The battered India airline companies received a lifeline from the government on October 31.

The 5% Customs duty on Aviation Turbine Fuel (ATF) has removed. In addition the government controlled oil marketing companies have announced a price reduction of Rs. 6,000 per kilolitre on ATF.

These two steps, will result in an about 17% reduction in prices, but predictably, airlines have chosen to hoard the price reductions to buttress their shattered financials, and say it is too early to say whether the drop can be passed on to customers in the form of lower air fares.

Adding insult to injury, airlines will force, their customers to start paying the "transaction fee"on air tickets from November 1, 2008. The fee will hike domestic fares by up to Rs. 500 and international travel by up to Rs. 10,000 a ticket. This fee will be payable even on refund tickets.

Please see the tags "Transaction Fee" for articles on this subject.

Press Trust of India reports, low cost carrier SpiceJet today reported a net loss of Rs 198 crore (INR 1.98 billion) for the second quarter ended September 30. The airline had posted a net loss of Rs 37.7 crore in the corresponding quarter of the previous financial year.

Total income of the carrier stood at Rs 363.3 crore in the second quarter, up from Rs 271.3 crore in the same quarter of the previous fiscal, the airline said in a statement.

SpiceJet witnessed a 53 per cent growth in operating revenue because of a three per cent increase in number of flights in comparison to same quarter last year. The company reported a 43 per cent growth in revenue per flight on account of increased passenger yield.

On the revenue generated during the quarter, SpiceJet CEO Sanjay Aggarwal said: "We have been able to achieve a 43 per cent growth in revenue per flight driven by a 77 per cent enhancement in average fare realisation this quarter when compared to last year".

There has been a correction in ticket pricing in the first two quarter of the current fiscal. The revised prices are holding in the market place and that it will be the case moving ahead at least till the end of this fiscal year, he added.

The Press Trust of India reports, the third runway of Indira Gandhi International Airport (IGIA), which was recently inaugurated, has been opened for round-the-clock operation from yesterday. The runway, which was inaugurated on August 21 this year by Civil Aviation Minister Praful Patel, was opened for commercial operations from September 25, 2008 but could not be used round-the-clock due to technical problems with the runway lighting system.

“The operational hours of the new runway were increased in a phased manner in accordance to best global aviation practices. Following the encouraging feedback from all stakeholders such as airlines and Air Traffic Control (ATC) on successful operations since its opening, the runway will now be available for operations round-the-clock,” a Delhi International Airport Limited (DIAL) spokesperson said.

The third runway, christened 29/11, has CAT IIIB instrument landing system (ILS) on both Dwarka and Vasant Kunj sides which will allow aircraft to land even when the visibility is as low as 50 metres. The runway, built to Code F standards, can handle the wide bodied aircraft like Airbus A-380 and Antonov AN-225. DIAL, a joint venture consortium operating and developing the IGIA, had build Rs 1,000 crore the runway in a record time of 18 months -- six months ahead of schedule on February 2009. “This will enhance IGIA's capacity to handle more aircraft movements,” added the DIAL spokesperson.

The maintenance of the main runways (11-29 and 10-28) will be carried out on alternate days on the weekdays whereas secondary runway (09-27) maintenance will be carried out on Sundays between 1 pm to 4 pm.

According to a Press Trust of India (PTI) report, Kolkata’s Howrah region is proposed to get a second airport in a bid to ease the passenger congestion at the existing Netaji Subhash Chandra Bose International Airport (NSCBIA). Speaking at a function in Howrah yesterday, Subhash Chakraborty, West Bengal Transport Minister said, “There has been a considerable increase of passengers at the NSCBIA and so it was necessary to develop another airport and Howrah was the appropriate place for the purpose.”

Laying the foundation stone of a bus terminus at Ramrajatala in Howrah, Chakraborty informed, “Currently, a consultancy agency deputed by the state government is doing the survey work and once they give the report, the whole project will be finalised. There is land belonging to the Eastern Railway beside the Kona Expressway, but there is some dispute with the land and so we are thinking of some other land. We have directed all the MPs and the MLAs of the district to look for land and once they give a report, we will finalise it.

When asked on why Howrah has been chosen for Kolkata’s second airport, Chakraborty said, “Howrah is the twin city of Kolkata and an airport in this town was necessary. Moreover Howrah's proximity to Kolkata will also help in developing this airport.”

Jet Airways, today connected Bengaluru with New York (Newark and JFK) and Toronto, via its European hub in Brussels with four weekly flights - on Fridays, Saturdays, Sundays and Mondays respectively, till December 14, 2008.

In keeping with the higher holiday season passenger traffic, Jet Airways will increase its frequency on the sector, operating daily flights between Bengaluru and Brussels effective December 15, 2008 to January 15, 2009; and will revert to flying four times a week on the same sector, effective January 16, 2009 onwards.

The launch of Jet Airways’ inaugural service on the Bengaluru-Brussels sector was marked by a multi-faith prayer session at the new Bengaluru International Airport, followed by the ceremonial lighting of the inaugural lamp by Mr. Albert Brunner, CEO, BIAL and Mr. Sudheer Raghavan, Chief Commercial Officer, Jet Airways.

Flight 9W 132 departed the new Bengaluru International Airport at 0135 hrs, arriving at Brussels International Airport at 0755 hrs. On the return leg, Jet Airways flight 9W 131 will depart Brussels at 1010 hrs and arrive at Bengaluru at 0005 hrs the following morning.

With the launch of these services, arriving passengers from Bengaluru can now conveniently connect to Jet Airways’ transatlantic services to North America and Europe in a seamless manner, on board its state-of-the-art Airbus 330-200 aircraft offering an unmatched international Premiere and Economy Class experience.

Jet Airways’ passengers can currently connect to six additional destinations in the United States and seven destinations across Europe through its code share partnerships with American Airlines and Brussels Airlines respectively.

This enhanced connectivity on Jet Airways includes Washington Reagan, Dallas, Boston, Cleveland, Baltimore and Raleigh-Durham in the United States, via New York (JFK) and to Birmingham, Madrid, Barcelona, Berlin Tegel, Manchester, Paris De Gaulle and Lyon in Europe, via Brussels.

Commenting on this new route development, Mr. Sudheer Raghavan said, “Jet Airways is proud to commence its signature wide body operations from Bengaluru to North America and Europe via its Brussels hub. Bengaluru will now be the fourth major Indian gateway for Jet Airways’ services to North America via Brussels, in addition to Mumbai, Delhi and Chennai”.

