Ch november 2005 by Newsline

November 2005 Vol II No.8

Rs 60

•IA appointment delayed •TAAI jottings •The Air Sahara sweepstakes •Bangalore Airport imbroglio Plus all our regular features

PUBLISHER’S NOTE

What next?

HE GREAT winter ‘open skies’ is about to commence, and flights will come in by the dozen. On an average, we are adding close to two down flights each month, with really no commensurate value addition to the infrastructure. The question everyone is asking is simple: how are you going to take it? Giovanni Bisignani’s answer was, circling over Mumbai for 45 minutes! The IATA Chief, on a whistle-stop tour of India, mentioned that he travelled in the cockpit from Jaipur to Mumbai aboard a Jet Airways flight, and was astonished to find that it took it a good three quarters of an hour to touch down in the country’s commercial capital after a perfectly relaxed and on-time departure from Rajasthan. Clearly, Bisignani didn’t want to upset his hosts too much, and, therefore, didn’t rub in the point. However, he left no stone unturned in talking again and again and again about the need to modernise, upgrade our infrastructure if indeed we are to catch up with China (He took a leaf from the questioners at the news conference he held in Delhi, where his obsession in comparing our growth path with China’s was all too evident.). The result was that, two days later, Civil Aviation Minister Praful Patel told the media that he had taken stock of the situation for the coming months, and that there would be a consistent effort to ensure that there was a reasonable infrastructure upgrade to ensure greater take-offs and landings, more parking bays and less disruptions due to fog. We should know in the next couple of weeks if these ‘stopgap’ measures are, indeed, having any impact. To be fair to the Ministry, infrastructure development does take a reasonable time to be put in place, and in the Indian context the boom in aviation has been so phenomenal that the infrastructure was

CRUISING HEIGHTS November 2005

bound to be inadequate. But the problem is not just with airports and infrastructure alone. Bisignani mentioned that IATA would be going completely ‘electronic’, as far as tickets were concerned, by 2007. That’s just two years away. While 40 per cent of tickets in North America are sold through the Internet, it’s 35 per cent and 30 per cent, respectively, for Europe and the Asia Pacific. In India, it’s an abysmal five per cent. Will there be a complete turnaround in the next 24 months to see a nationwide shift to e-tickets? Looks unlikely in the present scenario, where almost ninety per cent of the tickets are booked through travel agents, who operate on traditional lines. Perhaps, the only saving grace are the new kids off the block—Air Deccan, SpiceJet, Go—who all offer their wares through the Net. An increasing number of travellers are realising that the Net is quicker and cheaper and ‘the’ way to move forward—at least for domestic travel. It is inevitable that over a period of time, others will see a marked rise in online bookings. However, the real change will come only when travel agents go completely online. IATA is looking at the airlines meeting their deadline and the rest falling in place. In fact, one incensed operator did ask Bisignani about the reduction in commission, on the one hand, and the deadlines that has now been imposed on them. Bisignani ducked the question by saying that “IATA believed in working with its partners, and the travel agents are a key partner.” At the moment, there is a huge chasm between the airlines and their partners, and if things have to move to the next level, they need to see eye to eye. Your guess is as good as mine if it’s going to come any soon.

Off the cuff Like it or not, Renuka Chowdhary is a livewire who keeps the pot boiling at all times. She held a two-day meeting of state tourism ministers, for example, in late October to review the status of tourism projects and ensure a speedy implementation of approved projects to maintain the momentum in the sector. "We have to consolidate the thirty per cent growth in tourism, and infrastructure will play a major role," Renuka said to the ministers, who had assembled in Delhi for the meeting. Perhaps one of the best decisions was to do away with the 'matching grant' concept that forced states to come up with an amount equal to what the centre was putting in in order to get a project off the ground. She told the states to make sure that land was made available on a 100 per cent basis, so that the project could move quickly in a timebound manner. She is right; tourism, particularly the hotel industry, needs a single-window clearance, rationalisation of taxes and soft loans for construction. For the Northeast, the good news was that the Restricted Area Permit, which has been the bane of tourism in the area, is under review. The region that has got the highest-ever allocation for the year 2005-06 is also getting a special publicity blitz to promote tourism in the region. But the most important proposal was an integrated and holistic approach from the states to market their tourism wares ahead of the 2010 Commonwealth Games in the capital. "I request all states around Delhi to submit their projects for approval by the group of ministers constituted for the Games," Chowdhary told the gathering. Not just satisfied with that, she is systematically pushing her officers to make sure the projects come on time and they are able to build upon these proposals. As we mentioned before, she believes in keeping the pot boiling with ideas and initiatives.

contents WARNING SIGNAL p14 IATA Chief Giovanni Bisignani laid out a five point agenda for Indian aviation if it has to take off. An exclusive interview with the man who runs global civil aviation.

A SHARE OF THE SAHARA PIE p24 Who will finally get a stake in Air Sahara? A special report on the airline's effort to infuse fresh funds and bolster operations.

MUSICAL CHAIRS p34 Who will finally head IA? A special report on the national carrier.

CRUISING HEIGHTS November 2005

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

AIRPORT WOES

p10

Bangalore airport caught in a political storm

CRUISING HEIGHTS RENU MITTAL Editor

R. KRISHNAN Consulting Editor

ANAMIKA VERMA Editorial Coordinator

TAAI JOTTINGS

p38

Mayal is out, Kakkar is in. What's happening with the travel agents?

DUSHYANT PARASHAR Creative Director

BHART BHARDWAJ Art Director

RAJIV K. SINGH Gen. Manager (Admn)

Off the record

Editorial & Marketing office: D-11, Nizamuddin (East), New Delhi-110 014 Tel: 51825251/50, Fax: 51825250

p6 Odd man out V K Verma at the special lunch

Aviation Digest

p30

Virgin loses!

NEW SNIPPETS Tourism Digest p42 Don't over-react to Avian flu

p44

Dot Vs Continental

Last page

p48

The A380 arrives at sydney.

CRUISING HEIGHTS November 2005

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 parts without prior permission. the publisher assumes no responsibilty for material lost or damaged in transit. The publisher reserves the right to refuse, withdraw or otherwise deal with all advertisements without explanation. All advertisements must comply with the Indian Advertisements Code. the publisher will not be liable for any loss caused by any delay in publication, error or failure of advertisement to appear. Published and edited by Renu Mittal for and on behalf of Newsline Publications Pvt Ltd. D-11 (basement), Nizamuddin East, New Delhi-110014 and printed by Bhart Bhardwaj at Kaveri print process, 114 Patparganj Industrial Area, Delhi.

PERISCOPE

“

Not 24 carat

“There

is significant over-capacity on the Mumbai-London sector and it is no longer the path to Mackenna's gold.” VK VARMA Air-India’s commercial director

Keeping a secret “I

will be investing in the airline in my personal capacity. Besides, my company will also be investing in the project. However, the details of the investment cannot be announced just yet.”

LETTERS TO EDITOR

Your cover story on Vijaypat Singhania was really interesting. It is one thing to have the resources, but not everyone with money has the spirit of adventure and neversay-die attitude that the Chairman emeritus of Raymond exhibits. It’s scary to think that he is going to attempt a 70K balloon expedition, for which there really can be no preparation. But he will have the good wishes of all Indians when he sets out on his journey on November 19. Varsha Thane

KAPIL MOHAN Indus Airline Chairman

Go ahead “The

PIB has recommended to the Government the proposal of AI and AI Express to acquire aircraft. The proposal has been cleared on a not exceeding basis.”

Ajay Singh is dead right; people carry their snacks from home on these LCC flights and why not. A puri with achaar is much preferable to the coke-sandwichcoffee routine that is the staple on most of these lowcost flights. The flights are great, but will these guys do something about a more imaginative menu. No, thank you, I don’t need these soggy sandwiches. Puneet On email

AJAY PRASAD Secretary (Civil Aviation)

“The IAE engines are of proven technology, installed with a number of other Indian carriers flying the same type of planes. The total maintenance and economic package was very competitive and that would help us to keep our costs under control.”

Indian tourism is upbeat and we need to celebrate Incredible India. But why don’t we have a nationwide celebration on that day, instead of a song-and-dance routine at Purana Qila? After all, what we are celebrating is Incredible India. K. Vivek Mumbai When cabs in London can be painted with a riot of colours and a tram in Amsterdam can get the Incredible India colours, what stops us from doing the same with our aircraft. Why just the Incredible India logo? Why not go the whole hog? Sanjeev On email All correspondence may be addressed to Editor, D-11, Nizamuddin East (basement) New Delhi - 110 014 OR mail at newslinepublications@rediffmail.com

Good engines

BRUCE ASHBY CEO, IndiGo

Miles to go! “This,

however, is just the first step to a long and successful journey ahead. With GoAir, we promise to deliver to our passengers a quality consistent, quality assured and time efficient product.” JEH WADIA CEO, GoAir, at the launch of the airline

CRUISING HEIGHTS November 2005

COLD STATISTICS About six lakh passengers used Pune airport last year, and about 20 per cent growth is expected this year. The airport is going international, thanks to Sharad Pawar. He is the leader of the NCP and leader of Praful Patel, who leads the Civil Aviation charge.

While it takes a passenger about seventeen hours and forty-five minutes to reach Chicago from Delhi on Air India, the same journey on Lufthansa takes about eighteen hours and forty-five minutes. However, on American Airlines, the journey will be completed in less than sixteen hours.

The air cargo business is drowning in paper. Every cargo shipment travels with up to 38 documents. Each year, one could fill thirty-nine 747 freighters with the paper wasted on this documentation. In 1972, the average time for an air cargo shipment was 6.5 days; in 33 years that has been reduced by 12 hours, to six days.

LOOKING GLASS

This was also said “Once Air India’s aircraft acquisition programme is through, it should be possible to offer the ‘Bollywood to Hollywood Express’ connecting Mumbai with Los Angeles with a non-stop service.” “Bennett, Coleman & Company is eyeing stake in Paramount Airways, which operates four flights a day.” UNNAMED SOURCES

CRUISING HEIGHTS November 2005

OFF THE RECORD

Odd Man Civil Aviation Minister Praful Patel's lunch for IATA Director General Giovanni Bisignani was an exclusive affair at Delhiâ&#x20AC;&#x2122;s Oberoi Hotel. The top brass of the Ministry barring Secretary Ajay Prasad (away on a visit to New Zealand and Singapore) and Airport Authority Chairman Ramalingam (away to the US) were all in attendance. Also giving Mantriji company were the heads of the four `IATA` airlines from India-Naresh Goyal of Jet, Rono Dutta of Air Sahara, Sushma Chawla of Indian Airlines and V Thulasidas of Air India. The only exception that Praful made to the guest list was the inclusion of Air Indiaâ&#x20AC;&#x2122;s Commercial Direector V K Verma.Why was V K the exception. `` We don't know why the AI CD was included, but the Minister was specific that he must be on the guest list, `` said one Rajiv Gandhi Bhawan insider? Those in the know say that the Minister wants Verma to be well acquainted with Bisignani.Maybe he has a larger role for him in mind.

The Guest is God

Business as usual ITS BUSINESS as usual at Air India's Nariman Point headquarters. In other words the whole time directors have been appointed (barring that of Commercial Director V K Verma's that supposed to come through any time now) but they continue with their old functions. So you have the director (Personnel) Amod Sharma who continues to handle in-flight services, while the other two PESB appointees handle the portfolios they have been selected for simply because they were handling it earlier. So you have S Punhani handling Finance and V K Mehra as head of engineering.Apparntly CMD Thualisidas has issued a note asking directors to continue with their existing portfolios till further notice. Clearly the AI chief wants to wait till he has all four directors on board and the reshuffle will have to wait till then. Hopefully he won't have to wait too long to convene the next board meeting where all of them can formally take their seats.

CRUISING HEIGHTS November 2005

RENUKA CHOWDHARY'S magic mantra: Atithi Devo Bhava is likely to get back into full steam in the next couple of weeks with a full fledged media campaign across TV and radio apart from the print medium. The spunky lady from Khammam who has tirelessly worked the brand as a stand alone product that will add value to Incredible India has pushed hard to deliver the second phase of the campaign that will see more interactive sessions to train people at the grassroots through a nationwide blitz.

