometimes, perhaps, overconfident. But PP is clearly lucky—the economy is booming and the aviation sector is seeing unprecedented growth. There is a feel-good factor all round, and few are willing to question the minister sharply at such times. For example, on the slots issue he warned the new kids on the block that they better take what they are being offered, before he changes his mind.

The Kapil, Harbison Jodi The next CAPA conference will be held in October in Delhi, where it will release its aviation outlook report. By that time the much-delayed civil aviation policy is expected to have seen the light of day and the socalled Air India-Indian Airlines merger also firmly on course. But in this period, will there be anything exciting to say? Unless, of course, there are some new faces and some new stories to recount. Already CAPA is thinking of having an Indian aviation conference in the US. That sounds interesting. Certainly more interesting than the fare in October. Anyway that’s still some months away. If the aviation bug hadn’t bitten him, CAPA India CEO Kapil Kaul could easily be in the CRUISING HEIGHTS May 2006

new to tell

CAPA DIARY chat-show business. He has the looks, the flamboyance and the eloquence to carry off his thoughts. Recounting the India success story and its booming aviation market, he wondered if it were possible to raise US $100 billion in India in the next 10 years to complete the aviation story. While domestic passenger traffic is likely to exceed 50 million by 2010, the key area is fares, considering that the Indian market remains highly price sensitive. The merger of Jet and Sahara and Air India and Indian Airlines could see the emergence of new biggies. The possibility of Bangalore, Hyderabad, Delhi and Mumbai airports seeing the light of day were all welcome developments, besides, of course, the serial MROs planned by many players, prominent being Boeing. Kapil added that six months ago international investors were very gung-ho about India and were making frequent trips to know what was happening. This has changed. Does this mean there will be serious shortfall in subscription to IPOs or even debt funding? May be not, said Mallya, who feels it is the brand that matters along with track record. Kapil’s boss and CAPA CEO, Peter Harbison, put it in the right perspective when he said the big issue in India would remain the costing of airline, profitability, consolidation, etc. While new airlines are obsessed with cost cutting, there is little they can do about external factors, like rising fuel cost, airport charges, lease rentals, employee cost, taxes, etc. Should consumer spending diminish, as in the US, it could spell doom for many and push some airlines to losses. Hence, there has to be greater emphasis on restructuring, which he called the treacle effect. This will dampen growth or will be akin to running into a mountain of treacle. Therefore, airlines will have to consolidate. It is very difficult to merge and consolidate both international and domestic airlines. In the case of India, there is no alternative to merger of AI and IA.

Come on, Adel Adel Ali, Chairman of Air Arabia, was expected to throw some fresh light on the Middle East market. But somehow he didn’t see it that way. What he saw was a grand opportunity to talk again about Air Arabia and its wonderful plans for India and criticism of state-owned Air India and Indian for charging an ‘astronomical’ amount for ground handling support. Air Arabia is a classic case of having the cake and eating it, too. Particularly, in the Indian context. Ask any private domestic carrier; it will have a similar set of woes about the state-owned carriers. But what can the poor state carriers do when they find their passengers walking out and walking into competing domestic private carriers. He wants more competition

in the Indian aviation sector, with more players and greater options. Say that to Emirates, Mr Ali. They don’t allow you into Dubai, are unhappy with your operations and look to scupper your plans. So where is the competition back home?

Sparring Kannadigas

VERBAL DUELS Gopi: Vijay Mallya is speaking about his

full-service carriers with in-flight entertainment, gourmet meals, etc. Let me tell you, Air Deccan is not in the business of fashion, entertainment or gourmet meals. We are here to take people from point to point. We are focused on taking large number of passengers from point to point. We are here to make money. The President of India, Prime Minister, sarkari peons, everyone is flying. Three-and-ahalf years ago, Bangalore hoteliers were soliciting business desperately. Today Leela is charging US $600 per day and lesser-star hotels, $200. On a societal scale, if you want to change the lifestyle of people, it takes four to five years. “We have not only broken the cost barrier but also the caste barrier. Some kind of consolidation will take place. I do not know who will be the last man standing.

Mallya: The guru of LCCs is sitting here (referring to Gopi, who was sitting on his right at the round-table meet), but Kingfisher is determined to focus on upwardly mobile consumer class, with higher income and high aspirational values. We fly those who can afford to fly and want full service at true value. Profitability is a function of inflow of revenue and outflow of cost. As for Kingfisher, we believe there is market in high-income category. By the end of 2006, Kingfisher will have 18 A320 and it will have the same revenue as Air Deccan’s with 50 aircraft. Besides Kingfisher will have higher yields. That is our unique model. We want to get to profit quickly. I doubt if Gopi and Ajay (of SpiceJet) can sell tickets as cheap as EasyJet, which sells London-Paris for as low as £10. If the government were to bring down cost, then it will be the fastest growing. Air Deccan and Spicejet [passengers] are like sardines in a can. I am roomy.

CRUISING HEIGHTS May 2006

If Gopi were not in the aviation business, he would make a great politician. Now how many of you know that he once contested against former PM H.D. Deve Gowda? And his sparring with Vijay Mallya is like sparkling wine—there is plenty of zing and sparkle in the cut and thrust between the two. When he is battling the sarkar, Gopi, one can be sure, is sharpening the sword for a duel with the Good Times. “We are a 33-month-old airline with 35 aircraft. Against all overwhelming odds, we have made it. Yes, the market is a little overcrowded. Six months ago our import permission to acquire aircraft was rejected. I signed for 60 A320 aircraft, followed by another 30 and another 15 leased ATR and 15 leased A320. This official in the ministry of civil aviation saw Air Deccan’s plan to acquire 120 aircraft and simply rejected the import application,” Gopi thundered and added, “He asked me where are you going to park the aircraft. I told him you must not ask this question. After all what is parking bay but just dumping concrete. I called Praful Patel the next day and followed it up with a chat with this officer. It was done and the application was approved. I asked him why this mindset.” Gopi was excited about the operations in Sri Lanka. He said, “We had a helicopter company in Sri Lanka. Now we have a licence as an international carrier. We already have seven operational bases, and Colombo has become one more, where we are going to have an MRO. I opened Thiruvananthapuram base last month for receiving flights from Colombo. The operations of Deccan Lanka will start in another 90 days and it will connect Colombo to Thiruvananthapuram, Kochi, Tiruchirapalli, Coimbatore and Madurai. “And finally, the sales pitch: in 2006, Air Deccan will fly eight million passengers. Last year, Indian Airlines, which is a 50year-old airline, flew 7.2 million passengers. We have created huge network and have expanded in spite of the bureaucracy. However, our expansion caused few problems relating to operational integrity. We have got few top guys from Ryan Air to take over.” But it was an elegant and confident speech from the king of Good Times. Vijay Mallya spoke extempore, from the heart and there is no denying that he speaks with much vigour and confidence. And he made his point with telling impact: “Infrastruc-

The online

debate Y

atra is a new travel agency on the Net that is promising to take the travel trade industry by storm. Why not? After all, its backers are the famous venture capitalist Promod Haque, of Norwest Venture Partners, which has a 45-year history and a handling of a few billion dollars in venture capital, Anil Ambani and TV18. Obviously, this has sent shivers down the spine of the first mover, Deepak Kalra and his MakeMyTrip.com. It was therefore no wonder that at the recent CAPA meet, Kalra made a frontal attack on the assumptions made by Bhawna Agarwal, Founder General Manager of Yatra, when she made a slide presentation at the meet. Bhawna said, “From offline to online one can see US $420 billion available for spending. By 2009, there will be more than 400 million Indians in its proverbial middle class. New airlines have increased the people’s ability to travel. Smaller C class towns are now contributing to aviation growth by as much as 40 per cent. The 18 to 35 age group has the highest purchase power and they buy tickets online. Close to 48 per cent of these are married. They don’t travel once but are multi-time travellers, based on the VFR factor. Online purchase provides convenience, anytime shopping, is cheaper, etc. While the travel market is flourishing, it is still underserved. Just click www.yatra.in and find the difference. It is the first multi-channel, centralised travel-service provider. Yatra will also come to your doorstep. It is a multi-lingual travel-service advisor and not just an agent to book tickets and hotel rooms. “We have an unfair advantage. We have 20 million mobile phones, 200 million TV connections, 35 million Internet users. We have the largest consolidation of 15,000 to 20,000 hotel rooms. We are not here to kill competition, but expand the market. Persons without credit card will also be served from call centres, which will also provide non-English or multilingual services. You can choose from 1100 flights a day. At the last minute, lot of seats become available. We are travel advisors and can help airlines to reach out to new customers. Deepak Kalra, of MakeMyTrip.Com, begged to differ with Yatra’s model. He said India remains a sluggish market, with a middle class, numbering 250 million, that is highly price conscious. The penetration of credit-card usage is less, but it is not a constraint. We sell about 40,000 tickets through credit card every month. I remain optimistic that credit-card usage will open up the market three times the present size. However, online buyers are restricted to big cities. “For us, Bangalore is the biggest online market source. I agree there is bigger need for those in smaller cities to go purchasing online. Nationwide coverage

BATTLE ROYALE: Newcomer Yatra and Makemytrip.com are the two biggies that will battle for a bigger share of the pie

needs local offices, where the key lies in using latest global technology. MakeMyTrip.Com launched its service in September 2005 and has already captured three per cent of the domestic market share. Our aim is to make travel affordable,” he added. Kingfisher’s Vijay Mallya had a different view. He prefaced his point by saying, “We are in the aviation hospitality business”. Referring to travel agent commission, Mallya said we respect the distribution channel built by travel agents. It is not about cutting cost. Penetration of computers in a population of one billion, at just 1.4 million, speaks enough about using online booking. For Mallya, Internet is not the solution but the question is how fast is it going to change. In the US, you ask for coffee, you are directed to the coffee dispenser. In India, when I ask my secretary for coffee, she directs the peon to get coffee, who, in turn, runs to the canteen to get it. “Indians will always use the phone to get their travel agent to book tickets. I will always keep the travel agent on my side,” he added Both Kalra and Agarwal should perhaps take Mallya with a pinch of salt. As the boss he always takes the decisions that his colleagues merely implement.

We are not here to kill competition, but expand the market: Aggarwal I remain optimistic that credit-card usage will open up the market: Kalra CRUISING HEIGHTS May 2006

CAPA DIARY

Interview with Vijay Mallya

“A normal Indian is scared of small planes (he is nervous t On his pioneering role in aviation

I was the first industrialist to import jets and start UB Air. We had three jets then. A normal Indian is scared of small planes (he is nervous travelling by ATR), but is not scared of flying Boeing or Airbus. We are a funny nation. People here are afraid of flying during monsoon, especially on big jets. Three of my industrialist friends got together to buy an aircraft. But they don’t use it. The Indian government has a ridiculous policy of not allowing private aircraft to fly for two hours in the morning and evening at Mumbai airport. I have even spoken to the minister of civil aviation, but to no avail. In the US, if industrialists are in a hurry they are encouraged to use their own private jets, which get priority in slots. In India, our policy is the reverse.