Bengaluru is also the ninth Indian city to be connected to Jet Airways’ international network.

The Brussels hub operation is ideally suited to offer Jet Airways’ customers flexibility with flight timings, to connect India with North America and Europe.

Passengers from Bengaluru will experience Jet Airways’ dual-class, state-of-the-art Airbus 330-200 aircraft featuring its acclaimed herringbone-configured Première, which makes every seat an aisle seat .Besides converting to 180 degree flat beds with lumbar support and massage systems, Première seats also offer the busy business traveller oversized tables, laptop power, telephony, SMS, Email and live text news.

The spacious new Economy class, passengers will enjoy seats more spacious than the norm and ergonomically designed to reduce stress and strain for perhaps the most comfortable ride in its class.

GMR Hyderabad International Airport Limited (GHIAL) announced that it is all set for its maiden Haj operations from Rajiv Gandhi International Airport.

GHIAL has provided all facilities at the new Haj Terminal for the convenience of the pilgrims this year. The facilities are meant for both the passengers and the visitors.

The Saudia Airlines Airbus A300 flight to Hyderabad will land at Rajiv Gandhi International Airport at 4 a.m. on October 30, 2008 from Jeddah. The flight will take-off from Hyderabad to Medina with 300 passengers at 5:30 am.

The facilities include:

• Separate area for passengers and visitors.
• Separate toilets for male and female passengers are provided at the passengers and visitors area.
• Departure Lounge is provided.
• Security Hold Area has Tea/Coffee & snacks joints, telephone booth with local / STD / ISD, Forex Counters, & Duty Free area.
• First Aid facility.
• Paid Parking for the vehicles of passengers and greeters.

A Prayer Hall is also provided for Male and Female Passengers with facilities for Vazu (ablutions).

The airport is also providing buggies for elderly passengers besides wheelchairs for those who need this facility.

“An exclusive terminal for the first time in Hyderabad has been constructed with all integrated facilities like customs, immigration, security, food & beverage, retail / duty free, an exclusive car park for Haj travellers, which will bring down the processing time and enhance the standards of service provided by GHIAL”, said Mr. Viswanath, Chief Commercial Officer, GHIAL.

Customers can expect ‘business as usual’ with no immediate changes in operations

Delta Air Lines, Inc. (NYSE: DAL) announced, it and Northwest Airlines, Inc. merged, creating a premier global airline with service to nearly all of the world’s major travel markets.

The new airline, called Delta and headquartered in Atlanta, will begin its first day as a combined company with a commitment to delivering excellent service to customers in 66 countries and more than 375 worldwide cities – more than any other airline; with a dedicated base of approximately 75,000 worldwide employees; and with a best-in-class cost structure and strong liquidity balance that better positions the company to adapt to the weakening global economy.

“The airline industry faces a very difficult economic environment around the world and this merger gives Delta increased flexibility to adapt to the economic challenges ahead,” said Delta CEO Richard Anderson. “With much of the work to bring our airlines together well under way, the new Delta will be at the front of the pack in achieving the benefits of consolidation and is well positioned to navigate the tough waters ahead in a difficult economy.”

With the completion of the merger, Northwest Airlines is now a wholly owned subsidiary of Delta. Customers should continue to check-in and do business directly with the airline operating their flight just as they did before the merger. Delta will continue operation of the airlines’ separate Web sites, www.delta.com and www.nwa.com, as well as the two airlines’ reservations systems and loyalty programs.

The companies will be integrated through a thoughtful process with customer benefits rolled out over the next 12-24 months, including:

• The addition of Delta’s code to nearly all of the Northwest system by the end of 2008, creating thousands of additional connecting opportunities.
• Immediate complimentary upgrade reciprocity for elite members of both airlines’ loyalty programs, with airport lounge reciprocity continuing as usual.
• The launch of a fully consolidated worldwide flight schedule in advance of summer 2009;
• The introduction of elements of Delta’s brand throughout the Northwest system beginning in spring 2009, including Delta’s popular Richard Tyler designer uniforms, Delta’s livery, “signature cocktails,” enhanced in-flight entertainment and other onboard amenities.
• The consolidation of the Delta and Northwest loyalty programs, ultimately including the ability to combine miles from SkyMiles and WorldPerks accounts at a one-to-one ratio.
• The full integration of Delta and Northwest Web sites, kiosks, and customer-facing technology to ensure a consistent worldwide travel experience.

Delta has already invested significant resources to ensure a seamless transition for customers, including receiving clearance from the Federal Aviation Administration (FAA) of the airline’s plan to achieve a Single Operating Certificate over the next 14-16 months; adding extra staffing and technology at check-in counters and kiosks to provide added customer assistance beginning today; and posting complete merger information at www.delta.com and www.nwa.com to provide customers added assistance.

Employees share in success of combined company with equity stake, platform for future growth

As a result of the merger, employees will share in the success of the new company through an expanded ownership share in the combined company. In the coming days, Delta will distribute an equity stake to substantially all U.S.-based employees with international employees participating through cash payments in lieu of stock.

"Ensuring our employees are able to share in the benefits of the merger from the beginning is a prime example of the Delta Difference," Anderson said. "By sharing ownership with Delta’s people, we are not only recognizing the critical role employees will play in successfully integrating two customer-focused companies, we are also making good on a longstanding commitment that our employees will share in the success of the company."

Delta also has completed other key steps to ensure that employees benefit from the merger and are protected as the two companies’ workforces are combined. Specifically, Delta:

• Completed an unprecedented agreement with the Delta and Northwest units of the Air Line Pilots Association, Intl. (ALPA) on a joint contract that unifies both pilot groups under one pilot working agreement effective tomorrow. Additionally, the two pilot groups have agreed to a collaborative process that will achieve a combined seniority list;
• Committed that no frontline employees will be involuntarily furloughed as a result of the merger and that no hubs will be closed; and
• Implemented a seniority protection policy that ensures that frontline employees of both airlines will be provided seniority protection through a fair-and-equitable process.

Financial footing strengthened, providing increased flexibility to adapt to challenging global economic conditions

The closing of the Delta-Northwest merger brings together two of the industry’s most financially secure airlines to produce a best-in-class cost structure and an industry-leading balance sheet. The transaction is expected to generate $2 billion or more in annual revenue and cost synergies from more effective aircraft utilization, a more comprehensive and diversified route system, and cost synergies from reduced overhead and improved operational efficiency. The company expects to incur one-time cash costs not exceeding $600 million to integrate the two airlines.

