Ch november 2009

cover nov final:cover novemver NEW.qxd

November 2009

11/2/2009

6:03 PM

Page 1

Rs 60

As Air India passes through its darkestever hours and looks for help to get back to its glory days, infusions of financial assistance alone will not be able to rejuvenate the crippled carrier.

Document1

10/29/2009

11:29 AM

Page 1

Edit page.qxd

11/2/2009

5:58 PM

Page 2

EDITOR-IN-CHIEF’S NOTE

Clear as the skies above

O

n Friday October 23, the pilots of a Northwest Airlines A320 failed to make radio contact with ground controllers for more than an hour and overflew their Minneapolis destination by 150 miles before discovering the mistake and turning around. The pilots didn’t become aware of their situation until a flight attendant contacted them on the intercom. Both the pilots were immediately placed under suspension as Delta Airlines (that owns Northwest Airlines after the takeover last year) and the US NTSB (National Transportation Safety Board) began investigations into the incident.

During investigation it turned out that the pilots were “out of contact” with ATC (air traffic controllers) for an extended period of time. They told investigators that they were distracted while the first officer was showing the captain how to use a new crew scheduling procedure on their laptops. Later, the Federal Aviation Administration (FAA) revoked the certificates of the two Northwest Airlines pilots and Delta made it clear that they would be sacked. In a statement the airline said: “Using laptops or engaging in activity unrelated to the pilots’ command of the aircraft during flight is strictly against the airline’s flight deck policies and violations of that policy will result in termination.”

The pilots though are no different from

4

their brethren in India. In a statement their association said: “In any aircraft incident, there is always more to the story than first appears in the press. At no time during the incident were the passengers, crew or aircraft in danger. The NTSB is an independent federal agency charged with determining the probable cause of transportation accidents and promoting transportation safety. They are not charged with prematurely releasing self-disclosed information to be sensationalized in the press.” But it made no difference to the eventual decision of the authorities and the airline.

Contrast this with the sloppy manner in which our own pilots are treated, irrespective of the gross violations that they commit.

Most recently, the DGCA probe established that the VVIP commander of a chopper in the President’s fleet had violated ATC directives while landing at Mumbai airport endangering the lives of passengers. One wonders what action the Air Force has taken against him after the report was finalised.

Or, of the two pilots who were hit by fatigue when they flew their Air India aircraft from Mumbai to Goa before discovering that they had overshot their destination. Or, more recently, when the two pilots caught in a scrape with the purser and air hostess on a flight from Sharjah to Lucknow.

The point we are pursuing here is not whether someone was to blame or not, but the fact that the entire process was transparent, swift and completely in the public domain.

CRUISING HEIGHTS November 2009

Document1

11/3/2009

12:44 PM

Page 1

Off the cuff

Content 2-3 march CH 2008 final new.qxd

Fresh air in the skies Does sitting in a pressurised airplane cabin for a few hours make you sick? The major cause for your discomfort is the air within the cabin. A recent report in the Economist points out that the risk of catching an infection is far greater in plane cabins where there are hundreds of people. Swine flu, for instance, spread quickly around the world by air.

Help, however, is at hand. Recently, two British firms-BAE Systems, a defence and aerospace giant, and Quest International, a small producer of equipment used to sanitise the air in hospitals and nursing homes-announced that they had successfully adapted Quest’s technology for use in aircraft. The new system, AirManager, can be easily installed during a routine overnight service and uses less power than a light bulb. Costing about $16,000 per unit (two are needed on a BAE regional jet and five on an aircraft like the 757), it is also capable of destroying all the bacteria, viruses and other biohazards in cabin air.

Air has to be pumped into an aircraft flying above 3,000 metres to keep the cabin pressurised. Air is ‘bled’ into the cabin from the air entering the compressor stage of the jet turbine (before it is mixed with fuel and ignited). This ‘bleeding’ is the cause of the ‘polluted’ air in the cabin because pilots often reduce the amount of air brought in through the ‘bleeding’ process to save fuel.

The mixed air is maintained in the cabin at a pressure which is equivalent to an altitude of 2,500 metres and is passed through highefficiency particulate arrest (HEPA) filters. Provided they are well maintained, HEPA filters will trap most microscopic particles. But some things can get through, especially tiny viruses. The new AirManager system is said to kill 99.999 per cent of pathogens in a single pass.

11/3/2009

12:30 PM

Page 2

contents

MAHARAJA’S SURVIVAL PROBLEMS p48 Not too long ago, Air India was the pride of the country. Today, the national airline is struggling to survive. Who is responsible for this sorry state of affairs? Is it the high salaries, the dwindling yields or bureaucratic apathy? A detailed analysis along with an insider’s view that sifts fact from the fiction.

OFF THE RECORD

p12

AI chief Arvind Jadhav has been sending ultimatums for the top officials to join their departments in Mumbai but there are a few who have yet to make the move. Meanwhile, AAI continues to make news: it has a signature tune and its ladies’ CSR cell has set up a paper-making unit.

CRUISING HEIGHTS November 2009

NEWS DIGEST

p16

A behind-the-scenes story on why the government refused to accept the Qatar Airways’ request to raise the number of seats. Also an analysis of the Q2 results of Jet Airways, Kingfisher Airlines and SpiceJet.

Fraport – Airport Operations from Austria to Xi’an.

The Company Fraport AG is a leading player in the global airport industry. Following its initial public offering (IPO) Fraport has become the second largest listed airport company in the world, by revenues.

Fraport’s expertise is based on more than 80 years of aviation history at Frankfurt am Main, Germany. Frankfurt Airport (airport code = FRA) is located about 12 kilometers from downtown Frankfurt. A renowned pioneer for decades, FRA serves as Fraport’s home base and as a showcase for the company’s know-how, technology, products, and services.

With outstanding connectivity to all five continents of the globe, FRA is a intermodal hub with one of the largest catchment areas in the world and direct access to the German high-speed railway network. FRA is strategically situated in the heart of Germany and the European Union. Airlines can profit from high utilization rates and traffic yields.

Range of services The company prides itself in being a leading-edge provider of integrated airport services. Besides managing FRA, Fraport AG and its subsidiaries provide the full range of planning, design, operational,

commercial and management services for airports around the world. Fraport AG serves as a neutral partner to the world’s major airlines: offering a complete package of aircraft, cargo, passenger and other ground handling services. Outside Germany, the company has ground services op-erations in Austria. Other areas of Fraport expertise include cargo and ground handling, real estate development, airport retailing, IT services, intermodal concepts, environmental management, hub management, training, etc.

Fraport worldwide Through investments, joint ventures and management contracts, Fraport is now active on 4 continents. Fraport served some 78.2 million passengers in 2008 and handled 2.1 million metric tons of cargo (airfreight and airmail) at the Group’s airports.

Fraport, which bids for airport management projects worldwide, was awarded a 30-year concession for operating, managing and developing Indira Gandhi International Airport (IGIA) in India. Together with state-run Airports Authority of India (AAI) Fraport AG has formed “Delhi International Airport Private Limited (DIAL)”.

Fraport is the nominated “Airport Operator” and an Airport Operator Agreement

concluded with DIAL – under which it will be utilizing its extensive airport expertise developed over the past 80 years to assist with the operation, management and development of IGIA. Currently Air India offers three weekly passenger flights and Lufthansa offers daily passenger flights from Frankfurt to New Delhi. From April, Air India plans to provide daily connections.

Fraport AG Frankfurt Airport Services Worldwide 60547 Frankfurt am Main, Germany E-mail: marketing@fraport.de Internet: www.fraport.com www.frankfurt-airport.com Contact: Ansgar Sickert Vijender Sharma Fraport Airport Operations India Pvt. Ltd. Paharpur Business Centre Suite 302 21, Nehru Place New Delhi – 110 019, India Phone: +91 11 4120 7355 (AS) +91 11 4120 7334 (VS) Fax: +91 11 4120 7558 Mobile: +91 99 1038 2806 E-mail: ansgar.sickert@fraport.in vijender.sharma@fraport.in

Content 2-3 march CH 2008 final new.qxd

11/3/2009

12:30 PM

Page 4

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

CRUISING HEIGHTS Volume IV No 7

Editor-in-Chief

K SRINIVASAN Managing Editor TIRTHANKAR GHOSH

Consulting Editor R KRISHNAN

Reporters

FOCUS

p36

Cathay Pacific’s is a remarkable turnaround story.

Buffeted by the downturn and an oil-hedging decision gone all wrong, the Hong Kong-based carrier has managed to get back into the black, largely due to the initiatives taken by its CEO Tony Tyler.

SPECIAL REPORT

p32

While airlines around the world are trying their utmost to reduce their carbon footprints, the IATA’s Giovanni Bisignani has mounted an initiative to reduce aviation emissions. What does all this mean? A report.

PUNIT MISHRA JASLEEN KAUR SREYA SHANDILYA

Art Director BHART BHARDWAJ

Design RUCHI SINHA PRADEEP JHA

Photo Editor H C TIWARI

Director

RAVI SHARMA (Mob. 9650433900)

Gen Manager RAJIV SINGH (Mob. 9810030533)

Regional Manager (Mumbai) MADHURI REKHI (Mob. 9769439988)

Asst. Manager (Corporate Affairs) AMIT SINHA

DIRECT DELIVERY

p41

Studies have projected that with the recession ending, international trade will rebound. Express companies will reap the benefits when that happens.

(Mob. 9650433099)

BACK PAGE

p70

Etihad’s cadet pilot training programme of inducting female recruits is paying off.

Today, there are quite a few proud ladies flying the carrier’s aircraft around the world.

Subscription JAYA SINGH (Mob. 9650433044)

Executive Director RENU MITTAL Editorial & Marketing office: Newsline Publications Pvt. Ltd., D-11 Basement, Nizamuddin (East), New Delhi -100 013 Tel: +91-11-41033381 / 82 Mumbai: Ms Madhuri Rekhi (Mob. 09769439988) Platina, 9th floor, C-Block, G-59, Next to Citibank Bandra Kurla Complex, Bandra (East), Mumbai 400051, Tel: +91 22 3953 0528

Cover : With apologies to Air India and its venerable Maharaja.

SNIPPETS

p58

GHIAL has been awarded the “Best Airport Environmental Performance of the Year” award by CAPA, GoAir turns four, celebrates with plans for travelers and adds Indore to its routes; Paramount emerges as the company of the year and a lot more.

8

Inside: A special Cruising Heights promotional feature on the Travel Agents Federation of India’s 2009 convention. This editorial pullout was distributed at the TAFI Convention in Chiang Mai, Thailand.

CRUISING HEIGHTS November 2009

All information in CRUISING HEIGHTS is derived from sources we consider reliable. It is passed on to our readers without any responsibility on our part. Opinions/views expressed by third parties in abstract or in interviews are not necessarily shared by us. Material appearing in the magazine cannot be reproduced in whole or in part(s) without prior permission. The publisher assumes no responsibility for material lost or damaged in transit. The publisher reserves the right to refuse, withdraw or otherwise deal with all advertisements without explanation. All advertisements must comply with the Indian Adver-tisements Code. The publisher will not be liable for any loss caused by any delay in publication, error or failure of advertisement to appear. Owned and published by K Srinivasan 4C Pocket-IV, Mayur Vihar Phase-I, Delhi-91 and printed by him at Nutech Photolithographers, B-240, Okhla Industrial Area, Phase-I, New Delhi-110020.

Document2

10/30/2009

11:56 AM

Page 1

Periscope 4-5 March 2008.qxd

11/2/2009

5:19 PM

Page 2

How does it matter?

PERISCOPE

“

We should not be concerned who owns the airlines flying into our territories, provided the civil aviation authority of the country certifies that they are safe and that they comply with all the regulations.

CARLOS GRAU TANNER, Director, Government and Industry Affairs, IATA.

LETTERS TO EDITOR

The story (Meltdown cometh, October ‘09) was a delight to read. The aviation sector worldwide has been going through one of its worst phases for nearly a year and is still recovering as has been mentioned in the story. It is time for the sector to play its cards right. With airplane manufacturers Airbus and Boeing optimistic about the future, it won’t be long before the aviation sector springs back. In addition, the aviation industry should also take its environmental responsibility seriously while reducing carbon emissions to fight climate change.

Santosh Dalal, Rohtak October 2009

TAAI@Dubai: Showcasing India to the world

Rs 60

Express Industry: Reform in regulations must

Illustrations: Rajeev Kumar

I want to congratulate you for presenting the air cargo section in a new avatar. The overall ‘look and feel’ of the section is interesting and it has become more readable and lively than before. As a sincere reader of the magazine particularly the air cargo section, I was expecting it for a long time. I liked the section last in/ first out preciously for its sharp analysis on the Indian cargo industry. I hope, in the future also, the magazine would surprise its readers with more innovative content.

Manohar Singh, Jaipur

10

The column (A crowd must be regulated, October ’09) presented some jaw-dropping facts about the airline industry. As a matter of fact, the columnist analysed the Indian aviation scenario which has been seeing its worst days. The column pointed the pros and cons and lambasted the bigwigs of the Indian aviation industry.

Truly, there is no use of these symposiums unless and until suggestions rendered in these symposiums should be practically applied in furthering the interests of the Indian aviation sector.

Kailash Sahay, Lucknow

Organising moolah Yes, we are planning both rights issue and GDR placement. The combined amount will be about 150-175 million dollars. Timing will be before March 2010.This includes about Rs 1,800 crore being given in advance to aircraft manufacturers against future delivery of planes.

RAVI NEDUGANDI, Director, Kingfisher Airlines.

AAI for UDF We will submit the proposal for UDF at our airports to the Public Investment Board and the Airports Regulatory .The proposed UDF is around 70 to 80 per cent of the amount charged at private airports.

AAI Chairman V P AGRAWAL on the decision to have User Development Fee.

Revision mode We would revise the UDF at Hyderabad and Bangalore airports and also the development fee at Delhi and Mumbai.

AERA Chairman YASHWANT BHAVE on his plans ahead.

Maharaja's MoU Air India has become the first company to be associated with the Commonwealth Games, and we will put our best foot forward as an official carrier.

Air India Chairman and Managing Director ARVIND JADHAV after signing the MoU.

All correspondence may be addressed to Editor, Cruising Heights, D-11 Basement, Nizamuddin (East), New Delhi -13, OR mail to cruisingheights@newsline.in

CRUISING HEIGHTS November 2009

Oh no, not at all!

Our cabin staff have adequate opportunities and platforms internally to share feedback and concerns and ensure that they are heard and addressed as needed.

PRAKASH MIRPURI, Kingfisher Airlines spokesperson, on the news that their spritely air hostesses were jaded and tired.

Periscope 4-5 March 2008.qxd

11/2/2009

5:19 PM

Page 3

Business Class, anyone?

BA will use Airbus A318s and carry only 32 passengers. The aircraft have been equipped with 32 lie-flat seats as well as internet and text-messaging capabilities.

Westbound planes will have to refuel at Shannon airport in Ireland and passengers will be able to clear US customs there.

The flights-two daily in each direction-have

COLD STATS

taken over Concorde's old numbers BA001, BA002, BA003, BA004.

Return flights start around ÂŁ4,000 for a semi-flexible ticket; a fully flexible option costs over ÂŁ5,800.

Three London to New York business-class-only airlines collapsed between late 2007 and mid-2008 Silverjet, Maxjet, Eos - hit by rising oil prices.

British Airways' recently launched its businessclass-only flights between London and New York.

LOOKING GLASS Welcome to the Strong Arm Aviators flight! For your viewing pleasure we have a free bout up in the air.

Sit back and enjoy...

No impact Even if full-service airlines are converting their planes to a single class, it hardly makes any difference. I do not think it will have any downward pressure on the fares because the market is huge.

Spicejet CEO SANJAY AGGARWAL on the LCC rush in the Indian skies.

Hung up on growth One should be cautious in taking decisions and think for long-term. There was extreme emphasis on growth. But we were fortunate enough to restructure the delivery of aircraft, when the global economic slowdown hit the airline industry.

WOLFGANG PROCK-SCHAUER, former CEO of Jet Airways, soon after leaving the company.

CRUISING HEIGHTS November 2009

11

Off the Record nov.qxd

11/2/2009

6:12 PM

Page 2

OFF THE RECORD

AAI celebrations

T

he Airports Authority of India (AAI) is gathering steam; there is no doubt about that. In September, the Authority released their ‘signature tune’ at a well-attended function at Delhi’s Siri Fort Auditorium.

The tune written by Sameer and put to tune by Aadesh Shrivastava is catchy, contemporaneous and is as good, if not better, than some of the other signature tunes that one hears ad nauseum. Both, the music director and the writer were present on the occasion during the release ceremony.

It was a gala function that also saw a wonderful performance by spastic children to the signature tune. Also released on the occasion was the official

newsletter of Kalyanmayee: the organisation of the AAI ladies headed by the Chairman, V P Agrawal’s better half, Mrs Archna Agrawal.

That Kalyanmayee has also completely undergone a metamorphosis is evident from the remarkable papermaking unit that they have set up at Rangapuri, the sprawling AAI camp behind Vasant Kunj. The project is unique in that it uses all the waste paper generated by the AAI and put it to positive use at the paper-making unit. As Mrs Agrawal said: “The idea is to use all this waste for a good, environmentfriendly cause.” And, in keeping with the spirit of the occasion, the unit was launched on Gandhi Jayanti, October 2.

(Above) Photos from the ‘signature tune’ release ceremony that was marked by the presence of music director Aadesh Shrivastava and lyricist Sameer; (below) AAI Chairman V P Agrawal, inaugurating the paper-making unit at Kalyanmayee’s function.

12

CRUISING HEIGHTS November 2009

Document1

10/30/2009

11:48 AM

Page 1

Off the Record nov.qxd

11/2/2009

6:12 PM

Page 4

OFF THE RECORD

Is Jadhav

going to act?

N

ot everybody asked to report to Mumbai has moved to Mumbai and amongst those believed not to have moved are Executive Director (Customer Services) Manjira Khurana and ED (Coordination), Vinita

pusher who has usually delivered what is asked of her. On that score there is no doubt at all.

Vinita Bhandari is a different story altogether and those who have worked with her in the past have plenty of tales to tell. But that’s not the point. She gets the award for the airline employees who have been continuously promoted over the years without getting out of the capital. Now that must require some dexterity and some networking skills. Reportedly there has also been talk that those on the transfer list may not Manjira Khurana Arvind Jadhav move, but Jadhav may be sent packing. So you Bhandari. Amongst those pushing for see the clout of some people in the capital.

Manjira to be retained in Delhi is Civil But no one is looking at her. Everyone Aviation Secretary, Madhavan Nambiar is watching Arvind Jadhav instead. He has who believes that she is the most compe- issued ultimatum after ultimatum. Is he tent and diligent worker and needs to be now going to act or not? That’s the quesgiven her due. To be fair to her, she is a tion.

It’s going to be

in December

W

ell the common man’s story, the autobiography of Captain Gopinath of Air Deccan (later sold to Kingfisher) will be launched formally in December. All’s set with the book. It has gone to print and the launch is scheduled for mid-December. But the publishers and the good Captain are still tossing between Delhi and Bengaluru for the launch. Meanwhile, the formal launch of Deccan Logistics takes place on December 4 when Praful Patel cuts the tape at the cargo airline’s Nagpur facility. Good Luck, Captain!

14

CRUISING HEIGHTS November 2009

Beri

Arrives!

T

he two most popular Regional Directors in the Air India establishment, are RD (North) Vijay Paul and RD (West) Harihar. In stark contrast to the ‘no upgrade’ policy, all civil servants (read IAS) get their upgrades through the good offices of these two notables and reports are that they get their instructions from Mr Jadhav’s office. Kya ho raha hai Jadhav Saab? One rule for the plebians and Air Indiawallas and one for the babus. Kuch samaj nahin aaya!

Now there are two people who are making waves in Air India.

One is Captain Beri, who was appointed as a Director in the Northern region during the tenure of V Thulasidas. He has now joined the office of the present CEO Arvind Jadhav. The other person is Karan Khera. Now who is this gent who is like a shadow to the AI CMD? Watch this space for an update.

Document1

9/23/2009

10:44 AM

Page 1

NewsDigest 23:NewsDigest 23.qxd

11/3/2009

3:12 PM

Page 2

NEWS DIGEST

Middle Eastern Tales

NO TO MORE FLIGHTS FROM THE MIDDLE EAST: Aircraft at Dubai airport.

I

t is now becoming very clear to bureaucrats in the Ministry of Civil Aviation that should any foreign airline ask for increased flights under an improved Air Services Agreement (ASA) or what is generally called a bilateral, the reply has to be an unequivocal, ‘No’. Soon after the Air India meltdown some months ago (the melting, however, started much earlier), Rajiv Gandhi Bhawan decided to go very slow on a bilateral which incidentally manifested itself in the postponement of FlyDubai’s maiden flight to India.

The first signs that there would be a serious relook at the bilaterals came at the Routes Asia conference in Hyderabad in March this year when the recently (at that point in time) appointed Joint Secretary in the Ministry, Prashant Sukul, made it plain that there was a need to revisit the bilaterals.

It was an acceptance that the government was finally heeding to voices from many different corners. Since then, the two high profile cases of bilaterals on hold are that of FlyDubai and Qatar.

A recent case in point is that of Qatar Airways. The Qatar government mounted a vigorous campaign through their ambassador and the Indian Embassy in Doha for more seats for Qatar Airways. It was understood that the new deal would

16

have taken the weekly frequency of seats offered by either countries from the existing 8,000 to 13,000. But the Qataris desired that this should be raised to 36,000 seats a week or two-thirds of what Emirates of Dubai had been given. It may be recalled that when the issue of liberal bilaterals hit the media soon after the Air India meltdown, Civil Aviation Minister Praful Patel had said in one of his interviews that it was because of the

pressure from the Ministry of External Affairs which said that the MoCA should sign a liberal deal with Qatar as India was going to get gas from there.

Civil Aviation Secretary Nambiar and Prashant Sukul were opposed to this carte blanche and what was finally given to the Qataris was an additional ‘4000 seats’ as a temporary measure for the winter schedule.

Sukul is also believed to have later written

QATAR DEMAND WERE SCALED DOWN: A Qatar Airways plane at Doha airport

CRUISING HEIGHTS November 2009

Document1

11/2/2009

1:29 PM

Page 1

NewsDigest 23:NewsDigest 23.qxd

11/3/2009

3:12 PM

Page 12

NEWS DIGEST to the Ministry of External Affairs asking for the tangible benefits of such an increase and pointed out that they were yet to hear of the spinoffs (as had been promised) of the earlier increase in the seats. But it is a tricky situation no doubt considering that Indians are the biggest overseas group in Qatar and growing by the day.

