Is our fixation with user development fee (UDF) as the funding workhorse for our airports causing us to overlook other more efficient and social benefit-maximizing funding options?

V Ranganathan, Indranil Guha, Manuj Sethi & Reema Mahajan

Indian airports are in the throes of modernization. With work complete or nearing completion in four major ones — Delhi, Mumbai, Hyderabad and Bangalore — and tier II city airports queued up already, India’s airports liberalization process has progressed briskly. But is there more to it than what meets the eyes? Replacing our creaky airports with glitzy glass and mortar structures is one thing; transforming them into thriving international aviation hubs is quite another.

For that to happen, robust governance is a fundamental pre-requisite — an area that is the Achilles heel of our bureaucracy and political establishment. For example, before the airports privatization got underway, there seems to have been very little deliberation in our policy circles with respect to regulation of user charges to be charged by these new airports. No wonder, this issue has become one of the stickiest bones of contention since the opening of the new Bangalore and Hyderabad airports.

Under the proposed user development fee (UDF) regime, Bangalore International Airport Ltd (BIAL) has proposed a user charge of Rs 675 for domestic passengers and Rs 1,070 for international passengers. So how likely is it that such a UDF regime, which is slated to become the funding workhorse of most of India’s major greenfield and brownfield airports, would in fact end up becoming a major drag on the growth potential of India’s civil aviation sector?

The success of most of the leading airports around the world has been largely due to their ability to diversify their revenue streams and draw a larger share of their income from nonaeronautical revenues (that is, commercial activities like retail revenues and office rentals) vis-a-vis aeronautical revenues.

Singapore’s Changi International Airport earns 60% of total revenue from non-aeronautical charges, up from 40% in 1981. Non-aeronautical revenues help Changi cross subsidize its user charges and landing fee, which in turn helps the airport attract an ever increasing base of carriers and passengers from around the world to fly to Changi. The increased footfall thus generated drives retail spending at Changi’s many retail outlets and hotels, thereby covering for under-realization of user charges. To support this strategy, Changi has a conscious policy of investing in capacity well ahead of demand. Changi today has the capacity to handle 70 million passengers per annum (mppa) against an actual demand of 37 mppa (2007 figure). So successful has this strategy been that the tiny city state with a population of just 4.5 million manages to attract nearly eight times as many travelers to its airport.

Just like Changi, a CRISIL study has shown that the British Airport Authority earns 72% of total revenue from non-aviation activities; Toronto earns 62%; while Indian airports earn no more than 10-30%.

For Changi’s model to be successfully replicated in India, it’s imperative that Indian airports attract more passengers by rapidly adding capacity, lowering landing fee and eliminating UDF. Currently, our leading airports serve no more than one-sixth to one-fourth the passenger numbers served by the likes of Changi and Heathrow. For a city with a GDP half the size of Singapore’s, Bangalore’s airport for example, serves a paltry 10 mppa (against 37 in case of Changi).

Such measly scale of operation means that there is hardly any cost efficiencies associated with scale. Furthermore cost of capital for airport financing typically tends to be on the higher side, because of the plethora of operational, financial and political risks they entail. Besides, India’s upcoming airports have to contend with high operating expenses, owing to very high debt service obligation. Therefore, they seem to have little choice but to charge rather steep user charges to bridge the gap between revenue realization and debt obligations, more so during the initial years when the optimal revenue potential of the airport has not yet been realized.

So is there an alternative funding model that can help Indian airports lower their user charges? This is where some financial ingenuity and smart leveraging of funding opportunities provided by multilateral agencies like International Bank for Reconstruction and Development (IBRD) and Multilateral Investment Guarantee Agency (MIGA) can do the trick. Both IBRD and MIGA are part of the World Bank Group and help promote investments in developing countries by providing insurance cover against political and other non-commercial risks for projects in the developing world.

Now this is how it works: An airport first secures IBRD/MIGA’s backing which enables it to raise debts, whose repayment is structured such that repayment obligation during say, the first 10 years of operation is negligible. At the end of 10 years, the entire original debt is retired through a lump-sum ‘bullet’ payment, which in turn is refinanced through a new loan. The benefits of this model are two fold. Firstly, the cost of capital at the time of refinancing is much lower, given that the airport would have been in operation for 10 years by then and that most of the risks would have been mitigated over this period. Secondly, the ingenuity of the debt structuring ensures that interest payment obligation in the first 10 years is very low, thereby eliminating the need to charge high user fee to fund debt service obligation.

This model can be a very effective alternative to the UDF-based funding structure for India’s upcoming airports.

For the next Changi to emerge out of India, what we need is not just brand new terminal buildings replacing the old ones, but a change in mindset and a concerted strategy — both at the level of individual airports as well as at policy formulation level. It’s going to take some doing and out-of-the-box thinking to bring about a shift in the centre of gravity of Asian civil aviation from the Asia Pacific region to the subcontinent.

(Prof V Ranganathan is the RBI Chair Professor at Indian Institute of Management, Bangalore. The others are second year MBA students at the institute)

Source : The Times of India

Airports need 1,000 more ATC officers
Anirban Chowdhury / New Delhi

If you thought that the IGI airport in Delhi is the only one suffering a shortage of air traffic controllers (ATC), think again. The country has 1,500 ATC officers, which is only 60 per cent of its requirement of 2,500 ATC officers.

And despite new recruitments and training, the shortage will remain for the next few years, forcing ATCs to work much more than the stipulated working hours.

In fact, even the existing numbers are not all on ground controlling aircraft. “1,500 is just the total number of the officials across the country. Since the officials have several other duties and have to be present in the headquarters also, the total number of ATC officials (ATCO) actually controlling aircraft in the country at any given time comes to around 1,200,” said an AAI official.

Take the case of the Delhi airport, which currently has 200 ATC officials in all, out of which around 120 are senior officials.

The airport recently inaugurated its third runway and the internationally accepted requisite number of ATCOs for an airport having three runways comes to 350, a figure the airport will only reach in a year’s time, given the recruitment plans.

“Currently, as a result of the shortage, ATC officials have to work six extra hours every day,” says an ATC official.

Mumbai airport has a different set of problems. The airport has two intersecting runways operating, which would call for more precision in controlling the aircraft movements to avoid collision.

“Handling cross-runway operations requires specific training. These operations currently take place for around eight hours everyday at the airport. But given the expected increase in aircraft operations, once the lean season is over, the duration of cross-runway operations will have to be increased, for which we will need more trained ATCOs,” said an MIAL executive.

Hyderabad airport currently has no shortage of ATC officials but executives said that it had faced a problem in the initial two months after it started due to lack of trained manpower in handling the equipment.

“The Hyderabad airport is the first in India apart from Bangalore to have high-end air control equipment manufactured by European company Selex. Training ATC officials to handle that equipment took a little time,” said a Hyderabad airport spokesperson.

The Hyderabad and Bangalore airports have in turn put further pressure to an already thin staff as a large of number of officials from various airports were deployed at Hyderabad and Bangalore.

"Around 73 senior and even more junior ATC officials from across the country were deployed at the Bangalore and Hyderabad airports,” said an AAI official.

Waking up to the staff crunch now, AAI has sent 300 ATCO aspirants for training to the Civil Aviation Training College (CATC), Allahabad, the only such institute which imparts ATC training. People who want to join ATC services first sit for an exam conducted by the Airports Authority of India (AAI).

Those selected after the exam are sent to CATC for a training of six months to a year. The 300 new recruits are expected to join the airports by February 2009, which would ease the pressure on ATCs a bit.

However, even such ambitious recruitment plans have their problems, since there is a shortage of instructors at the training institute.

CATC has a total of 42 instructors, of whom five are retired ATC officials and the rest are officials currently deployed at various airports across the country.

"We usually deploy a skeletal staff in the college. But when the demand rises, we depute more instructors. But while we usually have a batch of around 60 students, handling a batch of 300 would require more instructors, which we are going to depute next year,” said an AAI official.

Meanwhile, a fresh batch of 96 junior ATCOs are expected to join Indian airports from September this year.