On an IPO

UB has a track record of creating shareholder value, and its stock prices have risen by 200 per cent in the last two years. Thus when we go to the market, we carry the credibility with us as much as it would apply to Kingfisher as it applied to UB. Further, there are airlines (did not name Indigo) that have placed a humungous order without even starting operations. When people announce a 100-aircraft order, there is a mismatch with infrastructure. It raises the question of credibility. As for Kingfisher, it does not intend to serve 100 sectors. We are focused.

ture in India is big challenge, but still we pay the highest airport charges. In ITrelated outsourcing, we are a low cost, but in aviation we are the highest cost economy. If airlines have to make money, then they will have to hike fares. Otherwise the business will go bust.” Warwick Brady, Air Deccan’s prized import from Ryan Air, was blunt and to the point. Clearly for this South African, long years in England haven’t resulted in a stiff upper lip: “India is a young market that has not yet matured. I think LCC is the best airline investment. Spice says it has made some money. We will also make some with our present operations, being carried out from seven bases. We operate 250 flights a day and hope to carry 18 million passengers in 2006. I do expect a bloodbath. I don’t see LCCs making profits for another two years. Indian Airlines has dropped fares on some sectors to ridiculously low level to get Air Deccan off the route.”

Jeh’s gargantuan plans Bombay Dyeing scion and the managing director of GoAir is gung-ho about the future of the aviation business. So confident that GoAir has decided to seriously look at an MRO, a cargo airline and other ancillary businesses. In a long, detailed and pretty

Jet Vs Kingfisher

Jet Airways is, without doubt, a success story. If I were Jet, I would not have made the acquisition. It is going to be a lot of headache (referring but without mentioning Air Sahara acquisition by Jet Airways) that was not bargained for. But I am upscale and that is why UB gets US $3.2 billion in revenue. Jet Airways has a huge workforce, and, with its new inheritance, the workforce will increase further. UB has 66,000 employees and it is one of the reasons I outsourced some jobs to Indian from Kingfisher. I have outsourced my category route flying to Northeast and J&K to Indian. Jet Airways has added overheads in the last 10 years. Even today Jet stock has fallen. I don’t believe that Jet cannot survive. If Indian Airlines can, then Jet also can survive.

On the IA-AI merger

I am a member of Parliament and sit on the Parliamentary consultative committee on aviation. The civil aviation minister has spoken of merging Air India and Indian Airlines but without any loss of jobs. Left parties will support it, as there will be no loss of jobs. But it will have serious consequences. One cannot quote the example of BA, as the situation in India is uniquely Indian.

“India is a young market that has not yet matured. I think LCC is the best airline investment... I do expect a bloodbath.” Warwick Brady CRUISING HEIGHTS May 2006

eloquent presentation, Jeh looked at the huge train traffic, something that he shares in common with Captain Gopinath and Ajay Singh, of SpiceJet, who, too, love quoting those astounding numbers. For those who don’t know the figure, it is an astonishing 15 million passengers everyday. And of these, nearly 7,00,000 travel by AC I, II class—the catchment compartments, so to speak for the LCCs in the country. “Today GoAir has four aircraft, which will reach eight A320s by October 2006, 18 by December 2007 and 33-aircraft fleet by 2008. We have already placed firm orders for 10 and option for another 10 and all to be powered by CFM engines. We have all the combinations, like short-term lease, long-term lease, sale lease-back, purchase, etc. India has a seasonal market, which means deploying huge capacity during seasons. Go has 26 flights a day covering 13 airports. We started in November 2005 from metro to non-metro, as we did not want to put 10 per cent of our capacity on social routes. From April 2006 we have begun connecting metro to metro. Our market share, which was two per cent in March-April 2006, is likely to register a significant growth from May onwards. GoAir is the first airline to go to Srinagar from

travelling by ATR), but is not scared of flying Boeing” reservation. You cannot have reservation on the one hand and aim to be a global player on the other. A mere merger of IA and AI will not help in toning up service and bringing down cost because the underlying theme is there should and there will be no loss of jobs except for 50 to 100 management jobs. Employees per aircraft ratio could go up to as high as 500. There has to be a political answer.

On Kingfisher Airlines

On reservations

This reservation applies to IA and AI regrettably. This kind of policy handicaps providing international-class service. Therefore, they will fall short. The private sector has opposed

Mumbai with flying time of two hours and 45 minutes. Majority, or, say, 65 per cent to 70 per cent, of the passengers are tourists, and we have been sold out for three-and-a-half months. Our service is as good as Jet’s and Jet is the best domestic airline in the world. “In 2004-05, six million passengers bought 15 million seats. In 2005-06, eight million passengers bought 20 million seats. It is quite a large number that airlines can target. In India we have 200 aircraft, while China has 800 aircraft and it sold 140 million seats. The passengers carried by easyJet are three times more than the passengers carried by all the airlines put together in India. The Indian market is yet to reach an acceptable growth level, where there is easy conversion of train passengers to aircraft passengers. By the year 2010, there will be 90 to 100 million passengers with increasing conversion of train pax into airline pax. However, it depends on the cost structure. “GoAir is now aiming to achieve the service standards of SIA. As for travelling on foreign routes, GoAir has no plans to fly foreign for another eight to nine years. And, if at all we go and when we go, it will be only to Asian destinations and not to Europe or the US. This five-year rule barring domestic carriers to fly foreign routes does

Kingfisher, in less than 10 months since it launched in May 2005, has garnered 8.7 per cent market share. It has recorded 70 per cent load factor, including new routes that it has never flown before. In a way, Kingfisher has raised the bar. “We have shrunk 174-seat capacity to 114. We have introduced Kingfisher First (first class) with 20 seats that have a 48-inch pitch, 125-degree recline and audio/video on demand. Kingfisher First is 10 per cent costlier than business class of Jet. The response has been excellent in those limited four sectors where Kingfisher First is being offered. The per capita productivity and growth is higher in South India than in North India, and therefore we are intent on capturing the Southern market. This has paid off. We are the biggest carriers on Bangalore-Delhi-Bangalore sector. We have more parking space in Bangalore than anyone. Already Hyderabad and Bangalore international airports are making fast progress.

“In 2004-05 six million passengers bought 15 million seats. In 2005-06, eight million passengers bought 20 million seats. It is quite a large number that airlines can target.” Jeh Wadia CRUISING HEIGHTS May 2006

not bother us. We think the growth opportunities within India, or domestic skies, are superior to international’s. As for cargo, truckers offer to carry at Rs 4 per kilo and we would like to compete with that in the air. Therefore, we are looking at dedicated freighter service, where we can offer the same pricing as truckers’.”

Telecom and Spice! Spicejet Executive Director Ajay Singh, who loves to quote the telecom experience to bolster his arguments about the future of air travel in India, believes lower costs will spur air travel just as low tariffs have seen an explosive growth in mobile telephony. But what Ajay forgets is the fact that the costs have consistently fallen in every sphere in the telephony business, but not so in aviation. The fixed costs aren’t going down and the price of fuel is climbing and climbing beyond anyone’s wildest imagination. Referring to easyJet Chairman’s remarks that airlines, like Jet, have no chance, he said, “I think Jet Airways is a great brand and the first private sector airline. Its revenues will come from long-distance flights and business/first-class passengers. It will have to concede the econ omy class passengers to LCCs.” —K. Srinivasan and R. Krishnan

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YEH HAI DUNIYA

Love... love... sigh! A LOVELORN 16-year-old schoolboy in Mumbai called the Alitalia office that a bomb would be planted on Flight AZ771 to Milan, which was due to fly at 2.20 am the next day. So desperate was he to give the information that by morning, the Alitalia office had taken three calls made from a landline and a mobile phone. He told the authorities that a group travelling on the flight would be carrying the bomb in a green bag. The CISF team at the airport soon zeroed in on 12 students and a teacher, who were leaving for Italy for a mock UN session. Without alerting them, the CISF tacitly found out that the number indeed belonged to a friend of theirs. According to the police, the boy tried to pull off the charade only to prevent his girlfriend from boarding the plane. Eventually the group did not take the flight and returned exhausted after spending 14 hours at the airport. The flight finally left at 4.30 am sans the group. Meanwhile the boy is known to be well-behaved and soft-spoken, with no previous record of misbehaviour.

Lab on flight KARAN HAMBIR, who is attached to the Tata Institute of Fundamental Research’s (TIFR) Homi Bhaba Centre for Science Education, was carrying bottles and boxes containing glycerine, potassium permanganate and other items in his kit aboard a Jet flight!!! He was returning to Mumbai with three colleagues after participating in a science exhibition in Andhra Pradesh. The chemicals slipped out of his kit after it was mishandled, filling the aircraft cabin with smoke soon after the plane landed in Mumbai. Hambir, too, suffered burns as he stamped his foot on the kit to contain the smoke. L u c k i l y, there was no fire. According to bureau of civil aviation security guidelines, inflammables cannot be carried on board an aircraft. So much to say of security.

Booze to boo WHEN HOST of E. Steven Live on WPHI-FM (100.3) and national sales director for Radio One Philadelphia E. Steven Collins was settling into his first-class seat next to his wife on a flight to Philadelphia from Los Angeles when he noticed a Robert Baldwin muttering something. But that was not the end to the matter. Sitting behind the couple, Baldwin used racial epithets, kicked Collins’ wife’s seat and put his bare feet on her headrest throughout the five-hour ride. Instead of reacting violently, Collins chose to notify the flight staff and ultimately the police, including a personal call to Commissioner Sylvester Johnson. He brought Baldwin to book. Baldwin’s attorney attributed the cause to alcohol, which was confirmed by one flight attendant, who testified that she had served Baldwin two double vodka tonics. Collins commented that Baldwin has to know that you can’t say things and do things without consequences, and that he would pursue this every which way and in every direction possible.

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What the hell “WE’VE POURED you a beer and we’ve had the camels shampooed, we’ve saved you a spot on the beach. We’ve even got the sharks out of the pool,” the introduction goes. Then, from a bikini-clad blonde, comes the slogan: “So where the bloody hell are you?” The oath-laden slogan of Australia’s new tourism campaign apparently did not go well with the British. They promptly banned it in Britain. The setback was nevertheless hailed as a marketing coup by Scott Morrison, the managing director of

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Taken for a Ride RIDING ELEPHANT to Amber Fort will now be a costly affair. The new fee is Rs 550. Rising cost of feeding the gluttons has been cited as the main reason for the hike. Of the new fee, Rs 410 go to the elephant owner, Rs 60 to the elephant welfare fund and Rs 50 to travel agents for booking the elephants. The remaining will go to the archaeological department and for cleanliness. The fee charged earlier was Rs 450, and this is the fourth hike in the last 12 years.