Those in the know say that the Civil Aviation Ministry was under pressure from the Principal Secretary to the Prime Minister who wanted the additional seats to be agreed upon. But Nambiar and Sukul said ‘no’ and that was the end of the matter. However, not wanting to annoy the Qataris, it was decided to offer them 4,000 additional seats for the winter schedule including two new stations of Amritsar and Goa. “We have no objection to anyone coming to Goa, the more the merrier. As far as Amritsar was concerned, they had lost out to British Airways and Singapore and wanted some international flights. Qatar came in handy,” said one officer who declined to be named.

Even as this news percolated down to other foreign airlines, mainly Gulf-based, a few of them began to observe self-restraint.

A VIEW OF OMAN AIRPORT: Gulf-based airlines are practising self-restraint.

will return one A 330 by end-October 2009 and another it has on lease from Jet Airways on November 22, 2009. This follows the delivery of the third A 330 to Oman Air earlier in October 09 and four more in a staggered way between now and March 2011. But Oman Air, at the same time

carriers and, therefore, Oman would have to make do with what it had at present.

For the future, however, Oman will ask for more and since it is not like other carriers and primarily focusing on the Muscat-IndiaMuscat traffic, there should be no difficulty.

It may be pointed out here that Gulf-based

(L-R) Akbar Al Baker, CEO, Qatar Airways; Peter Hill, CEO, Oman Air; Madhavan Nambiar, Secretary, Ministry of Civil Aviation; and, Sheikh Ahmed, Chairman, Emirates.

This was already evident from the statements of Oman Air CEO Peter Hill who was once the top executive of Sri Lankan Air when it was under the management of Emirates. It is a different story that Hill had to go because of some unpleasantness between him and the Sri Lankan government. He departed from Sri Lanka and after some rest joined Oman Air as CEO. Well aware of the Indian conditions, he recently stated that Oman Air had reached capacity on all its Indian routes and could add more only if it got additional rights, which at the present juncture appeared very remote for obvious reasons.

The failure to get additional rights has already manifested itself in the decision to return two leased A330s from Jet Airways which recently had invited offers to take them on lease besides a few B777s. It is now known that Oman Air

18

through its official channels, had indicated to the Indian government that it desired to enter into talks to enhance its network in this strong market.

Peter Hill informed the Gulf media that “we have always done well in the subcontinent” (what is the sub-continent without India) and the whole airline was built around it.

Oman Air at present served ten routes to India and had passenger loads exceeding 70 per cent all the year round. He even described the Indian market as its rice bowl and money chest. While indicating that Oman Air was keen to increase frequencies to India, he admitted that this was not an opportune time to open fresh talks for fresh enhanced bilateral entitlements. Peter Hill, obviously as a well-informed person, said India had already knocked back quite a few CRUISING HEIGHTS November 2009

carriers virtually evacuate one-third of the India-Europe and India-US traffic via their home hubs be it Dubai or Abu Dhabi and to a lesser extent Doha, Bahrain, and even Sharjah for traffic to Europe and the entire Middle East as is being done by Air Arabia.

While Indian carriers are utilising their entitlement more to Abu Dhabi than Etihad, the carrier of Abu Dhabi, the latter is carrying more passengers out of India via its Abu Dhabi hub to Europe and US. Etihad like Emirates is increasingly advertising in the Indian media of its excellent connections to London and the west coast of US via its home hub. This obviously Oman Air is not doing. And unlike the big birds, Oman Air is using narrow bodies like the Boeing 737 for its operations to India and instead of a single economy class Oman Air is offering improved business class seats.

Document2

11/2/2009

2:08 PM

Page 1

NewsDigest 23:NewsDigest 23.qxd

11/3/2009

3:13 PM

Page 14

NEWS DIGEST

I

t used to be daily fodder some weeks ago that SpiceJet may buy out this or that airline. We heard that Spice is in talks with IndiGo for an alliance before it actually took over; no matter if the fleet types were different. Then one day Spice CEO Sanjay Aggarwal flew GoAir from Mumbai to Delhi with Jeh Wadia, which again led to speculation that SpiceJet was keen to buy out Go. But the news was dissolved with the same speed with which it hit the headlines when Sanjay Aggarwal said there was no truth in that. The takeover or alliance speculation, which was part-sponsored and part-imaginary, slowly went out of circulation before it again hit the media after SpiceJet showed some profits in its balance sheet. Then we heard the news that SpiceJet’s original promoter and London-based NRI Bulu Kansagra and our own desi promoter Ajay Singh may look forward to May 2010 when SpiceJet completes five years and could get ready for international flights.

About the international forays, Sanjay Aggarwal recently stated that it could be to Riyadh and Damam and also MumbaiKathmandu and Chennai-Singapore.

SpiceJet, which has on date, 19 Boeing 737 NGs, will acquire 9 more 737s by January 2012 and while US and Europe were not on its radar, it could well seriously look at West Africa and South-East Asia. As recently as mid-October ‘09, Sanjay Aggarwal told the media that SpiceJet would be open to acquiring other airlines only if it added to its earnings. Thus in a way the buoyant optimism of Sanjay Aggarwal has begun to slowly give way to caution which is a good thing in times of recession.

But what we have heard in CRUISING HEIGHTS is that the speculation was not without basis. It is true that Jet Airways which is desperately trying to convert its Indian domestic services into a low-cost affair has opened talks with SpiceJet to reap benefits of commonalities. Both the carriers

Ajay Singh

Naresh Goyal

Bulu Kansagra

Wilbur Ross

A mega alliance in the making use Boeing 737 NGs and, therefore, could have operational alliance in engineering and ground handling. As our sources said the alliance would be explored between Jet’s LCC babies, Jet Airways Konnect, JetLite and SpiceJet. Should this happen, it will save huge costs in terms of operational savings for both the airlines. But there

ALLIANCES IN THE AIR: Jet and SpiceJet aircraft on the tarmac at Delhi airport.

20

CRUISING HEIGHTS November 2009

would be no codesharing, cross-selling of tickets and joint fuel management and the alliance would be for aircraft on ground.

The latest Jet-Spice alliance news comes nearly a year after Jet’s Goyal and Kingfisher’s Mallya rode an electric car to pose before cameramen during the first India Aviation Show in Hyderabad in October 2008 to announce a similar alliance which by the way also included codeshare.

While no one has seen the alliance actually getting into operations, Kingfisher Airlines spokesperson maintained that it was very much on. But what we have heard is actually beyond all alliances — whether with Kingfisher or SpiceJet. Our sources state that the game is now beyond the likes of Ajay Singh and Sanjay Aggarwal.

Recently, the Jet management (could be an euphemism for promoters) and SpiceJet management (again an euphemism for the main stakeholder W L Ross) and their close representatives met to seriously explore the possibility of forming a real alliance or near merger which would involve a no cash deal but share swap. At that time, say in September 2009, the shares of the two airlines were trading at a value ratio of 1:10 or one Jet Airways share for ten SpiceJet shares and which still remains the ratio in the BSE. So, with no cash transaction, it could become even easier to form an alliance. It is not just a coincidence that Jet Airways CEO Wolfgang Prock-Shauer left around the time such talks began and even SpiceJet management is under some kind of churning. The sources tell us that the talks have the backing of Wilbur Ross who owns nearly 31 per cent in SpiceJet. By December 2009, some of the FCCBs (Foreign Currency Convertible Bonds ) could come in for conversion. This may or may not be true but the fact of a possible alliance in the true sense involving possibly a share swap was certainly discussed at the right level between the two airlines. It is well known that Kansagra has been wanting to cash out but has not found an opportune time. At the same time, W L Ross does not want Ajay Singh to get into the serious management seat.

So, the news that appeared of on ground alliance was only a disguise for a real marriage. But then why has it not taken off. Simply because of JetLite that the SpiceJet guys abhor and do not want to be seen anywhere near. On the other hand, Jet Airways is fighting a legal battle with the Sahara group to sort out the issue. Sahara has asked Jet to pay it the balance of more than Rs 500 crore that Naresh Goyal has not paid and the Bombay High Court, which was adjudicating the matter, wanted

Document1

8/22/2009

2:46 PM

Page 1

NewsDigest 23:NewsDigest 23.qxd

11/3/2009

3:13 PM

Page 16

NEWS DIGEST

Returning the hardware

SpiceJet’s Sanjay Aggrawal

this to be decided between the two in arbitration. However, the two parties could not agree on it and referred the case back to the High Court and which is where the matter now rests.

SpiceJet sees JetLite as some kind of “kabab me haddi”. Jet’s Naresh Goyal, on the other hand, is unable to extricate the haddi from the kabab or is it kebab as Ross would like to call it. SpiceJet flies 127 flights a day to 18 cities with its 19 Boeing 737s. Jetairways Konnect operates nearly 56 aircraft under the LCC model and JetLite has a fleet of 23 aircraft of which 16 are Boeing 737s and the remaining CRJs, which came in as excess baggage when Goyal bought the airline from Sahara Shri. Nearly 70 per cent of Jet’s domestic flights are in the LCC category or low fare category. Naresh Goyal feels he should ultimately convert his domestic operations into a full-fledged LCC offering virtually low or very small twin class flights to connect business class passengers flying Jet Airways international flight where he will continue to provide first and business class.

It is no coincidence that Wolfgang Prock -Shauer who always spoke against the LCC model in India, left Jet Airways when the airlines had begun to think big on LCC in India, like a Southwest of the US which has never made a loss in its 28-year long commercial flying history.

There is yet another side to this story.

We are told when SpiceJet indeed gets rights to fly foreign routes, and if the alliance comes into being, then we could well have more LCCs flying the nearby Gulf and South-East Asian routes. After all, are we not seeing the Air Arabia, Nokair, Tiger Air, Air Asia and our own Air India Express?

22

O

wing to mounting losses, Kingfisher Airlines has reportedly returned 19 leased aircraft mainly A 320s in the past 11 months. The airline also faced some trying moments when GECAS (GE Commercial Aviation Services) took away three of its aircraft for nonpayment of lease rentals, which is not unique in the aviation industry especially at a time when the industry has been severely impacted by recession. KFA also, at present has about dozen aircraft on ground because of various maintenance and engineering issues like unavailability of serviced engines, etc.

Its capacity has shrunk by nearly 20 per cent and is in line with what Vijay Mallya had announced a year ago when recession-hit Indian carriers badly driving down both loads and yields. With just about 60 aircraft we are told Kingfisher Airlines is now operating nearly 74 per cent capacity

of its fleet in the low fare category though its low fare flights are not exactly like that of IndiGo which offers no hot beverages — tea or coffee — and which even SpiceJet began serving nearly a year ago.

Only recently, Mallya told the media that it is no longer possible to sustain such huge losses. We don’t know if Mallya’s appetite for risk has now been overfed. But it looks like that given the info that he has

postponed his plans to connect London from Delhi. It is also a different issue that the babus in Rajiv Gandhi Bhawan were not too keen to allow it lest it killed their own Air India and also partially Jet Airways by further depressing the loads and hence yields as well.

CRUISING HEIGHTS November 2009

NewsDigest 23:NewsDigest 23.qxd

11/3/2009

3:13 PM

Page 17

Go, Paramount, go

T

he media recently reported that Coimbatore-based Paramount Airways promoter M Thiagarajan was in talks with GoAir promoter Jeh Wadia to buy out the Mumbai-based LCC GoAir for a song of Rs 150 crore and also offer a small stake in his company in return. But Paramount would not take any of GoAir’s debts. This early-October “breaking news” came when there was another rumour floating in Delhi and Mumbai that SpiceJet CEO Sanjay Aggrawal was yet again in talks with GoAir for a possible buy out as Spice felt it was getting a tough competition from GoAir in some of the routes it was operating from Mumbai.

While the Spice story lost steam soon, the one involving Paramount and GoAir gathered steam. After being in silent mode for nearly 48 hours, Paramount said it was not in talks with Go for any takeover. Jeh Wadia reacted by saying that “in the light of recent speculative press reports, GoAir refutes any contact with Paramount Airways”. Wadia remarked that GoAir had received a number of proposals for investment in

the airline which was a testament to the shareholder value being created, but GoAir board had decided not to proceed with any of the proposals and instead focus on its business plan of inducting to its existing brand new fleet of eight A320s, another 12 A320s completing its order of 20 Airbus A320 aircraft worth $1.2 billion which the company had placed in July 2006 with Airbus Industrie.

But what is otherwise “available in public or is it financial circles and banking domain” is the reported debts of the two airlines. Notwithstanding its USP of “No Middle Seat”, Paramount is allegedly carrying a debt of Rs 300 crore since it launched commercial operations in October 2005. Paramount Airways was started by M Thiagarajan in early 2005 with family investment. Later, it is believed that he sold a small stake to Kotak and a little less to Bennett and Coleman. The latter was on barter basis. In any case Thiagarajan’s main business of textiles has been doing well except for some skirmishes after the global meltdown.

Thiagarajan himself is a keen aviator and that drew him out of the traditional family business of textiles to try his hand in aviation or run an airline. Nearly three years after the launch of his airline, Thiagarajan had been talking of first consolidating his position in South

India before moving to West and North India and which he began doing from early 2009.

After Paramount was launched in October 2005 and till October 2009, in four years, the fleet of Paramount has remained at a total of five Jets: two E170 Embraers and three E175 Embraer Jets with seating for 72 to 80 persons without the famous middle seat. The reason for having at least five aircraft may be largely due to the government policy which allows scheduled domestic carriers to fly foreign routes after five years continuous flying in the domestic skies and also subject to other conditions that include having a minimum five aircraft fleet.

Even as the above report clarifies a certain position, it was not missed by critical observers that Paramount Airways had also been highlighting its presence and this continued till June/July 2009 (something akin to what Capt Gopinath did in his short-lived airline dream — a la Air Deccan — but was lucky to cash out and in turn leave Mallya in the deep red). In February 2008, the airlines said in a press release that Paramount Airways would be inducting two more Embraer E170s to its fleet in April/May 2008 which would take its total to seven. It then said in the whole of 2008, it would acquire seven Embraer aircraft and another 15 such aircraft in 2009 taking the total number of Embraers with Paramount Airways to 27. And by 2010, it would expand its fleet to 40 to enable allParamount’s M Thiagarajan

CRUISING HEIGHTS November 2009

23

NewsDigest 23:NewsDigest 23.qxd

11/3/2009

3:13 PM

Page 18

NEWS DIGEST

class airline and its business model was unique and the first of its kind in the world of aviation. It had done away with cramped economy seating and offered gourmet food and luxury at affordable effective pricing”.

Paramount Airways Corporate Communications said on July 16, 2009 that from the third quarter of 2010, Paramount would become eligible to fly foreign routes after having completed five years continuous flying in the domestic skies.

The airline will fly to Far East like Hong

(Top) A Boeing 777 taking off and (right) at the Boeing assembly line.

India connectivity. In this context, it was stated by Paramount that it enjoyed a market share of 27 per cent in South India.

But as on date Paramount has only five Embraer aircraft: two E170s and three E175s.

Explaining the position, Paramount Chairman Thiagrajan states: “Everything is as visualised and spelt out. There have been delays because of market conditions. On November 9 and 11, we shall be taking delivery of two more Embraer (E 170) jets bringing our total fleet strength to seven and as the market conditions improve I can assure you that we will be adding the numbers as promised.”

The Paramount chief even said that once it completed the five years mandatory domestic flying, it would fly over a longterm to the US and Europe. In fact, Paramount Airways was quoted in media that it was in talks with Boeing and Airbus to buy either the Boeing 787 Dreamliner or Airbus A350 for its European and US connections. However, till such time these aircraft entered commercial service, Paramount would be happy to take on lease — in the interim — either Boeing 777s or Airbus A330s. This was stated even as recently as March 2009 when the global aviation industry as a whole was, and as is, still going down.

On June 19, 2009, during the Paris Air Show, there was a joint announcement by Paramount Airways in Chennai and Airbus Industrie from Paris about the deal that had been struck between Paramount and Airbus.

As per the deal, Paramount had signed a MoU with Airbus for the purchase of ten A321s and another ten A321s as options.

The funding was to be done by the European Central Bank.

On the occasion, Thiagarajan, in a joint press release, said: Today marks an

24

important and strategic landmark in our expansion plans and in particular our goal to become a leading international carrier. The A321 will help realise these ambitions and attainable goals and we are delighted with our aircraft choice. With the new aircraft Paramount Airways will launch services operating from key hubs.

Paramount has created a niche for itself in the domestic market by flying smaller aircraft as compared to other airlines operating with 150-180 seaters. The airline will follow the same strategy of right-sizing in its international operations. The airline is assessing opportunities to fly to the Far East and Middle East. Paramount will offer the same distinct experience to its international passengers with luxurious seating, gourmet cuisine and value-added services. It further said Paramount Airways is an “all-business

GoAir’s Jeh Wadia

CRUISING HEIGHTS November 2009

Kong, Singapore, Bangkok, Colombo, Mauritius and Maldives besides Middle East cities like Doha, Sharjah and Abu Dhabi. It did not mention Dubai.

What is well known in the civil aviation industry is that the A321 is, perhaps, the most inappropriate aircraft for the Gulf and South East Asian sector. You use either the smaller A320s or B737-800s or the bigger A330s, B777s, etc. Look at SIA or Emirates which offer a far better premier class product than Paramount. Secondly, the yields into and out of India have fallen so badly that many airlines are trying to make up for it in other sectors. “We have carefully evaluated all aircraft and our decision to go for the A321s is based on the assessment that it is the best in its class for the range for the destinations we are looking at. For example, I can use this aircraft to fly to Taipei and Hong Kong from our base in Chennai,” said Thiagarajan On September 24, 2009, ECC Leasing Company Limited based in Dublin, Ireland moved the Madras High Court to appoint an advocate commissioner to seize, wherever it found two aircraft (E170 Embraer) leased out to Paramount Airways.

ECC had given on lease these two Embraer E170s LR aircraft as per the agreement entered into with Paramount Airways on May 5, 2005 for five years. Paramount was to pay a monthly rental of $185,000. ECC issued a notice of termination on July 31, 2009 to Paramount as the airline defaulted

Document1

8/28/2009

1:23 PM

Page 1

NewsDigest 23:NewsDigest 23.qxd

11/3/2009

3:13 PM

Page 20

NEWS DIGEST

A prototype of the Airbus A 320 in flight: It makes no sense to fly one of these birds on the Gulf or South East Asian routes from Indian destinations.

in paying the rentals. Paramount made a part payment of $11,09,780 on August 15, 2009 and another $12,58,085 remains due.

Paramount then said it would pay two months arrears on or before September 30, 2009. The case was later posted for hearing in October 2009. According to insiders at Paramount, the matter has been resolved and there was considerable ‘misunderstanding’. This insider, who declined to be named, said that there was a certain amount of money paid with each installment as security deposit for servicing.

Since the servicing was taking place at the Chennai end, they wanted this money to adjusted against the lease rental which, the source clarified, has since been done.

During the same time, GECAS (GE Commercial Aviation Services) wrote to DGCA and Paramount to hand over the three Embraer E175 aircraft to it for nonpayment of lease rentals. Paramount, however, objected stating that it had recently paid huge sums to GECAS and also an additional deposit of five million dollars which could be used by GECAS and adjusted against the pending rentals. It has since been resolved, the same source said and added that GECAS had now offered the same aircraft on further lease on the expiry of the present arrangement next April. In fact, the source said indignantly, GECAS was told that their attitude could seal the fate for the engine order (Thiagrajan confirmed that he would be making the choice of engines at the Dubai air show) and wondered how they would feel if the order was switched from CFM to Rolls Royce?

Thus, whether it is the Irish leasing company or the US leasing company, delays in lease payment are now being construed as defaults and such leasing companies know more than the airlines that yield both within and outside India, have fallen sharply as with the loads. But will these developments have its impact on the

26

Toulouse-based senior official of Airbus Industrie who was in touch with Paramount officials for the sale of A321s ? We were told that the Airbus Industrie representative could not meet the key persons who had sealed the MoU. But a never-say-die Paramount management was last heard conducting a series of interviews to recruit pilots for its future fleet in September ‘09 in Chennai.

So what does one make of the takeover stories? In retrospect it appears that every airline promoter believes in a fair bit of hype lest he loses his leased aircraft and market share consequently. Otherwise, despite knowing about such developments,

Airbus VP (Marketing) Dr Kiran Rao

how could there be such speculative stories and studied silence thereafter?

GoAir: At the end of September 2009, the much-awaited part-animation and partdrama “The Age of Stupid” premiered around the world featuring Nusli Wadia, his aviator son Jeh Wadia and his GoAir. Jeh was shown asking a question: “How many people can afford a one rupee fare?” I CRUISING HEIGHTS November 2009

would imagine every single Indian can, he replied. The issue related to global warming, holes in ozone layer being caused by excessive flights of commercial jet liners. However, this clearly brought out the view of Jeh Wadia who still feels that a one rupee fare can attract passengers but what he does not say is it does not help in building an airline as Air Deccan’s Capt Gopinath realised, or Naresh Goyal for that matter after he bought Air Sahara and converted it into JetLite.

Jeh Wadia and GoAir are in the same position but it is not that bad because of family funding till now. When it will stop we don’t know. But one thing has definitely happened. Neither Jeh Wadia nor anyone in GoAir ever talks even remotely optimistically of what this airline proposes to achieve. GoAir was set up in June 2004 and in June 2005, Jeh Wadia announced the launch of GoAir from October 2005 though it was actually launched only in November 2005. At that time, he said the airline would have a fleet of 20 A320 aircraft — all leased. As per the plan, GoAir was to induct nine A320s in the first full year of operations - 2006 — and another 11 A320s in the second year or 2007. Incidentally, these were the years of the aviation boom in the country. GoAir in July 2006 placed orders for 20 A320s of which ten were firm and ten options. For many reasons, GoAir could not stick to the delivery/induction schedule of its proposed leased/owned aircraft. But at the height of the boom, it said GoAir would increase its fleet size to 19 by January 2009 and to 34 aircraft by March 2011.

The early optimism suddenly disappeared as did the family support somewhere along the line. So what GoAir really was flying in March 2008 was only six A320s which has risen to eight A320s in October 2009. In between, GoAir and its promoter Jeh Wadia would often be quoted

NewsDigest 23:NewsDigest 23.qxd

11/3/2009

3:13 PM

Page 21

in the media that GoAir was looking to divest equity, induct more funds for fast expansion, etc. It even approached many Private Equity firms for sale of minority stake and had valued the airline overall at $400 million or around Rs 1650 crore, less than what Jet had bought Air Sahara a much older airline with larger fleet and foreign operating rights. GoAir even discussed the prospects of stake sale with Ernst and Young.