By TBM Staff | Beijing

Beijing Capital International Airport performed without fault in the lead-up to and during the 2008 Summer Olympics, with reports the ‘mass exodus’ after the closing ceremony is also progressing smoothly. This is a great credit to the planning and execution of airport officials. According to a Centre for Asia Pacific Association (CAPA),as predicted in the Monthly Essential China, 2008 is proving a challenging year for Beijing Capital International Airport Co Ltd (BCIACL), as rising costs and slowing traffic take the shine off the airport operator’s earnings. Just days before the Olympic Games' opening ceremony, on July 29, 2008, BCIACL issued a profit warning, stating net profit for the six months ended June 30, 2008 may decrease significantly as compared with the CNY 567 million net result in the previous corresponding period. The company was quite explicit in the reasons behind the expected fall in profit, including: The implementation of the restrictions on flight throughput of the Beijing Airport by the CAAC in Quarter One of 2008; The weakening of aviation transportation demand, due to the slowdown of the global economic growth; The cancellation of flights or the postponement of increase of flights by certain airlines due to the high price of jet fuel; and The substantial increase in operating costs of the Company, due to the commencement of operation of Terminal 3 (T3) and related facilities of Beijing Airport. In January 2008, BCIACL announced plans to invest CNY 26.9 billion to acquire T3 from its parent company. Traffic continues to weaken The weakness in traffic reported by BCIACL continued into July 2008. The airport operator reported (August 21, 2008) the following traffic highlights in July 2008: Passenger numbers: 4.9 million, -4.6 per cent year-on-year; Domestic: 3.8 million, -4.6 per cent; International: 1.1 million, -4.5 per cent; Cargo volume: 105,000 tonnes, +1.3 per cent; Aircraft movements: 38,900, +6.7 per cent. Domestic throughput has been bouncing around in negative territory since February 2008, but the international slowdown has occurred more recently and is of concern. Beijing Capital International Airport passenger numbers growth (% change year-on-year): August 2007 to July 2008 Source: Centre for Asia Pacific Aviation and BCIACL Undoubtedly some of this reduction can be attributed to restrictions on inbound and outbound travel during the period, but cargo volumes have also slowed, rising just 1.3 per cent in July 2008. Beijing Capital International Airport passenger numbers growth vs cargo volume growth: (% change year-on-year): August 2007 to July 2008 Source: Centre for Asia Pacific Aviation and BCIACL Aircraft movements however continue to pick up, suggesting carriers are either operating smaller aircraft more frequently to/from Beijing, or suffering load factor reductions – or both. Beijing Capital International Airport passenger numbers growth vs aircraft movement growth (% change year-on-year): January 2007 to July 2008 Source: Centre for Asia Pacific Aviation and BCIACL In contrast to Beijing, Athens enjoyed a pre-Olympics traffic surge, while Sydney’s traffic prior to its Olympics in 2000 was consistently positive. Passenger numbers growth at Sydney (2000), Athens (2004) and Beijing Capital International Airport (2008): % change year-on-year Source: Centre for Asia Pacific Aviation, Sydney Airport, Athens International airport and Beijing Capital International airport Overall, BCIACL expected to handle about 5.56 million people during the Olympic Games – or growth of around eight per cent on August 2007 throughput. It remains to be seen if traffic will hit these targets, with indications from airlines that bookings for travel during the Olympics period had fallen short of expectations. Both Sydney and Athens reported further growth in demand after the Olympics – a situation many officials in Beijing will be hoping is repeated in 2008.

To move Mumbai flights to Terminal 5 at Heathrow Airport
TBM Staff | Mumbai

British Airways (BA) has announced the launch of direct flights from Hyderabad to London from December 7, 2008. The airline is scheduled to operate five flights a week and will operate a Boeing 777 aircraft on the route. The aircraft to be deployed on the Hyderabad route will have a three class configuration with Economy, Premium Economy and Club World class. The flight from Hyderabad will connect 19 American cities from London.

The airline currently operates to five Indian cities namely Mumbai, New Delhi, Kolkata, Chennai and Bangalore. The frequency of the airline to India will increase from 43 flights a week to 48 flights a week once the Hyderabad route is operational. “India is the second largest market after US in terms of volume. We have been evaluating the possibilities of connecting Hyderabad to London for the past two years,” stated Amanda Amos, Area Commercial Manager, South Asia, British Airways.

The airline, which inaugurated its dedicated terminal (Terminal 5) at Heathrow Airport, London in March this year, will move Mumbai flights to the terminal from the 17th of next month. Bangalore flights were the first to move to Terminal 5 in July this year, whereas flights from the remaining cities of India will be moved by October 22, this year. “The Terminal had issues when inaugurated; however, these issues are solved. All the global flights including ones from India will move to Terminal 5 by October 22, 2008,” stated Amos. Internationally, the airline is currently working on a joint business agreement with American Airlines, which will allow both airlines to co-ordinate routes, pricing structures, loyalty programmes etc. BA is also working on the merger with Iberia Airlines.

From September 1, 2008, Jet Airways, will re-introduce its third service on the Delhi-Udaipur sector with a new ATR 72-500 aircraft.

Jet Airways flight 9W 3325 will depart Delhi at 1635 hrs, arriving in Udaipur at 1810 hrs. On the return leg, flight 9W 3326 will depart Udaipur at 1840 hrs, arriving in Delhi at 2020 hrs. The flight will operate six days a week, with the exception of Tuesdays.

Udaipur, home of the famous Lake Palace hotel, is one of India’s foremost leisure and conference destinations

The new flight will complement the airline’s current twice-daily services on the sector- a direct flight (9W 3317/3318) and another flight between Delhi and Udaipur, via Jaipur (9W 3401/ 3301).

Direct flight 9W 3317 departs Delhi daily at 1140 hrs, arriving in Udaipur at 1320 hrs. On the return leg, 9W 3318 departs Udaipur daily at 1350 hrs, arriving back in Delhi at 1520 hrs.

Flight 9W 3401 departs Delhi daily at 0545 hrs daily, arriving in Udaipur at 0810 hrs via Jaipur. On the return leg, 9W 3301 departs Udaipur daily at 0820 hrs, arriving in Delhi at 1045 hrs via Jaipur.

Commenting on the new service, Mr. Sudheer Raghavan, Chief Commercial Officer, Jet Airways said, “With the festive season fast approaching, we expect passenger traffic on the Delhi-Udaipur sector, one of the most popular routes on India’s travel map, to increase. We have enhanced our services on the sector to cater to the same, offering passengers Jet Airways’ renowned service and superior connectivity between Delhi and Udaipur.”

(C) Bangalore Aviation

Jet Airways has started advertising its maiden international flights from Bangalore to and from Brussels, expected to commence from October 31, 2008, and November 1, 2008, respectively, subject to Government approvals.

The flights will be operated using Jet's Airbus A330-200 aircraft. Jet Airways has 10 in its fleet of of date.

The schedule announced on the company website is :

9W-132 Depart Bangalore 01:35 Arrives Brussels 07:55
9W-131 Depart Brussels 10:05 Arrives Bangalore 00:05+1

Passengers can connect on Jet flights to New York JFK, Newark Liberty, and Toronto Pearson, and on Jet's partner airline SN Brussels to most European destinations.

The flight timings, position Jet, squarely against the European giants Lufthansa, Air France, British Airways, and Emirates, who have long held sway over Bangalore.

Download the full schedules in MS Excel format here or in PDF format here.

Manisha Singhal / Mumbai, Business Standard

For decades, more than 70 per cent of the business and first-class passenger market between India and Singapore has been controlled by Singapore International Airlines (SIA).

But home grown Vijay Mallya’s Kingfisher Airlines is all set to challenge that with daily flights to the island city starting September 18 from Mumbai, a move that has prompted SIA to respond by adding more India-Singapore flights and increasing discounts.

Kingfisher is wooing SIA’s high-margin business and first-class passengers by deploying the state-of-the-art Airbus A330 and offering premium services.

“We are positioning ourselves as a premium Indian carrier with a ‘wow’ product on the route,” said Rajesh Verma, executive vice-president, Kingfisher Airlines.