OFF THE RECORD

Making News

t was a full house at the Grand Intercontinental for the IATA Chief's presentation on the future course of action for Indian aviation. Logically speaking that should have hogged the headlines. But no one had reckoned with the Air Sahara divestment hogging the headlines which is precisely what happened. Presentation over the TV crews grabbed their microphones and ran and run straight to the podium. Such was the melee that poor Vijay Mallaya couldn't even get down from the stage. He sat transfixed in his seat answering a volley of questions on his gameplan for the Sahara stake. A few steps away Naresh Goyal was surrounded by another gaggle of reporters quizzing him on his hush hush meeting with Subroto Roy and his ideas on the subject. Smart guys both, they used the opportunity to not just talk about the deal in the making but also about their own plans for the coming year.AI’s Thulasidas wasn’t buying into sahara, but they asked him too. Only shows how smart the the TV reporters are!

Buzz…zzz.zzz Raghu

Neta Subhash If the President of the Indian Tour Operators Association, Subhash Goyal hadn't been in the travel business he sure would have made a good politician. Out of the blue, Goyal got up at the IATA meeting to ask Giovnanni if he was doing anything to stop foreign countries from harassing Indian operators and cited the example of Naresh Goyal not getting permission to fly to the US. Of course, he neither named his fellow Goyal or his airline. But it was clear whom he was batting for.

CRUISING HEIGHTS November 2005

Menon is fedup.His representation on not being short listed for the top job at Indian Airlines is literally the last straw.Menon empanelled to be Additional Secretary wants to get out of Rajiv Gandhi Bhawan as soon as possible. Rajiv Talwar the Additional Director General at the Department of Tourism, may soon be soon moving to another high profile job in the centre.Apparantly his was one of the names considered for the special task force that the centre wants to set up on tourism to fast track certain projects.

Ritu Dazzles

IT WAS a touching token of remembrance that Praful Patel took with him when he went to the US of A in late October. He was there to address a FICCi-Indo-American Chamber of Commerce sponsored conference on infrastructure that was to be addressed by US Secretary of Transportation Norman Minneta.And for his counterpart,Praful had a an autographed framed picture of the historic open skies agreement that the two had signed in Delhi this summer. Actually it was tit for tat: Minneta had presented Praful a picture of his visit to the DOT's Washington office. And he decided to repay the gesture.

RITU KUMAR, the diva of the fashion fraternity, dazzled the leading hotels of the world when the jamboree had a grand party at the Purana Qila, in Delhi, late last month. The closed bunch of 400odd hoteliers had gathered in Delhi for their annual conference and Kumar dazzled them with her widely applauded fashion show. The ‘Tree of Life’ is a textile tableau combined with an audio visual that takes its audience across India’s unique blend of tradition, culture and style. The show has now been running for over 10 years and has travelled all over the world, opening doors to India’s rich heritage and tradition and receiving incredible acclaim from the fashion world and media. If reports are to be believed, the show won wide applause, as did the catering from the Taj group of hotels. What better way to spend an evening in the sensuous early winter of late October?

Foto frame! Azad Paanchi CAPTAIN SHARMA is a free bird or should we say Azad Paanchi! After having locked his room at AI's London office at the end of his term, Sharma declined to hand over charge to his number two and simply vamoosed. The AI management posted their man in Paris K K Lokur to take over. But that was, if one may say a `brief interlude. The good captain is back in the saddle for six more months. A bit of string pulling and the captain was once again an Azad paanchi!

CRUISING HEIGHTS November 2005

SOUTHERN DESPATCH

An Airport without With the resignation of Narayanmurthy, Bangalore’s new airport is left without its backer number one. An on the spot report of the road ahead for BIAL.

Former Prime Minister H D Deve Gowda Favourite Line: I am a humble farmer. Favourite threat: What will happen to the poor farmers. Greatest fear: Krishna is working with the opposition to topple a secular government. Pet peeve: What has Naryanmurthy done for Bangalore?

Former Chief Minister S M Krishna Favourite Line: I am proud of my record. Favourite threat: I am bored as governor and want to get back to active politics. Greatest fear: Dharam Singh is ruining all the good he had achieved. Pet peeve: That the media pays so much attention to the humble farmer Deve Gowda. CRUISING HEIGHTS November 2005

Chief Minister Dharam Singh Favourite Line: I support everyone. Favourite threat: I am not afraid of Deve Gowda or Krishna. Greatest Fear: That he will be a victim of the JD and Krishna crossfire. Pet Peeve: That the media is still so enamored of Krishna.

a Godfather! F

rom being an aspirational brand that drew investors and job seekers alike, Bangalore increasingly seems like a city entrapped in its own success, unable to deal with this mad rush. The demand for better and additional infrastructure to ensure that the city does not lose its El Dorado like charm appears very imposing. The city’s administrators appear to be at their wits end. Amidst this mele, the one project -international airport—which was viewed as gateway to the promised future, seems to be facing fresh challenges. In fact, nearly five years after the government awarded the Greenfield international airport project to a Euro-Indian team of developers (Siemens Ventures-Unique Zurich Airport-L&T), the venture continues to negotiate through a political minefield. First it was the new Congress-JD government which wanted to reexamine the project last year- however it approved it quickly— followed more recently by Left MP Nilotpal Basu who wanted to examine the selection process followed by the joint venture airport company in awarding building contracts to Siemens and L&T. And few weeks back, the sudden exit of India’s IT poster boy and Infosys chief mentor N.R Narayanamurthy from the board of Bangalore International Airport Ltd (BIAL) after a spat with JD (S) supreme and former Premier H.D Deve Gowda, is an indication of the tricky path which has to be still covered before the airport becomes a reality. Mr. Murthy was in fact one of the few people who used his good offices to open many a door in Delhi and cajole the state government to process files faster. And it may now need a go-getter like him more than ever because it wants to suggest building a bigger airport to cater to Bangalore’s rapid growth in air travel. While the state government nominee on the BIAL board, Vinay Kumar, a senior IAS officer heading Karnataka’s infrastructure department, is a strong supporter, he has to operate within the limitations of the establishment headed by a coalition government. While this should not be difficult if a proposal is bankable, when dealing with official establishments, opportunities can become problems galore. Though it does not need a

Infosys Chief Mentor N R Naryanmurthy Favourite Line: I wish Deve Gowda had asked me about what I had done for BIAL. Favourite threat: Bangalore is losing. Greatest fear: That the politicians will ruin a good thing. Pet peeve: That one can’t get the city moving without the politicians. CRUISING HEIGHTS November 2005

rocket scientist to understand the advantage of building a bigger and modern airport to deal with a rapidly growing jet set population, successive governments have not believed in placing it on the fast track. Perhaps the only people to have learnt lessons from the Bangalore experience are the GMR Group, the politically savvy promoters of the new international airport proposed at Shamshabad near Hyderabad, which is progressing fast albeit with minimum fanfare. The promoters have won approval from the government to build a facility which can handle 4.5 million passengers annually at an investment of Rs 1400 crore. The 4 km long runway is long and wide enough to guide the biggest airport—super jumbo A380—to operate. The cargo facility is to be built by an independent concessionaire to be shortly identified by BIAL. The airport was to be expanded three years later to deal with the next round of growth. However, the travel boom in the last year or two has thrown the earlier calculations awry. When the union cabinet okayed the draft concession agreement last year with BIAL, the promoters were working on earlier traffic estimates which would have seen the airport adequate for 4.5/5 million passengers by 2007. However, a recent traffic study based on the latest inputs suggests that when the airport is commercialized in March 2008, the traffic would have grown to 6.5 million passengers. By 2010, traffic will be in the region of 8 million and around 12 million by 2014/15. As a result, the BIAL CEO Albert Brunner is also chalking out a proposal to expand the airport to accommodate the growth. Brunner admits that an airport has to be big enough to deal with growth for at least a few years before the next round of expansion is kicked off. A larger airport now will cost less than expanding it later. The designs can be approved now and work on the second/ expanded wing started next year. While Brunner refuses to say more, sources say it may not be smooth sailing for the airport expansion proposal. While the private promoters and bankers may be ready to support the expanded project cost, the central and state government agencies on the board may be reluctant. The

SOUTHERN DESPATCH

A VISUAL TREAT: The new Bangalore airport promises not just a brilliant architectural design but top quality engineering. project currently has an equity of about Rs 350 crore and a debt component of Rs 700 crore raised by ICICI led banks. The state government has issued a subordinate debt of Rs 350 crore to bridge the balance investment required for the project. The state and the centre each hold 13% equity while the private promoters have 74% stake (Siemens 40%, Zurich 17% and L&T 17%). In Hyderabad, where the promoters of the Shamshabad project like Bangalore have decided to build a bigger facility from start, the increased cost is in the region of Rs 1740 crore, up from Rs 1450 crore estimated earlier. The new facility will more or less match the capacity of BIAL if the expansion is approved. Hence, if Bangalore is to be benchmarked against Hyderabad, a similar increase in investment may be likely. But the problem here is the government BRUNNER'S WOES: The Bial ceo is a troubled man. He has lost the most influential and bestnetworked man on the board.

THE INTERIORS: The interior of the new airport will make the destination not just a station to catch planes but a one stop entertainment complex. may not agree to any dilution of its equity position. The debt component will have to be increased. The commercial exploitationâ&#x20AC;&#x201D;building hotel, business park, shopping malls etcâ&#x20AC;&#x201D;which was parallely

planned to make up for the gap in airport revenue in the initial years to meet the return in revenue targets for the promoters will now have to be revisited. Besides, a fresh round of approvals, and possible revision of the concession agreement, which may now be needed, can call for special navigation skills, typically available with the likes of Narayanamurthy. Alternately, the centre, which was still wondering as late as last year, if the existing HAL Airport should be retained and not closed down as earlier committed, may reconsider this option. For the private promoters of BIAL, without a strong local guide, this may prove a difficult territory to charter. (Southern dispatch will be a monthly newsletter on events in the four Southern states.) CRUISING HEIGHTS November 2005

INTERVIEW

LCC has sex appeal! IATA Chief GIOVANNI BISIGNANI is blunt and business-like in his opinions. In a no-holds interview with K. Srinivasan, he discusses the problems that confront aviationâ&#x20AC;&#x201D;globally and in India. Some excerpts.

ow do you keeping readjusting to the rising cost of fuel? Fuel, today, in some places, is the Number One operating cost of airlines. It went from $64 billion to $100 billion last year. But what you need to notice is the fact that last year, nearly 35 to 40 per cent of the fuel was hedged. But this year, because of the high price and the difficult credit facilities for airlines, only 10-15 per cent will be hedged. So the impact is indeed very, very high. A one-dollar increase per barrel means one billion dollars in costs for aviation. Sometimes, airlines can put fuel surcharge or increase the cost. But these will never cover more than 20-25 per cent of the costs. So, it is just on the airline to absorb it. This is because of the competition and too much capacity. When the load factors goes down from 80 to 70 per cent in the low season, many airlines will even remove these surcharges. Are we going into recession because of these bills? We have already seen some very strong indication of this in freight. In our system, freight is a very strong pointer to what is going on. Last year it increased by nearly 13 per cent, this year it will be only 3.6 per cent. This is due to the effect of oil prices; a consistent decrease in freight is the start of an economic slowdown of the system. IATA completely failed to see the fuel surge. We were not expecting fuel prices to go up over six per cent except in a moment of tension. Our average forecast for this year is $57 per barrel, and we are forecasting for next year at $53 a barrel, if there is no major accident. How do airlines adjust to this new reality? Last year, in order to break even, we had to have fuel at $33 a barrel; this year we can break even at $50 a barrel. On the one side, this is due to the efficiency that we have put in the system in fuel and non-fuel sectors. This seven per centâ&#x20AC;&#x201D;the two things together, 4.2 per cent for non-fuel and 3.1 per cent for fuelâ&#x20AC;&#x201D;has helped move our efficiency from $33 to $50 per barrel. There are many issues that have contributed to this, including greater efficiency of the airlines, gross traffic and yields. These three components really helped to break even at fifty.

A one-dollar increase per barrel means one billion dollars in costs for aviation. Sometimes, airlines can put fuel surcharge or increase the cost. But these will never cover more than 20-25 per cent of the costs.