Grounded after three months AUSTRALIAN BUSINESS-CLASS airline OzJet cancelled domestic services just three months after launching it. The airline was quoted as saying that it did not have the support it needed to operate against big, established carriers. The airline had hoped to find a niche market for its business class-only service between Melbourne and Sydney, but travellers were prepared to travel the one-hour flight on cheaper economy tickets with either Virgin Blue or Qantas. The company raked up losses of more than $7.3 million.

Bullet sends jitters ALASKA AIRLINES’ Flight 384, scheduled to depart from Seattle-Tacoma International Airport, had to be delayed when a federal air marshal found a bullet in the cabin. Passengers were taken off the plane and Transportation Security Administration (TSA) agents rescreened the passengers and the aircraft. However, the TSA agents found no gun or any other items of concern during a subsequent search of the San Francisco-bound aircraft. Although it was not immediately clear how the bullet got onto the plane, but it is being speculated that the airline flies many hunters to Alaska, and that from time to time, bullets have fallen out of passengers’ pockets. The plane took off at 5.43 pm.

Shoes, too, scare

Millions for a suitcase EIGHT YEARS ago, Jose Tiongco, en route from Manila to Almaty, Kazakhstan, where he was giving a lecture at a World Health Organisation conference, lost his suitcase on the KLM flight. Consequently, he had to stand before his audience wearing jeans, a T-shirt and sneakers. He sued the airline, pleading that his reputation had suffered. Recently, a Philippine court awarded Tiongco $238,000. Naturally, the airline has appealed.

CRUISING HEIGHTS May 2006

Illustrations by Zahid Ali

the Australian government’s tourism promotion agency, Tourism Australia. He went on to call the campaign a marketer’s dream, and that it will be driving people to the Internet like there’s no tomorrow. The campaign is already on in the US and in New Zealand. However, Japan, Korea, Thailand and Singapore would get expletive-deleted versions of the campaign. The campaign features all the standard vistas of Australia—beaches, deserts, coral reefs—as well as traditional icons like the Opera House and the Sydney Harbour Bridge. Incidentally, the tourism promotion campaign, despite its pandering to crude national stereotypes, hiked arrivals from the United States by 40 per cent.

WHEN A male passenger, who was selected for secondary screening, set off an alarm when his shoes were passed through a detector that checks for explosives, authorities at New York’s La Guardia airport evacuated a terminal and halted outbound flights after a security alert over a passenger’s shoes, they said. A spokesperson said that the decision was taken to remove passengers from the terminal out of an abundance of caution. Interestingly, the passenger then put on his shoes and exited the area, leaving the authorities unable to explain why the man was not stopped. A frantic search for him proved futile. Passengers’ shoes have been regularly checked at airports since the attempt by British ‘shoe-bomber’ Richard Reid to blow up a Paris-Miami flight in 2001 using explosives hidden in his soles.

COVER STORY

Indian tale INDIAN VIEWS IT AS A PERFECT MID-SUMMER NIGHTMARE. IT PREFERS A SYNERGY WITH THE MAHARAJA RATHER THAN A MARRIAGE, WHERE, IT FEARS, IT COULD BE AN UNEQUAL PARTNER. R. KRISHNAN PIECES TOGETHER ITS SIDE OF THE STORY.

erhaps the single biggest refrain at Airline House is the step-by-step approach. At least that’s what the men and women of Indian would like to see as the first step. Next, they believe it will be a good idea to look at route rationalisation, followed by efforts to synergise the strengths of the two carriers before moving to the merger zone. A study conducted by A.F. Ferguson in 1998 had suggested the formation of a holding company to get the best out of the two carriers. As one pithy said, “We have faced competition with far more vigour than the Maharaja, and it will be very unfortunate if we are now converted as subjects to save the Maharaja.” What is particularly galling for IA, now Indian, is the decision to rob it of its identity after a decade and a half of struggle against the private carriers in an open skies environment. This paradigm shift in Indian aviation

in 1993 saw IA lose the cream of its talent to the Jets and the Saharas of the world. There was tremendous loss of manpower, mainly engineers and pilots. For the record, Indian Airlines lost 166 pilots—102 commanders and 64 co-pilots—besides 96 aircraft maintenance engineers between 1991 and 1995, with much of the movement coming post1993 onwards. Consequently, its per aircraft utilisation per year fell to 1600 hours. By 1995 its total pilot strength fell from 600 to 400, a figure it is now struggling to increase. It may be recalled when the first batch of private carriers came on the scene, Indian Airlines, with both Boeing 737-200 and Airbus A320 in its fleet, was the ideal poaching ground. Many of its Boeing pilots quit to join the competition that had chosen the 737 Boeing workhorse. This was also the time when foreign carriers, like Gulf Air, Air Lanka and Taiwanese carriers, began to induct the A320s, and as a result, IA’s A320 pilots, too, began to leave.

COVER STORY

Being the launch customer for A320, Indian Airlines had the full complement of co-pilots, commanders, trained commanders, examiner pilots/ instructors. This tribe of trained pilots also left, making it tough for it to compete. Notwithstanding all this, in 1996, Indian Airlines management, led by the redoubtable P.C. Sen, signed a productivity agreement with its pilots and engineers, and it slowly began to return to fight back for its space in the market. This led to increase in per aircraft utilisation per year, which reached 2756 hours in the year 1999. It was also the time when most of its flying got to be done by the A320s. IA progressively increased its daily flight departures, from 265 in 1999-2000 to 307 in 2003-04, and which rose further to 333 by the end of 2004-05. Its overall capacity increased by 17.4 per cent with the induction of leased aircraft. The flying hours per aircraft went up from 3048 in 2000-01 to 3426 in 2003-04. Today Indian has a fleet of 47 A320s, of which 30 are owned and three A319s are on lease; and three owned A300s and five flying Boeing 737-200s are from Alliance. To manage this fleet, Indian has 524 pilots and 510 engineers. Despite not being able to get the same complement of pilots, as was in pre1993, IA has managed to be in the battle. Obviously its fight-back strategy has seen the aircraft utilisation rising, FDTL showing an improvement and engineers turning over more number of aircraft (though engineers are currently not delivering as much as they had promised). In the early Nineties, after the first Gulf War, IA did a remarkable job in Gulf evacuation. Following that the government gave some foreign routes to it. But Air India, play-

The services of Indian have seen remarkable improvement in the face of competition from private players

In the early Nineties, after the first Gulf War, Indian Airlines did a remarkable job in Gulf evacuation CRUISING HEIGHTS May 2006

ing the big dad and behaving as if it held the copyright to international routes, prevented it from flying to new pastures. Despite the government agreeing, as part of route rationalisation and allowing Indian Airlines rights to fly to Hong Kong, Jeddah, Abu Dhabi, etc., till date IA has not been able to fly there. When it made out a strong case, AI got the Ministry of Civil Aviation to direct the domestic carrier to not go to any new international sector in 2003-04. It was also told to not increase its frequency on the existing international routes served by IA. When it wanted to start Jaipur-Dubai route, it was summarily rejected, as a result, the official domestic carrier had to include Delhi in that sector, following which Indian Airlines began a Jaipur-Delhi-Dubai flight. Unlike other carriers, Indian Airlines could not follow the fountain theory of flying to numerous destinations from fewer points in India. Rather it was forced to fly from everywhere in India to fewer international points. Although this had its advantages, it did not actually help in optimising the effort. For instance, it was only last year that Indian Airlines began the Mumbai-Sharjah flights. This has to be seen in the context of many additional rights conferred on Air Arabia, which now flies from Sharjah to Mumbai, Nagpur, and would be flying to Jaipur, Chennai, Kochi and other destinations in the South. Indian Airlines, as a consequence, is now flying to 17 foreign destinations from 18 domestic destinations. While Air India was preventing Indian Airlines from flying to new international points, foreign carriers were making merry. For instance, Kirghiztan and Uzbekistan airlines are flying from Amritsar to many European

The services of Indian have seen remarkable improvement in the face of competition from private players

In the early Nineties, after the first Gulf War, Indian Airlines did a remarkable job in Gulf evacuation CRUISING HEIGHTS May 2006

DIVIDING THE SPOILS

ccording to informed sources, the ministry of civil aviation is planning to set up four working groups to facilitate the merger between the two state-owned carriers. The working groups will be in the areas of marketing, engineering, manpower and operations. There will be two working groups each in Indian Airlines and Air India. One group each will be headed by the CMD of the two airlines. A functional director of each airline will head the other two groups. Most importantly, these groups will be fully empowered. Indian Airlines officials are extremely nervous of this arrangement, as one does not know at present as to who will head which group. For example, should the marketing and operations group be given to Air India, then it will do everything from the point of view of Air India, which will hurt Indian Airlines. In this context, they said, couple of years ago, when synergy between the two carriers was forged, as part of it the mileage earned was to be made available to the benefit of Indian Airlines’ customers as well. In fact, the then CMD Sunil Arora, who had nursed the airline back to profits, pushed vigrously for synergy. For a while, he was successful. Among the destinations that could be

destinations from their home base. That is, take passengers from Amritsar and off to Milan, Rome, London, etc., by using their domestic stations as the hub. So much so that third-country destination boarding cards are being issued in Amritsar itself. If Air India could not stop this, what was the point in preventing IA, also equally owned 100 per cent by the government from flying to these destinations? Air India chose to accept all this in the name of bilaterals and code share that is earning it nearly Rs 250 crore annually. In another year or so, the code share arrangements will cease to exist and Air India will lose this non-operating income. Instead of bracing up its own efforts, it has pressurised the government to force Indian Airlines to merge with itself. Air India has begun to compete vigorously with IA in the golden line—flights to the Gulf and Southeast Asia, particularly Singapore. Instead of competing with mega carriers, the Maharaja wants to kill IA. “With the fast approaching deadline that will see the abolition of code share royalties, Air India is devising new plans to usurp Indian Airlines,” IA officials allege. The entire consideration for merging from Air India’s point of view is to have one strong national carrier. At a meeting held in Mumbai in May 2005, Air India, in its presentation