In between, there were stories of GoAir being taken over by SpiceJet, which received $80 million from takeover specialist Wilbur Ross of US. So, the initial enthusiasm which one saw with Paramount’s Thiagarajan was also exhibited by Jeh Wadia for his GoAir. If Paramount has allegedly debts of Rs 300 crores, GoAir’s debts are believed to be Rs Airbus Industrie for 20 A320s?

450 crore. If Paramount has a market share Investigations show that GoAir has so of just two per cent, GoAir has a share of far received six A320s and another 14 to five per cent in India’s domestic aviation come. Meanwhile, Jeh Wadia did a sale market. The turbulent times GoAir has lease back of six A320s besides leasing two gone through in the recent days has seen its more A320s. This was done to keep in line expatriate CEO Edgardo with civil aviation Badiali, who joined policy which makes it GoAir in early 2008, mandatory for quitting by April 2009 scheduled domestic and CFO G P Gupta carriers to have at least leaving subsequently. five aircraft and fly for It is well known in five years continuously airline circles that it is in order to be entitled to extremely difficult fly international. GoAir to deal with Jeh Wadia. like Paramount does Like it is in Paramount not want to lose that where Thiagarajan opportunity and in case alone calls the shots, in the world and Indian GoAir, it is Jeh Wadia economy indeed picks who decides when up and air traffic moves his employees can up, he could then value sit or stand. Even his airline much higher. m a n u f a c t u r e r Is it not very Former GoAir CEO Edgardo Badiali representatives wish to interesting to note that avoid discussions with GoAir bosses and, Indian Airlines which placed orders on perhaps, the irritation of the latter Airbus Industrie for 43 Airbus A320 family understandably arises from the failure to get aircraft has received nearly 27 of those continued family funding to the airline and aircraft even as its agreement was inked more so after the economic meltdown. So about six months before GoAir. So, why what happens to the order placed with has GoAir not received the aircraft despite

ordering only 20 A320s worth $1.2 billion?

Because of the cash crunch. But Jeh Wadia does not want to lower his already low valuation by announcing that he wishes to cancel the orders. Nor is Airbus Industrie keen to hear such news as Airbus got far more orders for its aircraft compared to Boeing in India.

Unlike the MoU kind of deal which Paramount entered into with Airbus, Jeh Wadia entered into a legal agreement to buy 20 Airbus A320s of which ten were firm and ten options. When the boom came GoAir converted all into firm. With the economic meltdown, it decided to go slow on the acquisition as have other airlines.

Airbus not wanting to lose its market share has also played along and agreed to the deferral of deliveries.

Since the aircraft lease market has virtually collapsed, it is much cheaper to lease now than buy an aircraft as the prospects of sale and lease back have also dried up. These tactics work when the market is booming but not in recession.

Many airlines are trying to return leased aircraft so they don’t pay high lease rentals agreed earlier. They want to re-negotiate lower lease rentals and lessors are not happy. Jeh Wadia and GoAir is no exception.

Snow and Fun all year round Titlis The highest glacier excursion in Central Switzerland (10’000 feet)

TITLIS ENGELBERG

LUCERNE SWITZERLAND

Titlis Rotair The world’s first revolving cable-car that takes you into a unique glacier world!

CRUISING HEIGHTS November 2009

Ice Flyer Chair Lift Float safely over the glacier crevasses.

Titlis Glacier Park Enjoy the thrills of a microscooter, balancer, boogie board or classic snow tube.

Unique Panorama Breathtaking view from the sun terrace or the windprotected Toporama.

Titlis Rotair CH-6391 Engelberg Phone +41 41 639 50 50 titlis@titlis.ch, www.titlis.ch

27

NewsDigest 23:NewsDigest 23.qxd

11/3/2009

3:13 PM

Page 22

COMPANY RESULTS

Q2’09 results

Airline company losses pile up

T

he second quarter (JulySeptember) of the year is considered the leanest due to restricted air-travel by domestic passengers. Bad weather and heavy rains in the monsoon months often play spoilsport. Other than business travel, little tourist enthusiasm is seen. Therefore, poor or indifferent results declared by airline companies should not come as a great surprise.

Take the case of Jet Airways. The Q2 results of this year portray a picture portending a further slide into the proverbial red. Revenues fell 27 per cent in Q2 ‘09 to Rs 2,381 crore, as against Rs 3,258 crores in Q2 ‘08. Losses increased by nearly six per cent to Rs 407 crore ($87 mn) against Rs 385 crore in Q2 ‘08.

Why did this significant underperformance over the previous year’s second quarter occur? One can pin the disappointing results to over-capacity and high operational costs. Also, the global economic downturn has thrown up tough challenges for the aviation industry.

To address the problems ahead, the management attempted to downsize by reducing the number of employees. This led to an agitation by staff members, flight disruptions and delays. That was followed by a five days pilots’ strike in September ‘09 that threw all schedules haywire.

Hundreds of flights and bookings were cancelled. Reduced-fare offers by the airline to stimulate demand exacerbated the problem. It is estimated that due to the near-fatal strike by the pilots, the losses

28

Reduced-fare offers by the airline to stimulate demand exacerbated the problem. It is estimated that due to the near-fatal strike by the pilots, the losses went up to about Rs 800 mn

CRUISING HEIGHTS November 2009

went up to about Rs 800 mn. A spokesperson of the company spoke optimistically that the downslide had reversed and that the “cost reduction programme has started to show results”.

Jet Airways Senior General Manager K G Vishwanath commented: “the international side of the business, the slowdown in the US and Europe has had (an) impact on airlines reducing capacities and we have decided to rationalise our capacities in these markets”. Overseas flights today comprise 62 per cent of Jet Airways revenues. The aggressive overseas expansion in the past couple of years, while domestic business was still making losses, was a bold yet risky strategy. The airline has reduced capacity by 18 per cent, which helped to improve passenger load factor to 77 per cent. But this is still way below the break-even load factor of 95 per cent. Seat factor close to 80 per cent is what Jet seems to be managing at the present. But management was upbeat on their performance during the conference call announcing the Q2 ‘09 results. “Our domestic seat factor was 66.9 per cent versus 66.3 per cent in the same period a year ago and our international seat factors was 66 per cent versus 67.5 per cent in the same period a year ago” was the positive report.

Decisions are being taken by Jet to curtail costs further through an operational alliance with Kingfisher Airlines and reportedly, an engineering and ground alliance with SpiceJet. Private airlines have tried such synergistic moves

NewsDigest 23:NewsDigest 23.qxd

11/3/2009

earlier - but not much progress has been made till date.

Kingfisher Airlines faces a grim situation, too. Top-line was down 13 per cent in Q2 ‘09 thus plummeting to Rs 1,142 crore from Rs 1,323 crore in Q2 ‘08. Losses were reduced to Rs 418.77 crore for the quarter from Rs 483 crores in Q2 ‘08. The loss would have been higher had the airlines not changed the way it accounts for its repairs and maintenance costs. The airline curtailed its domestic operations by 17 per cent, increased passenger load factor by nine per cent but still managed a market share of 23 per cent.

However, there are deeper problems within the company. Even in the middle of a global economic downturn, when jobs are hard to come by, Kingfisher has been losing top executives of their sales and marketing functions including the Head of Global Sales, Head of Marketing and Head of Revenue Management in recent months. Several pilots have left, and others are in the queue.

Lower level sales and operations staff members have also been quitting due to the unstable nature of the company. There is no designated CEO or COO. Three executive Vice Presidents, who report directly to the owner, Vijay Mallya, are running the company. Many experienced hands from Mallya’s UB liquor group are being roped in to manage an airline business, which requires strong domain knowledge.

Severe cash flow problems have caused payment disputes with the Airports Authority of India, fuel supplier BPCL, and Lufthansa’s engineering and maintenance wing. Bouncing cheques and revoked bank guarantees do not speak highly about a company’s reputation.

In an optimistic note, the company reports in a press release in October 2009, that it remains to be “the market leader in the domestic industry” and “has increased their guest count by nine per cent inspite of capacity reduction of 17 per cent in the domestic market”.

However, at any point of time, between 12-20 aircraft stay grounded, adding to the costs. The operational alliance with Jet Airways, signed nearly a year back, has made little progress. Kingfisher Airlines requires a major overhaul if it is to survive in this competitive environment.

In contrast, SpiceJet posted a relatively brighter performance by reducing net loss to almost 49 per cent to Rs 101 crore in Q2 ‘09 from Rs 198 crore in Q2 ‘08. The airline had registered a

3:13 PM

Page 23

Passenger load factor was about 75 per cent.

Reduced fares and intense competition from Jet Airways (which introduced several low-cost flights) and other low-cost carriers led to earlier losses CRUISING HEIGHTS November 2009

profit in Q1 ‘09, due to its low-cost carrier status. Revenues increased 31 per cent in Q2, amounting to Rs 449 crore from Rs 343 crore in Q2 ‘08. The company reported a “43 per cent growth in revenue per flight on account of increased passenger yield”.

Passenger load factor was about 75 per cent. Reduced fares and intense competition from Jet Airways (which introduced several low-cost flights) and other low-cost carriers led to earlier losses. According to the CEO of the company, apparently one in every four seats on many flights during the period remained unoccupied. There were lower yields and a 35 per cent drop was faced by the airline. This meant less revenue generation. With the start of the festive season, there is gradual increase in traffic, allowing the airlines to raise fares without any adverse passenger impact so far.

SpiceJet expects to break even by the end of the financial year, barring unforeseen circumstances.

From June 2010, the airline will be eligible to start international flights. This does not mean they will opt for it. Even if they do, the strategy will be to avoid long-haul flights to UK and Europe, which would entail lease or purchase of larger aircraft.

The airline currently operates shorter haul Boeing 737s, so flights to the Middle East, SAARC countries and South East Asia could be on the cards. Not being in a cash-strapped situation is to SpiceJet’s advantage.

CEO Sanjay Aggarwal believes that “given our volatile times, managing cost effectively is intrinsic to the success of any business”. He is confident that their experienced leadership, careful and planned approach to growth and high standards in infrastructure, will make SpiceJet the “best low-cost airline”. The backing of investor Wilbur Ross is also a huge differentiator.

Analysis by Subhankar Ghose

29

Krishnan’s col final.qxd

11/2/2009

11:44 AM

Page 2

COLUMN/CHOCKS OFF

A traffic jam on the

ground

R Krishnan

Domestic legacy carriers have turned to the low-cost model to revive their business. But will the move bring them the desired loads when flyers are more interested in taking a trip only when fares are pegged at Rs 3000?

A

In April-June ’09, SpiceJet made a profit when the yields were averaging Rs 4000. With intensifying competition in JulySeptember ’09, the yields fell to Rs 2700 — a more than 30 per cent drop 30

t a seminar organised by the ATC Guild on October 20, 2009, the World Air Traffic Controllers day, (Centre for Asia Pacific Aviation) CAPA’s Kapil Kaul in his presentation made an interesting observation. He said that CAPA study showed that on the Delhi-Mumbai route if the fares remained under Rs 3,000, the loads picked up and when it exceeded Rs 3,200 the loads dropped. On the same subject, in a recent talk with the media, SpiceJet CEO Sanjay Agarwal said his LCC may see a loss in the second quarter ending September 30, 2009 due to sharply lower average ticket prices that led to seat load factor below 75 per cent.

Typically in LCCs the loads had to exceed 80 per cent to be anywhere near profits. In the first quarter April-June ’09, SpiceJet made a profit when the yields were typically averaging Rs 4,000. With intensifying competition in the second quarter July-September 2009, the yields fell to Rs 2,700 a more than 30 per cent drop in yields resulting in possible losses. But in the third quarter with rising crude prices or whatever, the minimum fares have begun to rise again indicating that there is a pick up in the yields.

Notwithstanding a marginal uptrend here and a sharp drop there in the yields, the overall airline scenario continues to be a cause for concern.

In the good times two years ago, when the loads were literally booming and the average crude led ATF prices were within manageable limits (compared to what they reached and dropped and again rising now) despite the government remaining helpless in bringing down the jet fuel prices kept artificially high by central taxes and state sales taxes. The boom did two things. One it supplied the huge loads and second it created a scarcity in the availability of CRUISING HEIGHTS November 2009

narrow body aircraft typically like the A 320s and B 737s. So what the airlines did was to acquire the aircraft for which they had placed orders much earlier, sell them only to lease them back on a profit.

Often it gave such airlines handsome profits which more or less helped tied over the finances to operate that aircraft at least for the first year without contracting debts. So we saw of the 22 A 320s which IndiGo had acquired since launch nearly four years ago, it had done “sale and lease back” 19 of them and which led the carrier to show profits and highest load factor. Even Spice had done a substantial sales and lease back or pure lease and even attempted to revise the lease terms when the market plunged after mid-2008 global economic meltdown. Thus, Spice showed marginal profits in between some quarterly losses.

But this facility or luxury was not available wholly to Jet Airways and Kingfisher which went at break-neck speed to take over the Indian civil aviation market by accelerating the aircraft acquisition pace which nearly equalled the speed of the jet aircraft. So, what they did was to shrink their capacity by either deferring or cancelling orders already placed or simply returning the leased aircraft. This was the way Kingfisher Airlines brought down its fleet from 87 to nearly 59 today. We mean the operational fleet. As for Jet, it did not do anything to its narrow bodies but preferred to first wet lease two to three of its Ten A 330s with Oman Air and now invite bids for leasing some of its Boeing 777-300 ER. On the other hand, Jet is also furiously trying to convert most of its domestic network to be operated on low cost or should we say low fare model. It is, in this context, we are now seeing increasingly Jet Konnect as the public face of Jet Airways’ domestic operations. Besides, Jet

Krishnan’s col final.qxd

11/2/2009

11:44 AM

Page 3

Low-cost fliers wait to check-in.

Airways is also carrying its earlier avoidable but now unavoidable excess baggage in JetLite or what was formerly the Air Sahara which it took over during the boom days. In fact, when Air Sahara was taken over, it also had placed orders with Boeing for ten more B 737-800s. Naresh Goyal had a disadvantage but also an advantage in that he could quickly respond and establish an entirely new low fare (not cost) carrier overnight in the Indian domestic airspace. So much so that never in the history of Indian aviation have we seen such a quick conversion from full service carrier to low fare carrier as with Jet Airways.

This conversion came on the face of repeated criticism by Jet Airways former CEO Wolfgang Prock Schauer who in his seven years with Jet always said, there was nothing like LCC and all they did was to hurt the Indian aviation.

What perhaps he did not realise was his own boss had converted to the LCC or low fare model and which led to the exit of Prock Sachauer.

Though Wolfgang may deny it, the fact remains that he did not read his boss mind though it is also equally true that he had been wanting to leave Jet for quite some time. The boom-burst theory also had its share of evacuation in Kingfisher where three of its five top bosses have left the organisation even as Mallya who actually was and perhaps still managing to be the ‘King of Good Times’ is struggling with his airline. I would like to recall what Mallya said at last year or year before last year’s HT Summit.

He said the airline business like his liquor business took the users on a high. But what he must have realised later is while the airline business can take you on a high immediately, it can also bring you down immediately. In the case of liquor the process is slow to go high and slow to come down as well. But what might have happened with Mallya is the combination of airline and liquor might have created a new mutant that is now making even a high risk appetite Mallya to say “Enough we cannot sustain airline losses any more”.

I have left the story of Air India out because it has lost all credentials for being an airline.

The recent MoU signed between Commonwealth Games authorities and Air India, designating the later as the official carrier of the Games is only an assurance that some how Air India will be allowed to survive till it comes down like a huge meteor on the Indian surface.

In the case of Meteor it killed all the dinos. In the case of Air India it may annihilate the airline business as well with few political victims.

So, if all these things happen, India will soon have a clear sky and our ACTOs will have no problem in managing the sky because there will be a traffic jam on ground because of grounded aircraft as against the air traffic jam which was the feature most of the days in boom days.

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

CRUISING HEIGHTS November 2009

When Air Sahara was taken over, it had placed orders with Boeing for ten B 737-800s.

Naresh Goyal had a disadvantage but also an advantage: he could respond and establish a new low fare carrier 31

Speical story.qxd

11/2/2009

1:20 PM

Page 2

SPECIAL REPORT

Photos: H.C.Tiwari

Quest for green skies The move is on to reduce aviation emissions and leading the charge is the IATA chief Giovanni Bisignani. Helping him along in his mission to have carbon-neutral growth from 2020 are individual airline initiatives to usher in the use of biofuels.

I

n February 2008, Virgin Atlantic became the first airline to fly with biofuel. The Boeing 747400 flew from London to Amsterdam, carrying in one of its four fuel tanks a 20 per cent mix of biofuel derived from coconut and babassu oil. It was the first time a commercial aircraft has flown using renewable energy — something that airline boss Richard Branson called “a vital break-

32

MAN ON A MISSION: IATA Chief Giovanni Bisignani (above)was in India recently to push the move to clean the environment by global airlines.

CRUISING HEIGHTS November 2009

through” and termed the “historic” flight a first step toward reducing the airline industry’s carbon footprint.

Environmentalists, however, dismissed the entire exercise as a “nonsensical” publicity stunt. One scientist described it as “high-altitude greenwash”. Jos Dings, Director, European Federation of Transport and the Environment was quoted as saying: “If Virgin would power its entire fleet with biofuel,

Document1

10/31/2009

1:49 PM

Page 1

Speical story.qxd

11/2/2009

1:20 PM

Page 4

SPECIAL REPORT

Small flights but giant steps for aviation Virgin Atlantic Airways Test flight on: February 24, 2008 Destination: London’s Heathrow Airport to Amsterdam’s Schiphol Airport.

Fuel type: 20 per cent biofuel mix of babassu oil and coconut oil and 80 per cent kerosene blend in one of its four engines.

Plane type: Boeing 747-400 Flight duration: Not available Air New Zealand Test flight on: December 30, 2008 Destination: From Auckland International Airport to Auckland International Airport Fuel type: 50:50 ratio of Jatropha plant oil and Jet A1 fuel Plane type: Boeing 747-400 Flight duration: Two hours

Plane type: Boeing 737-800 equipped with CFM International CFM56-7B engines.

Flight duration: 90 minutes Japan Airlines Test flight on: January 30, 2009 Destination: From Haneda Airport, Tokyo Fuel type: 50 per cent biofuel — camelina (84 per cent), jatropha (under 16 per cent), and algae (under 1 per cent)) and 50 per cent traditional Jet-A jet (kerosene) fuel Plane type: Boeing 747-300 Flight duration: One and a half hours Qatar Airlines Test flight on: October 12, 2009 Destination: From London Gatwick to Doha

Fuel type: 50-50 blend of synthetic Gas to Liquids (GTL) kerosene and conventional oil-based kerosene fuel.

Plane type: Airbus A340-600 aircraft using Rolls-Royce Trent 556 engines.

Flight duration: Six hours Air New Zealand, Continental Airlines and Virgin Atlantic Airways, along with biofuel technology developer UOP, have joined the recently formed Algal Biomass Organisation (ABO), which is cochaired by aerospace manufacturer, Boeing. ABO expects these new members will form the first wave of aviation-related companies interested in developing new generation biofuels.

Continental Airlines Test flight on: January 7, 2009.

Destination: From George Bush International Airport in Houston.

Fuel type: Jatropha plant oil (47.5 per cent) and Algae (2.5 per cent) and 50 per cent traditional jet fuel. it would have to use about half of the UK’s arable land.”

The Virgin Jumbo that flew without passengers from Heathrow to Amsterdam, used 95 per cent kerosene and 5 per cent biofuel derived largely from coconuts. Producing even that small proportion of biofuel required the equivalent of 150,000 coconuts. Three million would have been needed to power the whole flight. That’s perhaps one reason why Boeing has switched its focus to algae, which it says has a much higher biofuel yield and could be cultivated in vast man-made ponds. The Air Transport Action Group, which includes Boeing, Airbus and most major airlines, including British Airways, claims that it would take “only” an area of land the size of Ireland (or Haryana) — 70,000 sq km — to grow enough algae to replace the aviation industry’s annual consumption of 1.7 billion barrels of oil.

Another argument against biofuels was that any gains made would be offset by one year’s growth in the number of

34

The argument against biofuels was that any gains made would be offset by one year’s growth in the number of flights CRUISING HEIGHTS November 2009

flights. Airline passenger growth is expected to double by 2020 (notwithstanding the present slump). Aircraft emissions are expected to double by 2030. Therefore, the argument that biofuels, on the one hand, and the continuing rate of expansion on the other, was simply incompatible. Meeting those growth targets would require five Irelands (or Punjab, Haryana and J&K) by 2050.

Nonetheless, it is the pro-changers who are making waves as they unveil initiative after initiative to combat the double menace of ‘green taxes’ and the yo-yo like price of oil that swings from one end of the pendulum without rationale or reason. Leading the charge is the International Air Transport (IATA) chief Giovnani Bisignani who has been a relentless crusader against what he calls “schizophrenic policies”.

“Politicians think green and see cash.

In the name of the environment, UK Chancellor Gordon Brown doubled the Air Passenger Duty. The environment

Speical story.qxd

11/2/2009

1:20 PM

has not benefited, but airlines and their passenger are paying a billion pounds for his green credentials. And Europe is rushing to include aviation in emissions trading at the same time as governments are looking at carbon offsets,” said Bisignani.

In early October, at the Greener Skies conference in Hong Kong, the IATA chief said that “the aviation industry takes its environmental responsibility seriously. Our vision is for carbon-neutral growth on the way to a carbon-free future and we have challenging targets to guide us”.

A fallout of this relentless crusade has been “the explicit support of governments (particularly in Europe) for a global approach through the International Civil Aviation Organisation (ICAO). They have set some targets which are more political than technical. As such they are neither credible nor achievable with the timelines described,” said Bisignani What this would mean is that governments account for aviation’s emissions at a global level and as an industrial sector, rather than within national targets. This would ensure that airlines pay for their climate cost just once, not several times over, and it would drive emissions reductions with global standards on a level playing field.

“ICAO would monitor progress with the help of IATA and the industry,” said Bisignani.