INTERVIEW Would it be fair to say that IATA failed to see the low-cost revolution? Low-cost story is a story that has a lot of sex appeal, like the Internet bubble. Everyone spoke about the Internet revolution, and we saw later that it was actually an Internet bubble. If you see the low-cost model, it is just the same. Now let us look at the LCC structure in the mature markets. United States, for example. The US started the low-cost model, and there have been some very efficient and very good companies. What are their pluses and their needs? First, they need a big domestic market—no borders and no bilaterals. Second, you need an average flight of not more than an hour and 45 minutes, so that you can have an easy turnaround. You need a fleet with just one plane and labour costs that are different from the regular carriers. And in many cases you need a secondary airport where you pay a different price. In the US, you had many such opportunities and they were successful. In Europe, you had the same issue with an advantage—you had many good secondary airports. In the beginning, it was a very successful strategy because they anticipated a certain kind of potential need in the market, and they were very fast. What happened, the airlines and IATA had to readjust certain parts of the process in order to be competitive. We welcome the low-cost revolution. They have challenged IATA and they have challenged the airlines to be more effective. The result is that a couple of years later, for example, in Europe, we have three or four very successful low-cost airlines and many, many airlines that have failed. Whether this is a success story, is something that has to be considered. In the beginning, the LCC was a very big opportunity. It could pick cherries in choosing cities that had a market but no service. When you start to put a lot of capacity in LCC, as is the case in Europe, it becomes difficult to go on picking cherries because the best cherries have already been picked. And many point-to-point lowcost carriers did not have an alternative, so they were dominating the market, and in many cases they have opened new markets and new segments in the market. Many low-cost carriers in Europe had a double-digit margin—25-27 per cent. Now they have a margin, in some cases, of one per cent. They have played an important role because they have challenged us to do better. And how did we react to this? On the one hand, the airlines had to learn to drive down costs, start to understand that in a certain kind of passengers, the sensitivity of price was higher than a certain kind of service. People were ready to pay low prices because they did not care to have a newspaper or a meal. That was a challenge to us and the airlines have

The US started the low-cost model, and there have been some very efficient and very good companies We welcome the low-cost revolution. They have challenged IATA and they have challenged the airlines to be more effective. Many LCCs in Europe had a double-digit margin—25-27 per cent. Now they have a margin, in some cases, of one per cent. CRUISING HEIGHTS November 2005

SAFETY: A rapidly expanding and growing market like India will require not just infrastructure but watertight safety procedures in place. With growth will come issues of safety that require immediate redressal. “Safety is the number one priority for aviation. India’s record on safety is good, but constant attention and efforts are needed, especially at a time of rapid expansion.”

responded very well. In Europe, where the competition is higher, you have many big airlines that have the same sort of prices (as the LCCs’) because they have reengineered their cost structure. But a passenger will always be ready to pay a premium to a network carrier because it has a different service and offers you a network solution. If you go to London Heathrow, you can fly to the world. When you go to a secondary airport, sometimes it takes an hour and a half to go, you will always find the student ready to take a two-hour train journey to spend a nice weekend in London. That is the difference. In the US, it has affected carriers because the LCC, instead of flying to secondary airports, were flying to the major hubs. Therefore, they have been able to enter the business markets. This

E-TICKETS: India has a natural IT reputation. But it needs greater connectivity and linkages to take stock of the 2007 IATA deadline for e-tickets worldwide. “India is far behind at just 5.4%. It is extremely disappointing that a country as advanced in software development as India can be so far behind. India must be a leader in this region, not the last to get onboard.”

has devastated yields and strongly affected American carriers. In Asia the situation is slightly different. A couple of figures: In US, low-cost carriers constitute over 40 per cent of the domestic market. In Europe over 30 per cent, and in Asia, it is close to six per cent. Is it more difficult or easier in Asia? We see three kinds of trends. First, there is no big market like the US or Europe. You have single big markets like India and China. These are potential markets since the number of people travelling is still limited. In India, there are several issues: the average duration of most flights is over an hour and 45 minutes. There is a shortage of crew—pilots, engineers and cabin crew— and you have to recruit from other airlines, so you pay more than what they pay. Then

INFRASTRUCTURE: the most urgent and most critical of the issues. IATA believes that Indian aviation’s expected boom can go burst if the issue is not addressed quickly and solutions implemented speedily.

TAXES: The uplift levy was abolished in 2002. But over $36 million, due to international airlines, is still to be returned. The 10.2 per cent service tax will reduce Indian competitiveness. IATA will challenge this tax. “India needs a common-sense approach to taxation. That means recognising that we fully fund our own infrastructure, and ensure that any taxes or charges collected are transparent and re-invested in the sector.”

There is a shortage of crew in India, and you have to recruit from other airlines, so you pay more than what they pay. CRUISING HEIGHTS November 2005

“Without massive change, infrastructure will not be able to handle growth. Airports in Delhi, Mumbai, Chennai, Kolkata and Bangalore are not adequate. Among them, Mumbai is the worst, with poor service levels and insufficient capacity.”

you don’t have a secondary airport, a big market or cheaper crews. Will it be successful? There are many players, but not many will succeed. What is important in any case are two things that the government must do. First, it must treat everyone the same way. IATA wants no kind of subsidies, special assistance, but a level playing field. And,most important, infrastructure. If you not able to upgrade to the needs of having 200 more planes in the coming years, then a big success story could become a different kind of story. Then why should the government give out so many licences? This is a government responsibility. I am sure it will take into consideration these

SNAPPY ANSWERS New airports: I don’t want to go into details. Once new airports are operational, you have to close the old one after a period of standby. You can’t operate both. I don’t want to differentiate between LCCs and full-service ones. One airport subsidising another small one is not a very good idea. The hold-up in Mumbai: I can’t go into technical details. But I am told the situation wasn’t easy. The plane (Air Sahara) went into an area that was really muddy. It required very sophisticated and specialised equipment that not many airports have. It was handled in an efficient way. China vs India: China has no constraints on infrastructure. Traffic will be influenced by the price of fuel and the world economy. But infrastructure is in place, and if the traffic is there they will be able to take advantage of it in a very effective way. They have gone about it step by step in a very efficient way. And their airports are… well, impressive.

Air India’s V. Thulasidas, Jet’s Naresh Goyal and Bisignani.

I flew from Jaipur to Mumbai in the cockpit and I followed exactly what was happening. It is unimaginable that you have the green light to take off from Jaipur whereas you had a traffic pile up in Mumbai. We burnt 40 minutes of fuel going round and round in a 737-800. issues. I would like to see growth, but a balanced one. For example, if you take Mumbai—the most serious and urgent case—you have to put two things in place very quickly: handle in a better way the second runway and upgrade the ATC. But these are issues that can’t be handled in six months. You must have a workflow automation system. I flew from Jaipur to Mumbai in the cockpit and I followed exactly what was happening. It is unimaginable that you have the green light to take off from Jaipur whereas you had a traffic pile up in Mumbai. We burnt 40 minutes of fuel going round and round in a 737-800.You have a problem. My friend Thulsidas tells me he has the same problem with the 747s. I am convinced that you can move from 25 to 40 movements with a second runway for take off. But you don’t have to build a second airport for that. What about the profligacy of airlines? Their costs are a burden. Certain measures were taken by airlines, but the big move really is that, instead of low-cost airlines, it is moving to be a

We are working on landing procedures that can save billions in fuel costs. A slight change in the landing procedure at Hong Kong airport would mean a saving of nearly $40 million. CRUISING HEIGHTS November 2005

low-cost industry—we are pulling down the costs. Simplifying the business is really changing the model of many of the processes we were using. We are working in several areas. Services, like navigation charges, are an area we are looking into. The total bill is to the tune of $40 billion. We are working with our partners to bring in some kind of efficiency that will save us billions of dollars. We are working on landing procedures that can save billions in fuel costs. A slight change in the landing procedure at Hong Kong airport would mean a saving of nearly $40 million in fuel costs. We are very clear that we have to be more efficient. But it is the LCC revolution that forced airlines to trim the flab. Probably you are right. I think, the airlines were not fast enough to realise that they would have to change and we were to be leading certain kinds of revolution. Was it the LCCs? Probably not. It was 9/11 that pushed us, the slowdown in the economy, then SARS and the Iraq war. There were really five big issues that forced the airlines to readjust their cost structure.

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NEWS DIGEST

Globetrotting

IS THE Ministry of Civil Aviation revising the eligibility criteria that will permit the likes of Kingfisher and Spice to fly abroad? The main criteria at present are a minimum five years of continuous operation and a fleet of at least 20 aircraft. Instead, the net worth requirement - Rs 30 crore now - may be raised and made the benchmark. The criterion of at least five years of domestic flying is likely to slashed to two or three years. No decision has been taken on the fleet size. But it is understood that those airlines who do not wish to fly foreign routes may be allowed to retain their net worth or authorized capital requirement at Rs 30 crore. These changes could be incorporated in the new civil aviation policy which itself has been in the making for a few years and already seen three governments and over four ministers. But it must be recalled that in December 2004 when the Minister for Civil Aviation Mr. Praful Patel was addressing a press conference to announce the government decision to allow private airlines to fly foreign routes he did categorically state that the condition of five years was not sacrosanct. It is in this context, the argument of the previous CEO of Spicejet Mark Winders that since they had taken over Modiluft which already had two years of flying and had acquired some ASKMs it should not be difficult for Spice to start flying foreign routes sooner rather than later. Perhaps the same logic seems to be behind the attempt of Dr Vijay Mallya to take over Air Sahara.

A battle royale

HE YEAR is about to end. We will soon know who sold more aircraft Airbus or Boeing. But the fact remains that with the global economy picking up and airline passenger numbers hitting a new high notwithstanding the bankruptcy filing by leading American carriers, the A and B of global aircraft manufacturers are sure to hit the gold mine registering record sales. Both the manufacturers have already taken more than 1000 orders for new commercial planes in the year 2005. Four years ago, the two manufacturers were on the verge of near collapse and their shops were running thinly on previously booked orders of which many were cancelled following 9/11. At least Boeing faced a bleak future and its various manufacturing facilities within the US saw record lay-offs many of whom have since come back to the shop floor. In the first nine months till the end of September 2005, Boeing received 605 firm orders and Airbus an estimated 400. Airbus delivered 271 aircraft a 21 per cent rise from 224 deliveries in the same period of 2004. Boeing delivered 217 planes. The US based manufacturer might have delivered more but for the long strike by machine operators in September when Boeing delivered only six aircraft. Most of the new orders have come from European and Asian airlines that suffered less after 9/11 than US carries. Strangely, sky-rocketing fuel prices have so far not acted as a dampener for placing orders. But it has certainly forced carriers to look for more fuel efficient aircraft to power their fleet in future. Three major Asia Pacific airlines are shortly expected to announce orders for more than 100 wide body jets worth billions of dollars. Rising fuel prices is seeing more carriers zeroing in on Boeing 777 perhaps for the first time in last five years. By December 2005, Singapore Airlines, Cathay Pacific and Dubai based Emirates will clarify their positions. Perhaps the forthcoming Dubai Air Show slated for November 20 to 24 will see some announcements coming through. But it is Australian carrier Qantas that could tilt the balance with an order valued at US $ 16 or say Rs 70,400 crore. Should Boeing win, it will place the Dreamliner really on cloud nine. It will

also accelerate plans for an advanced version of its old war horse 747 jumbo and a new variant of 777. Last year Boeing won 277 firm orders, the highest since 2001. For this year the net order tally is already 649 (till October end). The previous Boeing record was 877 in 1988. Qantas board is meeting on December 7, 2005 to take a decision. Boeing’s proposal to Qantas includes 45 of the hot selling Dreamliners. Besides it also includes 20 new version of Boeing 747, 20 of 777-300 ERs and five 777-200 LRs. SIA is proposing to buy 10 of 777-200LRs, 20 of new 787 and 13 of 747 both in passenger and freighter version and about 20 of twin engine 777s to replace the fuel guzzling A 340s. It may be recalled that SIA launched its non-stop Singapore-Los Angeles flights about three years ago with A 340-500s which compelled the airline to levy a fuel surcharge to cover the cost of fuel being guzzled by the craft. Airbus hopes to book 200 orders for it’s yet to be developed (like Dreamliner) A 350. EADS (the parent company of Airbus Industrie) and BAE of Britain recently gave formally backed the industrial launch of A 350 to challenge Boeing’s Dreamliner or Boeing 787. Is there anything in it for India? Well Hindustan Aeronautics Limited (HAL) has already been given a huge order to manufacture the doors (with honeycomb lining inside) by Airbus Industire. Indian software companies like Infosys has been give a slice of the job to develop some aspects of avionics of Airbus A 380 the super jumbo. On the other hand, the Indian Institute of Science has joined hands with Boeing to build next generation aircraft. Various IISc departments like aerospace, metallurgy, center for product design and manufacturing and civil engineering have been involved in the Boeing project. Earlier this year, Boeing signed a MoU with IISc -a first for Asia. Boeing’s other global partners in research include Carnegie Mellon, Stanford engineering, MIT, Caltech, UIUC and Cambridge University. The IISc-Boeing tie-up will involve an investment of US $ 5 million each year for the next five years. From IISc side, the project will be managed by its commercial arm Society for Innovation and Development (SID).