“We are aware that there are established carriers like Singapore Airlines flying for years and they have deep pockets too. But we will get loads because we will offer a competitive product at competitive pricing,” he added.

The twin configuration A330 will have just 30 seats on Kingfisher First and 187 King Class seats (which are economy seats — Kingfisher does not have a business class).

First-class passengers will also be pampered with a chef on board, professional bar-tender, a jacket ironing facility and a social area with seat massages

SIA is already responding to the challenge by launching five more morning flights a week from Delhi, taking the total to 14 services a week ex Delhi.

“We are also looking at an increase of frequencies to Bangalore but that is slated for later in the year,” said Foo Chai Woo, general manager India, Singapore Airlines.

“Our aspirations will be to operate double daily to Chennai and Bangalore just like Mumbai currently. Looking ahead, we also need to increase flights to other key cities like Hyderabad as the market develops further,” Foo added.

Singapore Airlines executives said the airline is also offering discounts of between 33 and 66 per cent on return economy fares on its new flights. This will lead to some fare wars on the route as Kingfisher also has to fill its economy seats.

Kingfisher, however, says that it does not want to get into a price war but will respond to any challenge.

Travel trade experts point out that for Kingfisher the timing is right as it will launch just as the leisure season picks up. Load factors during the festival season go up 40 per cent between October and December.

Nirbhay Kumar & Chanchal Pal Chauhan, ET Bureau

NEW DELHI: Yet another hitch is cropping up in the way of Kingfisher’s international dreams. While UB Group chief Vijay Mallya wants to fly on the global routes using Kingfisher’s call sign, civil aviation ministry officials feel that international operations of the airline can use only the Air Deccan call sign.

Mr Mallya took over Air Deccan last year and the low-cost carrier is being merged with Kingfisher. While Deccan is completing five years of service in the domestic market making it eligible to fly overseas, Kingfisher does not fulfil the eligibility criteria now.

“We had allowed Kingfisher to operate two call signs in the domestic market, anticipating that the two would merge immediately and have a common ticketing and marketing platform. But we can’t allow them to fly international on Kingfisher’s call sign as the operating permit is in the name of Deccan Aviation,” a ministry official said. He, however, said that the ministry had no objection in Deccan flying on international routes under the Kingfisher brand.

UB Group recently sought government permission to operate two brands and hence two call signs given by the International Civil Aviation Organisation (ICAO) and International Air Transport Association (IATA). While no official comment was available from Kingfisher, an UB Group official said: “We would have a common reservation platform and marketing set-up from August 29.”

The current hitch may delay Mr Mallya’s plan to launch Kingfisher on Bangalore-London sector from September 3. Any procedural delay is expected to have an impact on company as the airline has already started the booking for the proposed foreign sector. According to the UB Group spokesperson, booking for the airline’s first international sector has been overwhelming.

I have updated all the BIAL transport information in October 2008. Please use the Vayu Vajra link on the main menu bar. If you find this article useful, before jumping off the blog, I will appreciate if you can leave a comment or your thanks. Also consider subscribing to the blog via RSS or choose to receive e-mail updates when new articles are posted.

I received some very encouraging news today and kudos to both BIAL and BMTC.

Bengaluru International Airport Ltd., and the Bangalore Metropolitan Transport Corporation sat down and have arrived at an action plan which will help increase the visibility and hopefully usage of the BMTC Vayu Vajra air-conditioned Volvo bus service to and from the airport, affectionately called "VV" by Bangaloreans.

BIAL will provide better visibility at the airport to VV all the way from the airport transfer buses till the terminal exit.

A display board will be implemented at the arrival baggage collection area which will provide real-time next bus departure timing from the airport.

BIAL will also canvass the airlines to put promotional placards or flyers in seat pockets and display informational videos on in-flight entertainment systems. I exhort the airlines to pitch in.

Despite significant loss, BMTC has been enthusiastically running the VV service, and these steps by the teams at BIAL and BMTC should help strengthen the service and offer a comfortable yet economical airport transport solution.

For more information on the VV service including route lists and timings visit the Vayu Vajra site.

DH News Service, Bangalore:

Work on the much awaited six-lane elevated road between Hebbal and Yelahanka bypass to facilitate smooth traffic to and from the Bengaluru International Airport (BIA) will start from November this year.

Speaking to reporters here after reviewing the progress of various national highway development projects in the State, Union Minister of State for Shipping, Road Transport and Highways K H Muniyappa said the four-km long elevated toll road will be in addition to the eight-laning of the existing stretch between the two locations to ensure better connectivity to the airport.

The National Highways Authority of India (NHAI) will be using the latest innovations in the construction technology for the project and the six-lane elevated road will be supported on single pillars and not pillar pairs, Muniyappa said. The NHAI will also take up 10-laning (six lanes with two service lanes on either side) of the stretch between Yelahanka and the airport with room for future expansion. The total project cost is Rs 450 crore and will be completed within a two-year time-frame, the minister said.

Meanwhile, the City is in store for another mega project: a 350-km greenfield expressway between Bangalore and Chennai.

Muniyappa said the alignment work for the expressway by consultants deploying satellite imagery is on and the process will be completed by December this year.

The feasibility report will be prepared thereafter. A detailed project report on the number of lanes and its cost will be worked out after the alignment is finalised, he said.

Muniyappa said the Bangalore-Chennai expressway is one of the four expressway projects approved by the Union Cabinet. The projects will be be taken up on public-private-partnership model, he said.

NHAI officials said the cost of building a km expressway is expected to be around Rs 15 crore.

He said 668 km of roads in the State under Phase III of the National Highways Development Projects are in various stages of completion. In addition, 609 km of roads have been identified for four or six laning and these include Hospet-Bellary (80 km), Hassan-BC Road (140 km), Kundapur-Goa border (194 km), Hospet-Chitradurga (125 km) and Karnataka-Maharashtra border near Bijapur (70 km).

Muniyappa said he will be laying the foundation stone for the Rs 36.56-crore Kabini bridge in September first week.

• Four-km long, six-lane elevated road between Hebbal & Yelahanka bypass
• The toll road will be supported by single pillars and not pillar pairs.
• Latest innovation in construction technology to be used
• Project cost: Rs 450 crore (USD 110 million)
• Time for completion: Two years

A commercially oriented machine, without heart or soul Business sense

‘Small thinking has sunk in in the infrastructure at BIA’
Chairs in the international departure area are uncomfortable

BAD PLANNING: A view of departure lounge at Bengaluru International Airport.

Reading, day in, day out of the challenges facing Bangalore’s spanking new international airport, one begins to wonder whether proximity to a few hundred information technology companies might not have rubbed off on the airport as well, afflicting it with this high tech disease: instant obsolescence.

In normal circumstances, it would seem to be a fairly bizarre situation, when a new facility like an airport which is presumably planned by experts reaches the limit of its rated capacity on the very day it opens — or so we are told by the many committees that are bending their minds to the question: How do you solve a problem like BIA? Clearly it cannot be solved so smoothly as the problem like Maria, that enthralled us in our younger days in The Sound of Music.

Having passed through the airport a day after it was opened — and about half a dozen times since then, I emboldened to share with readers, my theory of why people continue to grumble and curse when talking about what should be the pride of India’s Silicon City. The issue is not a few overflowing trash cans, or leaky toilets or aerobridges with teething problems. All that can be changed. But attitude cannot.

I am coming round to the belief that the airport was conceived and executed by small minds, who either lacked the vision of what the mature, internationally savvy passengers who patronise the airlines serving Bangalore came to expect — or just decided that the interests of their shareholders would be best served by getting away with the narrowest definition of contractual responsibilities… and cutting every corner in sight.