At a preparatory meeting in Montreal, IATA in a joint paper with the Airports Council International (ACI), the Civil Air Navigation Services Organisation (CANSO) and the International Coordinating Council of Aerospace Industries Associations (ICCAIA), called for governments to adopt a global sectoral approach to manage aviation’s emissions in the Kyoto II period. The industry further urged governments to adopt the following three sequential targets to drive progress: Improving fuel efficiency by an average of 1.5 per cent annually to 2020 Stabilising carbon emissions from 2020 with carbon-neutral growth And reducing net carbon emissions 50 per cent by 2050 compared to 2005 It is no surprise, therefore, that Bisignani is slowly winning a lot of friends. He met UN Secretary General Ban Ki Moon in September in New York to press his case and got his endorsement, then went to the ICAO meetings followed by the Green Skies conference in Hong Kong and then a back-slapping meeting with TERI (The Energy and Research Institute) Director General Dr R K Pachauri who is leading

Page 5

MEETING OF MINDS: Giovanni Bisignani (centre, in a blue suit) shares a moment with DGCA Chief Naseem Zadi (second from left) and Civil Aviation Secretary Madhavan Nambiar (third from right).

IATA in a joint paper called for governments to adopt a global sectoral approach to manage aviation’s emissions in the Kyoto II period CRUISING HEIGHTS November 2009

the UN Climate Change Body. With Pachauri, ICAO and the UN on his side, Bisignani can hope to rid the airlines of the tyranny of green taxes.

And four test flights with sustainable biofuels having proven that they meet the technical and safety standards for use in commercial aviation, progress is going at a much faster pace than anybody anticipated. “Three years ago sustainable biofuels were a dream. Now we expect certification no later than 2011,” said Bisignani. And to cap it was the recent announcement that eight airlines at Los Angeles International Airport (LAX) have signed an agreement to use synthetic biofuel for ground services starting in late 2012.

As a matter of fact, the environmental track record of the industry is good.

Over the last four decades airlines have reduced noise by 75 per cent Eliminated soot and improved fuel efficiency by 70 per cent.

Fleets will be 25 per cent more fuel efficient by 2020.

This will limit the growth of carbon footprint from today’s two per cent to three per cent in 2050.

What this means is that in three years, biofuels are likely to be not just environmentally sustainable (and not competing with existing food resources), it will be a drop-in replacement for traditional jet fuel, and it will be cost competitive with existing fuel

supplies and be readily available.

35

Tony.qxd

11/2/2009

12:01 PM

Page 2

FOCUS

T

wo months ago, a relieved Cathay Pacific announced its half-yearly results. It reported that it had swung back to profit in the first half with enough cash to fund aircraft purchases. But there was no interim dividend payment. The airline, Asia’s No.4 carrier reported a net profit of HK$812 mn ($104.8 mn) for January-June, compared with a loss of HK $760 mn ($1.1 billion) a year earlier.

That loss was primarily driven by a frighteningly gone wrong oil-hedging decision made when the oil prices were upward of $ 140-plus. But the subsequent dramatic fall gave the Swire Group owned airline

(the London-based group recently raised its stake in Cathay to 42 per cent. Air China with close to 30 per cent is the other big stakeholder) such a pasting that it is still recovering from the after-effects.

For the moment as global airlines are buffeted by lower and lower yields, CEO Tony Tyler has a job on his hands. He has re-energised the group and in early October (September 27-October 3) Cathay Pacific saw its passenger load factor reach 83 per cent and one day carrying close to 5000 premium passengers — the highest for the year. But Tyler remarked: “We had the best week so far this year. We managed to fill more flights, but at a much reduced yield.”

It’s typical Tony Tyler: straightforward,

matter of fact and to the point. In fact that’s what took this pucca pom of all places to Hong Kong. As he told the Flight Global earlier this year: “I wanted to live and work away from the UK. It was a pretty dreadful place in the mid-Seventies that was when I was making my career decisions. So I applied for any job which would get me overseas, preferably a long way away. I joined the Swire Group that sent me to Australia first to work in a road-transport and cold storage business, then posted me to the airline, where I’ve been ever since.” In 2007, he took over as the CEO of Cathay.

That’s been a remarkable turnaround from the gloom and doom of April-May when the results first came in and the

CATHAY DOES A

TONY SHOW

Buffeted by the downturn worldwide and an oil-hedging decision gone all wrong, Hong Kong-based Cathay Pacific managed to get back into the black from its losses a year earlier. The profits came after CEO Tony Tyler implemented a carefully-crafted strategy.

K. Srinivasan pieces together Cathay’s rejuvenation process.

36

CRUISING HEIGHTS November 2009

Tony.qxd

11/2/2009

12:01 PM

Page 3

airline took a series of tough calls to combat the crisis.

In May, Cathay reduced passenger capacity by eight per cent and cargo by 11 per cent.

The airline also introduced a four-tier, top-down special leave scheme under which staff was asked to take unpaid leave varying from one to four weeks according to their seniority. Almost 100 per cent (according to Tyler) agreed to the leave.

In September it signed its largest aircraft sale and leaseback agreement with BOC Aviation (Bank of China’s aircraft leasing company), for the sale and leaseback of six of the 19 Boeing 777-300ER aircraft it has on order.

“This is a landmark agreement because it is the largest single leaseback arrangement we have entered into. It is consistent with our cashpreservation priority during this difficult time,” Tyler was quoted as saying

As global airlines are buffeted by lower and lower yields, Cathay Pacific CEO Tony Tyler has a job on his hands

at that point in time.

The carrier also reduced almost by half, from 27.45 per cent to 15 per cent of its share in engineering services firm Hong Kong Aircraft Engineering Company (HAECO). The sale of over 20 million shares was made to its parent group Swire Pacific to raise over $244 mn.

Cathay has deferred the completion of its new cargo terminal at Hong Kong International Airport, to mid-2013, as a result of the current economic situation. The decision is aimed at easing pressures on the carrier’s balance sheet in the immediate future.

The cargo market has also nosedived, forcing Cathay to ground two freighters: Cathay Pacific Airways’ cargo tonnage fell in August at the smallest rate of the year, a 6.3 per cent decline prompting the airline to maintain that the airfreight downturn has bottomed out. The drop in August comContinued on page 40

CRUISING HEIGHTS November 2009

37

Tony.qxd

11/2/2009

12:01 PM

Page 4

FOCUS

“THE AIRLINE BUSINESS IS IN FOR ANOTHER

Q A

: Considering the present tough conditions, would you look to use your fifth freedom rights to fly from Mumbaior Delhi to London?

: We have no plans at the moment to fly between India and Europe. Our current policy, you can say is that India is a very important market for us and the important thing for us is connecting India to the Hong Kong hub. That has been our priority. And that’s what we have done.

Tony Tyler, Cathay Pacific's CEO, has nursed the carrier back to health with a series of measures. Today, he is cautiously optimistic, as K Srinivasan and Tirthankar Ghosh found out during this telephonic interview with him in Hong Kong.

Two-thirds of the passengers flown by Emirates and Qatar are Indians. You have a great opportunity here?

Of course, any rights like these are always available to be used. But at the moment, as I mentioned, we have no plans to fly between India to Europe. One of the reasons is: the market from Hong Kong to Europe is a very competitive one where the only commercial product in all these years is the non-stop product. We wouldn’t be carrying any endto-end traffic if we were to fly from and into India. So, we wouldn’t be flying between India and Europe traffic, which is also very heavily competitive. We can offer a lot of carriers with a lot more frequency. The moment we see better ways to deploy our fleet, we will surely take that opportunity.

One argument in India is that city-states like Singapore and Dubai or territories like Hong Kong have the advantage of turning a single hub operation into a multi-hub opportunity. India doesn’t have the same advantage in return.

Well, yes, but you have exactly the same opportunity with the Indian carriers to fly out of several places in India into Hong Kong.

So it is same for both sides. I am talking about fair equivalent exchange and it doesn’t matter which end of the route you are on. Every-

38

CRUISING HEIGHTS November 2009

Tony.qxd

11/2/2009

12:01 PM

Page 5

VERY DIFFICULT 12 MONTHS” body wants to go into a full plane to a big place with a lot of people. It is a quality, opportunity principle, which applies here.

Indian airlines are having a tough time and the losses are mounting. How’s the health of Cathay?

First of all, everything is relative. Cathay Pacific has been weathering the storm reasonably satisfactorily. We’ve had very difficult times as well and if you see our published results, you can see what’s been happening to our profitability and traffic. So, I wouldn’t say that we’ve been sailing through unscathed in these difficult times.

What we’ve tried to do are several key things. One is to continue to serve our premium passenger with best possible service in the air as well as on the ground and not to give them any reason to defect to our competitors. The other important thing that we tried to do is to keep our network intact.

We’ve got a very good network to and from great hubs. When we have made capacity reductions, we have been careful to do it in such a way that our revenue-earning potential of our network is not compromised. We keep check on our capital expenditure, reduce costs wherever possible and manage our business as tightly as we can. This has been a really good strategy: keep up our tourist levels and keep the network.

But you had to bite the bullet and reduce capacity…

We did indeed. We reduced capacity this year but we’ve done it very judiciously by making a few snips around the place rather than major troughs in any particular market. Even, our staff has agreed to take unpaid leave along with the cabin crew. Almost 100 per cent company’s staff has volunteered to take unpaid leave.

How have you achieved this 100 per cent acceptance?

It’s almost 100 per cent. What we’ve done is… it is graduated. Firstly, the junior staff took one week; then it went up to four weeks for the seniors, and now, leave can be taken any time in a twelvemonth period or deduction if they like from pay, takes place over a sixmonth period from June to November.

The carriers

from the Gulf are virtually nibbling at every market from Europe, and from India to Australia. They have not just economies of scale but huge cash reserves as well. How do you protect your turf?

I think these new state-run carriers from the Gulf pose a significant challenge for the industry. So, we need to emphasise and upgrade the quality of our service, which is still well ahead of theirs. You can copy the seats and the aircraft, but you can’t copy the personal style, service, skills and preparation.

Frankly speaking, even though our hub isn’t in the Gulf, it has certain geographic advantages. A hub close to China has other advantages, which they don’t have.

But have airlines like Emirates, Qatar and Etihad been picking up passengers from India and elsewhere in the region and sending them backwards to Australia and New Zealand at cheap fares.

They are backtracking if they do it that way, isn’t they? If they go from Delhi to Dubai, they are heading in the opposite direction from Sydney…almost exactly opposite according to the globe on my desk. The fact of the matter is that the powerful hubs and the traffic around create an obvious potential.

But you can do it. Cathay Pacific still carries a lot of Japanese to Europe even though there are not a lot of direct flights. So, provided you can get your marketing niche and your schedules well designed, you can do that. All carriers do it. When you are based in London or Hong Kong or Dubai or Singapore or Tokyo, you are going to be serving connecting traffic as well as origin-destination traffic. There is no point in tearing your hair out… it’s going to happen.

How do you see the onslaught on premium traffic? Do you see it coming back to 2007 levels?

Well, personally I think the premium traffic segment has taken a big hit in the last 12 months because the world has seen the worst financial crisis in several generations. It is not surprising that has happened. I don’t know how fast it will recover or how far it will recover. Nobody knows that actually.

We will have to wait and see; and, in the meantime, make judgmental decisions and educated guesses.

Air AsiaX, the new kid on the block, has launched non-stop from KL to London at hugely discounted rates. How do you counter that sort of competition?

If you base your view in a place like Hong CRUISING HEIGHTS November 2009

Kong as a worldwide financial powerhouse, it is home to a lot of homegrown, very successful businesses as well as an Asian home for a lot of nations. There are head offices and regional head offices here with lots of wealthy people. It is going to be a market for people who are prepared to pay a premium for improved service, and yet we will see nofrills carriers entering the long-haul game.

We’ve been selling very low fares on long haul and making money out of it for many, many years and will continue to do so. So, there’s always going to be new forms of competition.

What’s your prognosis for the next year?

First of all, I think the airline business is in for another very difficult 12 months. I don’t think we are going to see a sudden V-shaped recovery in traffic and yields. We are probably past the worst. If the world economy doesn’t suddenly collapse again, we should see some recovery in traffic and yields, but it will be slow and it will take sometime to get back to the levels we were operating at, over a year or so ago. As long as the economy doesn’t collapse again, we are probably past the worst.

You are the IATA Chairman and going green is the mantra of the times.

Your take on the carbon footprint from aviation...

As far as the carbon footprints (are concerned), first of all, most importantly, we are investing in new and more efficient aircraft.

We are also doing a lot of other things. We are making sure we operate these aircraft as efficiently as we can. Many things that other airlines are announcing and just starting to do, we’ve been doing for years. It is not easy for us to find new ways of operating more efficiently as it is for other airlines. But we continue to look for those.

We also have, for sometime now, set up a Carbon Offset Scheme. Anyone who is flying Cathay Pacific can go online and look at all their own emissions from their flight. At Cathay Pacific, for the last two years now, we have offset all our business travel. So, we are putting our money where our mouth is.

The Dreamliner (Boeing 787) is also part of your future fleet. Its delay has been a blessing in disguise for you?

Well, it’s been a little bit slow — the ‘Moveable Feast’ as we say in the Catholic Church.

When we originally ordered them, the first round was to be delivered at the end of this year. But then they slipped into next year.

39

Tony.qxd

11/2/2009

12:01 PM

Page 6

FOCUS

Cathay Pacific planes at Hong Kong airport.

pared to last year came as Cathay cut cargo capacity 14.1 per cent, giving the Hong Kong-based carrier a strong 72 per cent load factor, 4.3 percentage points better than August 2008.

Earlier this year, when asked if this turbulence was the worst he had ever seen, Tyler said, “It’s not worse than SARS,” when the World Health Organization put a temporary ban on travel to Hong Kong.

“But SARS was obviously not going to last for ever. The prospects now are certainly the worst I’ve ever experienced and the Asian financial crisis was bad too. In 1998, our revenues dropped 18 per cent.

Time will tell if 2009 will be that bad. The reality is that the airline industry is facing an enormous challenge, and Cathay Pacific is not immune. Our ultimate aim has to be to preserve cash wherever possible, and it is imperative for us to review carefully and realistically all the options open to us,” he said.

Despite a five per cent capacity reduction worldwide due to global recession, Cathay has been upbeat about India. In a move that was realistic, it launched a daily non-stop flight from New Delhi to Bangkok. It was a calculated move and one that has proved to be extremely popular with travellers. Said Tom Wright, Cathay Pacific’s General Manager for India, Middle-East, Africa and Pakistan: “Bangkok is not new to us, and it is wellknown how popular and affordable Bangkok is. We believe that there is untapped potential and this new route promises to serve the unmet needs.” The Delhi route was important for the carrier as it contributed to around 35 per cent of the total revenue earned from the airline’s operations in India, Wright explained.

The Indian operations apart — Cathay currently operates around 45 flights to Delhi, Mumbai, Chennai and Bangalore — the impact of global slowdown has

40

been hard on Cathay. Wright, in fact, echoed his CEO. “Things were very bad (early this year). There are some signs that things are improving more on the corporate side,” he said. He also stressed that the market recovery would not be rapid but slow and steady.

Perhaps, one of the reasons for the severe dip in premium travel was that Hong Kong’s busy calendar as a financial hub simply vanished once the magnitude of the financial crisis became clear. And the little travel that was happening was nowhere in the front of the plane.

So how does one handle that? Cut capacity but don’t reduce the network. In

‘The Delhi route was important for Cathay Pacific as it contributed to around 35 per cent of the total revenue earned from the airline’s operations in India’ — Tom Wright, GM- India, Middle-East, Africa and Pakistan

CRUISING HEIGHTS November 2009

other words, the destinations stay, but the frequencies go down. In fact there couldn’t have been any other strategy. Like Singapore Airline, its closest rival in the region (Cathay was named Airline of the Year 2009) in the World Airline Awards run by the London-based Skytrax research organization — the third time it has taken the honour in the past 10 years. The airline was also named Best Airline Asia in 2009. SIA that had the top honours last year dropped to number two), Cathay is a ‘network airline’ with most of its passengers connecting worldwide from the hub in Hong Kong.

No surprise then that the airlines FFP (Frequent Flyer Programme) — Asia Miles — was named “Best Frequent Flyer Programme” at the 2009 Business Traveller Asia-Pacific Travel Awards for the fifth consecutive year and honoured by the region’s travel and hospitality industry. The results of the awards are based on an annual readers’ poll conducted and analysed by an independent market research agency.

Part of the Oneworld Alliance where most member airlines have been talking to each other about mergers and acquisitions (M&A), Cathay has also been on and off in the news about either being acquired or seeming to be in pursuit of a partner. Both Tyler and the senior management at Cathay have consistently put down these reports and, in fact, the CEO dismissed the stories about a possible marriage with BA: “A predator who wanted us would have to be pretty big and have a strong digestive system,” he said. “We’re more likely to be predator than predatee,” he told the London Telegraph.

One reason for the enormous growth and network capabilities of the airline has been the takeover of Hong Kong by China.

That has given the airline a huge network in China that it could never have managed as a British Colony. So the idea going forward is to consolidate on those arteries, continue providing the exceptional service benchmarks that it has set and act as the prime hub in the Asia Pacific.

But Tony Tyler might not be around by the time the airline starts cruising comfortably again. He is three years from retirement (Swire employees retire at 57) and he hopes to use his time to get the airline back into health, set the agenda for the next decade and hope that what he has put in place will bloom in the years to come.

And, by the way, did Tyler fire the finance director for the hedging disaster? “No,” he laughed and told The Telegraph, “The decisions on hedging are collective decisions.” And for good measure he added that others too have taken a pasting; it’s just that they put

their hands up first.

Cargo Jottings12 final.qxd

11/2/2009

10:41 AM

Page 3

LAST IN/FIRST OUT

TRENDS

Courtesy: www.dp-dhl.de

TEN-T EA (Trans-European Transport Network Executive Agency) created by the European Commission, has undertaken some big projects which could bring benefits to the international air cargo sector.

The largest TEN-T project includes the launch of Galileo, the trans-European positioning and navigation systems

FIATA says IATA must consult or face consequences FIATA (Fédération Internationale des Associations de Transitaires et Assimilés or the International Federation of Freight Forwarders) has sent out a kind of warning message to all airlines that they must talk with the industry or else all initiatives will fail. FIATA’s head of security, David Fielder, speaking at the recent congress in Geneva said that any changes being thought about by the airlines to improve supply chain security had to have the support of FIATA as well as the freight forwarding industry. He pointed out with examples from Cargo Accounts Settlement Systems (CASS) that had been introduced in Malaysia without the IATA

consulting the local freight forwarders or their association. “We are constantly telling IATA that it must listen to us. I believe the chances of secure freight being fully implemented in the next four to five years are very low.”

As for e-freight, FIATA members said that the IATA was moving ahead very fast in its drive to implement it. IATA’s Aleks Popovich said that by the end of this year, around 16 of about 30 paper documents required in the movement of freight would be replaced with electronic messages. In fact, many of the FIATA members demanded that IATA scale back the time-frame of the e-freight roll-out.

Courtesy: www.unece.org

Aircargo on top priority for IATA ALEKS Popovich was recently appointed as Senior Vice President for Industry Distribution and Financial Services at IATA. If nothing else, the appointment points to the fact that air cargo has been given top priority at the international level.

Popovich joined IATA in April 2005 as Global Head of Cargo and almost single-handedly ushered in a 21st century approach to aircargo. He has spearheaded IATA’s e-freight initiative to enable $4.9 billion of cost savings in the cargo supply chain by converting paper-based processes to electronic documentation. Persistent in his efforts, Popovich said that by “the end of 2010, e-freight will be live at 44 locations in 27 countries…this will give the industry the capability to handle 81 per cent of international cargo with efreight”.

With his new designation, Popovich will oversee all of IATA’s passenger and cargo activities, including responsibility for IATA’s financial systems which handles $350 billion in annual settlements.

Incidentally, till a successor is found, Popovich will continue to stay on as Global Head of Cargo.

Giovanni Bisignani, IATA’s Director General and CEO would have liked to continue with Popovich in air cargo. However, it is generally believed that Popovich would help global aviation in his new position. As Bisignani put it,“In his new role,Aleks will be key among IATA’s senior management. I am confident that Aleks’ experience in helping guide British Airways in the post-9/11 period will be invaluable to us in this

On a more positive note, we (American Airlines Cargo) launched a new temperature controlled product called ExpediteTC which has been very well-received by the market. The pharma customer group has shown more resiliency in this economy so we hope this product will help stabilise our volumes.

Dave Brooks

President, American Airlines Cargo, on how American Airlines has weathered 2009

CRUISING HEIGHTS November 2009

network. The network facilitates the flow of air cargo (as well as other goods) and will provide a reliable and efficient positioning and navigation service, which can be used by all modes of transport in a variety of applications.

Galileo will become the one and only European global navigation satellite system. Up to now, Global Navigation Satellite Systems (GNSS) users in Europe have had no alternative other than to use the US’s GPS or the Russian GLONASS satellite signals. By being interoperable with GPS and GLONASS, Galileo will be the new cornerstone of the GNSS. This worldwide system will be under civilian control and with its full complement of satellites, more than the current GNSS systems, Galileo will allow positions to be determined accurately even in high-rise cities.

A smaller TEN-T project aims to provide Milan’s Malpensa Airport with a multimodal logistics park that integrates cargo traffic and offer benefits for the entire region.

41

Cargo

Colmn.qxd

11/2/2009

10:45 AM

Page 2

COLUMN/CARGO

Express growth linked to infrastructure The country's infrastructure has not been able to keep pace with the development of industry. Once that happens, the express industry will gallop ahead to reach its full potential, writes Taarek Hinedi he nascent air express industry began playing a vital role in connecting the world by the late 20th century. With factors such as globalisation of markets, international economic integration, removal of barriers to business and trade and the increased competition taking centre stage, businesses across the world began looking for avenues that created “access”. This changed the world significantly, giving rise to a new generation of individuals who believed they could have the goods, services, and information they needed; anytime, anywhere and any way they wanted.

The air express industry began playing an integral role in connecting the world, helping

T

businesses leverage the “just-in-time” manufacturing technique to cater to the growing demand. Shorter inventory time also propelled the need for a robust supply-chain logistics network. Thus today’s enterprises, regardless of size and reach, value time immensely. The industry’s vital features such as — timely reach, global coverage, and reliability along with value added features has given customers the confidence to trust express companies with their shipping needs.

Like its global counterparts, the Indian express industry too has evolved rapidly. The

42

CRUISING HEIGHTS November 2009

Indian logistics industry witnessed a constant growth process, particularly between 2002 and 2007, during which the sector grew from eight per cent to ten per cent annually. Highlighting the future potential of the sector is the expectation that the logistics business will reach a market size of over $125 billion in 2010.

With Indian businesses making concerted efforts to go global, the need for express service providers has grown substantially. Today, the expectations of Indian customer’s have evolved significantly and there is a growing demand for value linked services — both in monetary terms as well as in terms of benefit. This has made them world class customers, expecting world class services. This potential that the Indian express market has shown, has attracted several domestic and international players, and created a competitive market place in which customers are reaping the benefits of improved services.