CRUISING HEIGHTS November 2005

NEWS DIGEST

DOT Vs Continental

HE US government is proposing to relax the rules that limit foreign investment in US airlines. The virtual collapse of the industry and the spate of bankruptcies has made it necessary for the US to improve access to capital and crossborder cooperation between carriers. As part of this plan, the US Department of Transportation (DOT) disclosed that it would be willing to end the strict interpretation of the present laws that bar almost any influence foreign nationals and investors can have on the way to run US airlines. It was, however, clarified by DOT that US citizens would continue to supervise matters relating to defence, safety and security. Further a statement from the department said it would not seek to change the law that limits foreign investors to 25 per cent of voting equity in any US airline. The US law bars foreign entities from controlling the nation’s airlines. Under the present practice foreign citizens who wish to take an investment position have to resign themselves to passive position. But what is now being contemplated is to remove that hurdle if a foreign investor wishes to have a more meaningful role. The new initiative follows the massive losses of nearly US $ 38 billion registered by US carriers since the attack on twin-towers in New York in September 2000 .Of the top five US airlines, at least three - United Airlines, Delta and Northwest Airlines have filed for bankruptcy protection.

US Congress can only change the ownership restriction and considering the wellentrenched opposition to it the 25 per cent limit is unlikely to be altered. But DOT feels the existing law is actually impeding cross-border cooperation. The root of the matter lies in the US-EU talks which of late is threatening to spill over to the WTO Dispute Settlement Machinery following the accusations and counter-accusations by the US and EU that their aircraft manufacturing companies -- Boeing and Airbus respectively had received hefty subsidies for their new aircraft manufacturing programme. Besides, there is also a demand from EU that Americans should give its member nations equal and unrestricted opportunity or rights to fly into various American ports of call. All this could possibly change if US and EU reach an agreement on open skies with reciprocal investment regimes also built into it. With US having suffered more than EU member country airlines, the DOT feels a relaxation in ownership norms may help provide a new buying opportunity. If one were to go back it will not be that easy. For instance, British Airways and KLM now part of Air France had respectively bought 25 per cent stake in US Airways and Northwest Airlines. They subsequently sold the stakes. Even as the debate has been initiated in the US perhaps to test the waters, the US based Continental Airlines has rubbished the proposal saying the DOT’s action is a blatant attempt to circumvent the law. DOT

Air Las Vegas ! RYANAIR, EUROPE’S largest airline by market value believes its revenue from inflight gaming and gambling could eventually do away with the need to charge airfares, its CEO Mr Michael O’Leary has said. Ryanair gave away about a quarter of its seat last year and that figure could rise to between 50 per cent and 100 per cent depending upon how ancillary revenues grew, he said. “Ultimately, entertainment will be where there is money he told newsmen. Besides plans for in-flight gaming and gambling, the airline already generates ancillary income from services such as hotel bookings and car leasing. Ryanair has also offered two million free seats, in a

move to pressurize full service carriers such as BA whose fuel surcharge have widened the gap on fares between budget and legacy carriers. We are sure, the private carrier or should we say the one which claims to be in between budget and full CRUISING HEIGHTS November 2005

is reportedly trying to allow foreigners greater say in the management of the US airlines without actually lifting the cap of 25 per cent on ownership. Continental said the attempt to change the law outside the legislative process will not stand judicial scrutiny. Instead of DOT carrying the debate, it should actually be heard in the Congress Continental said. “The foreign control proposed by DOT tantamounts to allowing foreign airlines to operate domestic flights within the US which is clearly prohibited by US aviation law”. Continental said there should be a careful debate on all aspects of foreign control including the serious and far-reaching side effects on US jobs, national defence,

service carrier - Mallya’s own Kingfisher must be really wanting this to happen in India too. After all he has as an advisor Parvez Damania who was the first introduce alcohol service in his short-lived Damania Airways more than a decade ago. He rose from poultry business to running an airline and when he found it hard he closed down his own airline to join as an advisor to others like he joined briefly Air Sahara and now Kingfisher. But the government has already banned serving of alcohol and also does not allow gaming openly. The only casino one can see is at Leela in Goa but a small one at that.

LCC pileup

homeland security and the future of the American airline industry. Mention no names and the story could well be happening in India. During the NDA regime, a Group of Ministers headed by then Finance Minister Yashwant Sinha debated the possibility of raising FDI limit in domestic aviation from 40 per cent to 49 per cent and also permit foreign airlines along with NRIs and other non-foreign airline investors to bring in investment. The Ministry of Civil Aviation opposed the proposal tooth and nail while there was full support from Finance Ministry, Planning Commission and Industry and Commerce Ministry. The matter was buried.

Strangely it took more than five years since that happened for the present UPA government to hike the FDI limit in domestic airlines to 49 per cent. But again the nochangers in the Ministry of Civil Aviation now under a different political party rejected the idea of allowing foreign airlines to hold stakes in domestic scheduled carriers. So much so that even a proposal to allow Persons of Indian Origin who are otherwise eligible to acquire dual citizenship and Indian passport have been barred from holding majority equity. This is notwithstanding the demand of the Ministries of Finance, Industry and Commerce and Planning Commission supporting equity ownership by foreign airlines and majority equity by PIOs.

Go gets going GO AIR has finally taken off. It launched its maiden flight in the first week of November after a soft inaugural flight to Goa from Mumbai with its one and only one Airbus A 320. On board the flight to Goa were Sharad Pawar and his ever grateful follower the Civil Aviation Minister Praful Patel. The Nusli Wadia promoted low cost carrier is in negotiations with both Airbus Industrie and Boeing and proposes to acquire 36 aircraft in the next three years. It launched its services with one leased A 320 and is expecting the second to join its flight late November. The first flight originated in Mumbai where the Wadias have

their head office. According to Go Air managing director Jeh Wadia the airline will also fly daily to Coimbatore. It is a typical case of start up airlines Go Air and Paramount wanting to compete even before they took off. Paramount Airways which is headquartered in Coimbatore has already announced daily flights to Delhi and would soon connect Mumbai as well. CRUISING HEIGHTS November 2005

BY MID-2006 seven international low fare airlines should be flying in and out of India. At present there is one player from Gulf -Air Arabia from Sharjah which has mounted operations to Mumbai, Nagpur and Kerala. Tiger Air and Jetstar Asia from Singapore may also soon begin low fare operations. They will be joined by Jazeera Airways from Kuwait and an airline floated by Saudi Arabiaâ&#x20AC;&#x2122;s Al Tayar Group besides a new budget carrier from Macau. A tourist haven with casinos rivaling Las Vegas, even the launch of its budget carrier is based on a business model of flying visitors over short 3-4 hour flights. Jetstar Asia has already started its flights to Kolkata and is expected to enter the Bangalore market by mid-December 2005. Paramount Airways has entered into a service agreement with GE engine services for maintenance, overhaul and repair of CF34-8E engines of its Embraer aircraft. The nine year agreement is valued at US $ 12 million. This comprehensive and customized package was precisely the solution that our airline requires. We look forward to a long term relationship with GE said Paramount managing director M.Thiagarajan. The OnPointSM Solutions are designed to meet the unique engine service needs which include overhaul, on-wing support, new and used parts, component repair, technology upgrades, engine leasing and diagnostics etc. Even as Paramount is going ahead with its plan, equity market is agog with speculation that Bennet Coleman and Co( publishers of the Times of India) may invest or take a minority stake in Paramount purely as a commercial proposition. Sources said that had done this in the past with some other companies as well. What it wants is assured flow of Ad from Paramount for which it will charge a concessional rate and its own holding in Paramount will ensure that the two-way traffic works to benefit both.

COVER STORY

LOOKING FOR SOME SAHARA! Air Sahara is desperate to sell a stake, raise money and beef up its operations. Is it a short-term goal before completely unloading the carrier or is part of a long-haul strategy. No one really knows. R Krishnan looks behind the scenes to find some answers.

fter initial denials that Air Sahara was contemplating stake sale to any strategic partner, the airline was finally compelled to issue a press release when the rumours became believable. The one-paragraph handout said Air Sahara was in the process of identifying a suitable privateequity investor or strategic partner to fund the airlines’ expansion programme. It had engaged Ernst & Young to value the 12year-old airline, and also act as its transaction advisor. The last date for receiving the bids was set for 31 October 2005. The date has passed and we now have on record Mr Ronojoy Dutta, CEO and President, Air Sahara, stating on November 8 that, “We would shortlist over the next few weeks the two or three most attractive offers for equity participation to raise US $100 million to fund Sahara’s expansion plans. We are considering all offers at present. Our plan is to work with private-equity participation, but at this moment we are exploring all options, including offers received from some airlines”. Rono Dutta, as he is popularly

known, hinted that he might have something to tell by early December. Alongside, Air Sahara has appointed a US-based consultancy firm, Seabury Group, to vet its expansion plans for the next five years, until 2010. All this clearly suggests that Air Sahara is keen to hold on and is equally keen to expand the flying arm of the Sahara Parivar. However, the question being CRUISING HEIGHTS November 2005

asked in aviation circles is, Has Air Sahara got its valuation right?. Further, when every airline is expanding, what was it that held back Air Sahara, considering it had virtually the same first-mover advantage, like the very successful Jet Airways? It is precisely here the issues of professional management, adherence to schedules and a host of other airline-related operative issues assume significance.

Rono Dutta said that Ernst & Young had valued Air Sahara at between US $750 million and $1 billion. Cruising Heights understands that the valuation is US $982 million and the debt component is US $82 million. Even if we assume that the valuation is $1 billion, where does the figure of US $100 million come from, which Dutta mentioned as a sum to be raised immediately for its expansion plan to buy or acquire “15-20

DUTTA’S GAMBLE: Rono Dutta in front of a new look Air Sahara aircraft. Is he part of Subroto Roy’s gameplan?

CRUISING HEIGHTS November 2005

narrow-bodied aircraft and lease wide-bodied ones for international operations”. Kingfisher’s flamboyant owner, Vijay Mallya, seen as a prospective buyer of the stake, also mentioned the same figure, of $100 million. He went on record to state that “Kingfisher is examining the option to buy a stake in Air Sahara for up to $100 million. Buying equity in Air Sahara will help in synchronising the operations of an

COVER STORY

DUTTA’S GAMBLE: Rono Dutta in front of a new look Air Sahara aircraft. Is he part of Subroto Roy’s gameplan?

CRUISING HEIGHTS November 2005

COVER STORY

Business Royale

Seat Capacity

Number of aircraft

Business Royale

Economy

Business Royale

Aircraft manufacturer

Aircraft type

BOEING

B737-800

38”

31”

156

New generation

BOEING

B737-800

54”

34”

126

New generation

BOEING

B737-700

38”

30”

114

New generation

BOEING

B737-700

38”

30”

112

New generation

BOEING

B737-400

40”

32”

132

Classic

BOEING

B737-300

40”

32”

106

Classic

BOEING

B737-300

40”

31”

108

Classic

31”

Regional Jet

BOMBARDIER CRJ-200

Economy Classification

THE AIR SAHARA FLEET: The airline has a mix of Boeing 737s and Bombardier in its fleet.