Here are some examples: The pre-boarding waiting areas is where passengers, especially on international flights, tend to spend most of their time in airports — up to 2 hours is common. So world over, designers provide the most comfortable seating they can. The new Terminal 5 at Heathrow has invested in a number of corners with literally “sink in” sofas in which one can cacoon oneself in comfort. Incheon, Korea; Changi Singapore, the new Hong Kong airport on Lantau island, are all examples of thoughtful seating. But at BIA, they have standardised on a particularly hard and unyielding upright chair that will have you squirming within a few minutes. There are, in my experience, only two international airports worse in this respect — Bangkok’s Suvarnabhoomi, where they have gone all metal, and Frankfurt, that has created a unique torture instrument: a rounded metal bar on which one is expected to balance one’s posterior. Is this a German thing? BIA after all is part owned by Zurich Airport and that reputed name Siemens — both bywords for efficiency and quality. BIA is a poor showcase for your brand, mein damen und herrn.

Elsewhere, small thinking has sunk in — literally — into the infrastructure. You will be hard pressed to find smaller display boards for flight information, anywhere in the world. They have made do, with standard home theatre sized LCD TV screens, which cannot be read (at least by me) without spectacles. And at that size, they are unable to display enough lines and cannot show a departure that is just an hour away. This is a disgrace by any international standards. After a hue and cry about lack of public phones, they have stuck a few portable coin operated phones among the departure gates — the type your corner grocery store keeps on the counter.

This is the IT capital of India: It would have sent a splendid signal to the world, if arriving passengers found a few computer terminals with free Internet to check their mails. You can see them in Hong Kong, and in some 20 locations in Changi, Singapore — with two at every departure gate.

One could go on and on… Bangalore has waited for over a decade for a decent airport that measured up to the splendid image that its IT industry has created for India. What it has got is a cold, commercially oriented machine, without heart or soul. It may work — just — but it will never thrill. We deserved better.

ANAND PARTHASARATHY

© Copyright 2000 - 2008 The Hindu

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My personal observations :

Every business has a right to make a living and a duty to make a profit. At the same time, it has to balance financial needs with aspects of Corporate Social Responsibility and good customer service. I know the operational leaders at the new BIAL airport and they are good people and genuinely interested in meeting the needs of Bangalore both passenger and cargo. They realise the needs as raised by this article, but, I fear, they are being pushed to the wall by the financial promoters. It is all together possible that the storm over having two airports in Bangalore, has created the FUD factor (Fear, Uncertainty, Doubt), in the minds of the financial promoters, and they are looking to earn the maximum possible returns in the shortest possible time.

Kingfisher Airlines - Air Deccan will commence its much awaited international operations on September 3, 2008, offering Bangalore to London Heathrow non-stop service using its newly arrived Airbus A330 aircraft.

As per the airline website, the schedules are :

BLR-LHR IT1 0840 - 1450
LHR-BLR IT2 2205 - 1235+1

More details on the Kingfisher website.

Totally four A330 aircraft have arrived. While other schedules are yet to be announced, it is almost certain that Mumbai - London will be the next city pair to be served, followed by Bangalore - Singapore by late September. All using the A330 aircraft.

The ultra long range Airbus A340-500 aircraft are expected to arrive by end September. There is intense business planning on the Bangalore - San Francisco non-stop. Sky high fuel prices (pardon the pun), have forced many carriers like Thai to discontinue their A340-500 ultra long haul non-stop operations, or like Singapore Airlines to covert their service in to an all business class format.

Dr. Vijay Mallya is a maverick business leader, which deep pockets, and renowned for his bold decisions. Given the high passenger demand between "Silicon Plateau" and "Silicon Valley", I would not be surprised, if he commences the Bangalore San Francisco service, by early October, regardless of the fuel economics.

Bangalore - Hong Kong - San Francisco is another possible route.

All the Asian carriers operating from Bangalore, Singapore, Thai, Malaysian, Dragonair, are bound to feel the impact of Dr. Mallya's entry, and it will behoove them to forge interline alliances with him.

I have updated all the BIAL transport information in October 2008. Please use the "Bus" link on the main menu bar. Redbus DOES NOT accept online bookings for Vayu Vajra anymore.

Indira Gandhi Airport third runway commences operations soon
18-Aug-2008

Indira Gandhi International Airport, Delhi is undergoing a transformation. Delhi International Airport (P) Limited (DIAL) is carrying out an extensive modernisation programme at IGIA.

A key step in this process is the commissioning of the airport's third runway. This runway, currently in the final stages of development, will enable IGIA to significantly increase its capacity to handle aircraft movements.

Christened 11-29, the 75m wide runway (including shoulders) will be among the longest in Asia at 4430m. The runway has been constructed with a full length parallel taxiway, and a cross taxiway to connect it to the existing airport. The taxiway network to support the new runway is 15 km long. The runway works have been completed much ahead of the scheduled date of Feb-09.

The runway has been built to Code F standards - that means it is long, wide and strong enough to accommodate super sized aircraft such as the Airbus A380 or the Antonov An-225. In addition, the runway will also be equipped with CAT IIIB Instrument Landing System at both ends. This will allow aircraft to land even when the visibility is as low as 50m. This will complement the existing CAT IIIB equipment on runway 10-28 making Delhi Airport, one of the few airports in Asia and the only one in India to have twin runways with this advanced Instrument Landing System.

The runway lighting systems are one of the most advanced in the world. The system is being fitted with single lamp control and monitoring system introduced which enables monitoring of individual lamps at the stop bars.

The construction of the runway is a feat in modern engineering, involving an astounding 2.3 million m³ of earthwork and embankment filling. That is enough to form a 210 km long freight train!! The runway is more than 2 metres thick, comprising 7 layers of Filling, Concrete Treated Base and Asphalt concrete. Over 650,000 tonnes of asphalt concrete has been used during the construction of the runway and taxiways; material which can help build a 75 km long six lane expressway!!

Extensive usage of computer simulations was done while designing the rapid exit taxiways & link taxiways. Also, eco-friendly methods were used during the construction involving extensive use of fly-ash in concrete and other cement based material.

(c) Centre for Asia Pacific Aviation.

19 Aug, 2008, IANS

NEW DELHI: The national consumer redressal body has pulled up Kingfisher Airlines for adopting an unfair trade practice by misinforming passengers about the airline they were flying by.

J.K. Mittal bought a Delhi-Bhubaneswar return ticket on a March 8 Kingfisher flight over the internet from the airline's website. He paid Rs.4,800 each way.

When he reached the airport, he was told at the check-in counter that Kingfisher Airlines did not have a flight between Delhi and Bhubaneswar. Mittal was asked to take an Air Deccan flight instead.

The ticket for an Air Deccan flight cost Rs.2,500 each way while Mittal had paid Rs.4,800, he pointed out when he approached the National Consumer Redressal Commission.

Mittal, a lawyer, contended in his petition that the trade practice adopted by Kingfisher Airlines was unfair and should be prevented. He demanded Rs.50 million as punitive damages, to be given to the Consumer Welfare Fund set up by the commission.

Kingfisher Airlines lawyer M.N. Krishnamani told the commission that if Mittal had suffered a loss, he should have gone to the district forum. He also described the Rs.50 million claim as "totally exaggerated".

In his interim order, National Consumer Disputes Redressal Commission president M.B. Shah said he was not going into the exaggeration or otherwise of the claim at this stage.

But he ordered the airline "not to indulge in such unfair trade practice. A copy of this order be also sent to Director General of Civil Aviation for appropriate action," said the commission.

Krishnamani had also said that Consumer Voice, an NGO, ought not to have joined the case as a party at the request of Mittal.

Rejecting this contention of the airline, the commission said: "This contention appears to be without any substance, because consumer organisations are required to take up such causes for preventing unfair trade practices and under the Consumer Protection Act they are entitled to file such complaints".

Perfect storm

Shuchi Bansal

Airlines are blaming the rising ATF prices for their woes. But it is also a crisis of their own making. How are they coping?

The exasperation in Saroj K Datta’s voice is unmistakable. “We are doing whatever needs to be done — capacity rationalisation, maintaining aircraft fuel efficiency, and so on,” says the executive-director of Jet Airways, when asked about the innovative methods his airline is attempting to stay afloat.

His exasperation arises from the fact that the query is hurled at him quite often these days, just as it is at the other airline bosses. So often, in fact, that many of them appear to be on the point of throwing their hands up in the air.