Considering the fact that growth of the logistics market is directly proportional to growth of the economy, the robust growth trend witnessed in recent years, has been affected by the recession that has affected economies across the world. The industry has witnessed a drop in the movement of goods and services, freights have dropped and overheads continue to increase. According to reports, the total international and domestic freight traffic handled by Indian airports decreased by 4.5 per cent to around 1.5 lakh tonnes in March 2009 compared to the freight handled in March ’08.

The recession has also made customers costsensitive, which has further impacted volumes.

This has necessitated a change in strategy by express service providers. This phase of the economic cycle has also created an opportunity for businesses to learn and implement innovative methods to cut costs, improve customer satisfaction and increase efficiencies.

However, I do believe that the outlook for the air cargo industry in India is bright and companies foresee tremendous potential in the sector. The strategic geographical location of India and the country’s emergence as a manufacturing hub will contribute to this growth. According to reports, the Indian

Cargo

Colmn.qxd

11/2/2009

10:45 AM

Page 3

domestic and international express cargo industry is among the fastest growing in the world and is worth close to $2 billion. Over the last decade, it has witnessed a compound annual growth rate (CAGR) of 33 per cent. Thus major players continue to ramp up their operations and accelerate investments in India, anticipating the present and future needs of the market.

Though the express cargo industry has been contributing significantly to the Indian market, the sector still faces roadblocks in establishing and providing time definite and efficient services.

The foremost hindrance to the sector’s growth is the inability of the country’s infrastructure to keep pace with the development of industry, resulting in a very high cost of logistics as a percentage of GDP. Factors such as inadequate airport infrastructure, poor road and rail connectivity, inability to leverage technology, lengthy customs procedures, etc., have hampered the quality of services. The need is to have world-class gateway airports providing aviation services and facilities of global standards. In line with these critical needs, there should be adequate measures to ramp up aviation infrastructure, thus helping us improve cargo handling and customs clearance of time sensitive goods. Investing in a robust transportation network will also help Indian manufacturers gain access to global market places, equipping them to compete on a larger platform.

Apart from infrastructural issues, another key challenge is the tax structure; currently goods shipped across interstate borders undergo a clearance process drawing octroi and other taxes, thereby significantly increasing costs and delivery times in domestic distribution. All these costs of distribution add to the overall overhead

goods and services, which will further increase the need for time-definite transportation.

Adding to the growth trajectory is the government target of investing $ 20.38 billion, over the next two years, in the infrastructure sector in India and the budget of $ 9 billion towards the modernisation of existing airports by 2010.

The opening up of various Indian industries will boost the demand for value added express services in India as they will be the major users.

GST, which is proposed to replace state and central taxes, is likely to enhance the efficiency of the logistics industry. India’s prominent

geographic location, between South-East Asia and European Union nations, will also boost its emergence as a cargo hub. Increased opportunity will attract more players, leading to consolidation of the fragmented Indian express industry.

Technology (IT) has always been the driver in delivering cutting-edge performance.

Companies are now increasingly investing in developing solutions, such as automation, Ecommerce, Product Lifecycle Management and Enterprise Resources Planning (ERP) software to drive cost reductions, enhance quality of services and to meet customer expectations.

Also, given the current economic challenges of the global industry, Like other companies, the express industry too is concentrating more on scaling up efficiencies and streamlining operations to provide superior service at a reasonable cost. Thus, express companies will have to equip themselves with a well developed technology framework to manage information, accelerate pick-up and delivery, handle invoices, and expedite customs clearance and other tax procedures.

India’s express industry is vibrant with a large number of international and domestic players. The emergence of the country’s manufacturing sector will drive exports, resulting in the various industries leveraging the air express industry’s ability to provide “access” to markets worldwide.

Cargo terminal building at the Rajiv Gandhi International Airport.

The express industry is concentrating on scaling up efficiencies and streamlining operations to provide superior service at a reasonable cost costs. The government’s proposed introduction of GST (Goods and Services Tax) will not only simplify the movement of goods but also provide better access to emerging markets, thus empowering Indian enterprises to become international players.

The air express industry is poised for a significant leap forward as India is expected to become the manufacturing hub for the manufacture of automobiles, auto ancillaries, pharmaceuticals, high technology electronics, processed foods, textiles etc. Additionally, as more and more Indian businesses go global, we foresee a robust growth in the movement of

(Taarek Hinedi is Managing Director, India Operations of FedEx.)

CRUISING HEIGHTS November 2009

43

Cargo

express show.qxd

11/2/2009

10:51 AM

Page 2

DIRECT DELIVERY

Logistics sector gets

ready to boom As the pressures of the economic downturn lessen and manufacturing industry gets a boost, the sector that is most likely to reap the benefits is the air express industry. Two unconnected studies — one global and the other Indian — have predicted that the Indian logistics sector would certainly see better times in the coming years. A report. he green shoots of economic revival are making their presence felt.

Nowhere is this more apparent than the logistics industry. In fact, some recent studies on logistics industries have come up with some enthusiastic results and optimistic forecasts. Their message is simple: when international trade rebounds in the medium term, the logistics business will do well.

A joint study by DP DHL and London School of Economics (LSE),

T

International trade, Express Logistics and Globalisation: Part and Parcel of the Solution to Current Economic Challenges, has suggested that when international trade rebounds in the medium term, it would see a rise in the proportion of trade, particularly in value terms, accounted for by the air express industry. Frank Appel, CEO, Deutsche Post DHL, commenting on the study, pointed out: “Trade is critical to economic growth and to global development.

It is heartening to note that the one agenda that the

recent G20 agreed on was trade promotion. All governments agreed that trade will help in the shortterm, and is a critical and inevitable part of long term economic development. As

Recent studies on logistics industries have come up with some optimistic results and forecasts — when international trade rebounds, the logistics business will do well that the medium-term outlook for global trade remained strong even as trade was at best stagnant in the short run due to low availability of credit. The findings, based on an analysis of the cost and quality of logistics in Brazil, Russia, India and China (BRIC) which account for 40 per cent of the world's population and 15 per cent of the global economy and serve as exemplars to other emerging economies, were based on two important factors. The cost of sea transport and the availability of review procedures were the two key points that influenced an economy's

DHL FREIGHTERS: Ready for better times.

44

an economic integrator, our role is critical in ensuring that our services meet the growing needs of both developed and developing markets.”

The study mentioned

CRUISING HEIGHTS November 2009

Cargo

express show.qxd

11/2/2009

appeal to attract international trade. Sea transport cost was important in international trade, and governments could review transport costs by reducing obstacles to trade, and by private sector logistics firm becoming more efficient, the study said.

As compared to the cost of sea-borne transport which varies dramatically around the world, the cost of airborne freight is relatively constant. In recent years, air shipments have grown more than twice the rate of ocean freight. Countries that provide low cost shipping logistics are more attractive to firms producing generally low value products that are sent by ship.

The study has shown that countries wanting to attract firms that use air express shipments need to ensure reliability and timeliness first. In particular, countries where traders can ask for low cost, transparent review of any decisions made on the ground will have a higher share of world trade. The report also notes that effective review procedures are notably absent in the emerging economies, posing a challenge to shippers who intend to import or export time sensitive goods, such as high value 'must have' electronics. The analysis has inferred that if these countries were to ensure the discipline and current availability of such reviews, China and India could increase trade by 20 per cent, while Brazil and Russia would increase theirs by 30 per cent during post-crisis recovery.

Given the central role of logistics in international trade, the study avers that logistics companies play a critical role in supporting economic recovery.

Accordingly, during the economic downturn, logistics costs have come down substantially, helping to alleviate the full impact of

10:51 AM

Page 3

REASONS TO SMILE: A TNT employee gets ready for deliveries.

the economic downturn for businesses involved in international trade.

Similarly, logistics companies play an important role in enhancing the attractiveness of Asia as a place to do business. With the rapid growth of the Asian purchasing power, logistics companies have remain entrenched in the region, recognising its strategic role.

As logistics services are widely available, this, in turn will help countries in the

industry and spare parts for equipment as the economic climate calls for more upgrades and repairs than replacements.

“Air express remains an important and fast growing sector. The value of international trade has increased by 16-fold in the last half century, largely dominated by high value, time critical goods which require just-in-time deliveries.” said Appel.

“Deutsche Post DHL's early

Given the central role of logistics in international trade, the DHL study avers that logistics companies play a critical role in supporting economic recovery region cope with the economic downturn and be well placed for the upturn.

The study singles out three major areas of potential expansion in the air express industry: rising demand for individualised healthcare, demand for documents transfer in international services

entry into emerging markets in Asia Pacific, such as China, India, will help us to stay prepared for the upturn.

Whether it is time-critical deliveries via air or providing support in our supply chain solutions, the logistics industry will become critical as an integrator in generating

CRUISING HEIGHTS November 2009

post-crisis economic growth,” he added.

Almost along the same lines, the Associated Chambers of Commerce and Industry of India (ASSOCHAM) released a paper -- Building Logistics for Competitive Business -based on studies done on Indian logistics industry.

ASSOCHAM is the country's apex chamber with a membership of over two lakh companies and professionals. The study indirectly indicated that manufacturing, retail and real estate, which have been under stress for sometime now, will revive soon, resulting in a flourishing growth in the logistics industry in the next two years.

The paper dwelt on the development and future of Indian logistics industry. A forecast from the paper stated that the Indian logistics sector would be a $125 mn industry by 2010.

That essentially means that the logistics industry, which is currently at the $105 mn level in the country, would see a boom of 17 per cent in the coming year. The paper went on to add that

45

Cargo

express show.qxd

11/2/2009

10:51 AM

Page 4

DIRECT DELIVERY

(Above) A Deccan 360 freighter: All set for express delivery; and (alongside) Blue Dart: Connecting the furthest corners of India.

outsourcing of third party logistics (3PL) would become a $90 mn business by 2012 from the present $58 mn mark.

This boost, according to the paper, is slowly taking place due to the outsourcing of logistics services by a sizable percentage of Indian companies. In real terms, therefore, the growth would imply improved service delivery and customer satisfaction leading in turn to a rise in exports of goods and creation of job opportunities. While the sector is headed to redefine growth and development, there is growing interest among entrepreneurs to venture into the business as logistics services can be performed without possession of assets.

D S Rawat, ASSOCHAM Secretary General who released the paper said that one of the contributing factors for the growth in the logistics sector can be attributed to Value Added Tax (VAT). The tax is expected to drive Indian industry towards using more

46

3PL services as it highlights opportunities that 3PL service providers can utilise in the market.�

As per the paper, government support has also

The report affirmed that with globalisation, Indian firms have been demanding new logistics capabilities and more complex solutions from their 3PL partners.

The ASSOCHAM study pointed out that 3PL providers should focus on both functional as well as value-added services been instrumental in this growth. Ever since the government has focused on infrastructure development, the moves have seen investments in the logistics sector.

Greater acceptance of demand-driven logistics practices has introduced complexities into the supply chain and generated the need for contract logistics providers to deliver more

CRUISING HEIGHTS November 2009

expert services. 3PL providers can illustrate their ability to bring down conventional logistics costs and handle more complicated tasks. The customers, therefore, continue to give their 3PL providers more accountability in their business process.

With some corrective measures, 3PL providers can prove to be beneficial for companies, said the ASSOCHAM study. Their strategy should focus on both functional as well as value-added services like transportation, warehousing, freight forwarding, IT, inventory management, customer service, etc.

Considering the increasing competitiveness of the 3PL sector, it is likely to see further progress in terms of improved relationships between buyers and sellers of 3PL, according to ASSOCHAM. Though the aspects taken into account by DHL-LSE study and that of ASSOCHAM are different, the one common factor both have dwelt at length on is the effect of globalisation on the logistics industry.

Countries that seek to be at the forefront of the next wave of globalisation, as the DHL-LSE research pointed out, needed to benchmark themselves against global best practices. Logisticsbased emerging economies should start improving trade conditions to strengthen their international trade levels. According to ASSOCHAM too, the 3PL concept which was introduced in US and Europe was fast catching up in the Indian arena. But as the world moves at its fast pace and breaks geographical barriers, the various functional logistics activities have a big opportunity. It is time for the Indian logistic industry, to upgrade operations and try to grab and attempt better deals.

Cargo Jottings12 final.qxd

11/2/2009

10:41 AM

Page 5

CARGO JOTTINGS To the races with Emirates Blue Coat for Blue Dart BLUE Coat Systems, a technology leader in Application Delivery Networking, recently announced that Blue Dart has deployed Blue Coat PacketShaper appliances to more efficiently utilise network resources to deploy new advanced services. The appliances deliver the application accountability that enables Blue Dart to reclaim bandwidth on the network for video conferencing deployments throughout its branch offices.

Speaking about the deployment, Gautam Sen, senior manager, electronic network at Blue Dart, said, “Prior to the deployment of the Blue Coat solution, we needed to increase our bandwidth every year to make our applications run better.” With PacketShaper appliances, the logistics major will be optimising its bandwidth by effectively monitoring and managing applications.

PacketShaper appliances can identify more than 600 applications and monitor more than 100 metrics per application session, providing network administrators with the in-depth information they need to understand the impact of applications on the network. Utilising the detailed application intelligence that PacketShaper provides, Blue Dart can set bandwidth limits, classify and prioritise business-critical applications and maintain quality of service levels on an application basis from a single integrated workspace. This enables Blue Dart to optimise its network and reclaim bandwidth for more strategic use. With that reclaimed bandwidth, Blue Dart successfully deployed video conferencing services across its branch offices, increasing collaboration among its employees to create a more productive work environment.

EMIRATES SkyCargo has been chosen to transport the multimillion dollar cargo of F1cars from São Paulo’s Viracopos Campinas International Airport, Brazil for the first Abu Dhabi Grand Prix, scheduled on November 1, 2009.

For the event, Emirates SkyCargo deployed two of its Boeing 747 freighters to transport the 210,000 kg freight of cars, spare parts and related equipment.

According to Hiran Perera, Emirates Senior Vice President Cargo - Freighters, transporting such high-value cargo demanded special handling throughout the whole process — from on-ground handling to loading them into the freighter, and also during the flight. He mentioned that “Emirates’ staff, throughout our entire network of 100 More than 200 tonnes of F1 cars and equipment were transported from São Paulo to Abu Dhabi stations, are well on Emirates SkyCargo for the Grand Prix. trained and highly experienced in dealing with precious consignments”.

Emirates’ new cargo manager for North India EMIRATES Airline has appointed Halim Modassir as Cargo Manager for North and East India, based in New Delhi.

Modassir, who has more than 10 years’ experience with international airlines, joined Emirates in 2006 to manage the introduction of Emirates SkyCargo services to Kolkata.

In his new role, Modassir will be responsible for planning business growth, identifying new areas for business and prioritising these on the basis of profitability and potential, determining performance levels, and forecasting, monitoring and achieving targets.

FedEx advances in-flight safety FedEx Express unveiled the industry’s first on board automatic fire-suppression system (FSS), elevating the level of safety during international, over-water flights. The comprehensive fire-safety system is the result of seven years of design and development efforts at FedEx Express, and expands upon the company’s existing commitment to advancing aviation safety.

In April 2009, FedEx Express began installation of the FSS technology on MD-11 freighters: the workhorse of the FedEx international aircraft fleet. Each installation requires approximately 700 man hours and will be completed on the company’s 59 MD-11 aircraft in early 2011. FedEx also

plans to install the FSS technology on new Boeing 777 Freighters, which begin international service in company’s fleet in April 2010. In all, 74 FedEx wide-body planes used for international, over-water flights will be upgraded with the technology.

The FSS features a network of infrared thermal sensors, foaming-agent generators and an overhead cargo-container injector.

If heat is detected by the sensors, the firesuppression technology located above each cargo container is activated, simultaneously alerting crew members.

The metal container is pierced by an injector apparatus and filled with an argon-based biodegradable and noncorrosive fire-suppression foam that controls and extinguishes the fire in minutes.

CRUISING HEIGHTS November 2009

47

Cover Story New.qxd

11/2/2009

6:22 PM

Page 2

COVER STORY

AirandIndia the case of the poor Maharaja

An Air India Boeing 777-300 ER at the Farnborough Air Show two years ago: the pride of the fleet.

48

CRUISING HEIGHTS November 2009

Cover Story New.qxd

11/2/2009

6:22 PM

Page 3

An Emperor who had all the finery and respect, is today virtually without clothes. That, in short, is the Air India Maharaja’s story. Deep in the red, on one hand, and huge borrowings on the other — not to mention high salary payouts to its employees and dwindling yields — the national carrier is facing one of its worst periods. R. Krishnan pieces together the Maharaja’s woes and suggests ways to revive its fortunes.

CRUISING HEIGHTS November 2009

T

he hard times that the aviation industry is going through around the world continues to hog the headlines. In India, almost all the carriers have been in financial problems (see other pages of this issue of CRUISING HEIGHTS). Air India, however, certainly beats all of them. The Maharaja has taken a working capital loan which has now risen to Rs 16,000 cr on which the daily interest liability alone is a whopping Rs 4.7 cr — repeat Rs 4.7 cr. It has so far taken loans to purchase brand new aircraft totaling Rs 15,000 cr. Air India will have to take more loans to finance the purchase of remaining ordered aircraft (see accompanying story) — be it the pending three Boeing 777-300 ERs or the 27 Dreamliner Boeing 787s. The per day interest liability on the loans already taken by Air India to purchase the aircraft so far is about Rs 2.3 cr. The depreciation being

49

Cover Story New.qxd

11/2/2009

6:22 PM

Page 4

COVER STORY provided on the aircraft acquired so far is more than Rs 1000 cr.

Let’s look at its losses first.

After sustaining losses of Rs 7,226 cr since Air India and Indian merged in fiscal 2007-08 and the subsequent financial year 2008-09, the Maharaja is all set to record a loss of Rs 5,400 cr in the current fiscal (2009-10).

Should this happen, then beginning April 1, 2010, Air India would have also incurred a three year loss totalling Rs 12,626 cr.

There could be a small drop in losses if Air India is able to make some savings through cost cutting, which it is finding it extremely difficult to achieve. It is in this context that the savings planned by Air India or what has already been implemented assumes importance.

In any case, it will prove to be the proverbial drop in the ocean. Air India has so far inducted nine B777-300ER and eight B777200LRs; 30 A321s and A319s and 17 B737-800s for AI Express.

As far as the loans are concerned, the banks have been allowing the national carrier to draw loans against its assets which the PSU carrier has been doing. It is here that Air India feels that further infusion of equity will help the airline to retire loans, substitute high cost debt with low cost debt through soft loans, which, in turn will reduce interest liability. It is a fact that all companies raise equity or additional funds when they go in for a major capex (capital expenditure) or expansion and the carrier will be no exception. Air India’s present woes need to be seen in this background. Indeed, it is unfortunate that the airline’s expansion plans coincided with the global economic meltdown.

Air India’s turnover in 2006-07 was Rs 17,000 cr. In the current fiscal (200910), it is likely to fall to Rs 14,000 cr and

50

CRUISING HEIGHTS November 2009

Cover Story New.qxd

11/2/2009

6:22 PM

Page 5

Civil Aviation Minister Praful Patel pointed out on July 28, 2009, Air India’s average monthly expenditure before depreciation and obsolescence was approximately Rs 1,500 cr per month or Rs 18,000 cr a year CRUISING HEIGHTS November 2009

this is a trend which most airlines are facing and countering. This is mainly due to falling passenger traffic, falling yields, rising fuel prices, etc. A testimony to this is the fact that despite carrying the same number of passengers, airlines are earning less because air fares have gone northwards. If there is a fare hike, the passengers simply vanish. During the good times, there were many repeat passengers as well as brand new fliers. Today, there are very few repeats and virtually no brand new passengers. Air India, however, has a peculiar problem. Its earnings are not enough to even pay for its employee expenditure. As Civil Aviation Minister Praful Patel, in reply to a question in the Rajya Sabha, pointed out on July 28, 2009, Air India’s average monthly expenditure before depreciation and obsolescence was approximately Rs 1,500 cr per month or Rs 18,000 cr a year. How can an airline that earns only Rs 1,400 cr a year be able to incur a yearly expenditure of Rs 18,000 cr before depreciation and obsolescence?

Imagine a loan of Rs 2,000 cr or an equity support of Rs 5,000 cr! It will simply disappear into the proverbial black hole. Even if we take into account a 2:1 debt equity ratio and assume that AI is

51

Cover Story New.qxd

11/2/2009

6:23 PM

Page 6

COVER STORY

MAHARAJA’S CROWN JEWELS Aircraft Typewise

52

Aircraft Registration

747-400

VT-ESM

747-400 747-400 777-200ER

Name of Lessor

Lease rent p.m. (USD)

Investec

865,000

VT-ESN

Investec

865,000

VT-ESO

Investec

865,000

VT-AIJ

US Bank

670,000

777-200ER

VT-AIK

US Bank

670,000

777-200ER

VT-AIL

US Bank

670,000

777-200A

VT-AIR

Wells Fargo Bank

545,000

A-310

VT-AIA

Tapti Aviation

207,000

A-310

VT-AIB

Tapti Aviation

207,000

A-310

VT-EJG

Investec

245,000

A-310

VT-EJH

Investec

245,000

A-310

VT-EJI

Investec

245,000

A-310

VT-EJJ

Investec

245,000

A-310

VT-EJK

Investec

245,000

A-310

VT-EJL

Investec

245,000

A-319

VT-SCA

CIT

306,600

A-319

VT-SCB

CIT

306,600

A-319

VT-SCC

CIT

306,600

A-319

VT-SCD

AERCAP

306,600

A-319

VT-SCE

AERCAP

306,600

A-320

VT-EPB

Investec

275,000

A-320

VT-EPC

Investec

275,000

A-320

VT-EPF

Investec

275,000

A-320

VT-EPG

Investec

275,000

A-320

VT-EPH

Investec

275,000

A-320

VT-EPI

Investec

275,000

A-320

VT-EPJ

Investec

275,000

A-320

VT-EVP

ORIX

146,000

A-320

VT-EVO

ORIX

146,000

A-320

VT-EVQ

ORIX

146,000

A-320

VT-EVR

ORIX

146,000

A-320

VT-EVT

VOLITO

146,000

A-320

VT-EVS

VOLITO

146,000

A-320

VT-EYB

AERCAP

146,000

A-320

VT-EYC

AERCAP

146,000

A-320

VT-EYF

ORIX

146,000

A-320

VT-EYG

AERCAP

146,000

A-320

VT-EYI

AERCAP

146,000

A-320

VT-EYH

AERCAP

146,000

A-320

VT-EYJ

AERCAP

146,000

A-320

VT-EYK

AERCAP

146,000

A-320

VT-EYL

ORIX

146,000

A-320

VT-ESB

Investec

275,000

A-330

VT-IWA

YAMASA

664,000

A-330

VT-IWB

YAMASA

664,000

BEECH CRAFT

ZS-CCL

ALLEGIANCE

190,000

CRUISING HEIGHTS November 2009

able to borrow Rs 10,000 cr on an equity base of Rs 5,000 cr, how will it make a difference? A few years ago the Government of Delhi, supported by the Central Government wrote off a loss of Rs 2,500 cr from the books of the Delhi Transport Corporation before the corporation could limp back into operations. Perhaps, the Air India management could ask the government to write off its losses and then limp back to the skies. But is that what is wanted?