As approved by both companies’ stockholders earlier this year, Northwest stockholders will receive 1.25 Delta shares for each Northwest share they own. Based on Delta’s closing stock price on Oct. 29, 2008, this exchange ratio is the equivalent of $9.99 per Northwest common share.

“In today’s economic climate, this merger makes even more sense because we can capture $2 billion in annual synergies and build the foundation for profitable growth through improved revenues, a best-in-class cost structure and a strong liquidity position,” said Edward Bastian, Delta’s president and chief financial officer, and the new CEO and president of NWA. “As we have proven, this is a different type of merger for the industry thanks to the complementary nature of the two airlines and the caliber of the people who will make this the most successful merger in airline history,” Bastian continued.

Delta closed the merger after receiving notice from the United States Department of Justice (DOJ) that it would not challenge the merger after reviewing its competitive impact. Earlier this year, the merger also received clearance from the European Commission.

Delta today also announced the members of its new Board of Directors, effective immediately. Delta Chairman of the Board Daniel Carp remains chairman while Northwest Chairman Roy Bostock becomes vice chairman. Other directors will include seven from Delta’s Board – Richard Anderson, John S. Brinzo, Eugene I. Davis, David R. Goode, Paula Rosput Reynolds, Kenneth C. Rogers, and Kenneth B. Woodrow, and four from Northwest’s Board – John M. Engler, Mickey P. Foret, Rodney E. Slater and former Northwest CEO Douglas Steenland. Delta had previously announced the structure of its new Board during the merger announcement last spring.

With its acquisition of Northwest Airlines, Delta Air Lines is now the world’s largest airline, and also becomes the only US airline offering a full global network.

CompareSasta.com is the newest entrant in the online travel search market, and has started its service by offering a comprehensive real-time price information of flights and bus travel in India.

CompareSasta.com is trying to be India's leading price comparison website by enabling consumers to search, find, and compare a complete range of products and services best suited to their requirements.

CompareSasta.com users will benefit from choosing and comparing from hundreds of flight options with all available real-time price and itinerary combinations, as well as results displayed according to relevancy.

I did a sample check on flights between Bangalore and Delhi and was impressed by the results, as well as the filters and options available.

“For Indian travellers who prefer to be price conscious, this site will offer a compelling value proposition. The users will be able to search for the cheapest fares online, regardless of where they're based” said Mr. H. Tanna, Director – Operations, ES Group India.

When asked how CompareSasta.com will differentiate its offering from the existing players online travel meta search, Tanna responded - “Travel is just one of the first product from our portfolio of services. We will be India’s first Online Comparison Portal offering services ranging from Travel, Hotels, Tour Packages, Broadband, Electronics, Finance and so on. We will keep innovating and helping our users to get best deals available”.

The bad news continues to roll in for Indian aviation.

Austrian Airlines announced that it will cease operating its service from Vienna to Mumbai (Bombay) from 1 March 2009 onwards.

All international airlines choose Mumbai, the economic capital of India, while ignoring less competitive cities like Bangalore. As a result there is drastic overcapacity between European airports and Mumbai. The weakening Indian demand and the consequences of the crisis in European financial markets only add to the loss of profitable operations in the medium term.

The measure also means that one more of the airline’s total of six Boeing 767 aircraft will no longer be deployed on long-haul routes. The question of how to use the aircraft freed up by the decision remains open at present.

Austrian has already cancelled services from London City Airport, Luxembourg and Riga, and Chicago, this year.

According to the Centre for Asia Pacific Aviation, the International Air Transport Association (IATA) has announced global international traffic results for September, with passenger traffic declining 2.9%, compared to the same month in 2007.

International load factors tumbled by 4.4% percentage points from August to 74.8% in September.

Giovanni Bisignani, IATA’s Director General and CEO said, “The deterioration in traffic is alarmingly fast-paced and widespread. We have not seen such a decline in passenger traffic since SARS in 2003. Even the good news that the oil price has fallen to half its July peak is not enough to offset the impact of the drop in demand. At this rate, losses may be even deeper than our forecast USD5.2-billion for this year.”

This is the first time since the SARS crisis in 2003 that global passenger traffic has shrunk. Capacity cuts were not able to keep pace with the fall in demand. September load factors in all regions fell compared to August.

For September, all major regions reported that passenger traffic shrank, with the exception of Latin American carriers which saw an increase of 1.7%.

Even this is down from the 11.9% growth of the previous month.

African carriers posted the largest decline in traffic (-7.8%), a continuation of the previous month’s trend.

This drop in overall international air traffic does not bode well for Bengaluru International Airport (BIA) and its promoter BIAL. The domestic air traffic has reduced drastically, with short-haul traffic all but disappearing. Only a spectacular growth in international flights has enabled BIA a modest 1.5% gain in overall passenger traffic. The recent announcement by the world's largest airline, Air France-KLM, of withdrawal of the Hyderabad Amsterdam route due to poor performance, highlights the problem.

It is imperative for the BIAL consortium to put its thinking cap on and try to raise the domestic traffic, lest the international airlines pull the rug from under its feet.

The Press Trust of India reports that the Government’s decision to shut down the old Bangalore airport could come under fresh legal scrutiny with a parliamentary panel asking civil aviation ministry to respond to charges of “irregularities” in the concession agreement it has signed with the airport developer.

Quoting records of its hearings with the ministry, Airports Authority of India, its employees and the private Bangalore International Airport Limited, the panel said that the clause relating to the old airport closure was brought into the concession agreement “at a later stage... After a demand was made to this effect by BIAL”.

In its report on the functioning of private airports, the Standing Committee on Transport, Tourism and Culture said the concession agreement initially prepared and approved by the Union Cabinet “did not provide for the closure of the Hindustan Aeronautical Limited Airport” in Bangalore.

However, the July 2004 agreement actually signed with BIAL had a clause making it obligatory on the government to notify that the old airport would not be available for commercial civil aviation operations from the date the new greenfield airport became operational, it said.

The Committee, headed by CPI(M) leader Sitaram Yechury, said the AAI Employees Union (AAEU) had quoted the Aircraft Act to point out that an airport could be closed down only if security of the country and safety of aircraft were endangered. “In the given case of the HAL Airport, both these reasons are not present.”