The question, however frequently asked, is not out of place. IATA forecasts that the Indian carriers will lose a combined $2.3 billion (about Rs 9,900 crore) this year. This number, already large, appears even more ominous when one recalls that as recently as last March, IATA had anticipated a profit of $4.5 billion for the aviation sector in India.

“It no longer expects the industry to make a collective profit in 2008,” says Hitesh Patel, executive vice-president, Kingfisher Airlines. Patel isn’t as prickly as Datta on the survival strategies of his airline, but he’s not in high spirits either. “With the price of oil sitting at $135 a barrel, the world has turned upside down,” he says.

Kingfisher Airlines, which has been the mover and shaker of Indian aviation ever since it took flight, is believed to have run up a debt of Rs 4,000 crore. The airline, which is merging with Deccan Aviation, is understood to have a top line of around Rs 3,000 crore and is expected to make losses of Rs 900 crore on a yearly basis. This is in addition to the losses of around Rs 650 crore suffered by Deccan Aviation.

Flight for survival
“Airlines in India should be prepared to expect the unexpected while at the same time focus on achieving high utilisation,” says KPMG, the management cosultancy.

That sounds deceptively simple. Datta and his ilk are constrained by the fact that in this industry the obvious option of scaling down in the face of operating losses comes laced with complexities. Many airlines have cut flights, but they are breaking their heads over what to do with the idle aeroplanes.

The worldwide softness in the sector has ensured there are few takers for these aircraft; those who had leased the aircraft to Indian carriers will invoke a hefty penalty if the planes are sent back to them. According to experts, out of the 300 odd aircraft with Indian carriers, there is an excess capacity of 15 per cent, or roughly 45.

The airlines are therefore resorting to other methods to ride the storm. Nearly everyone is looking to raise money. The total capital required to be raised is $2 billion, says a report by Centre for Asia Pacific Aviation, or Capa, the airline consultancy and research outfit.

SpiceJet was lucky in its search. It found WL Ross & Co, the global private equity fund, which has promised to invest Rs 345 crore in the airline. “The details of the equity that’s been offloaded are still being worked out and are, therefore, confidential,” says Ajay Singh, director, SpiceJet.

WL Ross bought into SpiceJet’s growth story as it shares the airline’s faith in the low-cost business model. “We are very clear. We want to be a low-cost carrier and we want to be well-funded,” Singh adds.

State-owned Air India has asked the government for Rs 500 crore. It has also prepared a blueprint to save over Rs 1,000 crore a year by reducing capacity by 10-12 per cent from August. Kingfisher, Jet Airways and IndiGo, among others, also plan to raise money. Ernst & Young and even Capa are helping the airlines in their search for suitable investors.

Of course, infusion of funds is useful but airlines need to pilot themselves out of the mess through other measures. Kapil Kaul, CEO (Indian subcontinent and the Middle East) at Capa says the first golden rule for airlines is to fill their empty seats.

The low-cost airlines enjoy a passenger load factor of 70 per cent while the full-service airlines have a load factor of 60-65 per cent. The unused capacity must be filled by offering lower, last-minute fares – a measure made easy with the help of technology. “People are not flying because fares are high. If this capacity is used, it will stimulate their balance sheets. Money saved is money earned,” says Kaul.

Talking of savings, airlines must monitor their marketing expenditure closely. For most carriers, advertising has been the first casualty. Yet others are reviewing their contracts with their public relations agencies. On the revenue management side, the airline industry reduced its travel agent commission on tickets from 9 per cent to 5 per cent. However, it later declared that the industry would not pay any commission to the booking agents.

Some airlines have also abandoned the use of aerobridges at new airports which are charging a hefty fee for their usage. The carriers have deployed buses to ferry people to and from the aircraft.

“These are tough times for the airlines and they must brace themselves up,” remarks Mark D Martin, senior adviser, KPMG. However, Martin warns against knee-jerk reactions. “Don’t cut back on the sandwiches and Coke, it does not help as a rival carrier could introduce it and grab market share,” he says.

In a smart, attention-grabbing move, Simplifly Deccan, which pioneered low-cost flying in India and is now a part of Kingfisher, has announced that it will offer food and beverage on its flights. Justifies Kingfisher’s Hitesh Patel, “When a common man pays for an air ticket or for an AC first class train ticket, he expects some level of service. Also being a UB Group company, our brand has to deliver a certain level of service while the cost is kept under control.”

Several airlines have also resorted to cutting down their unprofitable routes. SpiceJet’s Singh says that the airline industry has cut down 20 per cent of its capacity. Unconfirmed reports suggest that Kingfisher and Deccan combine have together cut back nearly 100 flights a day. Jet is said to have pruned about 10 per cent of its capacity while Indian and Air India, SpiceJet and IndiGo have also “rationalised” their routes. “We are down from 150 to 95 flights,” admits Jack Ekl, chief pilot, Spice Jet.

IndiGo’s president and CEO Bruce Ashby says the airline is “revising its schedule for the late summer, off-peak period to remove marginal flying”. However, just cutting down flights is not enough. The airlines must identify and develop new routes and focus on the emerging traffic destinations.

Airlines’ current obsession with fuel conservation, in pursuit of cost saving, is also understandable. At $135 a barrel, ATF does not come cheap. Besides, the tax on ATF is not uniform — it varies between 4 per cent and 36 per cent from state to state. But to conserve fuel, an aircraft must shed weight. Some international airlines, it is learnt, have stopped stocking newspapers for their passengers as it adds to the weight of the aircraft. Yet another airline has reduced the number of pages in its in-flight magazine. It is reported that Japan Airlines is using lighter seats, trolleys and tableware. The water in the rest room has also been rationed.

Back in India, instead of relying on sundry ways to save fuel, IndiGo has implemented an intensive computer system that indicates how much fuel should be carried, and the optimum speed and altitude for the aircraft. Says IndiGo’s Ashby: “From day one of IndiGo’s operations we have optimised fuel burn.” The airline uses sophisticated flight planning software, from a company called NavTech, that considers all of the trade-offs of climb, descent, cruise speed, fuel boarded and so forth.

“We monitor the actual performance against the flight plan and give and receive feedback to and from pilots when there are deviations,” says Ashby. He says that the airline was careful in developing its aircraft specification to avoid carrying extra weight, which in turns requires more fuel. “Finally, we fly only ultra-modern, fuel-efficient brand new Airbus 320,” he says.

Turbulence in the air
The airlines are in a tailspin for several reasons. For a start, the price of aviation turbine fuel (ATF), which constitutes 40 per cent of a carrier’s operating cost, shot up from $100 a barrel to $135 a barrel in a matter of weeks. To compound matters, ATF costs 80 per cent more in India than its price in the international market.

That is not all. Inflation is on the rise and passenger traffic is on the wane. According to Kuljit Singh, partner at Ernst & Young, domestic air traffic, which was clocking 25 per cent growth some months ago, has entered into a downward spiral. “It is in the negative now,” he says.

Jet Airways’ Datta, however, maintains that the airline industry is still experiencing marginal, single-digit growth. In his view, other than the ATF prices, excess seat capacity and economic slowdown have unleashed chaos in the airline market. “Growth has melted away and fewer people are travelling,” he says.

Fewer people are travelling because the cost of air travel has soared. Several airlines have raised the fuel surcharge and added congestion charges. Yet others have increased their base fares. Consequently, on certain sectors there is an almost 100 per cent increase in fares. As the fares rise, the new breed of travellers spawned by the arrival of low-cost carriers, dwindles. “The consumer got spoilt by very low fares and is finding it very hard to digest the revised fares,” says Ekl of SpiceJet, a low-cost carrier promoted by the Kansagra family.

Former Air India chairman and managing director V Thulasidas believes that airlines could have managed growth and competition better had they not resorted to under-cutting. The tickets were priced so low that airline yields took a severe hit. “The industry cannot attribute all its troubles to ATF prices. It has to accept the blame for the current crisis,” he says.

Whether or not airlines admit to their role in perpetrating the meltdown, the fact is currently each one of them is reworking its business plan and chalking out fresh strategies to keep its head above water.