Commenting on fares, Air India officials pointed out that one should not go by exceptions. The sources said “The reality is that the yield for European carriers is more than twice on the India sector. Gulf carriers shouldn’t be the benchmark as they operate with different systems… there is no financial accounting.

Air Asia, for example, is a new carrier so it has to win market share by offering ridiculously low fares. They can do it because their cost platform is low.”

The Air India sources also mentioned that was the reason why Air India was under increasing pressure to reduce costs.

“Without cost reductions, no airline can survive in these days and more so Air India. Cost cutting has now become an established mantra and all companies in various sectors have resorted to it. Take the case of Japan Airlines - it was not able to survive and got government support.

BA has shed manpower. But AI can’t resort to layoffs because it is a Public Sector Unit (PSU). At the same time, it is also imperative that manpower costs are reduced drastically.”

So, we now have an Air India which is trying to reinvent itself. In its winter schedule beginning end-October and early-November 2009, all flights to US,

Cover Story New.qxd

11/2/2009

6:23 PM

Page 7

FROM THE FILES: Historical photos of the glory days of Air India.

Canada, Europe and Tokyo will be operated with B777s, a consistent and good product. Likewise, most trunk routes in India and South-East Asia will be operated with A321s and A319s. Air India has also issued a tender to lease out three B777-200LRs. The bids received will show the kind of lease money Air India may be able to get and will definitely help its cash flow. So, with five of its B 777200LRs, Air India will continue its nonstop flights on the Delhi-New York and Mumbai-New York sectors. The flight from Delhi will be extended to Washington which is expected to help increase load factors during the lean season.

Air India could extend the MumbaiNew York non-stop to another major US city soon — perhaps, Chicago. With the reduced cost of operations due to use of new aircraft, better passenger appeal as the

Air India is reportedly spending $311.8 mn every month before depreciation on its operations. This includes benefits offered to Air India staff CRUISING HEIGHTS November 2009

new aircraft have better in-flight facilities, some improvements in yield can be expected. While Air India will use fewer aircraft in its winter schedule, the ASKMs (available seat kilometers: A seat-kilometre is available when a seat is flown one kilometre. Seat-kilometres available are equal to the sum of the products obtained by multiplying the number of passenger seats available on each flight stage by the stage distance) will, however, remain the same because of higher aircraft utilisation. Newer aircraft allow that due to lesser downtime for checks/maintenance. Air India has been criticized for unusually long down time in New York of its B777-200LR which are used for the non-stop connections between Delhi- New York and Mumbai- New York. The plane takes 15 hours to complete its journey and is on the ground at JFK airport for more than 12 hours.

Experts, however, maintain that this was an incorrect method of projecting aircraft utilisation. For instance, even on a stand-alone basis Air India’s B777200LRs do nearly 15 to 16 hours of duty in a 24-hour day. Perhaps, the addition of Washington and Chicago may increase it even more. It may be pointed out here that Air India is one of the very few airlines in the world that has such a high utilization rate for its B777-200LRs. Also, Air India is reportedly spending $311.8 mn every month before depreciation on its operations. This includes benefits offered to Air India staff such as medical benefits, staff housing, holiday homes, travel passes among others. It is indeed a good idea to lease the Boeing 777-200LR unless Air India is not confident of earning from the flights of such planes an amount that may be less than what it could get from leasing it to the

53

Cover Story New.qxd

11/2/2009

6:23 PM

Page 8

COVER STORY Sultan of Brunei. Inspite of this knowledge, the Air India management had signed a revised wage and allowances agreement with its various sections of employees. As late as May 28, 2009, Air India management signed a revised agreement with Air India Officer Association for the executive cabin crew. Just three months after that, today there are frantic efforts by the management to cut wages, allowances or PLI, etc to remove the sticky flab acquired over years.

According to the Air India management, it was unfortunate that employees/unions haven’t been able to see the dimensions of the problem the company is facing. AI needs to save on all fronts. At present, the carrier is paying its pilots and maintenance engineers more than what others are paying. One wonders how the company can survive with such huge payouts? If AI/IC (Indian Airlines) had to increase pilots’ emoluments in the mid1990s when private airlines were paying more, isn’t it logical that they be matched again when they are paying less? The productivity of AI engineers is far lower than their counterparts? In that case shouldn’t their salary structure also be rationalised?

It is the unions representing these categories who are opposing the pay cuts.

One will have to see how the PLI (productivity-linked incentive) cut can be imposed. Without pay cuts, the airline cannot be made economically viable.

Salaries will have to go down; productivity will have to go up. Employees at all levels will have to demonstrate that having 25 years of experience is of no use if they can’t offer a quality product or service. An airline offering a quality product can only survive in a competitive environment when capacity exceeds demand. If the wake up call had been listened to two years ago, perhaps AI might not have been in a tight corner as it is now. Cost

MAHARAJA’S QUANDARY

A

ir India has on date 46 aircraft on lease and which will be returned as and when the lease tenure ends. It may be stated here that an announcement by Air India management in August 2009 that it will try to send them back earlier than the due date has evoked no response from the lessors. This is not surprising as the airline industry is in doldrums and the manufacturers are suffering from not

54

FULL STOP: An Air India plane on the tarmac.

AI needs to save on all fronts. At present, the carrier is paying its pilots and maintenance engineers more than what others are paying just cuts but also cancellation of orders placed during the good times. The aircraft leasing companies’ plight is worse.

Air India feels it will be able to return all or a bulk of its leased aircraft by 2011 and this will reduce the liability on lease rental payment.

Air India had, at the beginning of August 2009, a fleet of 156 aircraft of which 51 are new generation. The age of 69 old aircraft is between 15 and 28 years and the remaining 36 is between three to 15 years.

Air India sold 21 planes for an estimated $447.5 million between March 2007 and March 2009. It also sold and

CRUISING HEIGHTS November 2009

control measures should have been introduced in 2007 instead of availing working capital loans freely.

An Air Indian said: “One cannot ignore the fact that AI’s finances have also been hit because pool income (bilaterals) has gone down; revenues from ground handling have gone down due to government policies (which does not seem to be in a mood to implement its own policy). The double effect of the economic meltdown and liberal bilaterals given to Gulf carriers on the routes AI used to make money on; reduction in bilateral income; high ground handling revenues, etc. have all dealt a body blow to the crippled Maharaja’s carrier. Since most of these policy changes came with adequate notice, AI could have evolved rather than allow circumstances and the environment to get the better of it.

Unfortunately, neither the Babus in Rajiv Gandhi Bhawan who have always been holding the keys of Air India or Air Indi ans themselves are responsible. leased back 14 Airbus planes and three Boeing 747-400s for a total of US$ 428.98 million. Besides, it also sold one Boeing and three Airbus A 320s during the same period for $18.57 million.

We now understand that Air India has deferred the deliveries of the last three Boeing 777-300 ERs, it is scheduled to take delivery of, as their production has not yet begun. After the delivery of nine Boeing 777-300 ERs, Air India had made advance payments for the acquisition of three more Boeing 777-300 ERs that are now in various stages of production. So, Air India decided to defer the remaining three

Cover Story New.qxd

11/2/2009

6:23 PM

Page 9

AI: Sifting facts from fiction Barely three years ago, the two airlines — Air India and Indian — had a profit of Rs 64.94 crore.

Today, it has a whopping loss of anywhere between Rs 5,000 crore and Rs 7,000 crore. What has gone wrong? This indepth analysis, by an insider, takes a look at the financial state of the national carrier.

“P

erform or Perish”: That was the threat given by the minister of civil aviation to the employees of National Aviation Company of India Limited (NACIL), the merged entity of Indian Airlines (IA) and Air India (AI) sometime ago. The threat came in the background of the sudden stoppage of monthly wages of the employees for the month of June on the plea of resource crunch, or more correctly, due to lack of working capital. Simultaneously, there was a big hue and cry in the media with selective leaks from the ministry that Air India is running at huge losses.

The estimates varied from Rs 7,000 crore to Rs 5,000 crore. The huge workforce with figures ranging from 35,000 to 50,000 was highlighted as a major threat to the survival of Air India as an entity. This workforce has to behave: that was the sermon from the ministry and corporate media, which in most uncertain terms meant that the workforce has to be drastically reduced, the workforce should accept wage cuts, delayed wages, etc.

Facts and fiction During the first tenure of the UPA government, the combined net profit of Indian Airlines and Air India was Rs 162.44 crore in 2004-2005 and Rs 64.94 crore in 20052006 (Public Enterprise Survey 20062007, Volume II). The combined manpower was 33,547 which is now down to 32,287 as on March 31, 2008. It was in 2006-2007 that both the airlines suffered 777-300 ERs which were part of the 15 Boeing 777-300 ERs it had originally scheduled to acquire. The other big batch that still remains for delivery is the ever-elusive Dreamliner Boeing 787s which the manufacturer has now said will be delivered to Air India in 2011. Air India is keeping its fingers crossed.

The problem in not being able to terminate the lease is the nightmare that haunted Air India during 1996-98 when it had to fight a case in the arbitration court in London against the wet leasing company Caribjet. The leasing company ultimately got a compensation

losses of Rs 668 crore (provisional). Why? This is what the parliamentary standing committee on civil aviation was informed as per the 138th Report of the Committee on Demands forGrants (2008-2009) of Ministry of Civil Aviation, placed in Parliament on April 28, 2008.

“The committee was informed by the ministry that the erstwhile Air India had suffered a provisional net loss (after tax) of Rs 447.93 crore during the year 2006-07 as against a net profit of Rs 14.94 crore for the year 2005-06. The ministry in its reply to the query on the reasons for the loss has stated that this is due to settlement of wage arrears to the tune of Rs 425 crore, decrease in load factor and fall in yield due

Before liquidating NACIL for the sake of private airlines, it is being allowed to die a a natural death through delayed policy-making decisions of Rs 144 crore, the price that Air India paid for terminating the lease of two aircraft before the contracted date of expiry of the lease agreement.

We understand that Air India has already got a client for its Boeing 777200LR who is reported to be the Sultan of Brunei. The Sultan has reportedly agreed to pay $1.2 million per month per

CRUISING HEIGHTS November 2009

to competition. The ministry has also informed that the passenger load factor has declined from 66.2 per cent to 63.8 per cent for the year 2006-07”.

“The committee was further informed by the ministry that the erstwhile Indian Airlines Limited had suffered a provisional net loss (after tax) of Rs 240.29 crore during the year 2006-07 as against a net profit of Rs 49.50 crore for the year 2005-06. The ministry in its reply to the query on the reasons for the loss has stated that the varied price of ATF is one of the main causes for the loss.

The ministry also replied that on the revenue front also airlines continued to be hit by rapidly declining passenger revenue yields on account of intense competition and deployment of excess capacity in the market. Further, the bottom line of the company was affected due to the writing off of the entire amount due from its subsidiary company Airlines Allied Services Limited (AASL).

However, the passenger load factor has increased from 71.6 per cent to 73.1 per cent for the year 2006-07.”

The amount written off from AASL was Rs 295 crore. Therefore, the wage arrears of Rs 425 crore and amount of Rs 295 crore together amounts to Rs 710 crore which is more than the combined loss of Rs 668 crore for Indian Airlines and Air India. This meant that there was no operating loss even after tax for the year 2006-2007. The overall reduction of load factor of both the airlines together was 0.9 per cent only.

Amusingly, the ministry attributes Boeing 777-200 LR, which he may take on lease for two years or more. So, for three Boeing 777-200LRs, Air India will get a lease rental of US$ 3.6 million per month or over $40 million for a year or $125 million for three years which at current exchange rate means Rs 575 crore. But even this amount will be useless since Air India currently pays $13.61 million as lease rental every month for its 46 leased aircraft.

55

Cover Story New.qxd

11/2/2009

6:23 PM

Page 10

COVER STORY varied fuel costs as one of the reasons for the losses of Indian Airlines. However, the same reason was not attributed for the losses of Air India. The committee was also informed that the purchase of new aircraft

by Air India will have very positive impact on its operations. As per the ministry's annual report for 2007-2008, Air India had signed an agreement for purchasing 68 aircraft at a cost of $11 billion and a loan of $7.2 billion was cleared by EXIM Bank of USA on October 9, 2006. Subsequently, the order for acquiring 43 more aircraft was also cleared.

The above facts were in public domain till April 2008. Was there any “doomsday” projection whether on over-staffing or bankruptcy of merged Air India till that day?

The merger magic After raking in profits in 2004-05 and 200506 and ensuring no losses in 2006-07, the merger magic came into play. In the annual report of the Ministry of Civil Aviation for the year 2007-08, which was placed in parliament, the merger of Air India and Indian Airlines into the new company NACIL from August 27, 2007 was projected as a major achievement. Parliament was assured that the merger would not only improve competitiveness but would also: Create the largest airline in India; Improve world rank to number 31 in revenue terms, as against the current ranking for IA (67) and AI (48); Enable optimal utilisation of existing resources through improvement in load factors and yields on commonly serviced routes as well as deploy 'freed up' aircraft capacity on alternate routes; Provide an opportunity to fully leverage strong assets, capabilities and infrastructure; Provide an opportunity to leverage skilled and experienced manpower to the optimum potential.

Was the ministry, when the above projections were made, unaware of the serious threats confronting the civil aviation industry? Did the warning which the minister so eloquently explained in his statement in the Rajya Sabha on July 9, 2009, viz, lower seat occupation, high competitive market, high fuel cost, high fixed cost, etc, not exist then?

On what basis were the above-mentioned projections made? Was any sensitivity analysis made when these companies were merged and 111 aircraft worth a staggering Rs 50,000 crore purchased?

Sensitivity analysis based on SWOT (Strength, Weakness, Opportunity and Threat) of an industry takes into account not only the present business opportunities but also the future threats, the market risk, global economic scenario, etc. Were these

56

factors unknown? Who has mis-performed and brought the national carrier to a point of perish? Who is engaging in 'employeebashing' as part of a sinister design to sweep the actual acts under the carpet?

Kite-flying at its worst When the whole of the media, the management and the ministry were engaged in doomsday predictions about NACIL and issuing threats to employees to work without pay as part of a “perform and perish package”, none of them bothered to place in the public domain the basic document based on which the financial performance of a company is judged i.e. the annual report and the balance sheet of the company.

The first annual report of NACIL for the year 2007-08 was prepared and placed before Parliament after 15 months i.e., on July 9, 2009, the day the minister gave a statement in parliament. The statement showed all of a sudden a loss of Rs 2,226 crore! Why this inordinate delay in presenting the report? And where was the balance sheet of 2008-09? Even the minister stated in his statement on July 9 that “during 200809, the expected loss is approx Rs 5,000 crore”. Notice the words: it is neither a provisionary nor an audited statement of loss. It is only an approximate estimate and the revenue and expenditure accounts are still undisclosed. Yet the business media and the ministry have been diagnosing the reason for such staggering losses and targeting the employees without even seeing the balance sheet.

The analysis of the 2007-08 annual report clearly shows how the NACIL man-

An analysis of the 2007-08 annual report clearly shows how the NACIL management was trying to hoodwink the people by covering up what was happening to the national carrier CRUISING HEIGHTS November 2009

UPPER CLASS AIR INDIANS: The product is good but is it enough to woo travelers?

agement was trying to hoodwink the people by covering up what exactly was happening to the national carrier. In response to para 4 (IX) of audit observation in the annual report questioning deferred tax assets of Rs 13,712.9 mn shown in the balance sheet in the absence of virtual certainty of future taxable profits, the NACIL management commented confidently: “The merged entity would provide an opportunity to fully leverage the strong assets, capabilities and infrastructure and deploy the skilled and experienced manpower available to the optimum potential.

With all the synergy benefits arising to the merged entity, the company would be able to emerge in the domestic and international airlines industry. Recently, the company has taken several measures in order to reduce its cost platform and as a part of the turnaround strategy to face the impact of global recession… Fuel prices which have till very recently been skyrocketing have started cooling off which would certainly encourage air travel in the country/globally, as airlines prepare to reduce the fuel surcharge.

As a result, due to these measures there is a definite/virtual certainty of future taxable profits being available to the company (emphasis added).”

The above comments, made in December 2008, assured definite taxable profit in spite of all the real or fictitious weaknesses/ threats, now being talked about. Yet, only after six months, the management suddenly comes out and says “see we are bankrupt, we do not have working capital to pay wages, manpower has to be reduced, etc.” and the minister advises “perform or perish”. Perish means privatisation of NACIL

Cover Story New.qxd

11/2/2009

6:23 PM

Page 11

2005-06. The main component for the sudden increase in expenditure actually is the interest payments because of the huge borrowing and depreciation on account of acquisition of new aircraft. The interest payment has gone up from Rs 105 crore in 2005-06 to Rs 701 crore in 2007-08. The cash flow shows investment in fixed assets amounting to Rs 7,624 crore during this period. This is likely to contribute to much more increase in depreciation than shown in the balance sheet.

In the profit and loss account for the year 2007-08, depreciation is only 4.27 per cent of the expenditure when the same for Air India and Indian Airlines were 5.22 per cent and 4.4 per cent, respectively in 200506. This looks fishy. As a matter of fact, the balance sheet and profit and loss account of NACIL after merger need an immediate scrutiny taking into account several observations/reservations made in the audit report of the statutory auditors. with 111 brand new imported aircraft.

Happenings post-merger After the merger of Air India and Indian Airlines, which was pushed through with undue haste by the ministry, the government claimed that the loss of Rs 2226 crore during 2007-08 had increased to approximately Rs 5,000 crore in 2008-09. On what basis?

Where is the balance sheet or even the provisional, if not audited financial statement for 2008-09? If we take the major expenditure component i.e. the fuel cost, the average global crude cost in 2009 so far is about 51.85 dollar/barrel as compared to the average 94.85 dollar/barrel in year 2008.

This must have brought relief to fuel costs in the period from January to June 2009. The manpower cost in 2007-08 was 18.4 per cent of the total expenditure as per the company's balance sheet, which is quite rational even if we compare with profit-making Navaratnas like SAIL, BHEL and others.

Let us compare the revenue and expenditure of NACIL before merger in 2005-06 (when Air India and Indian Airlines earned profits) and after merger in 2007-08 (when it went into losses). The combined revenue of these two airlines was Rs 15,031 crore in 2005-06, which went up marginally to Rs 15,257 crore in 2007-08. However, the expenditure excluding interest but including depreciation rose sharply from Rs 14,923 crore to Rs 17,854 crore in the same period.

Why this big increase in expenditure? Incidentally, manpower was reduced by 1,260 persons during this period.

The fuel cost component of the total expenditure was shown as 33.7 per cent in the profit and loss account compared to 34 per cent jointly for these two airlines during

Posturing in Parliament Praful Patel, the union civil aviation minister, in his statement in Rajya Sabha on July 9, 2009 admitted that the equity base of Air India was only Rs 145 crores and the government in the past had never assisted Air India, unlike governments in other countries. Then he went on to add: “It is in this background that an equity infusion and soft loan by the government as a measure of softening the adverse financial situation is contemplated.” Contemplated? Is the minister aware of what the management had told the auditors on page 93 of the annual report, audited in December 2008? It stated: “The

“Perform or Perish”: the warning to Air Indians came in the background of the sudden stoppage of monthly wages on the plea of a resource crunch, or more correctly, due to lack of working capital CRUISING HEIGHTS November 2009

company has made a proposal to the government to increase the equity base to enhance equity capital by Rs 1,231 crore and also to provide soft loan support equal to Rs 2,750 crore repayable annually over a 15-year period at low interest rates. It is felt that this would strengthen the net worth and balance sheet of the company.”

Did the government accept or reject the proposal during the last seven months?

Why should it take more than seven months only to “contemplate” when in the case of Jet Airways, Kingfisher and other airlines, the Ministry took only a few days to push through their case for deferment of airport charges to the Airports Authority of India and fuel charges to PSU oil companies?

Who has under-performed in taking a decision on such a vital restructuring proposal of a company of national pride? And, lastly, why did not the minister refer to this pending proposal from NACIL to the government in Parliament?

The answer is clear. NACIL is being allowed to die a natural death through delayed policy-making decisions which were preceded by hostile policy decisions like handing over prime time slots of Air India/India Airlines to private airlines and through a planned media campaign to malign and demoralise the workforce, based more on fiction than on facts. Industrial unrest is also being created by the management at the behest of the ministry through coercive and provocative actions like delayed wage payment, etc.

The government must first perform in the interest of the PSUs before asking the employees to do so. If the government is serious, it can take two administrative decisions immediately which can stop the cash loss to NACIL. First, give back all the prime slots taken from Air India/Indian Airlines in domestic or foreign routes and, second, give priority landing facility to national carriers so that they do not have to spend costly aviation fuel in idle flying over the sky.

As a public sector, AI should have the first right to use AAI, another PSU. More importantly, the balance sheet or 20082009 must come in to the public domain immediately. The Parliamentary standing committee should investigate as to how the public airlines making profits till 2005-2006 had all of a sudden become a Rs 5,000-crore loss-making unit after the merger. An independent investigation will reveal the fudging of accounts, if any, and the real under-performers at the policymaking level who are bent on privatising the total civil aviation sector through a well planned conspiracy.

The national carrier, Air India, cannot be allowed to perish at the sweet will of the

government of the day.

57

Snippets Aviation.qxd

11/2/2009

11:27 AM

Page 2

SNIPPETS

DOMESTIC AIRLINES GoAir is four GOAIR announced the celebration of its fourth anniversary with an attractive ‘Book Early Pay Less’ offer, starting with an all inclusive fare of Rs 4, Rs 444 and Rs 1444. The offer allows customers to avail the cheapest fares by booking early with the lowest rate as low as Rs 4 and the highest at Rs 1444 depending on the time of booking. The offer is available for booking till November 4, 2009. GoAir’s ‘flexibility of flying’ service gives its customers the leisure of choosing their travel date upto March 31, 2010, under this offer.