flown by Indian Airlines customers, as part of its Desh-Videsh scheme, were also those that included Air India sectors. However, Air India rejected the arrangement and dishonoured the bonuses earned by Indian Airlines’ customers. Indian Airlines suffered monetarily and its credibility took a serious knock. It charged that if the marketing group went to Air India, pray what will happen to Indian Airlines, which has strong knowledge of domestic and regional markets. How could Air India supplant its long-distance markets’ knowledge on the domestic sector? Even if one looked at the finances of the two airlines, while Indian Airlines has been making profits nearly completely on the operational side, Air India profits largely include non-operational revenues, which might disappear once the code share payments and royalties cease to exist. Around two years ago, Indian Airlines suggested that it would do common ground handling in Delhi, while Air India will do it in Mumbai. Besides, the work relating to marketing, security and operations was also to be divided. Just when it was to be implemented, the arrangement was disbanded by Air India. The subsequent liberal skies agreement with ASEAN hit everyone and the

progressive opening up of skies is now threatening all, most of all Air India, and, to a lesser extent, IA. At its board meeting held on May 4, AI decided to go ahead with the appointment of a consultant to push through the merger. This was absolutely in keeping with what Praful Patel had told reporters a few days earlier, “The board [of the airlines] will meet shortly and take a decision to appoint a consultant. The board of any one airline can take this decision. The board will meet this month itself.” In fact, a panel has been set up under the chairmanship of AI CMD, V. Thulasidas, to select a global consultant for the proposed mega merger. Indian chief, Vishwapati Trivedi, ICICI’s chairman emeritus, N. Vaghul, civil aviation ministry additional secretary, P.K. Mishra, and civil aviation ministry joint secretary, R.K. Singh, are members of the committee. Indian’s finance director, M.S. Balakrishnan, and AI finance director, S. Punhani, are also part of the panel. Now that this decision has been taken, a battle royal will begin for who will be the consultants. At IA, that is the least of its worries. “Whoever be the consultant, if the decision is to ground us, what hope in hell do we have,” wondered one senior director.

While Air India was preventing Indian Airlines from flying to new international points, foreign carriers were making merry

made before the officials of both the carriers, including ministry officials, proposed the model of Air France-KLM merger. IA officials strongly argued that this was not the way to go ahead. Moreover, the so-called merger between Air France and KLM is yet to happen fully. The environment in India cannot be compared to that in either the US or Europe, both socially and economically. The government policy is to allow more and more airlines. But what is being suggested is to go against the policy and reduce the number of government carriers. IA feels the argument of Air India—that foreigners are getting confused as to which really is the official Indian carrier—is both flawed and misleading. In this context, they said if you are talking of one national carrier then what is the point in Air India itself having two carriers—Air India and Air India Express—with both going to a few common international destinations. This is the time for consolidation and, instead of the two carriers consolidating, attempts are being made to dilute those efforts. The current environment in India is such that aggressive merger talks will throw up political, bureaucratic, manpower and union issues. It will only result in the market being hijacked by private carriers from within and

CRUISING HEIGHTS May 2006

“Indian is not merging with AI...” Indian CMD, Vishwapati Trivedi, on the merger and sundry other issues, in an exclusive chat What is your view on the merger? We have been supporting the merger move, but I think there is generally a feeling that Indian is merging into Air India, which I don’t think is the idea. It’s a merger of two companies merging and not one company merging into another. Technically it may sound like that because something has to merge into something. There are two fifty per cent metals coming together to form a third metal, which is an alloy. So, I think that if everything is done correctly, we will get some advantages out of this synergy, notwithstanding some HRD issues that may crop up in the bargain; but this happens all the time and I think we will have to take it as it comes.

What would you view as your share of the pie? Today we are all over the Subcontinent and fly to Southeast Asia and the Middle East. I think that would be our range, given the aircraft [A320s] we have. But certainly the regional approach beyond India will have to be continued because we cannot be running all these 110 aircraft within India. We have to expand beyond India. How far we will go will be determined by the capacity of the aircraft, which is pretty much established. Then Gulf and SE Asia are profitable routes also. But I must tell you that somebody has to also think about the routes, which we are doing as our social responsibility. Those routes, god only knows, how they will be handled, but of course the consultant will be there to apprise us.

What happened at the last Air India board meeting? The last board meeting was essentially to decide the procedure for the appointment of a consultant who will hand hold the process of merger. Then there will be some working groups set up within both these organisations, some groups headed by personnel from Air India, some from Indian Airlines, and we will directly exchange our reports, probably channel it through the consultant as the final proposal to the government. The consultants will be just recommending. They will be doing the brainstorming; they will be the think tanks to work it all out.

You have just undergone a brand transformation from Indian Airlines to Indian; the costs of this changeover have been considerable. And now you are preparing for another makeover. There will be issues like these and they need to be resolved. The IT platform, the selling styles, the PSUs, the cargo issues, there are hundreds of issues to be resolved along with the transition costs. We will have to take the merger decision with these costs in mind, because the Indian brand has recently been changed. All the counters have been changed all over the country. Now that is a big expense already incurred, but we will see how it goes. I think all this will have to be part of the transition costs.

Within Indian, have you undertaken any serious debate on the issue? We haven’t done it seriously, to tell you the truth. We are waiting for the working groups to be set up and the debate or the discussion to start. Once that happens, I think, the discussion within the organisation will be automatic. At this stage, we have done some internal discussions, but we don’t know the milestones, the deliberations and the agenda. The working groups will probably throw [up] many options.

But what about your sales, marketing and expansion plans in the meanwhile? We will have to take a decision with our eyes fully open and should devise a system that the merger process should not slow down. It is only with existing aggression that we have to compete, which if for some reason slows down, then we will be falling into a pit and it will be difficult to come out.

After four months on the job, how do you view Indian? I think Indian Airlines can be a great strength, all my feelings about Indian Airlines from the outside that it is impossible to fix it is gradually vanishing… I think it is possible to do it, because what we thought was difficult issues haven’t actually been so difficult.

foreign carriers from outside. While IA officials are not against merger, it has to be a long-term perspective and not a forced one in the short term. The way out is synergy. When Indian Airlines started services to Singapore and Bangkok, more than a decade and a half ago, Air India’s market share was eight per cent. Indian Airlines, starting from zero, quickly raised its market share to 26 per cent, while Air India increased it to 11 per cent. No way did Indian Airlines actually dilute Air India’s market share. It was solely because of the connections offered by Indian Airlines from Chennai (then Madras), Delhi and Mumbai. Those days when AI used to fly down NRI workers in Gulf, including Sharjah, to Mumbai, the workers used to sleep on airport floors for hours and sometimes days before getting onward connection to the hinterland of India. After Indian Airlines entered the scene, it began offering direct connections, much to the relief of NRI Gulf workers. Indian Airlines captured the South India market. “Kindly tell us what prevented Air India from doing the same. Why could it not lease narrow body aircraft like Boeing 737 then, that it is now trying to do what Indian Airlines did first,” asked one indignant official. More specifically on the merger issue, they said, typically in airline or, for that matter, any business activity, the core to noncore employee strength is in the ratio of 30 : 70 or 35 : 65. The non-core staff are all those who are not directly connected with flying or operational duties. Thus pilots, engineers, cabin crew, etc., form the core strength of any airline. Many foreign carriers largely outsource the non-core activity. Since IA’s incorporation in 1953, it has been governed by wage revisions and today the lowest rank of employee gets at least Rs 12,000 per month, which is a direct cost to the airline. Besides they get medical and

The current environment in India is such that aggressive merger talks will throw up political, bureaucratic, manpower and union issues CRUISING HEIGHTS May 2006

other statutory benefits plus PLI. This baggage is an impediment to cost cutting exercise. The same also holds true for Air India, notwithstanding its outfit, Air India Charters Limited. One may argue that Alliance Air, a subsidiary of IA, employs core staff on contract. But the same is not true of non-core employees. On top of this, it also carried the baggage of Vayudoot, which was merged some years back into IA. In view of all this, should the government decide to merge, it would mean combining the baggage of the two airlines. The net result would only be a collapse and not soaring to new heights. Today the two operations are independent and, therefore, the baggages are being managed separately. If they are combined, the resultant heavy weight will ground both the airlines. It may be mentioned here that ever since the merger talks took off, AI has revised the pay scales of non-core employees with effect from 1997, resulting in crores of rupees being paid as arrears. Already there is talk of parity among the noncore employees in Indian Airlines. For IA, the argument is simple: leave us alone; if not, privatise. Merge or perish has been the mantra put out by Air India and the Union Civil Aviation Minister Praful Patel. And the media reports, in the month and a half since the presentation was made, seem to suggest that the merger is just a hop, step and jump away. The sheer speed and the rushing of the entire process have taken Indian Airlines almost completely by surprise. Insiders are appalled that their perspective has been lost in the entire process, and believe that it’s time to tell their side of the story. We spoke to a wide section of employees, who, for obvious reasons, don’t wish to be named, to piece this story together. The other side of the coin, so to speak, on the merger issue. — EDITOR

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GLOBETROTTING

AT A GLANCE Screeners fail security test IT HAS been reported that security screeners at 21 US airports failed to find bomb-making materials during government tests conducted last year. In all 21 airports were tested and not a single gadget anywhere stopped the bomb materials from getting through, even after investigators deliberately triggered extra screening of bags. The airports were not named for obvious reasons.

Some aviation this…

s kids, paper planes soared in and out of our lives. Now what was a pastime then has become a worldwide sport, with thousands of fans battling to carry off the championships in France. The A4 size paper aircraft were judged on the basis of which would fly the farthest, the longest or have the most acrobatic flight. Around 75 ‘pilots’ competed in a local secondary school in the Marseilles leg of the world paper plane championships. The winners will travel to the French national championships in Monaco to battle against winners from eight other French cities, hoping to secure a place in the world finals in Salzburg in Austria in mid-May. Winners from 48 countries will take part in the Salzburg finals. The rules of the championship: this competition is just for students; all contests need to be held indoor without any wind; and all planes must be built on site from one piece of officially supplied paper. The sheet must be modified by folding only! No ripping, gluing, cutting, stapling or ballasting is allowed. And that old trick of trying to give your plane extra lift by jumping on take-off is definitely out. By

Snake shake

the way, the world record is held by US paper-plane builder Tony Fletch, who has remained unbeaten since he flew his model 193 feet, or 58.82 metres, in 1985, farther than the first flight by the Wright Brothers. Another American, Ken Blackburn, holds the record for the longest time aloft by a paper plane of 27.6 seconds.

A ONE-METRE green tree python, a non-venomous snake native to Southeast Asia, was found by a cleaner in a female toilet in the arrivals concourse in Sydney Airport. The snake had been apparently abandoned after a reptile smuggler lost his guts before facing Australian customs. Customs officials have no clues as to the identity of the smuggler but say the incident shows the effectiveness of tight security measures at the airport. The snake was handed over to a quarantine vet and will be held in high security quarantine facilities until a decision is made about its future. The maximum penalty for smuggling wildlife into Australia is a $110,000 fine and/or imprisonment for up to 10 years.