SON IN COMMAND: It was only recently that younger son, Seemanto, had been given charge of the airline.

Eight bidders are in the race to pick up stake in Air Sahara, which has kept all options open, including strategic partnership. CRUISING HEIGHTS November 2005

established carrier with strong connections in certain key sectors”. Prodded further by the media, Mallya said, “We will make an offer for the entire stake. We have been told the valuation of Air Sahara is between $750 million and $1 billion. But we find this valuation done by Ernst & Young to be over the top. Our valuation does not come closer to this valuation. All we want is to scale up our reach, which Air Sahara can provide. We don’t need the brand.” Sources said Mallya, in his meetings with Air Sahara officials, indicated that he would be ready to pay up to $500 million, of which $100 million would be paid upfront. The remaining will be in two blocks of $200 million each. While the first block would be paid to acquire 74 per cent of Air Sahara’s stake, the balance 26 per cent would be held by Air Sahara and will be paid the balance money at the time of the completion of the transaction. Mallya’s game plan was to rope in one of the two aircraft manufacturers, even though he has gone to town saying he will bring in practically every version of Airbus family, beginning with A319 (he is already operating A320) to the super jumbo, A380, and the in-between ones, like the A330s. But he wanted the $100 million immediately. He reportedly approached Airbus Industrie with a proposal that if it backed him, he would withdraw the Boeing fleet Air

COVER STORY Sahara was currently using and replace it with Airbus. Dr Mallya reportedly discussed a similar plan with Boeing for $100 million, to be paid upfront, which would be adjusted on discounts that may be given should Kingfisher go in for Boeing fleet immediately after the buyout of Air Sahara and also replace its own Airbus aircraft it was flying currently. Cruising Heights understands that Boeing was not keen, and apparently turned down Mallya’s plan. Airbus Industrie is meanwhile waiting rather anxiously to fund Mallya, as it would mean one more customer in India. However, a fundamental mistake Mallya made was to go public on his plan and refer to the Information Memorandum prepared by Ernst & Young. According to highly placed sources, SaharaShri Subrato Roy, the boss of Sahara group, was upset that Mallya should have gone public about his airline. Subsequent to these developments, Subrato Roy went to the US to talk to some very wealthy NRIs and financial institutions if they would be interested in picking up a stake in his airline. What Rono Dutta has now said is a round up of what Subrato Roy and his advisors have learnt in the US. Air Sahara, launched in December 1993, operates with 26 leased aircraft, of which 19 are Boeings (737-400, 700 and 800) and seven CRJs. It also has few helicopters, made by Eurocopter. Incidentally, Jet Airways has already scotched all speculation that it will be interested in picking up stakes in Air Sahara or rather buy it out. This proposal, in any case, would not have made any sense for Jet Airways, as it has all the rights to go international except for a major security-related investigation in the US, which is taking a long time to resolve. There was also speculation that SpiceJet may have a go at Air Sahara. But even this has been denied by Spice. For instance, Spice, a reincarnation of the now-defunct Modiluft, was also an early starter like Sahara and Jet, but disappeared because of alleged mismanagement and dispute with its foreign partner, Lufthansa. It was in the air for two to three years. If anyone thought that Spice can use the ASKMs of Modiluft and also the three years it was on flight to get permission earlier than others to fly international, then they may have to do a recheck of policies. The same logic would apply to Kingfisher as well. Of course, all of this could change if the government changes the policy to allow domestic scheduled carriers to fly international based on three years’ operations and also allow the benefit of adding the experience/ASKMs logged by the defunct airlines now taken over and renamed.

TAKING CHARGE: Subroto Roy was recently in the US. He is believed to be directly monitoring the Air Sahara sweepstakes

Why would anyone pay a billion dollars for an airline when all its Boeing fleet is leased and also not exactly new? CRUISING HEIGHTS November 2005

Meanwhile, eight bidders are in the race to pick up stake in Air Sahara, which has kept all options open, including strategic partnership. Among the bidders are also pure investors and non-foreign airline entities, like Changi Airport, Blackstone Capital Partners, Carlyle Group, Temasek, etc. There could be a problem with Temasek, which is the official investment arm of Singapore government as also the majority stake owner in SIA. It is not known how many domestic airlines are in the queue for the bid. With both Jet and Kingfisher virtually ruled out, it remains to be seen if Spice would actually take the trouble of going ahead. However, there is one thing in common between Air Sahara and Spice—commonality of aircraft fleet—all Boeings. As raised earlier in this piece, what was the reason for Air Sahara not being able to succeed like Jet? Rono Dutta told a leading pink daily that his airline’s poor performance was due to under-utilisation of its fleet, mainly because of non-availability of pilots. But this is a factor that has plagued every airline, including Air India. Even this pilot shortage is a phenomenon that is less than 18 months old. The Indian domestic airline industry entered the boom phase beginning early 2005. After all, Air Sahara started 12 years ago and had enough lead-time compared with all the newcomers. The issue, therefore, is will Air Sahara allow the new partner total management control so that there is no repetition of what happened. The issue that is apparently holding back the stake sale is the very valuation of the stake. Why would anyone pay a billion dollars for an airline when all its Boeing fleet is leased and also not exactly new unlike Jet and Spice or, for that matter, what Mallya himself possesses in A320s. The true valuation, therefore, lies somewhere in between. Cruising Height understands that while valuing Air Sahara, Ernst & Young did not fully factor in the role of low-cost carriers, which, of late, have begun to eat into the market share of legacy carriers, primarily Indian Airlines, whose market share itself is reportedly on the verge of falling below 30 per cent. No doubt, Air Sahara has marginally increased its share, but it will also take a dip like that of Indian Airlines or even Jet with market share of 41 per cent as other LCCs begin to expand their fleet and offer virtually unheard-of fare. With more regional connections in the offing, not only to other towns and cities in the same region, but also to metros and major metros, the battle will truly become a dogfight.

AVIATION DIGEST

America West merges with US Air America West and US Airways, the fifth largest airline in the US in domestic capacity, finalised their merger and began operating as a single carrier. Customers should continue to book directly with US Airways or America West, as they did before the merger. The airlines’ websites will operate separately in the short term, as will the two airlines’ reservations systems. The new US Airways, which begins trading on the New York Stock Exchange under the LCC symbol, represents the nation’s largest full-service, low-cost, low-fare airline.

Routes awards MUNICH, ATHENS, Birmingham and Berlin have been named winners of their respective categories in this year’s Airport Marketing Awards. The names of the successful airports were announced in Copenhagen at the gala dinner during the highly successful Routes–The 11th World Route Development Forum. Sponsored by OAG, the world’s leading source of flight information, the awards are voted for by the world’s airlines and serve as an effective indicator of an airport’s success with its primary customers. Nominated, commended and winning airports are detailed later in the press release. Routes is the annual gathering for air service network development. It is centred on a large number of focused, pre-arranged meetings between airlines and airports to discuss, define and develop new route opportunities. This year, around 20,000 such meetings were held, supplemented by a similar number of extra meetings arranged during the event. The next Routes–The 11th World Route Development Forum will take place in Dubai from 17 to 19 September 2006, with Dubai’s Department of Civil Aviation acting as host.

Singapore ‘stop-over’ experience Singapore Tourism Board launched new initiatives from 1 October 2005 to make it easier for the five million air passengers who transit Singapore. New initiatives for transit passengers include bus shuttle services from the airport, tourist day pass for transit visitors preferring to travel and venture through Singapore on their own—they can redeem a complimentary Tourist Day Pass to enjoy up to 10 free rides on the Singapore metro and trains within a 24-hour period. F&B/shower facility vouchers for use at the airport upon return after transit experience. On their return to the airport, transit passengers can choose to freshen up with a choice of a food and drink voucher or a complimentary use of the airport shower facilities. These can be collected at the Singapore Visitors Centre, in the Changi Airport arrival hall. Transit visitors can also engage the services of a taxi-tourist guide (this is a paidfor service).

CRUISING HEIGHTS November 2005

Virgin loses race

irgin Rail is no longer able to claim ‘You Can Forget about Flying’ when you’re travelling between Manchester and Central London. On Tuesday, in a race against the train and in the full glare of the BBC TV North West Tonight regional news programme, VLM Airlines proved to be the fastest way to get to the centre of London from Manchester. The race was independently mounted by the BBC North West news team and involved two journalists racing by air and by train from Manchester to London’s Piccadilly early in the morning. The journalists arrived at Piccadilly Circus in the middle of the capital’s rush hour, and despite a long taxi ride from London City Airport (the main hub for VLM Airlines) to Piccadilly Circus (which is only a mile from Virgin’s London Euston Terminus), VLM Airlines won by 16 minutes.

Countdown begins THE FINAL countdown for the opening of Bangkok’s second airport, Suvarnabhumi, began on 29 September 2005, when Prime Minister Thaksin Shinawatra and an entourage of VIP guests landed on the first technical test flight operated by Thai Airways International. The Prime Minister said that the airport will now undergo its final tests as it heads for a full commercial opening in June 2006, fulfilling a promise that he made when elected for his first four-year term in 2000. However, he did not rule out the possibility of a minor additional delay due to ‘factors beyond our control’, such as the licensing

approvals needed from external parties, like the International Civil Aviation Organisation. About 1,000 people, including ministers, officials, representatives of various public and private organisations and journalists, were aboard the first two technical flights that landed on 29 September. When in full operation, the airport will help boost Thailand’s economic, social, communication and tourism development, and advance the government policy of making Thailand an aviation hub in Southeast Asia.

Oneworld Aeroflot is IOSA Japan Airlines has decided to join the one world alliance. JAL is the biggest carrier in the Asia-Pacific region. In terms of group revenues, it would become the largest member of Oneworld.it would be in the alliance's biggest three, alongside American Airlines and British Airways. Japan Airlines was the only one among the 20 biggest international airlines in the world (IATA members) not to have joined or sought membership of one of the three key airline groupings. Meanwhile, Royal Jordanian is also to join oneworld, the leading quality global airline alliance. It is the first carrier from the Middle East and Gulf region to be elected on board any of the global airline groupings - and the first airline accepted to join oneworld for more than five years

Emirates Internet check-in EMIRATES HAS introduced a new and convenient option for its customers to check-in for their flights–the Internet. Emirates’ passengers, departing from Dubai, Kuwait, Australia and New Zealand, can now select and secure their preferred seats online, and check

compliant

OJSC “Aeroflot - Russian Airlines” has successfully passed an audit inspection on the compliance with the operational safety standards IATAIOSA Aeroflot is the first Russian airline, which has been audited for IOSA.

Teenage entrepreneur takes to the skies

Eos launched Eos, the first airline focused since inception exclusively on the transatlantic business traveler has been launched. The daily roundtrip service between New York John F. Kennedy International Airport (JFK) and London Stansted (STN) has been widely welcomed. Eos recently announced pricing for its premium service, with a basic unrestricted roundtrip price of $6,500. in for their flights from the comfort of their home, hotel or office, by logging on t o www.emirates.com. The airline also plans to gradually introduce its online check-in facility to other destinations across its network in the next few months. Once the check-in process has been completed, passengers will be provided an online check-in receipt. They can then proceed to a dedicated counter at the airport to check-in their luggage and exchange their online check-in receipt for boarding passes. Passengers are required to present themselves at the airport counter no later than 90 minutes prior to departure.

CRUISING HEIGHTS November 2005

A BRITISH 19-year-old entrepreneur has founded a regional airline, and said he has plans to launch a service next week. According to Martin Halstead, the new service is slated on a route between Southampton and Douglas, on the Isle of Man, previously operated by Euro Manx. Halstead lives in Oxford and made his money designing and marketing flight simulator software. He has reinvested the cash he made, along with an inheritance, in a new venture, Alpha One Airways. He merged his company with an existing charter airline, Love Air, which operates out of London Stansted. He has financial backing from a private investor in the UK and a Dubai-based hotelier, Mohammed Moinuddin. He also has the moral support of Virgin Atlantic boss, Sir Richard Branson. The two travelled together on Virgin’s inaugural flight from London to Mumbai recently. “He’s a very nice lad and as bright as a button,” said Branson. “If anyone can succeed in business, he can. It’s good that he is starting.”