New addition to the network: GoAir announced the addition of Indore as a new destination in its network. The addition under the airlines’ expansion strategy has taken the total number of routes serviced by the airline to 13. The Indore route will now provide the customers daily flights from Mumbai and Delhi.

Paramount emerges as the company of the year THE Chennai-based Paramount Airways has been recognised by Frost & Sullivan Excellence in Best Practices award for 2009 as the ‘Global Commercial Aviation Emerging Company of the Year.’ The company, which is hardly five years old has more than 700 employees and is one of the country’s leading premium domestic airlines.

Presenting the awards at a glittering ceremony in London, Joe

Excellence in Best Practices Award 2009 went to Paramount.

Nivas, Director of Best Practices, Frost & Sullivan said, “The Best Practices Awards are presented each year to companies that identify emerging trends... Paramount Airways has redefined air travel in India with innovative product offerings”.

M Thiagarajan, Managing Director, Paramount Airways, while receiving the award said that it was an honour to be recognised by the leading growth partners in the research industry and market... we would soon like to extend our services to the global traveller”.

Paramount Airways flies to 16 destinations across India and operates 72 flights daily carrying over 3,600 passengers everyday.

Air India is first sponsor of CWG 2010 AIR India has earned the distinction of being the first Indian and global sponsoring company for the Commonwealth Games. The carrier recently signed a Memorandum of Understanding (MoU) with the Commonwealth Organising Committee to be the official

58

partner airline for the Commonwealth Games that will be held in Delhi in October 2010.

The MoU was signed by Suresh Kalmadi, Chairman of the Organising Committee on behalf of the Commonwealth Games and Arvind Jadhav, Chairman and Managing Director, Air India, at a recent function in New Delhi.

Speaking on the occasion, Jadhav said that it was a great honour for the national carrier to have been given the opportunity and responsibility of flying the athletes and officials for the mega sporting event.

Jadhav also mentioned that Air India would be creating very special and affordable holiday packages, on its vast network, for the participants which would give them an excellent opportunity to experience India.

Jet is ‘Best Indian Airline’ JET Airways recently received the ‘Best Indian Airline’ award at the Business Traveller Awards in London. This year’s awards were presented by British adventurer Sir Ranulph Fiennes in the presence of nearly 450 industry leaders. Widely accepted and recognised as the market’s benchmark for excellence, the results of the Business Traveller Awards are authenticated by means of an independent audit.

The award was among the many that Jet Airways has had the distinction of winning. Among them are the ‘Airline with Best First-Class Service in the World’, by readers of Business Traveller magazine as well as being voted as one of the top three airlines of the World by the Conde Nast Traveller readers’ poll, in New York.

Escapes with Jet: Jet Airways has launched its all new JetEscapes, a range of complete holiday packages. Priced competitively at affordable rates (inclusive of air taxes and surcharges), JetEscapes offers travellers various domestic and international theme-based packages, such as Honeymoon, Beach, Adventure, Cultural, Wildlife, Corporate Travel, Family and Pilgrim, to most domestic and international holiday destinations flown to by Jet Airways.

These range from well-known Indian destinations like Allepy, Bandhavgarh, Leh, Sasan Gir and Shimla to exotic international locations like Tamanegara (Malaysia), Nuwaraeliya (Sri Lanka), Paris and Brussels, among several others. JetEscapes caters to a range of price points with hotel categories ranging from comfortable three star to luxurious five star hotels, with airport/ local transfers in airconditioned private vehicles, city tours and meals, based on the package selected.

These packages also offer travellers the flexibility to customise their travel experience by enabling them to book travel packages with hotel check-in/check-out dates that do not necessarily correspond with their flight dates, at no additional cost.

According to Sudheer Raghavan, Chief Commercial Officer, Jet Airways, “The new JetEscapes is flexible, dynamic, seamless and real-time, enabling us to offer travellers complete holiday packages and make travel a joyful, hassle-free experience, and we are confident that it will prove extremely popular with travellers.”

CRUISING HEIGHTS November 2009

Snippets Aviation.qxd

11/2/2009

11:27 AM

Page 3

GHIAL bags CAPA Award

GMR Hyderabad International Airport Limited (GHIAL) has been awarded the “Best Airport Environmental Performance of the Year” award by Centre for AsiaPacific Aviation (CAPA). The award ceremony was held at the sixth annual Asia Aviation Outlook summit in Beijing and the award was received by G Radhakrishna Babu, Chief Financial Officer, GHIAL. On the occasion, Peter Harbison, Executive Chairman, CAPA, commented, “GHIAL is to be commended for incorporating sustainability in airport development, as a result of which the Rajiv Gandhi International Airport is the first airport in Asia to achieve a LEED Silver certification for Leadership in Energy and Environmental Design from the US Green Building Council. This sets a benchmark for other airports in the A view of the GMR Hyderabad International Airport Limited. region to follow”.

P Sripathy, CEO, GHIAL, said that the award recognised protecting the environment. Such recognition would further the fact that GHIAL was conscious about conserving and encourage GHIAL to raise the bar for sustainability initiatives.

GMR bags award for services to elders

Wipro, DIAL in strategic partnership

GMR Varalakshmi Foundation (GMRVF), the corporate social responsibility arm of the infrastructure major GMR Group, has been awarded the HelpAge India Silver Plate Award for its CSR work with elderly. The award aims to recognise and applaud the highest contribution given to the cause of disadvantaged older persons. Meena Raghunathan, Director, Community Services, GMR Varalakshmi Foundation, received the silver plaque and citation from Mukul Wasnik, Minister for Social Justice and Empowerment in Delhi.

The GMR Varalakshmi Foundation has been working with the elderly through a partnership with HelpAge India since 2004. HelpAge, set up in 1978, has been raising resources to protect the rights of India’s elderly and provide relief to Meena Raghunathan, Director, Community them through variServices, GMR Varalakshmi Foundation, receiving a silver plaque from Mukul Wasnik, ous interventions.

Minister for Social Justice and Empowerment.

C u r r e n t l y, GMRVF and HelpAge run three Mobile Medical Units (MMU) in Hyderabad, Rajam and Rajahmundry in Andhra Pradesh to take health services to the doorsteps of the elderly. Each MMU is staffed with a doctor, a health care worker, a pharmacist and equipped with appropriate medicines and medical instruments. It travels from village to village making a three-hour stop at each village. The value added services include recreational events for the elders, ophthalmic services, distribution of disability aids like walking sticks, wheel chairs and hearing aids.

DELHI International Airport Pvt Ltd (DIAL) and IT major Wipro announced a ten-year total outsourcing agreement to provide world class IT Infrastructure and Services for Indira Gandhi International Airport (IGIA).

The partnership assumes significance as IGI airport’s new integrated terminal (T3) - possibly one of the largest in the world — will be the gateway for the Commonwealth Games. Wipro will provide information technology, a key driver for critical airport operations, including flight management, terminal management, ground handling and property management and will also be responsible for managing a host of intelligent systems, including building management systems, access control, public address, and telephony.

The parties signed an agreement to form a joint venture which would be named Wipro Airport IT Services Ltd. Wipro would hold 74 per cent in the joint venture and DIAL will hold 26 per cent stake. The agreement was signed by PS Nair, CEO, DIAL and Anand Sankaran, Senior Vice-President and Business Head, India and Middle East, Wipro.

APPOINTMENTS Vinita Vasu is AVIAREPS’ Sales and Marketing Manager AVIAREPS - India a subsidiary company of AVIAREPS AG, has appointed Vinita Vasu as its Sales and Marketing Manager. Vasu comes with knowledge and 16 years of travel and tourism experience in the travel and aviation industry. In her present role, she will organise and direct all sales and marketing efforts towards attainment of objectives of AVIAREPS clients in India.

CRUISING HEIGHTS November 2009

Vinita Vasu

59

Snippets Aviation.qxd

11/2/2009

11:27 AM

Page 4

SNIPPETS

INTERNATIONAL AIRLINES Virgin Atlantic ties up with Amadeus GLOBAL leader in technology and distribution solutions for the travel and tourism industry, Amadeus, has signed a worldwide agreement with Virgin Atlantic to ensure travel agents to have access to the airline’s full range of content. This agreement will enable Amadeus’ over 20,000 travel agents across India to information directly from the airline’s inventory.

“Amadeus has always explored opportunities to deliver the best products and solutions to our partners and assist them in expanding their catalogue across service levels. We are proud to associate ourselves with Virgin Atlantic and use this opportunity in boosting the efficiency and services of our business partners,” said Ankur Bhatia, Managing Director, Amadeus India.

Speaking on the tie-up, Michael Burke, General Manager, Virgin Atlantic, India, said “We are delighted with this agreement and look forward to this association proving beneficial to our travel trade partners in India.”

Jon Harding, General Manager International & Distribution, Virgin Atlantic, said: “We have always been and remain committed to travel agencies who form an essential part of our multi-channel distribution strategy. We are delighted to announce this agreement with Amadeus and look forward to building on the close working relationship we enjoy with them.”

SIA starts daily A380 to Melbourne SINGAPORE Airlines recently started its daily A380 service to Melbourne, the second Australian city and the sixth city in Singapore Airlines’ network to receive the A380. Singapore Airlines currently operates 21 weekly flights between Singapore and Mel-

bourne, including the daily A380 service. Commenting on the new flight, Huang Cheng Eng, Singapore Airlines’ Executive Vice President, Marketing and the Regions pointed out that the A380 continued to be extremely popular with SIA’s customers. “Since the start of its operation in October 2007, the A380 has carried more than 1.8 million customers on more than 4600 commercial flights.”

The A380 features the exclusive Singapore Airlines Suites. A private sanctuary in the sky, and its intelligent design allows customers to lounge in bed to watch movies or TV programmes, read or dine as they would in the comfort of their own homes. The Singapore Airlines Economy Class promises more comfort and privacy than ever. The dining experience is enhanced by the use of exclusive Givenchy-designed serviceware and complemented by a wide selection of fine wines and spirits.

SilkAir’s daily between Singapore and Hyderabad SILKAIR, the regional wing of Singapore Airlines, has increased its flight frequency between Singapore and Hyderabad from five times weekly to daily.

The Singapore-Hyderabad flights have received strong support from customers and experienced good load factors over the past four months of operation after starting from June 15 this year.

With the increased flight frequencies between the two cities, SilkAir now operates a total of 40 flights weekly between Singapore and India. The airline will also be increasing the frequency of its flights between Singapore and Kathmandu in Nepal, Phuket in Thailand and Kunming in China.

Hawker 4000 delivers to first Indian customer HAWKER 4000, one of the most advanced and luxurious super-midsize business jets, has made its first entry in India. InterGlobe General Aviation (a subsidiary of InterGlobe Enterprises), the exclusive sales and service representative for Hawker Beechcraft in SAARC, delivered the first jet to a Mumbai based customer.

The winner of Robb Reports “Best of the best”, the Hawker 4000, priced at $ 22.2 million, has redefined standards for business aviation globally with its unmatched quality, comfort, safety, value and technological innovation.

The spacious and luxurious Hawker 4000 is capable of carrying a two-man crew and nine passengers over distances of upto 3,280 nautical miles and is wellsuited to the Indian market as it can complete all mission requirements normally only associated with aircraft of much higher acquisition cost. This Hawker 4000 delivery is the first of three deliveries to take place over the coming months and thus highlights the demand in the market.

Inside view of the luxurious Hawker 4000.

60

CRUISING HEIGHTS November 2009

Snippets Aviation.qxd

11/2/2009

11:27 AM

Page 5

Qatar first to fly with fuel from natural gas

A Qatar Airways aircraft has become the world’s first commercial passenger flight powered by a fuel made from natural gas. The journey from London Gatwick to Doha, took over six hours and was operated with an Airbus A340-600 aircraft using RollsRoyce Trent 556 engines. Shell developed and produced the fuel that was a 50-50 blend of synthetic gas to liquids (GTL) kerosene and conventional oil-based kerosene fuel.

Qatar is set to become the world’s leading producer of GTL kerosene when it is put into commercial production from 2012.

The blend of conventional kerosene and GTL kerosene will be known as GTL Jet Fuel. The flight is the latest step in over two years of scientific work carried out by a consortium consisting of Airbus, Qatar Airways, Qatar Petroleum, Qatar Science & Technology Park, Rolls-Royce, Shell and WOQOD in the benefits of using GTL Jet Fuel to power commercial aircraft.

Lufthansa to relaunch broadband

LUFTHANSA has decided to relaunch its broadband internet on board from mid-2010. The carrier will reintroduce FlyNet, its satellite-based internet on board service and its customers will once again be able to communicate above the clouds via broadband internet. In addition to the wireless Internet access, the newly improved service will permit in-flight data transfer over standard GSM/GPRS mobile networks. This will enable Lufthansa passengers in the future to also send text messages by mobile phone and transfer data via smart phones such as PDA,

KLM celebrates 90 years of flying KLM, the oldest airline in the world still operating under its original name, recently celebrated 90 years of flying.

KLM’s 90th anniversary celebrations have been modest.

The anniversary year was launched on January 1 with a celebration flight. The passengers included 90 sick children from the High-Flyer Foundation (Stichting Hoogvliegers). Another memorable event was the official naming of the KLM tulip by CEO Peter Hartman and former top model Frederique Van der Wal. In July, 90 senior citizens who had never before flown in an aeroplane were treated to a flight by KLM.

In-flight internet will be at the fingertips on Lufthansa flights.

iPhone or BlackBerry devices.

Lufthansa is focusing on providing high bandwidth, which is essential for unrestricted web surfing, email/file transfer including attachments, and the use of a Virtual Private Network (VPN).

Together with its new business partner, Panasonic, Lufthansa plans to equip a major part of its long-range fleet with FlyNet within the first year of operation.

“Best International Airline 2009”: Lufthansa has received several important awards made by the Asian tourist industry, including in India. It was recently voted as the “Best International Airline 2009”.

The airline was chosen by the readers of the leading Asian magazines for the tourist industry as the Best European Airline.

Lufthansa was also honoured at the CNBC Awaaz Travel Awards. The travel awards are among the most important forms of recognition of the Indian tourism industry. In addition, Lufthansa also managed to take a further first place in Australia, where it flies around 20 daily code share flights with Star Alliance partners, at the National Travel Industry Awards 2009 as the “Best Airline International Off-line”.

The German carrier also registered “top three” placing with the Asian edition of the globally-published magazine Business Traveller in the categories of “Best European Airline” and for its Miles & More loyalty program. “We are delighted about the awards in Asia and the first places in China and India, our largest markets in Asia.” said Uwe Müller, Vice-president Asia/Pacific of Lufthansa German Airlines. “Our strategy of sustainable growth in the successful Asian markets is paying off.”

CRUISING HEIGHTS November 2009

61

Snippets Aviation.qxd

11/2/2009

11:27 AM

Page 6

SNIPPETS Jet introduces second daily to Hong Kong

and complement the airline’s existing Mumbai-Hong Kong services.

JET Airways launched its second daily flight to Hong Kong from India, aboard a state-of-the-art wide-body Airbus 330200 aircraft on October 1, 2009, China National Day, the

From India to UAE at dream fares

Sudheer Raghavan, Chief Commercial Officer, Jet Airways lighting the inaugural lamp during the launch of flight 9W 72 from Delhi to Hong Kong at the Indira Gandhi International Airport.

anniversary of the founding of the People’s Republic of China in 1949.

The airline marked the occasion with a small inaugural ceremony at the Indira Gandhi International Airport, Delhi, in the presence of senior company officials. The new daily flights facilitate business and leisure travel between the Indian capital and the commercial hub of the East, Hong Kong

AIR Arabia, the largest and leading low-cost carrier (LCC) in the Middle East and North Africa, unveiled exciting low fares from across 13 destinations in India to its hub in Sharjah and onwards to the airline’s 46 global destinations.

These low fares come with the additional benefit of free baggage allowance of upto 20 kilos and a hand baggage allowance of seven kilos. Air Arabia’s compelling low fares inclusive of all surcharges, excluding airport tax and fees, are valid for travel till March 31, 2010. A K Nizar, Head of Commercial Department, Air Arabia said that with 46 destinations across the Middle East, North Africa, Indian Subcontinent and Eastern Europe, Air Arabia passengers could choose from a range of compelling fares as well as holiday packages through Air Arabia Holidays.

The carrier flies directly from its hub in Sharjah to Bangalore, Ahmedabad, Chennai, Jaipur, Kochi, Mumbai, Nagpur, Coimbatore, Thiruvanathapuram, Hyderabad, Kozhikode, Delhi and Goa. New Airbus A320 aircraft, the best leg room of any economy class travel, free hotel and car assistance are just some of the benefits of flying Air Arabia.

Emirates flies to Durban EMIRATES started its services to Durban on October 1, bringing passengers from around its growing network to the province of Kwa Zulu Natal. On the business and trade side, the province is a key commercial and manufacturing centre and Durban itself, is recognised as the busiest port in Africa. Emirates Sky Cargo has already set up a base in the city to support the movement of goods.

To mark the opening of Emirates’ 17th route into Africa, the airline offered complimentary two nights accommodation in a standard room at Durban’s Southern Elangeni Hotel to Business Class passengers.

62

CRUISING HEIGHTS November 2009

ch self add one page new 1:ch self add one page new 2.qxd

10/16/2009

12:43 PM

Page 3

Rs 60

June 2008

FIREWALKERS INC

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

CRUISING HEIGHTS The right stuff, all the time, on time Get your copy today. Call +91-9650433044 or email: jaya@newsline.in India’s best known aviation monthly from Newsline Publications Pvt. Ltd.

Snippets Tourism.qxd

11/2/2009

7:53 PM

Page 3

TOURISM SNIPPETS

TRAVEL & TOURISM

Hong Kong ready to offer total travel experience PROMPTED by the growth of Indian travellers to Hong Kong in August this year, the Hong Kong Tourism Board (HKTB) is all set to roll out the red carpet for Indians.The package includes thrilling and exciting experience for families and all ages.

To create awareness about the city’s tourism attractions, HKTB, with some popular key attractions - Hong Kong Disneyland Resort, Ocean Park Hong Kong, Madame Tussauds Hong Kong and Ngong Ping 360, organised “Discover Hong Kong Fair” from October 6-11, 2009 in the capital. The six-day fair wooed Indian travellers with spectacular performances by popular characters from Disneyland Resort and Ocean Park.

Commenting on the initiative, David Leung, Regional Director South and Southeast Asia, said: “HKTB is pleased to collaborate with our key attractions, cruise and travel trade partners to showcase the city’s extensive family fun activities and exciting events to offer visitors a total travel experience.”

According to the organisers, any trip to Hong Kong would be incomplete without a visit to Disneyland and Ocean Park. While Disneyland features fairytales with fun-loving Disney characters — Mickey Mouse, Minnie and Donald — Ocean Park provides theme park environment connecting people with nature.

The Hong Kong Disneyland has become a landmark tourist attraction in Asia. It offers a unique family vacation experience that features Disney fairytale and fun, quality dining, and relaxing resort environment at the two Disney-themed hotels. Disneyland is categorised into three lands — Adventureland, Fantasyland and Tomorrowland. In addition, it provides a cosmopolitan selection of Chinese, Western and Japanese cuisine in each of the three lands and stay at its two Disney-themed hotels, which provides elegance and Victorian hospitality.

Ben Wong, Director of Marketing, Regional Business, Hong Kong Disneyland Resort said, “There is something for every member of the family at Hong Kong Disneyland, and we are delighted to see more and more Indians visiting our world of fantasy, adventure and imagination.”

In addition, Wong launched the

Disneyland’s ‘stay and play for two days’ package which features a visit to the park for two consecutive days for the price of one and stay at Hong Kong Disneyland Hotel. Disneyland park offers ticket worth HK$ 350 for adults, HK$ 250 for children (3-11 years) and HK$ 170 for seniors (65 or above).The offer is valid till March 31, 2010.

Located on the southern side of Hong Kong Island, Ocean Park has always tried to connect visitors with nature. It has 20 rare animal attractions, including giant pandas, red pandas and thousands of fish, birds and amphibians. In addition, it provides 20 ride attractions. It serves Indian visitors with Indian cuisine and for this there is a veteran chef from New Delhi.

Hong Kong is also ready to welcome Indian travellers to sample its wine and food from October 30 to November 8, 2009, during the Hong Kong Wine and Dine Festival. During the fest, there will be street carnivals, food district promotions, hotel and dining offers and food and wine themed activities. Following that, there will be the 2009 Hong Kong WinterFest, which will be staged from endNovember 2009 to early January 2010 with glittering festive décor and activities. This will turn out to be a platform for collaboration between the HKTB and travel trade to stimulate travellers’ interest in visiting Hong Kong for Christmas and New Year celebrations.

Disney characters entertaining the Indian audience; (second from left) Ben Wong, Director of Marketing, Regional Business, Hong Kong Disneyland Resort; and (bottom) the Ocean Park entrance.

CRUISING HEIGHTS November 2009

63

Snippets Tourism.qxd

11/2/2009

7:53 PM

Page 4

TOURISM SNIPPETS

Vienna campaigns for more Indian tourists TO celebrate 60 years of diplomatic relations between India and Austria, the Vienna Tourism Board recently organised a lifestyle event in the capital that featured a buffet with culinary treats from the Austrian capital. The event was attended by 20 representatives of Indian travel agencies and tour operators.

Commenting on the ties, Norbert Kettner, Director of the Vienna Tourism Board said, “This special anniversary gives us a unique opportunity to deepen the close friendship between the two nations.

India and Austria have a significant shared cultural heritage. But still, we are intensifying our partnership with special focus on culture and music. Each partner draws on a rich reserve of cultural traditions and is committed to forging closer ties on tourism projects”.

The Vienna Tourism Board has identified the Indian market as a high potential emerging market for city tourism. Vienna’s increasing role in incentive vacations has also positively influenced the city’s standing as a tourist destination.

In recent years the Indian tourist

industry has grown around ten per cent per year, with this figure set to rise to as much as 15 per cent in coming years. Based on an increase of this magnitude, more than 50 million Indians are projected to vacation abroad by 2020 and according to the World Travel & Tourism Council (WTTC) this would further increase Austria’s positive tourism trade balance with India.

While the total number of overnight stays accounted for by visitors from India to Vienna in the first quarter of 2009 was down by 7.8 per cent, it was still satisfactory when compared with data from other European destinations such as Germany (down 10.3 per cent) or the United Kingdom (down 23.6 per cent).

Indian travellers often cite Austria as a preferred destination and value its moderate climate, high safety standards and cleanliness.

The Indian film industry considers Austria’s imperial locations as ideal backdrop for films.