Morgan Freeman back in the air AVIATOR AND occasional movie star Morgan Freeman is again exercising his priveleges as an airman. Freeman was busted in late 2004 for an altitude deviation while flying and had his licence suspended. The FAA was trying to ramrod a 90-day suspension, but reportedly settled with Freeman on a 45-day hit. “I thought that was fair because it is important to keep current—too much time off flying is not good; it’s not like riding a bicycle. You can get back and fly the airplane but it’s always better where you can reach for the right instrument without thinking about it. So I did my 45 days when I was working and I couldn’t fly anyway. They sent my licence back and now I’m flying again.” Welcome back, Morgan, y’all keep a sharp lookout on your altitude.

CRUISING HEIGHTS May 2006

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China is most intrepid destination

SAS flight robbed at gunpoint

CHINA HAS been voted the world’s most ‘intrepid’ destination by 80 per cent of travellers in an international survey conducted by Intrepid Travel, one of the adventure tour operators. The poll questioned thousands of travellers about their favoured locations and activities for an active break. Asia scored the highest when respondents were asked which continent they most associated with energetic adventure. When considering what inspired them to book an active trip over a conventional holiday, respondents put it down to visiting spectacular places that are not usually within reach of travellers. The growth of China’s international presence as a safe, accessible destination has translated into a huge influx of travellers to the area.

MASKED GUNMEN at an airport in Southwestern Sweden robbed a Scandinavian Airlines passenger aircraft.The aircraft had just landed from London. Several robbers, armed with assault rifles, crashed through a gate at the airport and held up baggage handlers who were unloading crates of money from the plane. No one was injured. Police evacuated the airport, Landvetter Airport, after the robbers left a suspicious package on the tarmac. Swedish police have arrested a suspect in the robbery.

Fossett claims another flight record ADVENTURER STEVE FOSSETT has claimed that he has broken the record for flying farther than anyone departing and landing at the same spot, travelling more than 25,000 miles (40,225 kilometres) in three days. Fossett landed his lightweight experimental aircraft at Salina, Kansas, Municipal Airport more than 74 hours after he took off from the same place. Certification of the record could take two weeks to a year. Fossett said he flew about 25,300 miles (40,707.7 kilometres) in the Virgin Atlantic Global Flyer. The previous closed-circuit record of nearly 25,000 miles (40,225 kilometres) was set in 1986 by Dick Rutan and Jeana Yeager. Fossett called the flight “a great satisfaction” but conceded, “It might not mean a lot to people outside of aviation.” The flight came about a year after he flew out of Salina on the world’s first solo nonstop trip around the globe. He returned after 23,000 miles (37,007 kilometres) and 67

Flying car ready for take-off

course a GPS (Global Positioning System) navigation unit. The company hopes to eventually have the vehicle classified so that it can be piloted with a light sport aircraft licence. A fully operational prototype is expected to come out in 2008 or earlier, according to the company, while Transition vehicles are expected to hit the road, and the sky, by 2009 or 2010. Building retractable wings won’t be the major challenge: F-18s and even some World War II era planes have folding wings. Instead, one of the biggest challenges will be creating enough cargo room to satisfy customers. The planes, which will cruise up to 12,000 feet, will probably use an offthe-shelf engine, he added.

CRUISING HEIGHTS May 2006

A LANCET study by Dutch researchers suggests that sitting still for long periods cannot alone explain why air passengers are at higher risk of potentially deadly blood clots. So far, developing deep vein thrombosis (DVT) was thought to be raised by air travel, particularly long flights. A team from Leiden University Medical Centre measured levels of chemicals indicating clotting activity in 71 healthy volunteers before, during and immediately after an eight-hour flight. It also compared the concentrations in the same individuals at the same time points during eight hours of sitting in a cinema and eight hours of regular daily activities. Four out of 10 participants carried a gene that put them at increased risk of thrombosis. The results showed increased concentrations of the chemicals during the flight compared with the other two situations, especially in volunteers with other risk factors for thrombosis. Therefore, it is not just immobilisation, but there is something else that adds to the risk when a person is in the air that does not exist when they are sitting down for a long time while on the ground. It was suggested that low air pressure and oxygen levels were the most likely candidates, but it was impossible to rule out other potential factors, such as stress or air pollution.

Illustrations by Zahid Ali

THIS SUMMER, graduate students at the Massachusetts Institute of Technology will try to get an idea aloft that has intrigued people for decades: the flying car. Terrafugia, a start-up created by Lemelson—MIT Student Prize winner Carl Dietrich and colleagues at MIT’s Department of Aeronautics and Astronautics, is aiming to show off what it calls the Transition “personal air vehicle,” a vehicle resembling an SUV with retractable wings, to the EAA Air Venture Conference in Oshkosh, Wisconsin, at the end of July. The Transition is designed for 100- to 500-mile jumps. It will carry two people and luggage on a single tank of premium unleaded gas. It will also come with an electric calculator (to help fine-tune weight distribution), airbags, aerodynamic bumpers and of

hours. Last month, he broke the record for the world’s longest aircraft flight, travelling 26,389 miles (42,460 kilometres) in about 76 hours. Fossett piloted the Global Flyer on roughly the same route as the flight he took last year, but he added turns to increase the mileage. Fossett said he became restless during his three days in the plane. “Overall this was a very difficult flight because of the amount of time involved,” he said, “On the other hand, the flight went very well.”

New DVT-risk theory

Q&A

take it

easy Stelios Haji-Ioannou loves to describe himself as a serial entrepreneur, and quickly adds that this is “more respectable than being a serial killer”. An exclusive interview with the 39-year-old legend, who was in Mumbai to announce his Indian tie-up.

What is the future of LCCs in India, given the kind of constraints that are there? I think the market is going to grow; there is no doubt that once you tell consumers there is a cheaper way of flying, the demand keeps growing. I don’t expect every single one of them to survive. There are winners and losers in every market. I believe that those who are keeping closer to the easyJet—no-frills approach, if you like—business model, are going to have a better chance of survival. I am a little concerned with the attitude towards airport infrastructure in India. While I welcome the recent template change, from state-owned to private ownership, of airports, it should not replace state monopoly by private monopoly, as it will bring with it rise in prices and airport charges. I hope they don’t screw it up. The key to success of LCCs lies in opening as many airports as possible to private sector to set off competition between airport

service providers. The airlines should have the right to choose the airport that they would like to serve. And, as an extension of this, it should also be available to passengers as to which airport they wish to go to choose their flight.

What does this diversification into easyHotels mean? It is something that I do using different companies, different capital, different management practices. It is the prerogative of a private entrepreneur like me to try my hand or luck in different sectors. It is not the airline’s money that goes into the hotel. I want to diversify. I don’t think an individual should have so much investment in one industry. I also believe that the benefit you will get out of an aviation boom, like you have here in India, will translate into a mini boom in other areas. So in a way, it is capitalising on the aviation boom without investing in aviation—you start a budget hotel.

If you look at the time you started easyJet and the present, there is a huge difference—costs are higher, fuel prices are astronomical. In that sense, the present-day LCCs are at a disadvantage. We were slightly luckier than the current environment. Remember, fuel applies to everybody. Low cost carriers burn less fuel than legacy carriers. Therefore, in a high fuel environment and era, I think the LCCs have a competitive edge over the high cost carriers. I also believe that the local players in India will figure out how to keep reducing airport costs. India is a very enterprising country, it should not create monopolies; it should allow airports to compete with each other for business. As I said I do not expect everyone to win, but I feel there are some people who are switching to the business model very well and I expect them to do very well. What sort of consolidation do you see in the Indian market? Sometimes you get successful mergers between companies, but I am more a believer in companies going bankrupt, rather than consolidating. I think Capitalism is a very Darwinian environment, where the fittest survives. And sometimes you have to lose— just to lose some competition so that the others can be profitable. Look at America, its domestic airlines are in a mess because it has Chapter 11, which the airlines go in and out of, without really going out of business. Why didn’t you enter the Indian aviation market? If the market had been opened 18 months ago, I would have thought about it seriously. But now it is a case of Johnny come lately. There is something called the firstmover advantage. The next one may not happen in the foreseeable future. I am not saying that the market will not be there. All I am saying is I don’t know how many will survive. I expect both—growth and shakeout. The real challenge is going to work out a paradigm shift in LCC. For easyJet or me it was Internet that did it. What all of us are now doing is a slight variation of the similar business model. Actually, I am looking at a 27-year-old person who can suddenly come with an entirely different, dramatic and revolutionary solution. Let me also say that you do not make profits immediately. It needs two, three or even, say, five years to break even.

Fuel applies to everybody. Low cost carriers burn less fuel than legacy carriers. Therefore, in a high fuel environment and era, I think the LCCs have a competitive edge over the high cost carriers.

Please give us some details of this hotel odyssey. I began setting up easyHotel in 2000. I separated the ownership of the airline from the hotels’. I have 14 different business ventures and have a strong passion to protect my brand. We are planning to set up four hotels in India by 2007 and four more in 2008. They will be easyHotel properties with franchise agreement. There is need for cross selling. I see a major explosion in aviation business in India. It will be achievable if more hotel rooms are also available. Our easyHotels will get into India very quickly. As for the room size available in easyHotel, we classify them as small, very small and tiny. What people need is a clean room with a neat bath and little decoration. If it is one person for one night, the size will be different and if it is a couple wanting to stay for, say, four days, then the room dimensions will have to be different. You are starting eight hotels. Have you spoken to the established hoteliers, like the Taj or Oberoi’s? The partner in the first eight properties will be Istithmar, of Dubai. They will be the owners; we will be the brand managers. But the agreement is non-exclusive, which means we are open to more suggestions from local entrepreneurs. I would love to hear from them. I have met Mr Oberoi. He is a legend, but this is the other end of the spectrum. Now that we would be up and running, there will be more publicity about our concept. I hope that other people will approach me for more partnerships and franchises. The LCCs are filling aircraft, but the yields are poor. India has a middle class that is the size of Europe. I think you can have a 1000-aircraft market here one day, but I don’t really know it would be divided over how many airlines.

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easyJet has 115, going to 150. Ryanair has a smaller number of aircraft, but bigger ones, so we have the same passenger numbers. You can have two or three clear winners and then a lot of smaller ones. The next major initiative will be bringing down costs further. Ryanair did it by removing window shades, seat pockets, baggage weight, etc. I still don’t see all this as a paradigm shift now. I don’t think removing window shades will bring down costs. I think Boeing will charge you more for removing the shades. Ryanair is charging a ticket price that goes up when you check in a baggage. Bigger the baggage, the more you pay for it. It certainly is a point of friction. Let’s wait and watch what Ryanair gets at the end of it. Would it be better to have a singleaircraft fleet or a mixed one? You have a single-aircraft fleet yourself. I actually broke the mould. After September 11, when I went shopping for aircraft, Airbus was very very dear, so we planned the order for 120 A319s. Basically, it was an irresistible price. So we now have two suppliers. And I think it’s actually healthy. As an airline, you are better off playing one against the other. If you have at least 25 aircraft of each type, they don’t really get much cheaper.