GUEST COLUMN Airport officials and workers try to retrieve the Boeing 737 of Air Sahara after it ran off the runway due to a faulty landing in Mumbai on 11 October 2005.

By Gurcharan Bhatura

Who was holding Mumbai airport?

n 9 October 2005, an Air Sahara B737 operating flight (S2 226) slipped off the main runway while landing at Mumbai airport. The flight was coming from Kolkata, with 111 passengers and an eight-member crew. Fortunately, there was no loss of life. Sixty airlines operate over 400 daily flights through Mumbai, the busiest airport in the country. Mumbai airport has two runways, both meeting the specifications laid down in Annex 14 by the International Civil Aviation Organisation (ICAO). Its main runway is 11,500 feet long, with a declared landing distance of 10,995 feet. All arriving aircraft plan their landing within the notified distance. This length is more than sufficient for a B737, as it can comfortably land in 5,0006,000 feet.

Sixty airlines operate over 400 daily flights through Mumbai, the busiest airport in the country. CRUISING HEIGHTS November 2005

Weather at Mumbai airport that evening was fine, with visibility of 4,000 metres. Landing aircraft normally come on glide path and touch down after 1,000 feet of runway threshold. But the Air Sahara B737 is reported to have touched after the runways intersection, losing valuable landing distance and overshooting by 650 feet from the runway end. The ground around the runway was slushy, and the aircraft not only got bogged, but also broke its undercarriage. The challenge before Mumbai airport was to quickly get this aircraft out and resume normal operations. The airport, in the meantime, had shifted operations to the secondary runway, which is shorter than the main runway. To cope up with the heavy traffic load, Mumbai airport also revised the landing and take-off distances of its main runway, and opened it for aircraft operations. The modified distances were quite sufficient for B737s and A320s,

primarily used for domestic operations. This provided considerable relief to the airlines. As per established practices world over, the aircraft operator is responsible to take out its disabled aircraft obstructing airport operations within a reasonable time. At the same time, to restore normalcy, airports are advised to facilitate aircraft operators in mustering local help. Based on international experience, ICAO has also provided guidelines to airports for preparing plans for removal of disabled aircraft. Airports are also advised for periodic update of these plans and regularly conduct mock exercises. Mumbai airport also has one such plan notifying sources that can help aircraft operators in need. Removal of disabled aircraft is not easy. It demands specialised equipment and skills. It is also recognised that such emergencies may affect any airline or aircraft operator, and can occur at any airport. Maintaining specialised equipment, like heavy jacks and tractors, air bags, etc., and skilled manpower by individual airline or airport may cost them a fortune. Therefore, IATA, the association of airlines, has designated airlines as per their capabilities and given them the responsibility to help, on payment, the operators in need in different regions of the globe. For Indian subcontinent, Air India is the designated airline. It houses specialised equipment needed for B747 at Mumbai airport. Air India has to its credit many successful operations in the past. Hard surfaces (roads) wherever needed for easy

Based on international experience, ICAO has also provided guidelines to airports for preparing plans for removal of disabled aircraft. CRUISING HEIGHTS November 2005

roll of disabled aircraft are normally constructed by the airport. As stated earlier, the aircraft operator is responsible to remove the disabled aircraft itself or by hiring a specialised agency within a reasonable time, which could vary from a few minutes to few hours. In cases where local help is not available, this time could even extend to a few days. Notwithstanding this, if the airport finds that the aircraft operator is not making serious effort to remove its aircraft, then it can get the same removed at the operator’s risk and cost. It is experienced that a well-coordinated effort of the airport management, aircraft operator and the expert airline (here, Air India) can produce quick results. In the instant case, Mumbai airport had a well-rehearsed plan. Even the responsibility to remove the aircraft is also well defined. Then, why the airport took more than 80 hours to remove this small aircraft, weighing 60 tonnes? This incident has created a debate among aviation experts as to ‘who was holding Mumbai airport—Air Sahara, Air India or Mumbai airport?’. Perhaps, the DGCA inquiry will bring it out. Author, a well-known aviation expert, is a former director of Mumbai, Chennai and Kolkata international airports. He has handled many such aircraft emergencies, and can be contacted on gurcharanbhatura@rediffmail.com

SPECIAL REPORT

WHAT’S UP AT IA? Plenty is happening in Indian Airlines. A new shuttle, a new logo and a complete makeover of a fifty-year-old legacy. The only thing that isn't getting the go ahead is a new CEO.An inside report on what's happening at the country’s national carrier. 34

CRUISING HEIGHTS November 2005

TOP DOGS: (left to right) Sushma Chawla, acting CMD IA—networked and savvy, the lady is in command. Minister Praful Patel—keeping his cards close to his chest. Civil Aviation Secretary Ajay Prasad was keen to give Goel an opportunity but the Minister said no.

ill Vishwapati Trivedi be appointed as the next Chairman and Managing Director of Indian Airlines? The question has been asked a thousand times in the last two months and no one is any wiser. The one man who does indeed have the answer is Civil Aviation Minister Praful Patel and he isin’t talking. “It will happen in good time. The process is under way. Why are you people in such a hurry,” is Patel’s retort each time the media

quizzes him on the subject. But the fact of the matter is that the Public Enterprise Selection Board (PESB) recommendation is still pending with the Ministry with Patel yet to approve the selection. It is a bit of a mystery as to why Patel is unwilling to go ahead with Trivedi. After all the PESB had the Secretary (Civil Aviation) on its panel and the single name suggestion would not have gone forward without his approval. It would now look completely out of place for the Minister to turn down a name that has been put forward with the consent of the number one civil servant in his Ministry. `` I would suggest that Trivedi’s name couldn’t have been cleared without some discussion between Patel and Prasad. Be that as it may, he may now be looking to be sure that Trivedi will be a loyal and committed CEO.Once satisfied he may sign the file, `` said one bureaucrat who knows the Minister rather well. Those in the know state that this Madhya Pradesh cadre officer has met the Minister more than once and the discussions between the two have been cordial.Trivedi,who belongs to a family of civil servants, is extremely well connected coming as he does from a distinguished political lineage. One of his uncles (mama), Shyama Charan Shukla has been Chief Minister of MP and another (V C Shukla) has been a union Minister. His sister and brother in law are in key positions in the Uttar Pradesh bureaucracy. It is precisely these credentials that observers cite to clarify that it won’t be easy for Praful to brush aside Trivedi’s claim, reject his name and ask for a fresh name. These insiders are of the opinion that Patel is only waiting for the green signal from his mentor and leader Sharad Pawar before he signs the file and the real delay is at the end of the Agriculture Minister. Caught in a welter of other issues, Pawar really hasn’t had the time to take a final call on the issue. Meanwhile in Indian Airlines all the new whole time directors—Anil Goel (commercial), Anoop Shrivastava (Personnel) and M S Balakrishnan (Finance) have taken over their new responsibilities as whole time directors of the company. Goel is the senior most of the new directors and Anoop the youngest. Infact IA’s Commercial Director has less than six months to go and there was talk some two weeks back that it was more than likely that he could hold acting charge of IA till Trivedi arrived to take charge.

SENIORMOST: Commercial Director Anil Goel is at the moment number one in seniority.

Apparently the Cabinet Secretariat processed a letter suggesting that the ACC would like the senior most officer to be in command.

YOUNGEST: Director (Personnel) Anoop Shrivastava is the youngest board member. CRUISING HEIGHTS November 2005

Apparently the Cabinet Secretariat processed a letter suggesting that the ACC would like the senior most officer to be in command. The communication is believed to have the backing of Secretary (Civil Aviation) Ajay Prasad as well. Nonetheless, the Civil Aviation Minister put the whole issue on hold. There is believed to be more than one reason for this. Foremost is the fact that the present incumbent Sushma Chawla is the first woman CEO at IA and Patel does not want to rock the boat unless it is someone taking charge on a regular basis. There is the fear that any attempt to remove Sushma will be adversely commented upon. She has a formidable number of backers within the establishment and they too wouldn’t have taken to it lightly. Patel is also believed to be peeved with the CabSec for telling him about an ACC decision when he himself is a part of the ACC. In case there is too much delay in the appointment of the successor to Sunil Arora it is more than likely that the CabSec will send back a fresh proposal along the same lines but more in the form of an ACC document for approval of the relevant ministers. Infact there are some suggestions that such a document is already under circulation, but it looks unlikely that Praful would like to have a change of guard at this stage. “I have the greatest confidence in Anil Goel, but I have to take other issues into confidence as well,” Patel told an insider. There are also some who are suggesting that one reason for the uncertainty is Praful’s desire to complete the aircraft acquisition process that would include the configuration of the aircraft, the interiors and the final signing of the agreement between the two sides. Alongside there is a complete makeover that IA is getting under the direct supervision of Mantriji.Already the Minister has been shown several different variations of the makeover by Director (PR) Deepak Brara and Sushma Chawla.Patel is believed to have short listed a couple. A final name for the India shuttle service that will connect the major metros (and will be a no frills LCC type of IA offshoot) is also expected to be settled by the month end. So really Praful may be wanting a new CEDO once these issues are out of the way. Meanwhile it is clear that the new A 319s that are joining IA on lease will be for the shuttle operation. The first aircrafts are coming into the capital from Hamburg where the Airbus 319 manufacturing hub is based. IA’s Director operations and a team of pilots are already in the German city waiting to take charge of the aircraft.

SPECIAL REPORT

THE REVOLUTION

Aswini Kakkar has taken over as the President of the largest travel body of the country. It wasn't a smooth transition. Kakkar was the Vice President under Balbir Mayal and quit TO battle him for the Presidentship.In the end he ousted him. While the battle a reflection of the division within TAAI, the trade believes the change will be for the better. A special report. 38

CRUISING HEIGHTS November 2005

AT TAAI!

THE COLOMBO SHOW: A panaromic view of the proceedings at the last TAAI jamboree at Colombo.

September 2005: On the face of it, the Travel Agent’s Association of India jamboree in Colombo couldn’t have given anyone an inkling of what was in store for Balbir Mayal.The two term President of the country’s most powerful body of travel agents strutted about the Colombo Hilton looking supremely confident and completely in command. Clearly he liked all the perks that went with the territory—the attention, the patronage and the big time opportunity to network. But if one scratched below the surface it was a different story. At the daily lunches and dinners, scores of agents spoke of what BALBIR MAYAL: wanted they perceived as the politics in the organianother term. Felt had done zation, the ad hocism at the top, lack of enough to get support of key institutional redressal of grievances, players. favouritism and a deep schism between the zones. One word that kept getting bandied about time and again was ‘transparency’. TAAI wasn’t transparent. In other words Balbir Mayal and Company weren’t transparent; they were playing cloak and dagger games with their own members. And they had plenty of instances to cite to bolster their arguments. November 2005: Ashwini Kakkar, the CEO of Thomas Cook is the first to throw the THE NEW TAAI TEAM (From left to right): gauntlet. He resigns Sunil Kumar (Treasurer), C V Prasad from the Mayal led (Vice President), Ashwini Kakkar (President) committee. The reasons and Rajinder Rai (Secretary General) are described as ‘personal’. But those in the know state that there were several reasons for the mild mannered Kakkar’s decision. For one, most of them were against Mayal’s ambitions for a third time. Rajinder Rai (better known as Rajji) now a Secretary General in the national body and the head of the Northern India chapter puts it bluntly: “some people thought Taai was their property and they could go on and on and on. That’s not right.” Kakkar himself declined to speak about the past. He insists on looking ahead. Anyway to cut a long story short, he quit and from being Mayal’s VP became his opponent at the annual elections. No surprise that he won and ASHWINI KAKKAR: Wants a retained more or less the same team that had more transparent and forwardbeen with Mayal for long. Rai, for long a thorn looking TAAI that will be a in the flesh of Mayal, was the big exception. platform for members. CRUISING HEIGHTS November 2005