Datta’s been extremely tied up managing his 15-year-old, award-winning airline that was profitable till last year. Jet Airways posted a Rs 221 crore loss in the fourth quarter of 2007-08 compared to a Rs 88 crore profit in the same quarter a year ago. It registered a net profit of Rs 28 crore in 2006-07, which has begun to look even better in comparison to the Rs 253 crore loss in the last financial year.

SpiceJet’s Ekl says that his airline was profitable before the ATF price hike. Patel refuses to share the details of his company’s financial performance but says that airlines worldwide, not just in India, have been suffering due to rising crude oil prices. Aviation is predominantly a low-profit-margin business. According to IATA, the industry earned an estimated $5.6 billion in 2007, which represents a wafer thin 1.1 per cent net margin on sales of $490 billion.

“The situation is serious. But what it has done is to ensure that airlines take dramatic measures to lower their cost of operations,” says Ajay Singh of SpiceJet. Clearly, airline managements are working towards finding ways to cut costs, increase revenue and raise funds to cruise through the turbulence.

Looking beyond passengers
Often, even minor innovations help increase revenues. Or, at least, save money. International carriers such as Ryan Air of Ireland and EasyJet in the UK have proved that. Low-cost carrier Ryan Air functioned without tickets (and saved money) as almost 95 per cent of its bookings were done online. Another low-cost airline, Jet Blue, changed the uniform of its employees from formal to casual. The airline saved money as fewer uniforms had to be issued to an individual in a year since casuals were low on maintenance. Secondly, people productivity went up as a result as they worked more efficiently. “You need out-of-the-box thinking to save money,” says Martin of KPMG.

Low-cost carriers must focus on non-passenger revenues. This includes selling food and beverages, merchandise, and even insurance on board. Airlines following the classic LCC model chase non-passenger revenue. “However, India’s low-cost carriers have shied away from doing it,” says Kaul. SpiceJet does not share the details, but admits that to save money, the summer vacations of some of its expatriate executives have been extended and they have been allowed to stay home longer.

Ashby says “innovation” is not merely jargon, “but we are not doing anything that we were not doing a few months ago”. In his view, IndiGo may be a bit different from the typical airline because it is fairly young. “We launched operations barely two years ago. So we commenced operations with the world’s best practices that airlines worldwide are implementing,” he claims.

Jet Airways’ Datta and E&Y’s Kuljit Singh are not for passing off minor tweaking in operations as innovation. “We need practical solutions and not management jargon,” says Datta. E&Y’s Kuljit Singh agrees. “How much innovation can the airlines do when 60 to 70 per cent of their operating costs are fixed. And cost cutting in this manner does not make you profitable. It only helps in saving some money,” he adds. The most that airlines can do is to resort to fuel hedging. Says Hitesh Patel: “We are closely monitoring our costs but nothing material can be achieved till certain big ticket items are addressed in India.”

Clearly, the big ticket items are fuel price and other airport charges. Airlines’ plea is that the tax on ATF should be reduced and made uniform. Thulasidas says that Air India, too, made a representation to the government to recognise aviation as a basic infrastructural requirement rather than luxury travel. SpiceJet’s Ekl says that at least the Indian government is open to the industry’s suggestion and willing to help. “In the US, the situation is very bad and the government does not come to the rescue of the airlines,” he says.

Whether or not the government rescues the airlines, will some of them fold up in any case? Of course, airlines do not admit that they are up for sale, though industry insiders say that some of them are looking for buyers. However Ashby is not convinced about consolidation. “Consolidation in itself means nothing. We had a round of consolidation last year and it all resulted in the same airplanes flying to the same places but with different paint jobs. However, we may see some additional capacity reduction and possibly further consolidation as a result of the high fuel prices,” he says.

Indian entrepreneurs have a huge appetite for losing money. So Kapil Kaul does not see too many casualties in the short run. Besides, things can only look up from here. Travel is integral to the economy, which is still growing at 8 per cent a year or thereabouts. The sector’s prospects beyond 2010 are bright. ATF prices are stabilising. Key airports will be modernised and taxes on fuel may be lowered. That’s not all. “We expect Indians to take to air travel in a big way,” says Kaul.

That sounds like just the balm to soothe Datta’s nerves.

For more on the politics and impact of ATF pricing please read my article Fuel populism killing air transportation

The civil aviation ministry has directed the Hyderabad airport to levy a user development fee (UDF) of Rs 375 on each domestic passenger, more than 38 per cent lower than what GMR Hyderabad International Airport Ltd (GHIAL), the developer of the airport, had asked for.

The airport had asked for a UDF of at least Rs 600 from domestic passengers travelling out of Andhra Pradesh. For passengers travelling within the state, it had demanded a user fee of Rs 350.

UDF is the fee levied at the airport on departing passengers to enable the airport developer bridge the gap between expenditure and admissible revenue as stipulated by the ministry guidelines.

The Hyderabad airport already charges Rs 1,000 as user fees from international passengers.

“What has been allowed to us is much lower than what we had asked for. This will definitely mean losses for the airport. We have to take a call on how to fill the widening gap between our revenues and costs,” said A Vishwanath, chief commercial officer, GHIAL.

In its accounts submitted to the civil aviation ministry last month, GHIAL had estimated that due to the recent slowdown in traffic, the gap between revenues and costs would widen by another 15 per cent which would make a case for UDF which was more than Rs 600.

“However, we had said that even with the rising costs, we were fine with a levy of Rs 600 but could not go lower than that,” he said.

The ministry today also came up with guidelines on the basis of which UDF is to be charged at airports which will be finalised after discussions with various stakeholders. According to the guidelines, the project cost is to be estimated on the basis of aviation-related costs and have to be in line with the targetted capacity creation. The guidelines mandate the consideration of whether the contract was awarded after competitive bidding.

Apart from the aeronautical costs, cost of capital employed, depreciation, operation and maintenance, and taxes would also be admissible as a pass through into the tariff.

For estimating the cost of the capital employed, cost of debt on actual basis and 14 per cent return on equity is to be considered. Since expenditure items like personnel costs, operations and maintenance and pre-operative expenditure have not been verified, a cap was proposed for these items.

The guidelines have stipulated that to estimate revenue of the company, the sum of the total aeronautical revenue and a portion of non-aeronautical revenue has been considered.

Source : The Business Standard

BIA facilities under scanner
B S Arun, DH News Service, New Delhi:

A team of the civil aviation ministry will visit the Bengaluru International Airport (BIA) on August 19 for an inspection of the facilities there in the light adverse remarks made against the new aerodrome in its report by the Airports Authority of India (AAI).

The ministry officials will also hold a meeting with the State government and BIA officials regarding improvement of passenger amenities and other issues.

The AAI, in its report, concluded that the airport was facing severe capacity constraints putting passengers in great inconvenience.

Directed by the civil aviation ministry to conduct the study in the face of criticism of the facilities and capacity bottlenecks, the AAI also observed that as against the allotted 12 to 20 per cent of space for commercial utilisation, BIA has used up to 30 per cent of the space. This, the AAI said, has affected the passenger amenities. The problem faced by the passengers was acute in the security hold area (SHA), it noted and called for measures to set them right. Lack of adequate space for toilets in the SHA area has also been cited in the report.

The report, which has been submitted to the ministry, is understood to have suggested that plans for the second terminal should be taken up right away. It has said that the airport was already brimming to its capacity of 11 million passengers a year.

On the terminal capacity, the report, prepared by a team led by AAI member (planning) V P Agarwal, pointed out that the airport was built to handle a capacity of less than 10 million passengers, while the BIA was claiming that it was 11.4 million.

Hence, it said, reopening of the old HAL airport — closed after the May 23 opening of the new airport — might have to be looked into.

It, however, noted that the runway has not been saturated but a second runway would become necessary by 2011. The Tuesday meeting will also discuss the submissions to be made before the Karnataka High Court at the August 22 hearing of the petition relating to the reopening of the HAL airport. Recently, the Karnataka Assembly set up a House Committee to go into the various inadequacies of the airport including lack of adequate number of toilets, overcrowding at SHA, excessive utilisation of commercial space, no VIP lounge and narrow access to aerobridges among other things.