KLM announced on October 22, 2008, that KLM Royal Dutch Airlines is suspending its Amsterdam–Hyderabad service, effective February 1, 2009.

KLM launched flights to this destination in October 2005 in anticipation of a growth in traffic to India.

KLM is suspending this service in response to financial results of this route and local market developments.

All passengers will be booked onto other flights.

KLM continues to serve the Indian market with daily services to both Mumbai and Delhi.

KLM and its partners will continue to focus on India, operating direct flights from Amsterdam and Paris to Delhi, Mumbai, Bangalore and Madras.

In what is sure to be a shock, to both the BIAL and HIAL consortia, the Deccan Chronicale reports, the parliamentary standing committee on transport, tourism and culture, on Thursday October 23, recommended immediate withdrawal of user development fees (UDF) being charged by Hyderabad and Bengaluru airports.

It said the private operators had invested only Rs 330 crore and Rs 240 crore at Hyderabad and Bangalore respectively to develop the airports. The rest of the amount came from the AAI, state governments and through debt from financial institutions.

Observing that the government’s policy was to make air travel more affordable, the committee said the UDF imposed on passengers “may be withdrawn immediately and no more UDF may be imposed on passengers in any of the airports.”

The committee has also recommended that the HAL airport in Bangalore, and the Begumpet airport in Hyderabad be used for short-haul domestic flights.

The committee, headed by the CPI(M) leader, Mr Sitaram Yechury, said any future greenfield or brownfield airports should be developed with the Airports Authority of India (AAI) having a majority stake in a joint venture.

What impact this recommendation will have on the pending UDF requests of the consortia at Delhi and Mumbai is also to be considered.

SpiceJet is sure going to win the hearts of the Rajasthani community, and major businesses like Bosch India, with its new Bangalore - Jaipur direct flight.

Starting October 26, 2008, SpiceJet schedule will offer a B737 morning departure, same day evening return.

SG284 depart Bangalore 08:45 arrival Jaipur 11:30.
SG283 depart Jaipur 17:15 arrival Bangalore 20:00.

At a ceremony at New York’s Public Library recently, Condé Nast Traveler one of the world’s leading high end travel magazine, announced that Jet Airways has been selected as one of the top three airlines in the world in its 2008 Readers Choice Awards survey. Congratulations to the team at Jet.

Jet Airways, India’s leading international airline, launched North American service last summer from Mumbai/Delhi to New York’s JFK and Newark airports – adding Toronto Pearson International and San Francisco International airports within the past year. Jet Airways connects Bangalore to JFK and Toronto via a daily Brussels flight.

At the same time, Jet Airways has announced the introduction of attractive eight and fifteen-day apex fares on key domestic routes.

The new fares are applicable for sale and travel with immediate effect, and can be applied on both return and one-way journeys.

Reservations may be made through Jet Airways’ offices across India or through travel agents.

Passengers travelling on these routes may also earn 20% of base JPMiles when they avail of the Apex fares.

The Bill for setting up the Airport Economic Regulatory Authority (AERA) was passed by the Lok Sabha on 22-Oct-08.

The prime objective of AERA will be to create a level playing field and foster healthy competition among all major airports (Government owned, Public Private Partnership based, Private) encourage investment in airport facilities regulate tariffs of aeronautical services, protection of reasonable interest of users, operate efficient, economic and viable airports at notified airports.

The Authority shall consist of a Chairperson and 2 persons to be appointed by the Central Government from amongst persons having adequate knowledge and professional expertise in aviation, economic law, commerce or consumer affairs. The member shall be whole time appointees.

Whenever the Authority is deciding a matter involving a civil enclave in a Defence airfield, the Defence Ministry will be represented by an additional member on the Authority who will be nominated by the Ministry of Defence.

The Authority shall determine tariff once in 5 years and may, if it considers appropriate in public interest amend, the tariff from time to time during the 5 years.

The AERA Bill was introduced in Lok Sabha on 05-Sep-07. It was, thereafter, referred for the consideration of the Department Related Parliamentary Standing Committee on Transport, Tourism and Culture.

The Standing Committee examined the AERA Bill in consultation with the stakeholders and presented its report to the Parliament on 17- Apr-08. The Committee had made some recommendations most of which were introduced to the Bill.

The Bill will now be introduced in Rajya Sabha.

For more details on AERA functions please read my previous article

CNN-IBN reports that airlines will pay all outstanding dues on aviation fuel to oil companies in six monthly installments and will be given a credit limit of 90 days to purchase the current requirement of aviation turbine fuel (ATF), it was decided in the national capital on Wednesday.

The decision was taken at a meeting of heads of various airlines and oil companies and presided over by Civil Aviation Minister Praful Patel and Petroleum Minister Murli Deora to discuss payment of dues to oil companies.

"Cumulatively, the dues of the airlines industry to the oil companies are about Rs.2,500-2,800 crore (Rs.25-28 billion). We have decided that this shall be cleared by the airlines in six-monthly instalments by March 2009," Patel told reporters after the meeting.

He added that for current uplift of ATF, oil companies will extend to all airlines a credit limit of 90 days; besides, oil companies will start revising ATF prices every fortnight, replacing the current monthly revision.

Kingfisher Airlines chairman and CEO Vijay Mallya, Jet Airways executive director S.K. Dutta and Air India chairman Raghu Menon were amongst those present. So were the chiefs of state-run oil firms Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum.

The meeting was necessitated as some airlines have defaulted on payments for the ATF they have bought at the end of their 60-day credit period.

Patel also said he had "cautioned" airlines that they would have to take more responsibility if they wanted support.

With the theme – “You’ve earned it”, Star Alliance launched its new multi-platform brand campaign on Monday, October 20th, 2008. The campaign is aimed at increasing awareness and familiarity of the Alliance customer benefits, with a special emphasis on the value of global recognition for the frequent International traveller.

“Working away from home on international business trips can take its toll on the global frequent traveller, and the potential rewards for such travel are often simply not clear enough. Star Alliance was the first international airline alliance specifically set up with the frequent international traveller in mind, created to focus on the development of rewards, products and services aimed at providing hassle-free multi-airline, multi-destination travel,” said Mark Davies, Director of Marketing Communications for Star Alliance.