What about maintenance? It doesn’t get cheaper when you have 25 each.

I don’t think removing window shades, seat pockets, baggage weight, etc., will bring down costs. I think Boeing will charge you more for removing the shades. CRUISING HEIGHTS May 2006

What are your views on LCCs flying overseas? Beyond four hours, people start expecting frills. I think the limit is four hours. You call it overseas; I don’t think there is anything about crossing borders or crossing water. All that is easy, provided you don’t expect people to sit on the plane for too long. The Indian subcontinent is quite a big place already. Lots of flights are already three to four hours. What’s the future of LCCs worldwide? You cannot have flourishing LCCs without open skies. Soon there will be open skies between the US and Europe; ownership restrictions will be removed or drastically modified and there will be many more M&As (mergers and acquisitions). As for the issue of yields for legacy versus LCC, the yields before we started on the EuropeLondon route was £100. We changed it all and brought it down to £42. It is cost-plus even though yields are coming down, but are enough to make money. However, an efficient management has to ensure continu ous cost reduction.

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The slots go to Jet The government announces its decision

t was the sort of low-key announcement that took almost everyone by surprise. No hoopla, no press conference, no grand announcement. A simple statement in Parliament, while answering questions, wrapped up what had been a contentious issue for longthe acquisition of Air Sahara by Jet Airways and the controversy over its getting all the slots and parking bays of Sahara in the process. An unusually reticent Praful decided it was best to let the press release go to PIB, which promptly put it on its website. Here is what it says: The Ministry of Civil Aviation has finalised the policy to be followed regarding the use of airport infrastructure in case of merger/take over of airlines and sale/transfer of aircraft. This information was given by the Minister for Civil Aviation, Shri Praful Patel, in Parliament today. The Aircraft Acquisition Committee (ACC) of the Ministry of Civil Aviation had in its meeting held on March 28, 2006, considered the issue of policy on transfer of airport infrastructure in case of merger/take over of airlines. It was decided that only the user rights over such infrastructure that are given to an airline on non-payment basis, e.g., parking bays, landing slots, etc., may be allowed to be used by the airline that takes over the aircraft. For all other rights, the terms of lease/sale agreement between airport operator and airline will apply. User rights may be allowed to be used by the airlines that take over the aircraft only in respect of those rights, which are actually under use by the air-

Jet cannot sell or transfer the airport infrastructure allotted to Air Sahara. These facilities can be used only by Jet or returned to the airport operator. CRUISING HEIGHTS May 2006

line that transfers the aircraft. All other rights will be taken over by Government/airport operator. The user rights will be available with the airlines that takes over the aircraft only till such time that the infrastructure concerned is under actual use. The Government has accepted the recommendations of the Aircraft Acquisition Committee. So how does one interpret the new policy? Itâ&#x20AC;&#x2122;s a win-win situation for Jet. But how should others look at it? The new policy will allow transfer of airport infrastructure used by one airline to another. Incidentally this policy was not ready when Jet Airways had taken over Air Sahara, and in the absence of it, Jet was forced to run Air Sahara as its subsidiary. With the announcement of this policy, Naresh Goyal-owned Jet can merge Air Sahara with itself. Jet took over Air Sahara, subject to statutory approvals, on March 30, 2006, for Rs 2,300 crore.

Two days before that, the Aircraft Acquisition Committee of the Ministry of Civil Aviation, at its meeting held on March 28, 2006, considered the issue of policy on transfer of airport infrastructure in case of merger/ takeover of airlines. It decided that only user rights over such infrastructure that was given to an airline on non-payment basis, like parking bays, landing slots, etc., may be allowed to be used by the airlines that takes over the aircraft and, of course, the company as well. Thus what the new policy means is that Jet cannot sell or transfer the airport infrastructure allotted to Air Sahara. These facilities can be used only by Jet or returned to the airport operator. Jet had already applied for 100 per cent transfer of Air Sahara shares to Jet. If anyone knows, Jet’s appetite for any number of parking bays and landing slots will not be enough for Naresh Goyal’s jetting and expanding ambition. While the new norms will apply to the merger of AI and Indian, it will also be allowed when an aircraft is sold by one airline to another.

BIRD’S EYEVIEW: A Panoramic view of Chennai airport

The new norms will apply to the merger of AI and Indian CRUISING HEIGHTS May 2006

Official sources said DG (Investigation and Registration), entrusted with the socalled routine job of looking into Jet’s buyout of Air Sahara and if it would lead to a monopoly, may present its report towards the end of May 2006. But the Aircraft Acquisition Committee has already given its okay to the 100 per cent transfer of all assets of Air Sahara to Jet Airways a day after March 30, 2006, that covers transfer of properties as well as parking bays and landing slots. While announcing the new M&A norms, Praful Patel observed that with this the government will have nothing to do in the Jet-Sahara deal and it will have freedom on whether it would merge or set up a separate company post-merger. But what cannot escape anyone’s attention is the question of monopoly being addressed by the DGIR. Is it because of the so-called monopoly angle that the Ministry of Civil Aviation is proceeding at jet speed or is it breakneck speed to initiate the merger of the two, notwithstanding some major problems that will require cool heads to resolve them?

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Deccan launches IPO The country’s first Low Cost carrier will raise much needed cash through its IPO. After three years of rapid growth, Air Deccan wants more. A brief report on the LCC’s plans for the coming months.

eccan Aviation is offering 2.45 crore-equity shares through the book-building route at a price band of Rs 150-175 per share. The promoters are expected to hold 75 per cent of the post-offer equity of Rs 98 crore. The airline hopes to raise Rs 400-425 crore through this offering—a reduction from its previous plan to raise Rs 700 crore through the IPO. The offer proceeds are to be used for setting up a training centre, a hangar in Chennai, infrastructure at airports, market development and debt repayment. , Air Deccan managing director GR Gopinath said. “We believe the IPO pricing offers a fair value for our prospective shareholders.” The two private equity firms, ICICI Venture and International Capital, which hold around 26 per cent stake in the company through their placement of $40 million in January this year, are likely to prune their exposure to half during the IPO while Captain G R Gopinath, along with other promoters, may divest 20 per cent stake. Air Deccan foray into the market comes at a time when the industry is growing at a brisk pace with growth in first three months of this year registering 45-50 per cent growth compared to the same months of last year. About 40 per cent of the offer proceeds will be used towards debt repayment to reduce the aircraft financing costs. The prospectus says that Deccan Aviation is going public to raise funds for setting up a training centre worth Rs 65 crore and a hangar that will cost Rs 40 crore. It will also require around Rs 17 crore for setting up infrastructure at various airports and will require around Rs 133 crore for debt repayment. For marketing development, it has earmarked around Rs 45 crore. Air Deccan was the first airline in the country to come out with a low cost model and sells some of its tickets for as low as Re 1. It has 30 aircraft in its fleet, including

THE KEY PLAYERS: Gopi with Mohan Kumar, who manages the Air Deccan finances

The airline hopes to raise Rs 400-425 crore through this offering CRUISING HEIGHTS May 2006

19 turbo props and 11 Airbus A320s. It touches 53 airports in the country and in 2005 flew a million passengers. This year, it plans to fly over 3 million passengers, which works out to 15 per cent of the total number of airline passengers. Its cost per seat km is around Rs 2.8 that is the lowest among all domestic airlines in the country. Assuming the aviation market grows at 15-20 per cent annually, revenues earned per passenger at Rs 3,000 and keeping the load factor (level of filled seats in a flight) at 70 per cent, the implied value per share of the company works out to Rs 165-170 for 2006-07. This value will be pushed up. If the company is able to either increase the revenues on a yearly basis or control its operating costs. The market capitalisation based on the price band will be Rs 1,5001,700 crore, working out to a price by revenues about two times.

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Jet profits up 15 percent JET AIRWAYS posted a 15.32 per cent rise in net profit for 2005-2006, to Rs 452.04 crore from the previous corresponding Rs 391.99 crore. Net income from operations was up 31.25 per cent at Rs 5693.73 crore (Rs 4338.01 crore for the year ago period). Steep gain in other income helped the airline achieve this buoyancy The board has recommended dividend of Rs 6 per equity share. Chairman Naresh Goyal also told the media while announcing the results that a feasibility study would be done to start a cargo airline. In Q4, Jet had 70.76 per cent increase in net profit to Rs 227.12 crore (Rs 133 crore) on 35.06 per cent growth in net income to Rs 1625.30 crore (Rs 1203.36 crore). Total expenditure for Q4 and full year rose 74.54 per cent to Rs 1439.58 crore and 52.37 per cent to Rs 4765.20 crore, respectively. Results gained from other income, up 1688.36 per cent for the quarter and 437.66 per cent for the fiscal, courtesy Rs 270.64 crore-profit on sale and lease back of five aircraft. Without it, net profit would have been lower than before. Top Jet officials admitted that fuel was the single biggest challenge for the airline. Higher fuel rate forced an additional $ 22 million for the quarter and $ 67 million through the year. Following RBI approval, Jet hedged for 10,000 barrels of fuel uplifted abroad. It totally consumes 300,000 barrels per month. It plans to hedge full overseas uplift or 10 per cent of overall fuel consumption. During one of the first new conferences to launch the issue, Capt Gopinath said that that Air Deccan offered 85 routes and 53 destinations to the Indian traveller and that the company’s route strategy would help to grow new markets for air travel in the country. At the moment it has the largest network in the country. M G Mohan Kumar, the company’s finance director, said that the airline was seeking to reduce cost of operations by using newer and better technology. Air Deccan also seeks to manage costs through sales and barter exchanges for advertisement space, including internal aircraft spaces such as storage bins, headrests, tray tables and baggage tags, and outside surfaces of the aircraft. “A team is currently working on it. We aim to notch up 3-5 per cent of our revenue through such ancillary streams,” Warwick Brady, Chief Operating Officer, said He added that the company intended to become profitable in 18-24 months.