In addition, the city’s museums are gaining popularity among Indians while the parks and gardens provide them real touch with nature.

Norbert Kettner, Director of Vienna Tourism Board.

64

CRUISING HEIGHTS November 2009

Snippets Tourism.qxd

11/2/2009

7:53 PM

Page 5

India’s first international cruise

Travel the mSmart way

LOUIS Cruises India, a subsidiary of the 12-ship Louis Cruises fleet, one of Europe’s leading cruise operators announced its itineraries, preferred sales agents, voyage information and launch dates for operations in India, using Kochi in Kerala as its homeport. It will start operating from December 2, 2009 to April 25, 2010 through their preferred sales agents. “We are delighted to bring MV Aquamarine to India”, said Oneil Khosa, MD, and CEO of Louis Cruises, India,“She is a beautiful ship, with 525 luxurious cabins, restaurants, and entertainment for the entire family. It is a product fine tuned keeping in mind the Indian traveller so that Indians can feel at home. We, at Louis

GALILEO GDS, one of the world’s largest providers of travel content and a technology leader serving travel companies in India, has launched mSmart, a service that allows customers to pay for flights, rail, car rental or travel packages using their mobile phones. The service is powered by PayMate, India’s leading mobile payments company. Galileo is the first GDS in India to implement this mobile phone payment solution that is available to more than 5,000 travel agents and a further 11,000 travel outlets.

Speaking about the innovative payment method, J B Singh, President and CEO of Galileo in India said that mSmart was a pathbreaking solution and it would offer travel agency partners a convenient and a hassle-free channel to receive payments.

Commenting on the convenience of the service,Ajay Adiseshann, Founder and Managing Director of PayMate said “The mSmart service directly addresses the pain points of cash and cheque collections; something small businesses could well do without. Electronic Payment collections are a boon to any business.”

Hotels on Expedia Insiders’ list

Oneil Khosa, CEO & MD, Louis Cruise India, Malaika Arora Khan and Arbaaz Khan during the launch of Louis Cruises India.

Cruises, believe that the Indian traveller has evolved and today is at par in terms of what he seeks in a holiday with the developed world.”

Khosa added. Vijay Puthran, Country Head of Sales and Marketing, Louis Cruises India commented,“I am fully satisfied that as a product and product offering, MV Aquamarine will redefine the cruising industry in India. Moreover, with the support shown by Ministry of Tourism, Government of India, Kerala Tourism, Sri Lanka Tourism, Maldives Tourism, we expect the operations to be smooth and flawless.”

Great showing by WelcomHeritage AT the recent Indian Association of Tour Operators (IATO) Convention at Bengaluru, the WelcomHeritage Directory was awarded the ‘Best Directory of the Year 2009’ for the second time in a row. The award was presented by Vijay Thakur, President, IATO. The comprehensive WelcomHeritage Directory, introduces each state and includes information and photographs of each property under the brand. The directory serves as a guide for guests as they can choose preferred locations for family holidays and interesting conference venues for meetings. Facilities on offer, nearby places of interest, weather details, mode of travel, distances of nearby places as well as maps on convenient routes enable travellers to make the most of their trips through this directory.

At another function in New Delhi, We l c o m H e r i t a g e received the Today’s Traveller Gold Award for Most Innovative Promotion of Heritage Tourism in 2009 Sunil Sikka, Head - Marketing & Business from Ambika Soni, Development, WelcomHeritage receiving the Minister for InformaAward from Vijay Thakur, President, IATO, and Arun Anand, Vice President, IATO. tion and Broadcasting.

TEN Indian hotels have made it to be amongst the world’s favourite hotels on the annual global Expedia Insiders’ Select list. The Oberoi Grand in Kolkata has claimed the top spot among the favourite Indian hotels. The others in the list include The Oberoi Amarvilas, Agra; The Oberoi, Mumbai; Shangri-La Hotel, New Delhi and Lemon Tree Amarante Beach Resort, Goa. Chateau Beauvallon, near the town of Mont-Tremblant in Quebec, Canada, was named the world’s favourite hotel.

The Expedia Insiders’ Select list was compiled using a combination of hundreds of thousands of traveller opinions from Expedia customers. This was combined with insights from Expedia’s own network of hundreds of experts worldwide, systematically comparing hotels and resorts to similar properties to determine the best value for money. Hoffman, Managing Director, Expedia Asia-Pacific, says: “The fact that ten Indian hotels have their presence on this year’s Insiders’ Select list confirms our belief that India offers world class accommodation and shows that international travellers are impressed by both, the quality and value of the accommodation they find in India.”

Akshradham @ Metropolitan THE Metropolitan has crafted a special package for visitors to the Akshardham Temple. The temple displays centuries of traditional Indian and Hindu culture, spirituality, and architecture. Constructed entirely with Rajasthani pink stone and Italian Carrara marble, the monument also features a musical fountain and large landscaped gardens.

The package includes a room with American breakfast, one-way airport transfer, a full-day trip to Akshardham temple by air-conditioned luxury car, a day of local sightseeing of Delhi and a ten per cent discount on shopping at Craft House, unique lifestyle store.The package is valid from October 1, 2009 to March 31, 2010.

A view of one of the Metropolitan Hotel’s luxurious rooms.

CRUISING HEIGHTS November 2009

65

Snippets Tourism.qxd

11/2/2009

7:53 PM

Page 6

TOURISM SNIPPETS

Resorts World Sentosa calls Indians to celebrate the New Year THE worldwide economic meltdown may have restricted travellers from visiting foreign coasts but that has not deterred Krist Boo, Resorts World Sentosa’s Vice President of Communications to woo Indian tourists.

Undertaking the three-city road show in Delhi, Mumbai and Bangalore to promote Asia’s biggest family destination, Resorts World Sentosa, Boo was quite confident that “Resorts World Sentosa will draw many new Indian travellers and give Indians who have visited Singapore before a new reason to come again. Despite the global slowdown, we have a target of 13 million visitors in our first year of operations in 2010”.

One of the most expensive and extensive integrated resorts, Resorts World Sentosa is a destination that offers round-the-clock entertainment. Visitors can look forward to top-class attractions, luxurious accommodation, concerts, free public performances and much more. Universal Studios theme park, the world’s largest Marine ( L-R): Ajay Sharma, Regional Manager,India, Resorts World Sentosa , Krist Boo, VPLife Park, shows of celebrity lookalikes Marilyn Head Communications, Resorts World Sentosa and Addison Goh, Director of SalesMonroe, six unique hotels, a luxury spa, a casino Sentosa Leisure Group with a Marilyn Monroe look-alike. and dining and shopping options complete its offerings. located within Hard Rock Hotel — which serves up a tandoor secUnderscoring the importance of Indian visitors, the Resort tion delivering delicious Indian favourites late into the evening. offers several Indian vegetarian dining options in Universal Studios In her effort to offer hassle-free travel to Indian visitors, Boo Singapore and its hotels.Among these is a Bolly Rock restaurant — said, “With 137 flights a week operating out of India at an average flight time of 5.5 hours and the distance of 25 minutes between Changi Airport and Resorts World Sentosa, Indian travellers no longer need to travel long-haul for a worldclass holiday experience”.

Besides holiday fun, the Resort also has meetings facilities that can accommodate upto 35,000 delegates at any time.

Addison Goh, Sales Director, Sentosa Leisure Group, who was also at the Delhi road show said, “The Resort offers companies many unique options for meetings and incentives.Clients can choose to hold a meeting in our Compass Ballroom for anything from 10 to 10,000 people, followed by an exclusive red carpet party along Hollywood Boulevard in Universal Studios Singapore”.

Novotel Hyderabad is one THE first anniversary celebration of Novotel Hyderabad Airport was marked by the presence of music director and Oscar winner A R Rahman. The contemporary hotel, owned

by GMR Hyderabad International Airport Limited and managed by Accor Hospitality is the second Novotel in the Hyderabad city.

Said Simon Jinks, General Manager, Novotel Hyderabad Airport,“Over the last one year we have always strived for perfection in the service industry and make this hotel an ideal destination for business and leisure travellers to relax, in an environment specifically designed with deluxe facilities, ease of access to latest technology and warm and professional service.”

With its proximity to the airport and the tranquil envi-

66

P Sripathy, A R Rahman and Simon Jinks cut the celebratory cake to mark the first birthday of the Novotel Hyderabad Airport .

CRUISING HEIGHTS November 2009

ronment around the hotel, Novotel is emerging as a favourite choice for business travellers. It is also an ideal stopover for any traveller with its unique offers such as ‘FlexiStay’ package for short durations up to four or eight hours.

Snippets Tourism.qxd

11/2/2009

7:53 PM

Page 7

Shahrukh is Honorary Ambassador of Korea now

Liverpool for the Beatles, football and more

The indisputable czar of Bollywood ‘Shahrukh Khan’ has been appointed the Honorary Ambassador of Korea (Culture & Tourism) in India on October 15, 2009. Subsequently, the Korea Tourism also conferred upon Shahrukh Khan the title ‘Honorary Black Belt (five Dan) of Taekwondo’.

The Korea Tourism Organisation (KTO) considers its association with Shahrukh Khan as really special because he is the very first Bollywood star to be appointed Honorary Ambassador of Korea (Cul-

VisitBritain - the national tourism office of UK - in association with global travel solutions provider Galileo, recently conducted an exclusive trade workshop showcasing Liverpool as an exciting travel destination.

The three-hour workshop endeavoured to promote Liverpool as a destination for this fall-winter season. It showcased Liverpool city, its art and culture, entertainment and nightlife along with endless shopping and most importantly the two iconic draws to the city:The Beatles and football.

According to Paramjit Bawa, Country Manager, VisitBritian, “There has been a three-fold increase in Indian tourists holidaying in Britain over the past decade and the numbers of Indian visitors have grown by about 170 per cent between 1993 and 2007. Since most visits tend to centre on London, this workshop is part of a series of initiatives to promote regional tourism in UK and highlight key aspects of Liverpool including its culture, history, nightlife, shopping experiences and musical heritage.”

Amari’s expansion plans Amari, Thailand’s largest domestic hotel management company, with an inventory exceeding 3,000 rooms and employing over 3,000 staff recently announced that it will be investing $44.1 million in a corporate growth strategy.The group, which currently has 11 properties in key destinations across Thailand including Bangkok, Phuket, Koh Chang, Pattaya, Koh Samui, Chiang Mai and Krabi, plans to operate 40 further properties in AsiaPacific by 2018.

This announcement comes a year after the appointment of President and CEO, Peter Henley who has spent his tenure in planning major changes, allocating investment to the enhancement of systems and processes, significant revitalisation of the Amari brand and corporate management restructuring which has included the appointment of strategic senior hires from hospitality giants including Ritz-Carlton, Hilton Hotels & Resorts, Six Senses and Shangri-La. Shahrukh Khan receives a plaque from the Korea Tourism Organisation.

Travelport -VFM Leonardo tie-up

ture & Tourism) after the KTO recently set up its India office at New Delhi. ‘Korea, Sparkling’ is the official tourism brand of Korea and it symbolises the lively energy of the Korean people and culture.

Khan being the most popular and loved Bollywood star across the world, the Korea Tourism is confident that his association with the ‘Korea, Sparkling’ Brand will help in further enhancing awareness and interest in Korea among his fans. Shahrukh Khan conveyed his appreciation to the Korea Tourism for appointing him its Honorary Ambassador in India and conferring upon him the title ‘Honorary Black Belt of Taekwondo’.

Travelport GDS, one of the world’s leading providers of global distribution systems (GDS) has extended its relationship with VFM Leonardo and appointed them as sole distributor of visual hotel content on both the Galileo and Worldspan platforms.

VFM Leonardo, leading distributor of visual hotel content, is already the sole distributor of hotel visual content on the Galileo system, provided through its VScape Digital Asset management system (VScape), and Galileo-connected travel agents have been able to access an extensive range of hotel photos, virtual tours and videos on hotels and resorts worldwide. Following positive customer feedback on the value of this visual content,Travelport GDS has extended the relationship with VFM Leonardo to also include its Worldspan system.

Under the new agreement, using VFM Leonardo’s VScape webbased tool,Travelport GDS will now be able to offer the thousands of hoteliers who participate in its GDS systems, the ability to upload their visual hotel content on to both Travelport GDS platforms at the same time, creating a more cost-efficient and streamlined process.

Shop, enjoy and say goodbye to 2009 The all new Malaysia Year-End Sale 2009 or M-YES brings 44 days of fantabulous retail therapy and a better way to bid 2009 goodbye with great dining experience and fun entertainment from November 21, 2009 till January 3, 2010.

M-YES will be launched with a main event on the November 21, 2009 in Kuala Lumpur. Almost every store in major shopping complexes will offer big discounts through the sale period. Visitors to Malaysia can visit posh shopping malls, departmental stores and vibrant street marts during the grand year-end holiday season.

CRUISING HEIGHTS November 2009

67

Snippets Tourism.qxd

11/2/2009

7:53 PM

Page 8

TOURISM SNIPPETS

Dr Mohamed Higazy Egyptian Alchemy: Aswan Folk Troupes' captivating performance mesmerised viewers.

Rhythms and colours of Egypt fascinate India The Embassy of Egypt, in collaboration with the Indian Council for Cultural Relations (ICCR) organised a weeklong cultural festival from October 3-10, 2009 to strengthen Indo-Egyptian cultural ties. The festival was a pan-India initiative and covered four cities: Delhi, Chandigarh, Kullu and Noida.

Throughout the week, cultural vignettes took Indian audiences close to the Egyptian soil. While the focus of the festival was dance and music, there was an exhibition

Sarovar’s new property in Kerala SAROVAR Hotels and Resorts has signed its third property in Kerala, in addition to Gokulam Park, Kochi and The Muthhoot Plaza, Thiruvananthapuram. The new hotel has been signed with Vasu Coco Resorts Pvt Ltd. It will be launched by fall-2010 as Vasundhara Sarovar Premiere.

The property is spread over more than eight acres and is located on the Vembanad Lake, which is the heart of Kerala’s backwaters. The 50-room five star resort is around 63km from the Kochi airport. Vasundhara Sarovar Premiere will offer unmatched services and distinguished (L-R) Ajay Bakaya, Executive Director Sarovar Hotels and Resorts, P Vasudevan and Prashanth Vasudevan, the owners of Vasundhara Sarovar Premiere.

68

of contemporary arts showcasing Egyptian works and a film festival of Egypt’s classical repertoire. In addition, there was also a food festival on the concluding day.

Commenting on the initiative, Dr Mohamed Higazy, Ambassador of Egypt said, “Through this Egyptian cultural week, we have tried to bring an eclectic fusion of our diverse art treasures, from traditional to contemporary, to our Indian audience. This cultural exchange was designed to reflect our deep rooted affinities.”

accommodation for travellers to the cities of Vayalar and Kochi.” said Anil Madhok Managing Director, Sarovar Hotels and Resorts.

P Vasudevan, owner of Vasu Coco Resorts Pvt Ltd said, “We are pleased to be associated with Sarovar Hotels...We are confident that Vasundhara Sarovar Premiere will soon be a preferred hotel of many tourists and business travellers to Kerala.” This fullservice resort will cater to the conferencing segment with a capacity to accommodate upto 100 people. The food & beverage facilities will include a restaurant and bar; leisure facilities include a spa, health club, children’s play area and theme walks.

CRUISING HEIGHTS November 2009

Snippets Tourism.qxd

11/2/2009

7:53 PM

Page 9

Domestic travellers can revive hotel industry A recent report on the hotel industry in India makes some startling revelations. Despite the contracting global economy, India had 104 times more domestic travellers than international ones.

The report, the 2009 edition of ‘Hotels in India - Trends and Opportunities’, done by the New Delhi office of Global Hospitality Services presents market performance across 11 major cities in India and highlights important trends in the Indian hospitality industry.

According to the report, in 2008-09, the industry saw an overall decline in occupancy and revenue per available room (Rev PAR) in most cities in the country. This was expected in view of the global economic contraction. The report, however, states that India recorded 562.9 million domestic travellers in 2008, as compared to only 5.37 million international travellers. According to HVS, domestic tourism has never been given its due and in the downturn of 2001-02, it was the domestic traveller who rescued the tourism industry. This time around, too, it will be the domestic traveller who will swing the tide for the industry, the report mentions.

The report also details an account of the new supply entering the market in 11 major cities. It states that in a period of 11 years, from 1998-99 to 2008-09, the supply of rooms increased by 109 per cent.

The supply is further expected to increase by 9.4 per cent by 201314 from that in 2008-09; reflecting a faster growth in the coming years.

With the Commonwealth Games due for October 2010, DelhiNational Capital Region (NCR) will remain the focus amongst all cities.Though the city is set to witness a growth of 192 per cent over its existing supply (16,560 rooms), HVS expects only 53 per cent of these rooms to be built over the next five years.The report estimates that only 5,700 rooms will open before the Commonwealth Games.

a new ambitious global health initiative, Massive Good.

The project has been created by the Millennium Foundation for Innovative Finance for Health, and will allow travellers to give a ‘micro-contribution’ every time they purchase travel services, which will go towards fighting HIV/AIDS, malaria and tuberculosis in developing countries. The initiative has the potential to raise upto $1 billion in additional funding for global health during its first four years of operation.

The announcement was made on the first day of the UN General Assembly, during a meeting of the Task Force for Innovative Finance for Health, spearheaded by UK Prime Minister Gordon Brown and World Bank President Robert Zoellick. “We pledge, by supporting this initiative, to encourage our industry to help raise funds to treat the sick in the poorest of our world’s countries,” affirmed the declaration signed by major travel industry representatives. Signatories included the giants of travel and tourism sector worldwide.

APPOINTMENTS

New Director of ETA Adel El Masry has been appointed as the new Director of the Egyptian Tourism Authority (ETA) in India. This is El Masry’s second mission for ETA after a four-year stint in Paris as the Director of ETA where his efforts saw a three-fold increase in the tourist flow from Paris to Egypt.

With his years of work experience in the travel industry, he has become an undisputed Adel El Masry expert in tourism sector and has gained vast experience in media, marketing, tourists counseling and international tourism. Masry is looking forward to increased co-operation from travel agents and tour operators in India.

San Francisco’s middle name is ‘Happy’

Whitaker is now Group CEO

San Francisco has been named one of ‘The World’s Happiest Cities’ in an article posted on Forbes.com. It is the only city in North America to be included in what the magazine calls,“urban centres closely associated with full of joy”.

Commenting on the new status, Joe D’Alessandro, President and CEO of the San Francisco Convention and Visitors Bureau said, “It is no surprise that San Francisco has been named one of the happiest cities in the world. San Francisco’s scenic beauty, combined with its ideal year-round climate and diverse neighborhoods makes it an ideal city for both visitors and residents.”

The data provided for the list is part of the 2009 Anholt-GfK Roper City Brands Index, released in June 2009.

The research was compiled through online interviews with 10,000 respondents in 20 countries. “San Francis- The Golden Gate Bridge: one of San Francisco’s co makes the list well-know sights. because it’s perceived by foreigners as the ‘most fun’ of America’s major cities,” claims Simon Anholt, policy advisor and market researcher for GfK Custom Research North America.

With over two decades of experience and several leadership positions globally, Michael Whitaker has joined InterGlobe Enterprises as the Group CEO - Travel,Technology and General Aviation Services. He is responsible for driving four key businesses of InterGlobe Enterprises: InterGlobe Air Transport, InterGlobe Technologies, InterGlobe Technology Quotient Michael Whitaker and InterGlobe General Aviation. He also, is a member of the executive committee of InterGlobe Enterprises.

Prior to joining InterGlobe,Whitaker held the position of Senior Vice President-Alliances, International and regulatory affairs for United Airlines. In this role he was responsible for the company’s international and domestic alliances, including the Star Alliance, where he served on the Alliance management board.

United to do massive good Leading representatives of the Global Travel and Tourism Industry came together for the first time ever, to declare their support for

Simon Nowroz in a new role Travelport GDS, one of the world’s leading global distribution system (GDS) providers operating both the Galileo and Worldspan platforms, has announced the appointment of Simon Nowroz as President and Managing Director for the Asia Pacific region, following the decision by Brad Holman to leave the company in early 2010.

Currently Managing Director of Travelport Asia, Nowroz assumed this region-wide role from September 28, 2009.

CRUISING HEIGHTS November 2009

Simon Nowroz

69

back page 88.qxd

11/2/2009

7:56 PM

Page 2

BACK PAGE

wonderful women

Those in their

J

flying machines

ames Hogan must get a medal for this achievement. The Etihad CEO launched this programme some three years back and in this period it has become a huge success.

The programme, called Emirati cadet pilot programme, has grown considerably since it was launched in January 2007 and now boasts 45 UAE nationals who are currently training to become fully qualified pilots with the UAE’s national airline.

And wonder of wonders, two women are now among the graduating class: Aisha Al-Mansouri and Salma AlBaloushiare the first women to win their wings in the programme, which is run by Horizon International Flight Academy for the Abu Dhabi headquartered airline.

Of the two ladies, Aisha Al-Mansouri wanted to become a pilot after her

70

zero gravity experience at an airshow at Al Ain. In a conversation, she said: “I love being up in the sky and know instantly that I want to become a pilot.

My family is so proud of what I am doing.”

Her colleague, Salma, had no idea that she would be a pilot one day. In fact, she was studying to be a nurse, “but something just didn’t feel right,” she confided to a reporter. “I didn’t have a real passion for what I was doing and that made studying to become better hard work. It made me stop and look at life and I decided to follow my childhood dream of becoming a pilot. I am hard-working and have found a passion in life again.”

To complete the Etihad pilot programme a cadet has to undertake 930 hours in the classroom and 205 hours flying experience in single and multiCRUISING HEIGHTS November 2009

(Top) Etihad’s growing female pilot community (Left to right) Rebecca Hillyard; Shereen Al Mazroui; Shareefa Al Bloushi; Rose Omari; Salma Al Baloushi and Hamda Al Qubaisi; and (above) Salma Mohammad Al Baloushi and Aisha Hassan Al Mansouri, the first female cadet pilots at Etihad.

engine aircraft as well as Etihad’s stateof-the-art simulators.

The class of 2009 was the second to complete the course. More recently, Etihad welcomed the 100th cadet pilot to its flying programme: another woman, Shareefa Al Bloushi. She became the sixth female Emirati cadet pilot to join the programme.

About five per cent of the pilot strength worldwide comprises women pilots. That’s about 5000 out of a lakh pilots.

Document2

10/31/2009

3:47 PM

Page 1

RNI No. DELENG/2006/16897 Posting Dt. 3-4/11/09 Reg. No. DL(E) 20/5294/2009-11