The campaign is supported by a series of short documentaries called “A Meeting of Minds”, produced in association with CNBC International, where budding entrepreneurs interview global business leaders on the art of doing business better, especially in emerging markets, and how these business leaders have taken their businesses from local to international.

One of the episodes shows entrepreneur Anthony Pereira, founder of U.S. renewable energy company, AltPower, meeting Simon Woodroffe, founder of Yo@ Company Holdings, which created Yo! Sushi and Yo! Hotel. All 10 episodes are lively, fast moving and show business leaders in London, New York, Beijing and Shanghai. These short films are available for viewing at www.staralliance.com.

“Being recognised as a special person across the alliance is not an easy logistical task to achieve, yet with more than 11 years of experience in this field, we know we’re best placed to be at the forefront of this global challenge. Through this campaign, we are aiming simply to remind our core international audience of the benefits we’re spearheading for the industry, including alliance-wide priority baggage; Connection Centres at our major hubs and Alliance lounges to name but a few. After all, our frequent international travellers have truly earned it!,” added Davies.

Complementing the campaign, Star Alliance has also developed an international business etiquette guide to recognise the importance of different cultures when doing business around the world. This has been produced in association with international magazine Monocle.

The campaign was designed, together with advertising agency Touch DDB, to highlight the fact that Star Alliance products, services and rewards were developed to help customers alleviate the stress of travel.

The multi-platform media campaign, developed with media agency MEC, has advertisements on targeted news, business and travel websites that direct visitors to a video landing page on our Alliance website. The campaign will also run in Star Alliance’s 21 member carriers’ in-flight magazines, on entertainment channels and in posters at London-Heathrow and Paris-Charles de Gaulle airports.

Kingfisher Airlines Chairman, Dr. Vijay Mallya, in an interview with Ashwini Phadnis of the Hindu Business Line claims it is "Taxes, not over-capacity, that is killing the Indian civil aviation sector".

The business logic to Dr. Mallya's statement is to reduce fares by reducing the ridiculous taxation structure on Aviation Turbine Fuel (ATF), which ensures ATF in India is almost double the international prices. Regardless of product, India is an extremely price sensitive market, and lower fares will bring the passengers back to the skies from the trains and buses.

While I agree with Dr. Mallya on the over-taxation, I talk his claims on over-capacity and taxes being the sole reason for the failure, with a big pinch of salt. Airlines were well aware of the tax structure before entering the market. I am surprised at the lack of planning and lack of risk analysis.

Over the last two months, despite reduction in ATF prices (thanks to lower global crude prices), all airlines have taken the benefit in to their books, rather than passing it to the consumer. It is natural for both government and public to be sceptical.

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I have not asked for a bailout or financial relief: Vijay Mallya.

As far as Kingfisher is concerned we do not sell at a loss. Jet Airways, over the last six months, their conduct shows that they too will not sell at a loss. There are other guys in the industry who will happily sell at a loss.

For the Chairman of Kingfisher Airlines, Mr Vijay Mallya, it is not over-capacity in the domestic market place, but the high taxation levels in the country that is killing the domestic aviation.

At a meeting with Business Line at the Business Centre of Taj Palace hotel as he rushed for four back-to-back board meetings, Mr Mallya outlined what he felt were the problems facing the industry.

Excerpts:

There is a rumour that you have asked Accenture to look at downsizing staff in your airlines.
We do not have surplus staff. Accenture was specifically hired to do merger strategy and merger synergy identification with Air Deccan. All this has been completed and we have actually realised Rs 300 crore out of the Rs 375 crore spent on synergies.

You are said to have met with senior opposition leaders and also Mr Sharad Pawar to seek a bailout of financial help for the aviation sector?
I have not meet a single opposition leader. Yes I did visit Parliament. But this was the first trip after leaving Parliament. As a former MP, I can visit the Central Hall (of Parliament) for life. I met several people but that does not mean I am lobbying.

I have not asked for a bailout or financial relief. All I have said that if States continue to charge sales tax on aviation turbine fuel (ATF) the aviation industry is not viable.

On Monday, you were quoted as saying that there will be more job cuts in the industry?
This is not correct. I was asked a question as to whether I was disappointed at the reaction of the Government towards the crisis facing the sector.

My response was that the Government should express urgency in considering the request of the aviation industry. However, they have other natural priorities. I hope our turn comes quickly. But I have not met with either the Finance or Petroleum Minister, although I made a presentation to the Prime Minister. I have not asked for a bailout or a single farthing from the Government.

It is the tax which is killing the aviation industry. I said that if you want to charge this kind of sales tax then this industry is not viable.

As far as Kingfisher is concerned we do not sell at a loss. Jet Airways, over the last six months, their conduct shows that they too will not sell at a loss. There are other guys in the industry who will happily sell at a loss.

So what has happened, we have raised the prices and this is because of the fuel surcharge, that is why traffic has slowed down. So if you analyse the cost structure it is the tax (which is affecting the airline industry).

What is the way forward? Given the fact that this is election year.
Why can people not understand that even in an election year, the airline industry is as important as any other industry. Can you imagine what will happen if the entire airline industry of India gets grounded and Air India has to manage on its own.

So, is the negative impact of elections worse or recognition that there is over-taxation? Anywhere in the world there is not such high sales tax (on ATF).

The fact of the mater is if the aviation industry has problems there is no point in making this big drama about tax-payers money. There is no point making a big drama about bailout.

All we are saying is stop fleecing us. We pay 70 per cent more for fuel than Singapore and Dubai. Is that fair?

We provide vital connectivity; any fellow who suggests that air traffic connectivity is not essential needs to have his head examined.

The second point I will like to say is history. Aviation is a substantial element of national security. If tomorrow there is a conflict and Indian Air Force does not have enough planes to transport troops and materials, Government will commandeer all civilian aircraft.

It is a very important sector, aviation. Everyone just wants to slam it. May be sometime if the airlines actually get grounded, the people will realise how important they are.

How long can this (high prices of ATF) go on?
We will all dramatically reduce our flights.

By when?
We do not operate like others. Saying if not done by this date then we will cut flights. We are not going on strike. We are merely saying that we cannot operate and pay these kind of tax. So either get real or you will see a complete slowdown or we will keep on chopping flights and grounding planes.

There is said to be 20-30 per cent over-capacity in the market
It is not over-capacity. Where are you getting all these leads from? Over-capacity! Do you know what is demand and how many planes are required? Neither you nor I know. We have seen a growth trajectory of 32 per cent CAGR over the last three years.