Fifty per cent of seats are going at discounted rates. Given pressure on yields, Director Victoriano P. Dungca said yields could only improve increase load factor through greater control in reservations and reduced no-shows at the airport. While fuel costs have to be endured potential exists to cut other costs and enhance efficiencies like higher utilisation of aircraft. Jet would conclude a $500-million FCCB issue to part finance purchase of 30 aircraft for $2.5 billion by the end of May. At a later date, there would be a $ 300 million domestic equity raising exercise. Against Sahara Airline’s enterprise Naresh value of $500 million, Jet had Goyal agreed to pay its owners $444 million. This does not imply reduced valuation, Mr. Dungca said. It reflects the difference between “buying the company and buying the shares.” Following the owner’s request for some payment, Jet paid Rs 500 crore, secured fully on Sahara’s outstanding shares and the personal guarantee of its owner, Mr. Subroto Roy. If the deal does not go through, Mr. Roy returns the money or Jet sells the shares. Jet has signed a management consultancy agreement with Sahara; Lufthansa engineers have been brought in to inspect planes, spares and maintenance processes. “Eventually we would like to merge the two airlines,” Mr. Dungca said, the integration process taking 12-18 months.

Top Jet officials admitted that fuel was the single biggest challenge for the airline CRUISING HEIGHTS May 2006

The airline has already signed deals worth $1.4 billion to buy 60 aircraft, including 30 Airbuses and 30 French-made ATR-32s. These will be delivered over five years. The airline is also considering an issue of American Depository Receipts (ADR). Plans for the offering, expected in June next year are on the drawing board. Deccan Aviation’s revenues have grown from Rs 14.72 crore in FY’01 and stood at Rs 518.28 crore for the eightmonth period ended November 30, 2005. The net profit stood at Rs 98.7 lakh in FY’01 but for the eight-month period ended November 30, 2005 the company had a loss of Rs 117.9 crore. Deccan Aviation’s is the second IPO in this sector in recent times coming on the heels of a hugely successful issue launched by the country’s biggest airline player - Jet Airways last year. IPOs by Air-India and Indian Airlines are also in the air. Or maybe a joint IPO by the merged monolith that Praful Patel wants to build in the public sector.

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INDIAN News Internet ticketing

agreement with Airbus Industrie for the purchase of 43 Airbus A320 family aircraft, comprising 19 A319s, four A320s and 20 A321s, at an estimated cost of US $2 billion. The deal was signed in New Delhi by Dr Vishwapati Trivedi and Dr Kiran Rao, Executive Vice-President, Airbus Industrie, in the presence of His Excellency the President of France Jacques Chirac and Hon’ble Prime Minister of Signs with ICICI India Dr Manmohan Singh. The airline has signed an MOU The funding arrangement for with ICICI Bank for funding of the the PDPs would be a syndicated pre-delivery advance payments External Commercial Borrowing (PDPs) for acquisition of its air(ECB) of US $152 million, with craft. Dr Vishwapati Trivedi, ChairICICI Bank acting as a sole man & Managing Director, Indian, arranger and underwriter and and Kalpana Morparia, Joint Manwould be spread over from June aging Director, ICICI Bank, Mum2006 till January 2010. ICICI bai, inked the agreement recently. Bank was short-listed in a competThe signing of this MOU is a itive bidding process wherein sevsignificant step forward in the tieeral nationalised banks, private Indian Chairman and Managing Director up of funding for the airline’s airsector banks and foreign banks Dr Vishwapati Trivedi shaking hands after craft acquisition programme. This participated. Indian has been able the agreement with Kalpana Morparia, acquisition will allow it to step up to tie up this funding without the Joint Managing Director, ICICI, while growth, expand its market and furrequirement of any guarantee from standing besides her is Chanda Kochhar, ther improve the quality of its the government of India. Going Deputy Managing Director, ICICI product offering, besides replacing forward, Indian would tie up longsome of its existing Boeing 737 and A300 aircraft. term funds with the support of European Export Credit AgenThis agreement is a follow up to the national carrier’s cies (ECAs) to complete the acquisition process. THE NATIONAL CARRIER has introduced Internet ticketing system, wherein passengers having Net-banking accounts with State Bank of India or Union Bank of India will be able to buy tickets by making payments online. The airline proposes to bring ABN Amro, Punjab National Bank, Citibank and HDFC bank under the ambit of the facility.

JET News Combined flights: The airline has combined its flights 9W 1603/1604 on the Delhi-Srinagar-Delhi sectors with flights 9W 603/605, which operate on the same route. Flight 9W 603 is being serviced by a 737-400, while a 737-700 is flight 9W 605. Two awards: Recently, the Frequent Flyer Programme (FFP), JetPrivilege, of the airline was honoured at the 18th Freddie Awards ceremony, held in the US. It won this highly coveted award in the Best Customer Service and Best Bonus Promotion categories for the region Japan, Pacific, Asia and Australia. JetPrivilege also bagged the second position in Programme of the Year and third place in Best Member Communications, Best Affinity Credit Card, and Best Award Redemption in the region. In addition, the airline was honoured with two awards at the concluding celebration dinner of SATTE 2006. Samsung presented the awards—Indian Domestic Airline with Spectacular Growth and India’s Most Popular Domestic Airline—to Nandini Verma, Vice President, Corporate Affairs and PR. Tie-up with Lufthansa: The airline and Lufthansa German Airlines have entered into a reciprocal frequent flyer agreement. Frequent flyer members of both airlines will benefit by way of earning and redeeming frequent flyer miles while travelling across the network of the two airlines. This

partnership is in effect from May 1, 2006. Members of the Jet Privilege programme can now enjoy the convenience of Lufthansa’s global connectivity and earn JPMiles when they travel on any of Lufthansa’s 42 weekly flights to Frankfurt/ Jet CEO Wolfgang ProckMunich from Mumbai, Schauer (right) and Werner Delhi, Chennai, Heesen, GM, Lufthansa Bangalore and Hyderabad. The benefits of this partnership extend to Lufthansa’s entire network of 13,200 weekly flights across 188 destinations across 78 countries. Offers consultancy: The airline has been engaged as a consultant to Sahara Airlines Ltd. It will now assist the Sahara Airlines management in improving its overall performance and customer service as also to promote the interests of Sahara Airlines Ltd in India and overseas. Dale Moss, Chief Operating Officer, will guide and lead the Jet consultancy team for improving the product and performance of Sahara; Thomas Kuhn, currently heading the Berlin operations of Lufthansa Technik, will take over as head of engineering & maintenance of Sahara; Poh Leong Choo, former Senior Manager Cabin Crew of Singapore Airlines, will take over as the head of customer services and in-flight services departments of Sahara.

CRUISING HEIGHTS May 2006

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TAAI’s Junketeering Egypt visit: The Egyptian Tourism Authority recently invited the Managing Committee of Travel Agents Association of India (TAAI) to Cairo on a three-day official visit for exploring the possibility of enhancing tourism between Egypt and India. A gala dinner was hosted for the invitees by Zoheir Garranah, Egyptian Tourism Minister, aboard Nile Maxim Floating Boat. Together with Ashwini Kakkar, President, TAAI, both explored various avenues for developing tourism opportunities between India and Egypt. The following day, a press conference, chaired TAAI DHAMAKA: From Egypt to Bangkok, TAAI is having a gala time. by Ahmed El Khadem, But what about some work, Mr Kakkar? Chairman, Egyptian Tourism Authority, and co-chaired by over and it is a good feeling to be back ments. This overseas meet was possible Ashwini Kakkar, was organised, which with colourful memories of all that took only because of the hard work of our was well attended by over a hundred place in those four days in Pataya and members, Mr Romesh Bhatia, Mr local travel agents and tour operators Bangkok. I feel that such a large gather- Davinder Sharma, Mr S.K. Mahajan, from all over Egypt. The TAAI delega- ing of our senior members from our Mr H.S. Randhawa, Mr Kuljeet Singh tion was also taken to the famous trade from all over Punjab and who took personal interest and therefore Egyptian Museum, El Khalili Bazaar, Chandigarh is an amazing experience. ensured to make this overseas meeting a Cairo International Conference Centre, We come together amidst all our differgreat success. the pyramids and the Sphinx. A gala ences, from different parts of Punjab, to lunch was hosted by Sanjeev Malhotra, participate and interact in some serious (The above are excerpts from General Manger, Mena House Oberoi discussions about working of the trade, the Punjab Chapter’s Chairman’s Hotel, to honour the guests. meet professionals, which is not possiReport, delivered at TAAI’s last Chair speak: The first overseas ble for many members in day-to-day Regional Meeting in Bangkok from meeting of TAAI (Punjab Chapter) is dealing, and understand global developApril 9-14, 2006.)

India’s Largest Air Ambulance Service TOPSGRUP©SM, an ISO 9001:2000 certified security group, has launched Tops Air Rescue (TAR)—an air ambulance service that is at par with international standards. Enriched with the finest, internationally trained teams of medical professionals, having loads of experience and great capabilities Tops Air Rescue has been specially designed to handle emergencies that require high levels of coordination, alertness and safety. The company’s previous venture, Topsline 1252, an emergency response service on land, has tasted success. Services would be provided from all the 90 offices of TOPSGRUP©SM, and thereby, by default, it becomes the largest and the most well-networked air ambulance service in India. Each aircraft can be converted into an ICU environment with facilities ranging from cardiac monitoring to defibrillation with pacing capabilities and advanced airway management. CRUISING HEIGHTS May 2006

SNIPPETS

Emirates on Top!

Croatia Visa

AWARD FOR SKY CARGO: Emirates Skycargo picked up three awards at the prestigious Cargo Airline of the Year Awards for its success as a fast-expanding global air cargo carrier, reputation for unsurpassed customer service, and the best cargo airline to the Middle East, Far East EMIRATES TEAM: and Australia. The SkyCargo’s Phil Rawlings, awards are a secondJacqui Evans McArthur, time victory for Ram Menen and SkyCargo this year, David Taylor which, in early April, was also named as the top carrier on the German market in the Aircargo Performance Study. PROFITS GALORE: Emirates has posted net profits of Dhs 2.8 billion (US $762 million) for the financial year ended March 31, 2006, up five per cent from the previous year’s record profits of Dhs 2.7 billion ($726 million). The group’s revenue increased by an impressive Dhs 5.2 billion ($1.4 billion), or EMIRATES CHAIRMAN: 27 per cent, to Dhs 4.3 Sheikh Maktoum billion ($6.6 billion), compared with Dhs 19.1 billion ($5.2 billion) last year. The group’s cash balance was Dhs 11 billion ($3 billion) at the end of March, an improvement of 28.6 per cent against a year earlier. It will pay an increased dividend of Dhs 386 million ($105 million) to the Government of Dubai, its owner, compared with Dhs 368 million ($100 million) paid last year.

Korea, Something More KOREA TOURISM ORGANISATION has unveiled ‘Korea, Something More’, a campaign targeted at a niche segment of Indian travellers. This comes in the wake of Jong Jong Min Kim’s visit to India. The President, Min Kim Korea Tourism Organisation, said that India is a significant market for Korea, and considering the potential it holds in the tourism sector, Korea Tourism Organisation aims to promote the destination amongst prospective traveller by initiating a series of effective joint promotions, tactical campaigns and cross promotions trough various trade and media channels. Last year, 58,545 Indians visited Korea.