BIAL CEO BRUNNER TO DECCAN HERALD

• Passenger traffic growth far surpassed all projections
• Construction of a second terminal cannot be delayed
• A mini terminal at "low cost" to be built immediately
• Second runway in four years
• More space needed for passengers inside the terminal

Bangalore International Airport Limited (BIAL) CEO Albert Brunner has said that airport capacity is not measured by passengers per annum but by passengers per peak hour.

“Currently, we handle an average of 24 ATMs (Air Traffic Movements) during peak hours and about 303 a day. The ATC figures estimate it to be 30 ATM an hour. This calculated in passengers term result in 11 million passengers annually. BIA can easily handle 30 million passengers a year. You can play with capacity. It is always measured by peak hours. The AAI does not allow more than 30 ATM’s an hour” Mr Brunner said.

On the growth in air traffic, he explained that there has been a drop in overall air traffic since 2007, with the current growth staying put between 10 to 12 percent and a 25 to 30 percent year on year growth, during the last three years.

The construction of the second terminal building will take between two to three years to construct, while the second runway would be completed in three to four years from now.

Expansion plans

“It is not possible to construct it earlier. As far as the immediate expansion plan, we would begin construction of a ‘Terminal at Low Costs’ and not a low cost terminal. It has to be fast, simple and easy to build and should be ready in the next 12 to 15 months. The costs of the expansion are being factored into” he noted.

On the frequent comparison of the BIA with the GMR operated international airport in Hyderabad Brunner said, “Our aim was not to build an architectural marvel, but a world class a functional and operational airport. The Hyderabad airport is 30 percent bigger, but we are functionally superior”.

He added that the airport was conceived during a time when India, was not ready for a privatisation process in airport infrastructure. “Between 2000-02 there was much turbulence in the design aspects and projected air traffic growth. We increased our investment from Rs 1412 crores to Rs 2470 crores. Lufthansa Consulting that did the estimates for us put 2018 for a need of a second runway. We are ahead and would have it in 2012. They might be better in the exterior, but our airport is better inside.o addressed complaints on cleanliness and doubled the number of toilets,” said Mr Brunner.

Emphasising the necessity to convince public and industry leaders on a one airport concept, Brunner said the City will lose out on air traffic if the old airport is opened.

“Airlines would not want it. Aviation growth in the South will be hit. Cities the world over that have two airports have a greater volume of air traffic. What will we tell our concessionaires who have invested Rs 1000 crore” he said.

‘Green Pledge’ on I-Day

Bengaluru International Airport Limited (BIAL) on Wednesday unveiled ‘The Green Pledge’ on the eve of Independence Day.

A release issued by BIAL here said, akin to the aircraft taking off from its runway, the spirit at the Bengaluru International Airport is also soaring with patriotic fervour.

To commemorate Independence Day, the airport is all geared up to get the employees of the airport and the passengers to pledge - Independence from litter and a promise to keep the environment clean and green. For every pledge received, BIAL (Bangalore International Airport Limited) will plant a tree.

‘The Green Pledge’ campaign will run for one week beginning today. Albert Brunner CEO of BIAL said “We are asking all passengers who visit BIAL to sign a pledge that they will keep it clean. And for every signature we get, we’ll plant a tree. The significance of every tree is that it triggers off a healing chain reaction that improves the health of our planet. ”Additionally, symbolic of 61 years of Indian Independence, 610 trees will be planted by BIAL in the city at two locations - The Prakruthi Township in Babusapalya and at the Anugraha Ashram (School for Street Children) in Jaladamarada Doddi.

The essence of the campaign is making the city and the airport greener while sensitising the public to keep our environment litter and pollution free.

By carrying forward the philosophy behind Bengaluru International Airport’s identity that reflects the flowers and trees of our Garden City, BIAL will now actively engage the public in this noble cause. This is just the start of a sustained activity which will continue long into the coming months added the release.

Source : DH News Service

WL Ross announces execution of definitive documents for funding transaction
13-Aug-2008

SpiceJet Limited and WL Ross & Co. LLC (WL Ross) announced the execution of definitive documents for a funding transaction with WL Ross and others.

The completion of the transaction will make available up to INR421 crores (USD 100 million) to SpiceJet. This is higher than the INR345 crore (USD 80 million) proposed earlier and has been made possible partly through the participation of Istithmar World Capital and SpiceJet Director, Mr. Ajay Singh.

The infusion of capital will take place in two successive tranches. Completion of the funding of the first tranche is subject to certain conditions precedent, which are expected to be fulfilled in the next two weeks. The remainder of the funding will be received after shareholder approval which the Company will seek shortly. As part of the transaction, Goldman Sachs has agreed to subscribe for equity warrants in the Company under the preferential issue guidelines of SEBI and subject to requisite approvals.

Mr. Bhulo Kansagra and Mr. Ajay Singh, Board Members of SpiceJet, said "We are delighted that such a large amount of funding has been made available to SpiceJet at a challenging time for the aviation industry in India. This investment validates the confidence of our investors in the low cost model that SpiceJet has chosen to follow. We are delighted to have WL Ross on-board SpiceJet and we are confident that this will better enable SpiceJet to maintain its proud position as the most efficient airline in the country."

Mr. Wilbur L. Ross Jr., Chairman & CEO, WL Ross & Co. LLC said, "This financing is intended to give SpiceJet the staying power to get through the industry consolidation that is underway. We also gain encouragement that oil prices have been abating and that the government has appointed a Committee under the Chairmanship of the Cabinet Secretary to recommend measures to stabilize the industry."

Mr. Ranjeet Nabha, Managing Director & CEO of WL Ross India said, "We have worked closely with the promoter group and Istithmar World Capital to provide SpiceJet with a strong capital base that will enable it to emerge from the current down turn and be recognized and admired, not only in India, but on the global stage." Mr. Ross and Mr. Nabha are expected to join the Board of Directors of SpiceJet.

(c) Centre for Asia Pacific Aviation.

Travel agents to shut shop on August 14 to fight back airlines
By Krupa Vora | Mumbai

In a bid to give a strong fight to the airlines for the current commission cut scenario, 2,750 International Air Transport Association (IATA) accredited agents and 50,000 non-IATA agents will shut shops on August 14, 2008. The decision was taken at a joint meeting held between Travel Agents Association of India (TAAI), Travel Agents Federation of India (TAFI) and IATA Agents Association of India (IAAI) in Mumbai yesterday. Apart from this, the airlines and the associations will also hold a meeting on the shop shutting day to discuss the commission cut. Though the agents associations demanded the airlines to implement the zero commission regime from May 1, 2009, the airlines deferred it to November 1, 2008 from the previous deadline of October1, 2008. "When the commissions went down from seven to five per cent, Air India had given us in writing that the commissions will remain the same for the next four years. The four year deadline will get over on April 30, 2009 and hence the new commission should be implemented from May 1, 2009. We were unhappy when airlines deferred it to November 1, 2008," said Praveen Chugh, President, TAFI.

According to the associations, the transaction fee should be combined with the ticket fare, rather than the agents asking for it separately. "No end consumer is going to pay for the transaction fee if it is asked separately, the transaction fee has to be bundled with the ticket," added Chugh. Other demands by the associations to the airlines include, necessary budget for training travel agents, study tour, service tax on Profit Linked Bonus (PLB), insurance by airlines and service fee on Agency Debit Memo (ADM) and PLB for all agents.

Shuhdha Joshi, Honorary Secretary, TAAI said, “The zero per cent commission needs to be undertaken in a phased manner because there are corporate contracts which are signed on yearly basis. The back end structures need to change to adopt the zero commission regime. Training and education is required. All these things need time and cannot be undertaken in a haphazard manner.”

Source : TravelBizMonitor

Foreign airlines flock to India, ignore global downturn

India is seen as a growing market for international airline traffic and the current market size is nearly $5 billion (Rs 21,000 cr) a year

They are cutting flights to several destinations in the wake of a worldwide slump in business, but international airlines are doing just the opposite in India because they believe the country’s international air traffic will only grow in the coming years.

Interestingly, this comes even as the domestic aviation business is going through a downturn.