We are not talking about capacity. But we are talking about the fact that we are flying aeroplanes and losing money. Because of the tax. If the tax is not solved we will not fly to provide transportation at a loss and let Government get rich.

Let us say that on an average the price of oil was $40 a barrel. The Government said they will charge a 30 per cent tax. So in their State revenue budget it is accounted as budgeted revenue by this date from ATF. The same ATF went to $140 they collected $52. A windfall for the States.

All I am saying is collect the $12. They are not entitled to collect the difference. That is what we want simple and straight forward.

The bad news just does not stop for the domestic Indian civil aviation industry.

Recently released figures show an alarming drop to only 8.6 million domestic passengers for the third quarter of (July-September) 2008, with a miserable 2.68 million passengers for September 2008. This represents a 17% reduction over the same period last year, a 19% reduction from the previous month, and whopping 25% drop from the preceding quarter. Compare this with 33% annual growth in the previous three years.

Most industry experts attribute this drop due to the 25-30% reduction in capacity by airlines, and the 10-15% increase in fares.

Jet group (Jet Airways and JetLite) are still the dominant force in the industry, and with their new found ally the Kingfisher group (Kingfisher and Deccan) control almost 60% of the market.

Despite the deep cuts, flight load factors continue to drop. Experts feel there is an excess capacity of 20% or about 300 flights, which need to be cut, before the demand-supply balance is reached. This is evidenced by the sharp capacity rationalisation undertaken by Kingfisher Red (formerly Simplifly Deccan), which helped the airline raise its load factors from a miserable 39% in August to a more respectable 51.7% in September.

While all airlines have been witnessing a drop in traffic from the beginning of this year, the Kingfisher group shows a sharp decline of over 30% from the first quarter (Jan-Mar) of 2008 to the third quarter (Jul-Sep) of 2008.

The "perfect storm" of collapsing demand, increasing costs, and a global financial meltdown, has truly let loose its fury on the Indian domestic civil aviation industry. The FUD factor (Fear, Uncertainty, Doubt) is further curtailing traffic as India Inc., rushes to save costs. There is no doubt on the severity of the impact. The blame lies squarely with the airlines who followed a herd mentality and blindly rushed in to buying capacity, while growth was at 33% a year.

The airlines may not have had a plan to deal with 33% declines, but without a doubt, they need immediate rationalisation of the insane Aviation Turbine Fuel (ATF) taxation structure, that is killing the Indian civil aviation industry. It is time Mr. Murli Deora and Mr. P. Chidambaram start listening to the pleas of their cabinet colleague Mr. Praful Patel.

ATF price rationalisation may not solve all the problems, but at least, it is a start.

The consolidation in the Indian aviation industry has commenced.

Jet Airways announced, today, it has entered into a codeshare arrangement with JetLite, its wholly-owned, all economy subsidiary as part of its ongoing efforts to offer passengers synergetic benefits when they choose to fly with the Jet group.

As part of the agreement, Jet Airways will place its marketing code (9W) on key domestic routes operated by JetLite (S2), enabling both carriers to offer passengers better connections and a wider network.

Jet Airways’ JetPrivilege members travelling on these codeshare flights* can avail of a range of JP benefits, including the accrual of JPMiles based on class of travel. Moreover, the JPMiles thus earned will be Status JPMiles, and these JPMiles as well as each codeshare flight will also count toward JetPrivilege tier upgrade/ retention. JPMembers will also earn Tier Bonus JPMiles and Online booking bonus for the codeshare flights booked on the Jet Airways website.

Jet Airways Citibank Co-brand Credit Cardholders can use their companion discount vouchers on codeshare routes on applicable booking classes. Exclusively for Platinum members, there will be a waiver of cancellation charges on all these codeshare flights.*

Commenting on the codeshare, Mr. Wolfgang Prock-Schauer, Chief Executive Officer, Jet Airways said, “The codeshare agreement with JetLite will enable both carriers to optimally leverage their respective networks, offering passengers enhanced online connectivity across more than fifty domestic and international markets.”

Mr. Daniel Barranger, Vice President-Sales, JetLite added, “Besides offering passengers seamless connectivity and additional same-day return possibilities on several domestic sectors, this agreement is an important step forward in achieving further revenue synergies between the two carriers, both leaders in their respective market niches.”

Additional codeshare services between the two airlines will be implemented in phases.

*Conditions apply. Please refer to www.jetairways.com for more details

The tumultuous last week in the Indian aviation scenario, which rivalled the best soap opera dramas of Bollywood, Tollywood or Sandalwood, shows no signs of abating.

The popular joke of the day is "Who says there is a CREDIT crunch in India? See all the politicians taking CREDIT" [for 'protecting' the jobs of the Jet Airways staff].

The fight between Petroleum minister Murli Deora and Civil Aviation minister Praful Patel, both from Mumbai, spilt out in the open, with the Oil ministry charging airlines with default, and Patel defending the 'defaulter' airlines.

According to Press Trust of India (PTI) report, Civil Aviation Minister Praful Patel recently defended delays by airline companies in making payment of their fuel bills saying they were not defaulters, but the Petroleum Ministry maintained that Jet Airways had defaulted on payment of Rs 259 crore to Indian Oil Corporation (IOC). Rs. 100 Crore = Rs. 1,000 million = $20 million.

After Petroleum Ministry gave details about the dues of Jet Airways and its new found ally Kingfisher Airlines, Patel told reporters in the Parliament that the airline had a 60-day period to make payments. “So they cannot be branded as defaulters,” said Patel. However the Petroleum Ministry countered Patel by saying that Jet had failed to make payments even after expiry of the 60-day grace period. Jet's total outstanding to IOC stood at Rs 859 crore, of which it had defaulted on payment of Rs 259 crore bills, which were due on September 25 and October 5 this year after the expiry of 60-day period, said a senior official.

Similarly, Kingfisher owed Rs 110 crore to IOC, of which Rs 60 crore remained unpaid after expiry of the credit period. Jet also owes Rs 284.3 crore to Bharat Petroleum Corporation Limited (BPCL) while Kingfisher owes Rs 246 crore to BPCL and Rs 525 crore to Hindustan Petroleum Corporation Limited (HPCL). The official further said, “It is not correct to say that we are terming them defaulters just like that. We said they were defaulters because they failed to make payments even after 60-day credit period.”