TOURISTS FROM India planning to visit Croatia this summer may get visa on their arrival in the country if they hold multiple entry visas of any European country. H.E. Dino Debeljuh, the Croation Ambassador, and Niko Bulic, Director, Croation National Tourist Board, confirmed that a proposal to the effect had already been sent to the foreign affairs ministry of their country and the response was awaited. Earlier Subhash Goyal, IATO President, had requested the two Croatian dignitaries that if visa rules of their country could be relaxed, large numbers of Indians would visit Croatia.

Sri Lanka Tourist Board News

FASHION EXTRAVAGANZA: The national tourism organisation (SLTB) of the island country recently hosted a special corporate evening to celebrate the travel trade ties with India. Representing the myriad shades and colourful hues of Sri Lanka and adding fervour to the India Show were the fashion creations presented from the leading Sri Lankan fashion house—Odel. Ethnic chic and Western silhouettes were clubbed

CRUISING HEIGHTS May 2006

together with traditional weaves to offer ready-to-wear collections. Indian models Neha, Harry, Ritu, Barkha shared the ramp with their Sri Lankan counterparts, Saliya, Jackie, Kumudu, Rozanne to present these designer creations. B2B SESSIONS: In its bid to attract increased travel trade traffic from India, SLTB plans to organise interactive business sessions with Indian travel and trade fraternity in Delhi, Mumbai, Hyderabad and Bangalore. With these B2B sessions, fifteen top-end travel companies from Sri Lanka, comprising of hoteliers and tour operators, will be interacting with more than 600 companies in India during the roadshows. SLTB aims through the roadshows to strengthen and provide a greater impetus to the travel trade ties by proliferating association with Indian corporates, travel and hospitality trade.

Malaysia Air’s Bonanza THE NATIONAL carrier of Malaysia is offering all India online return airfare of INR 21,500 and INR 25,500, exclusive of taxes, for Australia and New Zealand routes. This special offer is valid for travel for the months of May and June, with the journey to the specified destination to be completed by June 30, 2006. The Australia route covers Sydney, Melbourne, Perth and Brisbane, while Auckland city will be covered on New Zealand route. Travellers can avail the offer by logging on to the airlines’ website, www.malaysiaairlines.com. The airline presently operates 27 weekly flights out of its five gateways in India—daily flights from New Delhi, Mumbai and Chennai and thrice weekly flights from Bangalore and Hyderabad.

Spain Stands Second SPAIN, ONCE AGAIN, is the second country in the world in terms of tourism arrivals in 2005—it received 55.6 million visitors (up six per cent) and tourism revenue earned was US $46 billion (up 4.5 per cent). Interestingly, the

population of the host country is 42 million. In 2005, the income expenditure was €855 per trip per person (down two per cent), €86 per day per person (up five per cent) and the average stay was 10 days (down six per cent). Tourism is the main economic sector of Spain and accounts for 11 per cent of the gross domestic product, and employs 12 per cent of the working population. The quality and variety of Spain’s conference facilities place it at the forefront of the sector. The recent inauguration of new conference centres goes to demonstrate this

positive evolution and improvement and, even more so, Spain’s competitive position in the field of business tourism. Conference centres are the most popular venues for holding meetings in Spain, and some have even received prestigious international awards in recognition of their excellent quality. Aware of the huge outbound from India, Spain is seriously looking at promoting the country as a rock solid destination that offers a variety of goodies for the discerning Indian traveller.

Hello ONLINE CONVENIENCE: KLM and Air France have joined hands and launched combined Internet check-in service. KLM passengers can now also check in online via www.klm.com for Air France flights and destinations. Passengers will now have swift access to reservations, a single boarding pass for the entire journey and Internet check-in options for more than 90 per cent of all airports. Passengers can check in online between 30 and 1 hour prior to departure. NEW FLIGHT: In yet another move, the airline launched a fourth weekly flight between Hyderabad and Amsterdam. The new flight will further strengthen KLM’s presence in India and help the airline meet the increasing demand for international travel from the region.

UPS, Disney Tie-up UPS and Hong Kong Disneyland today announced their alliance making UPS the Official Express Delivery Sponsor of Hong Kong Disneyland. Under this agreement, UPS will deliver Disney’s magical memories around the world by bringing its express delivery services to the Park. UPS and Hong Kong Disneyland will develop joint marketing initiatives in Mainland China, Hong Kong, Macau and Taiwan. “UPS and Hong Kong Disneyland are pairing two worldclass brands—delivering exciting experiences to consumers around the region,” said Ken Torok, president of UPS Asia Pacific. “The alliance demonstrates our commitment to Hong Kong and further strengthens our position as a reliable global business partner in package delivery and supply chain services.” “At Hong Kong Disneyland, we believe in creating magic not only at the park but in the heart of every guest,” said Bill Ernest, executive vice president and managing director of Hong Kong Disneyland Resort. “This alliance with UPS allows all our guests to have a touch of that Disney magic delivered straight to their homes.”

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ITH Joins Hands with Amadeus AMADEUS INDIA, a global leader in technology and distribution solutions for the travel and tourism industry, has signed a contract with International Travel House (ITH) to be the sole GDS (Global Distribution System) for its complete operations in India. As per the contract, ITH will use Amadeus reservation system and its automation services for smooth, standardised and consistent service across all its 10 locations in the country.

Bird contracts

Jagson plus: Bird Information Systems Private limited (BIS), a leading technology provider of automated aviation and travel related software solutions, has partnered with Jagson Airlines Limited. Under the long-term contract, Bird will provide the booking technology for the Airlines Inventory Hosting, reservation at the airline’s offices, call centre and Internet booking engine. Further, a unique stateof-the-art departure-control system would be in use for airport operations. Berlin Airports plus: Bird has won a contract from Berlin Airports to be their sole representative in India, and as such will support Berlin Airports in Indian market in the areas of marketing research, contact for decision makers of the Indian travel industry, travel organisers, travel agencies, airlines and airports. Berlin Airports will, in turn, support Bird at local market level through cooperation with airlines and travel agencies in Berlin and Brandenburg.

Deccan goes to Patna INDIA’S NO 1 LCC plans launching daily flights between Delhi and Patna, beginning June 1, 2006. Bookings are already on. The airline is already operating daily flights between Patna and Kolkata. Patna is the gateway to the famous Buddhist and Jain pilgrim centres of Vaishali, Rajgriha, Nalanda, Bodhgaya and Pawapuri, and attracts domestic as well as international tourists.

No fun? Get refund!

a travel company, is offering ‘satisfying holidays’ or ‘Money Back’ on its holiday packages. This move comes after the company’s ‘Lowest Airfare Guarantee’ campaign tasted phenomenal success. Elaborating on ‘Money Back Guarantee’, the company said that the campaign stems from its confidence to deliver superior products and live up to the promise of offering satisfying holidays.

Sarovar Hotel News SAROVAR HOTELS enhanced its portfolio by signing on four more hotels under its various brands: Sarovar Portico, in Indore, Park Plaza Silverton, in Mussoorie, and a Hometel, each in Mumbai and Baddi, in Himachal Pradesh. Sarovar Portico, slated to open in October, will be part of the very posh shopping mall, Treasure Island, located on M.G. Road, in the heart of the city. It will have 100 rooms, a restaurant and bar, a fitness centre and a business centre. Park Plaza Silverton, slated to open by the end of 2006, is the new avatar of Mussoorie’s most famous Raj landmarks— The Sylverton Hotel. It has 48 rooms and suites, a lounge bar, a restaurant with al fresco dining on the terrace, gym and health club, and a conference hall.

Fly First and Swing to Lopez KINGFISHER FIRST: The airline has introduced Kingfisher First for business travellers—first-class service between Mumbai, Delhi, Goa and Kochi at business-class fares. The plushest sleeperette seats have a 48-inch pitch, 125-degree recline, adjustable headrests and fully extendable footrests. Passengers can entertain themselves with the latest audio-and-video-on-demand system on the extra-wide personalised video screens. NEW AIRCRAFT: In another development, Vijay Mallya signed a deal with Gustav Humbert, President and CEO, Airbus, for the purchase of five A340-500 aircraft, with options for five additional aircraft. Dr Manmohan Singh and German Chancellor Angela Merkel attended the ceremony. Powered by Rolls-Royce Trent 500 engines, which burn up to 20 per cent less fuel than older generation engines, the long-haul aircraft are capable of undertaking direct flights from India to the United States. Deliveries of this ultra long-haul aircraft will commence in 2008. Meanwhile, talks are on with a US-based airline with a view to signing a strategic partnership JENNIFER LOPEZ TO PERFORM: The airline plans to bring down the renowned pop, Latin and R & B singer, Jennifer Lopez, to India as part of the celebrations of its first anniversary this month. This will be the first time that Jennifer Lopez will be performing in India. The concert is being organised and produced by DNA Networks, the international event company, on Sunday, May 21, 2006, at the MMRDA Grounds in Mumbai. Tickets, priced at Rs 2,000 and Rs 1200, are on sale from May 12. Details of ticket outlets can be accessed on www.dnanetworks.com. The airline has announced that its passengers flying first class during the promotion period, upon exhibiting two boarding passes of Kingfisher First in their name at the Kingfisher Airlines counter at the airport, can avail two special tickets to the Kingfisher First Lounge at the concert. Guests travelling Kingfisher Class can also win free tickets to a premium enclosure at the concert along with loads of exciting prizes during the month of May. One lucky seat on every Kingfisher Airlines flight during the promotion period will be chosen as the Hot Seat and the guest to whom that seat is allocated will be entitled to a ticket to the concert. King Club members can redeem 2500 King Miles for a free ticket to the concert.

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WOW:

It’s ‘Bawadi’, not bawdy! Well, for those who haven’t heard the news yet, its world's longest hotel strip (costing $27 billion) that’s coming up in the next few years in Dubai. One of the hotels, AsiaAsia, will be the largest in the world, with 6,500 rooms. Many hotels will be based on themes ranging from the Arabian Desert to the Wild West. When you just seem to feel ‘seen it, done it’, Dubai comes up with something incredible.

The king of good times When Vijay Mallya launched his Kingfisher First service aboard his A320s, he made sure he was there to cheer his guests. Well, good idea, considering they pay through their nose for the experience of travelling in the front of the aircraft (the airline’s top deck is a good ten per cent pricier than Jet Airways’). Some of those who have experienced “the finest experience in the Indian skies” seemed favourably inclined to the product. But we shall wait for some more reactions before passing judgment. Meanwhile, eat well, relax well and arrive well.

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