SPECIAL REPORT Kakkar has since the famous victory met the press and laid out an ambitious roadmap to pull Taai out of the morass and make it a vibrant forward looking organization that not only responds to the needs of travel agents, but is also looks at trends and options for the industry. “As facilitators of tourism, we do not work alone; we have to work naturally in a collaborative partnership,” said Kakkar (see interview) Although he doesn’t spell it out, the second reason why Kakkar, his supporters insist, pulled out, was the groupism, the lack of a fair programme for the members and a laid down roadmap. Mayal supporters are livid that anyone could even suggest this. “There was plenty that was achieved during the term of Balbir Mayal. The commission issue was the most important. We stopped the airlines were reducing it further. The insurance scheme was introduced by Balbir and he was largely responsible for the travel agents credit card scheme. And, don’t forget, he gave us a profile in Delhi,” said one supporter who declined to be named. But there are others who sharply question this argument. J S ‘Billa’ Arora of Lords travels, for example, accuses Mayal of running Taai like a ‘personal fiefdom’ when he was President. Asked to elaborate on this serious charge, Arora is blunt: you are either with Mayal or againt him. You can’t have a point of view that can be different from his. Billa states that one of the prime reasons (although he admits that some of the causes are historic) for TAFI (Travel Agents Federation of India) slowly gaining

Making a new start

strength amongst the younger lot is because of the manner in which TAAI takes up membership. He also accusses Mayal of having worked behind the scenes to scuttle the last TAFI conference in Singapore. The charge of membership ad hocism was also put forth by several other first timers during the meeting in Colombo. “Where was the open house in Colombo, it was a closed house with all the issues pre-decided,” said one new TAAI member from Kolkata and added, “the commission is our lifeline. Nothing is being done on it. The strike was a big farce as all the big agents were getting their tickets from the GSA and business was as usual. We were the worst hit.” Kakkar is circumspect. He doesn’t want to talk about the commission issue and inflame passions. He also praises his predecessor and gives him full marks on the insurance issue. At the same time he is clear that unless there is a multi pronged assessment of issues, TAAI will be left far behind other industry bodies. Educating the people just as much educating the trade is a key point in the Kakkar agenda. Similarly he wants a greater digitalization and use of the internet to help clients get a huge tranch of information at one go. But industry observers are unanimous that the model that TAAI must hope to emulate is the CII.At the moment tourism and civil aviation is a key segment of the CII,

Extremely eloquent, Ashwini Kakkar is passionate about his business. Apart from his huge responsibilities as Managing Director of Thomas Cook, he wears two other hats—the TAAI Presidentship and the Chairmanship of the Indian chapter of the WTTC (World Travel and Tourism Council). During a recent trip to the capital, Kakkar spoke to Cruising Heights.

Mayal supporters are livid that anyone could even suggest this. There was plenty that was achieved during his term. The commission issue was the most important. but there is some move from various travel and tourism bodies to go for a comprehensive tourism platform that will bring all the players—big and small—under one umbrella to debate and discuss industry issues in house. “We can have our different points of view, but when we go out as the industry to the government we, must speak in one voice,” said Subhash Goyal a veteran of the travel lobby. Its an exciting agendas and one that requires a united house. Perhaps the number one job for Ashwini Kakkar will be to get the whole of TAAI behind him. Hopefully that should happen sooner rather than later.

Goyal goes on and on Meanwhile the The Indian Association of Tour Operators has decided that the Balbir Mayal formula is the right formula. They have re-elected Subhash Goyal as MEETING THE PM: Goyal and President for a record fifth time his team in this file picture with Dr Manmohan Singh for tenure of two years. The entire team of Mr. Goyal, barring one member, has been re-elected as well. Whether it reflects a stranglehold Subhash over IATO or a lack of fresh talent in the organisation or a complete disinterest amongst members for interaction with the government and other industry bodies is a matter of debate. But messers Goyal and Company would like us to believe that it “reflects the rapport and appreciation the team generated during its tenure”. The re-elected Office Bearer’s include Major Murli Dhar as Sr. Vice President, Vijay Thakur as Vice President, Lally Mathews as Honorary Secretary, Ravi S. Kalra as Honorary Joint Secretary and P.K.Sarkar as the newly elected Honorary Treasurer. The incumbent Treasurer, Mr. Arun Anand has been inducted into the Managing Committee for the association. Speaking on his being re-elected as President, IATO, Goyal said, “I am thankful and appreciative of the members for once again reposing their trust in us by re-electing me and my team as the Office Bearers. We will work towards enlarging and harnessing the opportunities that ensure a better business environment for the association and its members.” He further said, “We will focus our energy towards a drive for abolition of the Fringe Benefit Tax, which is limiting the growth and is applicable to Travel Agents and Tour Operators and also for 90% abatement in the Service Tax”. The association would also aim at engaging the Government in a dialogue to address the problem of bouncing of bookings by hotels and also seek land for IATO Building and construction of a training institute for professionals for the travel and tourism industry.

On the presidentship A: I am excited at the opportunities that it offers. My meetings with officials at the Railway Ministry and in the Tourism ministry have been most positive and we hope to roll an action plan in the coming months. There are over 2000 travel agents who offer a wide spectrum of services across this nation with a turnover of over Rs 20,000 crore each year. Mind you, Rs 10,000 crore of this is the form of credit. I cannot think of any one institution that provides such a magnitude of service in this form. Having said that I wish to add that we want to move to the next level by expanding the range of services we offer, educating and advising customers and also enhancing the capabilities of our own people. Any specifics A: We are looking at a large number of issues. Last mile connectivity, for example at some of our major religious places like Tirupathi, Sabarimalai, Vaisnodevi and Shiridi.Booking of railway tickets through travel agents. Time is of so much essence and it would mean saving of millions for the country. I am extremely happy at the response we got from the officials and we hope to take this forward. On the meeting with Tourism Minister Renuka Chowdhary A: Renuka Chowdhary has done fantastic work as the Tourism

Minister. I really don’t have enough words to express my appreciation of her effort. We discussed a large number of issues including the Commonwealth Games to be held in Delhi in 2010.30,000 new hotel rooms will be needed by then in the capital. You need a holistic approach to make the event a memorable one for everyone including the tourists who will come in. She was good enough to invite us to participate in the preparatory work and we shall be offering our expertise in specific areas that they may require. On IATA’s 2007 deadline for e-tickets A: I don’t think it really is a deadline; it is more in the nature of a broad cut off point. Frankly with internet connectivity and broadband issues still to be resolved in large parts of the country, it would be difficult to estimate when really we can go completely into the e-ticket mode. On issues before TAAI A: We are working in a large number of areas. Crawlers, for example, that can offer the customer best fare from different options. Digital encoding of visa and passport details with travel agents that can help in emergencies. But these are all elements that we are working on simultaneously. But there is no stacking of issues. What gets done first will be implemented first.

TOURISM DIGEST

AT A GLANCE

World’s richest shooting tournament Further enhancing Dubai’s position as a top global sporting destination, Olympic gold medallist Sheikh Ahmed Mohammed Hasher Al Maktoum recently announced an international skeet shooting tournament, with the richest purse, to be held in Dubai. “A lot of hard work has gone behind my desire to excel in the sport of shooting, but I do not wish to rest on my laurels. I wish to work with all those interested and concerned to now put Dubai and the UAE on the world map when it comes to the sport of shooting,” says Sheikh Ahmed, “This is why we are offering the richest purse ever for a shooting tournament”

Don’t overreact!

he WTO is to meet with the World Health Organisation to combat the looming threat of the avian flu epidemic, having a serious impact on international tourism. Recommending governments to follow WTO’s crisis-management guidelines, WTO SecretaryGeneral Francesco Frangialli said international travel would be the first economic sector to be hit if people began cancelling holidays because of fears of visiting certain destinations. As one of the biggest sectors in the global economy, international tourism was worth US $622 billion last year, spent by more than 763 million tourists, and is currently expanding at

an annual rate of nearly six per cent. But industry growth could easily be hit by the outbreak of another epidemic, as happened when, in 2003, SARS reduced international arrivals to Northeast Asia by nine per cent and to Southeast Asia by 14 per cent.

Korea Tourism Organization announces new corporate image WTM 2005 will see the Korea Tourism Organization launch a new logo and organisation name to keep pace with current trends. The ‘Korean Wave’, or growing popularity of Korean arts and culture, has also indicated a significant interest in all things Korean. The new Corporate Image (CI) has been designed to illustrate the image of welcoming a visitor. The design incorporates the first Korean character of Korea Tourism Organization, with the circle at the top of the CI representing the globe and the role of the organisation to promote Korea’s culture worldwide. The arm-like image symbolises the open arms of welcome and also the welcoming smile of Koreans. The circle on the bottom of the CI symbolises perfect harmony and infinity.

CRUISING HEIGHTS November 2005

Visit Malaysia Year 2007 targets 19 million visitors TO CELEBRATE the country’s 50th anniversary of independence, Malaysia has targeted tourist arrivals at 19 million, with a special focus on the meetings, incentives, conferences and exhibitions (MICE) market under its Visit Malaysia Year (VMY) 2007 campaign. According to figures from Tourism Malaysia, tourist arrivals increased from 10.6 million in 2003 to 15.7 million in 2004. It generated almost RM 30 billion in revenue, becoming the country’s second highest foreign exchange earner. Among other niche tourism products the country will be promoting are ecotourism, edutourism, sports tourism, health tourism and Malaysia My Second Home. In 2004, Malaysia received the highest number of visitors from Singapore (9.5 million), Thailand (1.5 million), Indonesia (7,80,000), and China (5,50,000).

Dark tourism meeting

Melbourne tops

DARK TOURISM, a fascination for visiting sites associated with death, destruction and doom, is the topic for the next meeting of the British Tourism Society. The event will focus on issues such as visitor motivation, ethics and morality, modern interpretation and the responsibility of tourism providers. Pompeii, Auschwitz and the pyramids may not be top of the hot-spot list for many tourists, but Ground Zero is now one of the most popular tourist attractions in New York City. Numerous tourist attractions, like Ground Zero, highlight the growing demand for what is termed ‘dark tourism’ or ‘tourism macabre’ and the need to carefully manage this new market.

MELBOURNE IS Australia’s most liveable city and the second most liveable city in the world, next to Vancouver, according to a new survey by the Economist Intelligence Unit (EIU) in London. The Economist Intelligence Unit’s Liveability Ranking assesses living conditions in 127 cities around the world by looking at nearly 40 individual indicators. The survey gives a rating of zero per cent to 100 per cent and judges a city with a lower score to be the more attractive destination. Melbourne’s ranking was two per cent, compared to Vancouver at one per cent and Perth, Adelaide and Sydney at three per cent.

World Tourism Barometer

AN ESTIMATED 460 million international tourist arrivals were recorded worldwide in the first seven months of 2005. This represents an increase of some 25 million arrivals compared with the respective period of 2004, or 5.9 per cent growth, according to the preliminary data gathered for the new issue of the WTO World Tourism Barometer. The year-todate increase is very much in line with WTO’s initial forecasts for the twelve months of 2005. According to the updated forecast in this Barometer, the year, as a whole, is expected to end with an increase of five to six per cent. This can be considered exceptional, because international tourism is not only on track to consolidate the bumper year of 2004 (+ 10.7%), but it will also exceed the forecast long-term average growth of four per cent.

France nixes tobacco tourism THE FRANCE parliament has passed a bill prohibiting anyone in France to carry more than ten packets of cigarettes outside their home, according to a published report. Under the legislation, the transport of more than 200 g of cigarettes bought retail for personal use will be banned, and the quantity that may be stored at home will be limited to 10 cartons, or two kilograms. If the bill is confirmed, those caught in violation will be fined. The measure was hailed as a victory by tobacconists, who say that their trade is being killed off by people stocking up with cheap cigarettes from across the frontiers in Belgium, Spain, Luxembourg, Germany and Italy. French cigarette currently ranks as the third most expensive European cigarette, following the UK and Norway, with as high as 40 per cent increase in taxes in two years. Consequently, the black market for imported cigarettes in France has grown.