Petroleum Minister Murli Deora had personally brokered the 60-day credit deal between Naresh Goyal’s Jet Airways and Sarthak Behuria, Chairman, IOC. Deora said last week that he was hurt when Goyal did not keep his word on making timely payments.

The official said both Jet Airways and Kingfisher Airlines had to clear their outstanding at the earliest as state-run oil firms themselves were in difficult times. “Our companies have a social obligation to fulfil. They sell subsidised cooking gas to households and even more subsidised kerosene to the poor. They have been living on borrowed funds and need funds to keep these subsidised sales going," said the official. IOC, BPCL and HPCL together lose about Rs 280 crore on sale of petrol, diesel, domestic LPG and kerosene. “Do you now expect them to sell subsidised fuel to the rich travelling by air?” he said. {This statement reflects the demented thinking of the ultra-smart people, so often found in Government, I have been raving about. Please see my article on how the populist fuel policy of the Indian government is killing Indian aviation.}

The completely lopsided, and vote-grabbing, populist mindset, of both, the Union and various State governments, have left the Government controlled oil companies in shambles. The three companies have not received oil bonds, which are used to compensate for half of the losses they make on fuel sales, for past three quarters. The combined borrowings of the three, which stood at Rs 48,400 crore in March 2007 and Rs 66,900 crore in March 2008, has increased to Rs 1,10,000 crore ($2.2 billion) as of this month. The oil companies are forced by the governments, to lose, Rs 2.85 a litre on petrol, Rs 7.26 a litre on diesel, Rs 29.19 a litre on kerosene and Rs 335.03 per cylinder on domestic cooking gas. The companies are projected to lose Rs 1,47,592 crore ($3 billion) in revenues this fiscal.

The official further informed that Aviation turbine Fuel (ATF) was priced at import parity rates (as if the fuel were to be imported) because around 80 per cent of the crude oil used to make the fuel was imported at international rates. Pricing of ATF was de-regulated on April 1, 2001 and since then it has been governed by fluctuations in the global market. Over the base price, customs duty of five per cent, eight per cent excise duty, three per cent education cess and sales tax at an average of 25 per cent is levied. State taxes and excise duty amounts to about a third of the ATF price.

In the meantime, PTI also reports, Jet Airways Chairman, Mr. Naresh Goyal, met with Finance Minister P Chidambaram to seek tax concessions on aviation turbine fuel as part of measures to overcome the crisis that has hit the Indian civil aviation sector.

According to sources, Goyal met Chidambaram at North Block this morning and drew attention of the finance minister to the problems that airlines in the country were facing. Goyal is understood to have asked Chidambaram to consider the demand of airlines to rationalise taxation and levies on ATF, which has become one of the biggest issues of carriers in India.

It is a known fact, that Mr. Chidambaram does not have any maneuvering room, given the raft of populist measures taken during this financial year, keeping in view the upcoming general elections.

In true television drama style, keep watching for the next episode.

Madhumathi D.S. of the Hindu Business Line reports that the 5 month young Bengaluru International Airport, which was expected to have a dream take-off on the back of phenomenal traffic growth during 2005-08, now seems to be going slow on its expansion plan in the face of a traffic decline.

“There has been a dramatic fall in monthly traffic for all airports in India since June 2008. We are currently conducting a study on the current trend and based on the results, which will be out in two-three months, we will take a decision on our next expansion plan,” the operator, BIAL, said in response to queries from Business Line.

Until a couple of months ago, BIAL CEO, Mr Albert Brunner, was hoping to take up a mezzanine expansion now and a larger Rs 3,500-crore phase 2 in early 2009 with a second terminal, pending the board’s clearance.

Bangalore's traffic numbers, reflect the overall slowdown across the country. BIAL said, “The overall annual growth of passenger volume [at Bengaluru International Airport] has dropped to 3 per cent since June 2008” compared to an anticipated 8 per cent growth rate.

The Southern sector has been especially dented. “There has been a drop of approximately 15 per cent in the flights operating in the Southern sector (Kochi, Coimbatore, Hyderabad, Chennai) from Bangalore since May 2008. The Mumbai, Kochi, Coimbatore, Delhi, Goa, Hyderabad, Chennai and Pune routes have collectively seen a 12 per cent reduction in the number of flights,” as per BIAL sources.

The dip could also not have come at a worse time than now for BIAL, which is awaiting the Civil Aviation Ministry’s clearance to start collecting a user fee (UDF) from domestic fliers leaving the city. The UDF is one of the main revenue sources for its ambitious expansion plan.

BIAL started collecting a user fee of Rs 1,070 each from its outbound international passengers from the first day of its operations.

The May, June, July period is lean all over India, but traffic has continued declining instead of picking-up in late August and September as it does every year. Clearly the "FUD Factor" (Fear, Uncertainty, Doubt) of the global economic melt-down is having its effect on the psyche of India Inc.

Bangalore’s air traffic, the third highest in the country, was until a few months ago the envy of some other larger cities. BIA opened in May 24, taking over 10.1 million annual passenger traffic from the HAL airport. In fact, the traffic growth was so large and unforeseen – from 4 million in 2005 to over 10.1 million in FY 2007 – that BIAL had to insert two unscheduled expansions into first phase of the project in 2006-07, a move that pushed the project cost from the original Rs 1,400 crore to Rs 2,500 crore.

That happily poised graph has changed its course downwards. Even as BIA completed 100 days in late August, the writing was on the wall. Peak hour traffic did not grow to match the capacity, though BIA handled 2.42 million passengers, on the wing of 30 per cent rise in international airlines and air freight carriers into the city.

From 170 flights per day and 340 air traffic movements (ATMs) when it launched, BIA will now end the Summer ‘08 season with 162 flights (324 ATMs) per day. Winter ‘08 flights would see a small 1.5 per cent gain with 165 flights (or 330 ATMs). According to the operator, “Although the domestic air traffic reflects a [fall] of 1.5 per cent, the overall positive growth is due to the increased international flight operations from Bangalore.”

This is in spite of adding six new international carriers since it began services - Dragon Air, Tiger Airways, Oman Air, Air Mauritius and most recently Kingfisher Airlines and Jet Airways. International flights, BIA said, have increased over 230 per cent year on year for the Winter season.

BIAL said the domestic UDF, once cleared, will be part of the airline ticket cost; the airlines will collect it while issuing tickets, as directed by the Directorate General of Civil Aviation. BIAL plans to set up counters to collect the fee by cash or credit card from those who have booked their tickets in advance but will be flying from the levy date.