Large carriers already operating here such as British Airways and Emirates are either increasing the number of flights to Indian cities they already fly to, or beginning to fly to new cities, while smaller players such RAK Airways and Garuda Indonesia are starting to fly into the country.

India is seen as a growing market for international airline traffic and the current market size is nearly $5 billion (Rs21,000 crore) a year, said a senior official with a foreign airline.

“India, with its huge middle-class population of over 250 million, is like an untapped gold mine,” said K. Ravindran, chief operating officer, RAK Airways, which started operations in India from April, flying between Kozhikode and Ras al-Khaimah in the United Arab Emirates. “With its present international travel market not even covering 2% of the population, the country offers large opportunities for airlines. India is an important geographic area in all our future network plans.”

ON THE RADAR

Kapil Kaul, chief executive officer (Indian subcontinent and West Asia) of consulting firm Centre for Asia Pacific Aviation, said India is a critical destination for international airlines based on the “various dynamics of competition and consolidation of their network”.

“So, when a rebound happens there (in global markets), these carriers will have an advantage as they would have already built capacities in India,” he added.

Deutsche Lufthansa AG, Singapore Airlines Ltd, Cathay Pacific Airways Ltd, British Airways Plc. (BA) and Emirates are in the process of increasing the frequency of their flights and connecting new destinations here.

Hong Kong Dragon Airlines Ltd (an affiliate of Cathay Pacific), Saudi Arabia’s Sama LelTayaran Co. Ltd (popularly known as Sama), and AirAsia Berhad are also launching operations in the country.

This surge, Kaul said, is also because international airlines are trying to gain a foothold in the India-bound market before domestic private carriers Jet Airways (India) Ltd and Kingfisher Airlines Ltd grow into a threat.

Jet launched its international operations in 2004 and Kingfisher will start flying overseas routes from September.

“Other reasons include a nearly liberalized bilateral government policy with other countries and sustained economic growth amidst recession,” he added.

For instance, Emirates, which recently increased the frequency of its Delhi-Dubai flights, is readying for another round of expansion by increasing the number of flights to Hyderabad and Bangalore from October.

Singapore Airlines is also adding five flights on its Delhi-Singapore sector from September, taking its total flights to Indian cities to 63.

“We will be adding two more flights in Bangalore as India is our key market,” said Gunjn Chanana, public relations manager for India at Singapore Airlines, without disclosing the airline’s growth rates here. “We believe there is potential (for more) growth.”

“India today is by far the largest single market for Qatar Airways with a network of nine cities, which represents more than 10% of our global network of 83 international routes,” said Qatar Airways’ chief executive officer Akbar Al Baker in an email.

Qatar Airways added Kozhikode as its ninth destination in India in June.

The global aviation industry is waging a losing battle against rising aviation fuel costs, which have increased 30% this year.

However, international airlines expect potential passenger growth from India to nullify the impact over the long term.

“For example, we have registered a load factor of 86% during the first half of this year in the India-Sharjah sector,” said Housam Raydan, corporate communications manager, Air Arabia PJSC which operates 86 flights a week between Sharjah and India.

Much of the rise in international air travel from India is driven by traffic to South-East Asian countries, while demand for destinations in the US, Australia and New Zealand is also increasing.

“The overall (number of) Indian arrivals to Malaysia from January to May 2008 is 234,245, a growth of 32.5% from last year. Similarly, Singapore has also witnessed above-average growth,” said Neelu Singh, chief operating officer, Ezeego1.com, a Mumbai-based online travel agency.

Naresh Goyal, founder chairman of Jet Airways, had said in an earlier conversation with Mint that Indian airlines pose a serious threat to international carriers on account of the quality of their service.

He had added that Jet, which earns nearly half of its operating revenues from international operations, would extend its global reach to other cities in North America, Europe, Africa and Asia in phases.

“However, international carriers will have to be a bit cautious in increasing their capacities considering the current downturn,” said Wolfgang Prock-Schauer, chief executive officer of Jet Airways.

His warning holds merit as three carriers—Linee Aeree Italiane SpA (Alitalia), Eva Air (Taiwan) and British Midland Airways Ltd—have suspended their Indian operations over the past two years, because of intense competition.

Ryanair Ltd, United Air Lines Inc., US Airways Inc., Qantas Airways Ltd and BA have either deferred, or cancelled their international flights to various cities owing to the high jet fuel prices.

Source : The Mint

New Bangalore airport faces probe by legislators
August 10th, 2008 ICT by IANs

By Vishwanath Karnic

Bangalore, Aug 10 (IANS) The two-month old Bangalore international airport, a Rs. 25-billion ($625-million) greenfield project, faces a probe by a Karnataka legislators’ panel over alleged deviation in design and lack of sufficient facilities for passengers as well as visitors. “The new airport is no better than an ordinary bus stand”, “It is substandard”, “There is no proper seating arrangements for passengers and visitors” - these are the terms in which state legislators and ministers describe the new airport.

A consortium of Unique Zurich Airport, Siemens Project Ventures and Larsen & Toubro (L&T) has built the airport, with the Airports Authority of India (AAI) and the Karnataka government as minority stakeholders.

“There has been deviation from the architecture, style and design. It does not add to the image of Bangalore. There are no proper facilities for passengers and visitors,” Congress legislator D.K. Shivakumar, who raised the issue in the state assembly last week, told IANS.

Legislators from other parties supported him. The Bharatiya Janata Party government agreed to set up a committee of members from both the assembly and the council to probe the lapses. The panel is to be set up soon.

“I have raised the issue based on my personal experience at the airport and also because of complaints I have received from several people,” Shivakumar said.

“As a representative of the people I cannot sit quietly,” he said when asked why the alleged deviation and lack of facilities are being raised now, more than two months after the airport began operations.

“I am a former urban development minister. The design of the airport is different from what was approved,” Shivakumar charged.

When asked if there was any scope to change the design now, he insisted: “There are lots of possibilities to improve. It can be done. The legislators’ panel will decide that.”

On Wednesday Minister for IT and BT, Katta Subramanya Naidu, called the new airport, about 40 km north of the city centre, “a poor cousin to other airports of international standards, including the New Delhi and Hyderabad airports.

“The new airport was expected to enhance Bangalore’s image and also that of Karnataka. But it is nowhere near the expectation one had from it.”

He said if the airport management does not upgrade the facilities to international standards, the state government may invite others to take up the job.

While the management declined comment on the move for a probe by the legislators’ panel and Naidu’s near-threat, the response from industry and trade organisations was lukewarm.

“It is a ticklish question. It is better if we leave these issues to the judgement of users,” said D. Muralidhar, president of the Federation of Karnataka Chambers of Commerce and Industry.

“Personally I think facilities are good. However, scope for improvement is always there,” he said.

“It is a new airport. Some questions (regarding facilities) do get raised when we tend to compare it with other international airports. At the same time we need to understand that facilities are far better than at the old airport,” Muralidhar said.

T. Ramappa, secretary general of the Bangalore Chamber of Industry and Commerce, shared Muralidhar’s views.

“Personally I don’t think it is so bad,” he said.

“I have used it twice and I did not have any problems. Of course there certainly is room for improvement,” Ramappa said.

The airport began operations May 24 after three failed starts in the previous two months. The promoter operator - Bangalore International Airport Ltd (BIAL) — had to settle for a soft launch because the Election Commission’s model code of conduct was in force as assembly elections were on in Karnataka.

Marred by controversies, litigations, protests and cost over-runs, the much-awaited launch was put off thrice (March 28, May 11 and May 23) due to delays in setting up the air traffic control, training operators, government clearances and finally the poll panel’s directive.

With the opening of the new airport, the 50-year-old state-run Hindustan Aeronautics Ltd (HAL) airport in the city was shut for civilian traffic despite protests by corporate honchos of the new economy against its closure.

However, Naidu said the state government will ensure HAL airport stays as there are a number of cities with two airports. “We will take up the matter with the central government,” he said.

According to the Concession Agreement between BIAL promoters and the Indian government no airport can operate within 150 km of the new Bangalore international airport.