Britain’s ‘Tallest Tower’ to Open in Portsmouth A NEW landmark, resembling a billowing sail, towers over Portsmouth Harbour on the South Coast, the centre of England’s naval power since Tudor times. At 170 metres, Spinnaker Tower is the tallest publicly accessible structure in the UK, offering superb views over the harbour and up to 37 km in three directions. There are three glass encapsulated viewing decks. Deck One has a glazed floor, where visitors can ‘walk on air’; Deck Two has two self-contained multimedia stations showing the history of the harbour; and Three, the Crow’s Nest, is open to the elements. A panoramic glass lift takes visitors up and down outside of the tower. The Tower Cafe Bar serves coffee, classic sandwiches by day and wine and bottled beer at night. The attraction is open daily. CRUISING HEIGHTS November 2005

SNIPPETS

Singapore’s Nizam odyssey

INGAPORE AIRLINES began operations to Hyderabad, India’s fifth largest metropolis, when the airline started its four times weekly service on October 30. The service will operate on Monday, Wednesday, Friday and Sunday using Boeing 777-200 and Boeing 777-300 aircraft. These aircraft can seat 288 and 332 passengers, respectively, in a three-class configuration. The airline has also mounted additional services from Singapore to Bangalore. Hyderabad will become Singapore Airlines’ eighth destination in India, others being Ahmedabad, Amritsar, Bangalore, Chennai, Kolkata, Mumbai and New Delhi.

IA at the forefront Q INDIAN AIRLINES has carried over 105 tonnes of relief material from different stations in the country to Srinagar, free of cost, for the earthquake-affected people of Jammu & Kashmir. Earlier, in February-March this year, following the unusually high snowfall in the state, Indian Airlines had operated 28 special flights to Srinagar, transporting 2,321 passengers. Q The airline has also introduced a non-stop daily flight on the Delhi-Singapore sector and a connection from Jaipur to Kuala Lumpur beginning 30 October 2005. The flight, IC 859, will depart from Delhi at 0005 hrs and reach Singapore at 0755 hrs. The return flight, IC 860, will leave Singapore at 0915 hrs, arriving in Delhi at 1240 hrs. With the operation of this flight, 2,030 seats will be available per week on this sector. For the first time, Jaipur will be linked to Bangkok and Kuala Lumpur, through the extension of the existing flight from Delhi. The twice-a-week flight, IC 847, will operate on Wednesday and Sunday. The airline has also planned a twice-a-week connectivity between Pune and Singapore from 13 December 2005. The A320 flight, IC 561/562, will operate via Hyderabad. On its domestic network, Indian Airlines has introduced BangaloreGoa-Bangalore flight, and a Bangalore-Pune-Bangalore flight, thus offering non-stop connection on both sectors.

Q Domestic air travellers in the country can look forward to a triple treat from Indian Airlines this festive season. As part of its constant endeavour to provide value additions to its product, Indian Airlines has re-launched the Super Saver scheme, and also introduced two innovative facilities for booking-Dial-a-Ticket and IA-IDBI ATM ticketing.

CRUISING HEIGHTS November 2005

Eastern Spice

PICEJET IS flying east. The airline announced the launch of its daily direct flights between Delhi and Kolkata. Operations began on November 6 on SpiceJet’s new Boeing 737-800 aircraft. A Red Hot Special launch fare of Rs 999, available until 30 November 2005, as well as a Red Hot Special fare of Rs 1,899, available for travel until 31 January 2006, and available for sale until 11 November 2005, subject to seat availability (Prices are exclusive of fuel surcharge), were the highlights.

CAPA awards

HE CENTRE for Asia Pacific Aviation (CAPA) will announce and present its Aviation Awards for Excellence 2005 at a gala dinner, hosted by Tourism Malaysia, in Kuala Lumpur, on 5 December 2005. Previous award winners, including AirAsia CEO, Tony Fernandes, will be present at the glittering event, on the first evening of the second Annual Asia Pacific Aviation Outlook Summit 2006. The CAPA Awards for Excellence are the epitome of strategic leadership, innovation and influence in Asia Pacific’s aviation industry. The awards seek to highlight these three

credentials, selecting the ‘outperformers’ of the industry. A panel of the Centre’s industry experts, applying pre-determined criteria, has judged all awards. It is

based on performance in the key areas during 2005.

CRUISING HEIGHTS November 2005

Magical Mauritius

AURITIUS TOURISM Promotion Authority recently organised road shows in Bangalore, Hyderabad and Ahmedabad with an objective of introducing diverse tourism products, enhancing visitor arrivals and launching ‘Magical Vacations’ campaign for the Indian market. Mr. Vijaye Haulder, Deputy Director, Mauritius Tourism Promotion Authority, led the Mauritius delegation, comprising of 23 leading tour operators and hoteliers. The delegates successfully interacted with around 215 Indian travel trade companies during the road shows. Mr. Haulder said, “India is an important market for us. We have already seen a significant increase in traffic inflow from India. We are keen on exploring the potential offered by different Indian cities and the burgeoning IT and ITES population of India; hence our campaign, Magical Vacations, would proactively propagate the exotic locales.”

SNIPPETS

HICAP award for Oberoi HOTEL INVESTMENT Conference Asia Pacific (HICAP), the pre-eminent hotel investment conference in Asia Pacific, which is the most important gathering of hotel investors, financiers and leading industry professionals in the region, honoured P.R.S. Oberoi, Chairman, The Oberoi Group, with the Lifetime Achievement Award at its annual conference in Hong Kong in mid-October. This award has been given in recognition of his long involvement and contribution to the hospitality industry and his pioneering leadership in making The Oberoi Group a global brand by taking the concept of luxury to a new paradigm. Speaking on the occasion, Mr. Oberoi said, “I am indeed grateful that you have honoured me. Building good hotels is not enough. It is important to create a pool of employees that share a common passion and vision.” Car Rally: ‘The Heritage Drive 2005’ from Delhi to Shimla, organised by Himachal Tourism in association with

Oberoi Hotels & Resorts, saw participation of over 50 vintage and classic cars. This unique drive has been conceptualised to recognise the effort made by owners in

Bollywood Dhamaka in Seoul

roducer and director Mahesh Bhatt commenced shooting of his new film, Gangster–A love Story, in Korea. “We are trailblazers from Bollywood who would like to emphasise the fact that globalisation does not mean Westernisation. We are delighted to be the first to be shooting in Seoul, particularly because the South Korean film industry has become a formidable force in world entertainment. “KTO is thrilled about the fact that South Korea is the new destination for the Bollywood film industry. We have been trying to come up with an effective marketing tool and integrated regional communication platform for the Indian market,” said Jeon Hyo Sik, Director, Korea Tourism Organization.

restoring vintage and classic cars to their past glory. The drive also aims at increasing awareness and interest in the cause of heritage motoring among all strata of society. This drive endeavours to encourage the preservation and restoration of vintage and classic vehicles as an integral part of India’s heritage. ‘The Heritage Drive 2005’ saw the vintage and classic cars pass through Karnal, Kalka, Parwanoo and Kairyghat over two days before reaching Shimla. The drive saw the participation of exquisite vintage and classic cars that included marques such as Rolls Royces, Buicks, Volkswagens, Chevrolets, Mercedes, Stude Bakers and Fords, some of which dated back to the 1930s. The drive will see the cars driving in hilly terrain for over 100 kilometres. As part of ‘The Heritage Drive 2005’, Oberoi Hotels & Resorts presented ‘The Rai Bahadur M.S. Oberoi Trophy’ for ‘Concourse d’Elégance’ to the most elegant car.

No more bouncing

OUNCING OF groups and repricing of room rates by hoteliers in view of the tourism boom will, hopefully, become things of the past under an agreement signed between the Federation of Hotels & Restaurants Association of India (FHRAI) and Indian Association of Tour Operators (IATO). The agreement, signed by M.P. Purushothaman (President) on behalf of FHRAI and Subhash Goyal (President) on behalf of IATO, gives details of the code of practices that will govern the future contracts between hoteliers and tour operators, putting an end to a long drawn out controversy and confusion plaguing their mutual relationship.

Eating out at KL

alaysia is all set to celebrate the fifth edition of KL International Gourmet Festival 2005 with an unprecedented line-up for dining opportunities. The main aim of the festival is to expand the awareness of dining options for Kuala Lumpur residents and visitors. Twenty-three of the city’s finest restaurants will present special festival menus that will be offered to diners at special festival prices. In addition to the dining offers, there will also be special wine and cigar offers. Guest chefs and numerous fringe events will all add to the glamour and prestige of the festival. The festival has also become one of the lynch pins of KL’s tourism industry because of the global spotlight that has been placed on the local culinary industry. Prices have become more competitive; establishments, extra innovative and supporting; food and dining promotions, more frequent and widespread.

Deccan Khabar AIR DECCAN has opened a new call centre. The average calls each day number 12,000. This new state-of-the-art call centre, which has been designed in keeping with the aggressive expansion plans of the airline, will be able to handle 25,000 calls per day, which is double of what was being handled previously. There are basically three key functions of the call centre, namely, enquiries, bookings and cancellations. The booking engine has been integrated with the universal airlines reservation maintenance software so as to provide real-time information about flight schedules, arrivals, departures, etc., to callers instantly. The airline has launched direct flights from Chandigarh to Jammu and back beginning October 31. So far, both cities had no air connectivity. Imagine a situation with a patient in cardiogenic shock, a heart attack, a trauma, somebody getting respiratory distress in high altitude, an old-age pilgrim in Himalayas getting shortness of breath—all these are pictures of a

CRUISING HEIGHTS November 2005

medical emergency requiring urgent help— equipped well enough to treat any eventuality not only on the spot but on way to a hospital as well. To meet these, an intensive care unit bed has been created in an aircraft, called ‘Air Rescue One’—a joint venture between Escorts Heart Institute & Research Centre and Air Deccan. Capt Gopinath, Managing Director, Deccan Aviation, said, “It is going to be a concerted effort from two leaders in the field of medical evacuation services. But it is not just for the rich. We are also in dialogue with insurance companies so that the services permeate to the common man, which is what happens globally.” The country’s first-ever in-flight shopping scheme, under the banner ‘Brand for Less’, was also launched recently onboard Air Deccan flights. This is in collaboration with AVA Merchandising. The scheme offers a wide choice of world-class brands for home, office and personal use at possibly the lowest prices in India. The scheme is targetting sale of approximately 25,000 products a month.

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The big bird arrives

HERE WERE hundreds of curious onlookers that crowded the harbour and Sydney international airport to view the much-awaited arrival of the A380—the gargantuan 550-plus seater from Airbus. The aircraft first flew to Singapore’s Changi Airport for a series of tests to ensure that the magnificent double decker is fit and ready to join Singapore Airlines, the launch customer for the aircraft. From there, it flew to Sydney for tests with Qantas, another of its launch customers. Ideally, the plane should have joined the two fleets around this time, but production delays have now postponed the launch to early 2006. As a result, Airbus is paying millions of dollars in compensation to its early-bird customers, which also includes Emirates.

In this photo released by Qantas Airways, the Airbus 380 passes over Sydney Harbour on its way to landing at Sydney’s International Airport.

Intercontinental odyssey CONTINENTAL AIRLINES kicked off the first Delhi-Big Apple flight with its non-stop 777 odyssey to New York. What it means is you can have dinner, breakfast and lunch as you zip your way saat samudar paar to the US in a spacious Boeing jet that will take slightly under 16 hours. “Continental is making history again today by linking these two great nations with non-stop flights for the first time,” said Jeffery Smisek, the airline’s President, who travelled to Delhi on the inaugural eastbound flight. Joining Smisek at the launch celebrations at Delhi’s Indira Gandhi International Airport were Sheila Dikshit, Chief Minister of Delhi and David C. Mulford, US Ambassador to India. For the record, flying times are approximately 15 hours, 50 minutes westbound and 13 hours, 55 minutes eastbound.

Nandini, Nandini! SHE LOOKED perfectly at home and why not. She was back where she always belonged to—by the side of Jet Airways boss Naresh Goyal. And her face said it all—happy, contended and relaxed. And, mind you, not once did she look at Vijay Mallaya, who had indulged in this high-profile poaching episode that shocked Naresh and surprised the civil aviation community. According to an insider, Nandini is in the midst of all the action— bilaterals, networking with the babus and generally keeping Jet Airways and boss Naresh cruising at 33,000 feet as far as the netas are concerned.

Basketball blues IT DOESN’T require an aeroplane to publicise the NBA, but who is to tell that to diehard marketers looking for that one final push. One of the most popular sports in the US and on par with baseball and American rule football, basketball has produced stars such as Michael Jordan and Magic Johnson. But those stars have long since retired, and it now requires a push from the skies to give a real fillip to the sport.

CRUISING HEIGHTS November 2005