UDF has become a double-edged sword for BIAL. They are facing the "Devil's Alternative". Imposition of UDF will have its impact on an already weak aviation scenario, and not imposing UDF, will have disastrous consequences on the finances of BIAL. I do not envy Mr. Brunner's seat at this moment, he has some very delicate balancing to do, and hard choices to make.

All I can offer is my support during these tough times.

SpiceJet today announced the appointment of Sanjay Aggarwal, as Chief Executive Officer (CEO) with immediate effect. Aggarwal takes over the position from Siddhanth Sharma. Prior to his current responsibilities in SpiceJet Aggarwal held the position of Chief Operating Officer and Chief Strategy Officer for Flight Options.

Previously Aggarwal had worked as senior director of Marriott International and had also been Manager of Financial Planning for the maintenance, reservations and internal consulting areas of US Airways.

Commenting on his appointment, Sanjay Aggarwal said, "I believe that SpiceJet is well positioned to grow rapidly as a low cost carrier, and I am delighted to have the opportunity to help the company achieve its potential."

Wilbur Ross, who led the recent $100 million cash infusion program into SpiceJet, added, "Of the many candidates, Sanjay was by far the most impressive. He is precisely the right person to lead the existing highly capable management team in turning SpiceJet around."

K.V. Subramanya and Anil Kumar Sastry at the Hindu report that the domestic passenger traffic at Bengaluru International Airport is down. Short-haul domestic air traffic has dropped drastically, and shifted away from the air to surface transport like buses, trains and cars. BIAL is suffering the double blow of a slowdown in the domestic aviation industry which has forced increases in air fares. The new airport's remote location and 1 hour commute only adds to its woes.

The full report :

Passenger traffic, particularly in the domestic sector, at the Bengaluru International Airport (BIA) has come down since June.

In the initial days after the opening of the airport, BIA handled around 172 flights a day — international as well as domestic. However, the airport now handles only 162 flights while the domestic traffic has come down by 1.5 per cent, according to sources at the BIA.

The passenger traffic did not pick up at the BIA during late August and September as was seen in other airports in the country. The overall annual growth of passenger volume in the country had dropped by three per cent, the sources said.

However, the trend was not unusual, as according to the global trend, September was a lean season for the aviation industry, the sources claimed. Although there had not been any flight suspensions to or from the BIA because of the fall in traffic volume, there had been some ad hoc or unscheduled cancellations of flights in the past two months due to “operational reasons.”

However, during the winter 2008 schedule, the number of flights would go up to 165 a day, the sources added.

Meanwhile, major airlines have been witnessing decreased load factor on domestic routes, particularly short-haul ones.

While the average load factor had been around 70 per cent, on some routes it was as low as 20 per cent, said a senior official of a private airline. While two private airlines used to operate two flights a day each to Mangalore, they were likely to operate one each, after the flights registered just 20 per cent load factor.

Similar has been the case with many private carriers operating on short-haul routes, namely Hyderabad, Chennai, Coimbatore, Kochi and Thiruvananthapuram.

However, the overall positive growth at BIA, despite the fall in domestic air traffic, was due to the increased international flight operations from Bangalore, the sources explained.

In the last four and a half months, six new international air carriers had started operations in Bangalore: Dragon Air, Tiger Airways, Oman Air, Air Mauritius and most recently Indian carriers Kingfisher Airlines and Jet Airways. The total increase in international flights was around 230 per cent as compared to last year’s winter schedule, the sources said.

Beneficiaries

The reduction in number of passengers on short-haul flights has benefited bus operators and the Railways. The load factor on trunk routes had increased substantially since the opening of the BIA.

Anwar Hussain, Senior Divisional Commercial Manager, South Western Railway, Bangalore, said while important trains on trunk routes always used to run packed, the load factor on Shatabdi Express (Mysore-Bangalore-Chennai) had considerably increased. It used to be around 75 to 80 per cent earlier, he added. On the other hand, wait-list on trains on important routes had become lengthy, Mr. Hussain added.

The Karnataka State Road Transport Corporation (KSRTC) and RTCs of neighbouring States too introduced more buses connecting Bangalore with important destinations in their States. KSRTC Director (Operations) K.S. Rajkumar said the corporation recently signed inter-State agreements with its counterparts.

According to the Press Trust of India, German flag carrier Lufthansa, today said, it will act as a mentor to Indian state carrier Air India to become a member of Star Alliance, a global grouping of top airlines.

"Lufthansa is the mentor for Air India and we will work together to get the latter on board the Star Alliance," the German airlines' South Asia director Werner Heesen said here.

However, Heesen said his company had no plans at present for financial investments in India.

"Financial investments are not on the strategic map of Lufthansa for India," he said when asked about the airlines' plans for South Asia in the wake of the current aviation industry crisis.

He said Lufthansa currently operated 55 flights from seven Indian cities to three destinations in Germany--Berlin, Frankfurt and Munich.

All Lufthansa flights have nearly 60 per cent bookings from travellers of Indian origin, he said. "Indians form about two-thirds of the total passengers on our flights from Delhi, Mumbai, Chennai, Bangalore, Hyderabad, Kolkata and Pune," Heesen said.

So, Lufthansa was consciously planning its routes to suit Indian travellers. "Also, we are ensuring that Indians get to feel at home by including all types of Indian cuisine, Indian attendants speaking the languages of different regions and in-flight entertainment with local content," he added.

Press Trust of India reports that fair trade practices body Monopolies and Restrictive Trade Practices Commission (MRTPC), today, ordered a probe into the operational alliance formed between two leading private carriers, Jet Airways and Kingfisher Airlines.

According to highly placed sources, taking a suo moto cognisance based on media reports, the MRTPC ordered its investigative arm, Director General of Investigation and Registration (DGIR) to conduct a preliminary investigation.

In an order the MRTPC asked the DGIR to submit its report within 60 days effective today.

The order comes within days of Jet and Kingfisher announcing formation of an alliance for co-operation in several areas, including joint fuel management, common ground handling and cross-selling of flight inventories.

The alliance has bough together the two airlines which account for nearly 60 per cent of market share. It envisaged sharing of their network and resources to meet the challenge of aviation downturn.

While Jet had earlier acquired ailing Air Sahara, Kingfisher had taken over the crisis-ridden Deccan to emerge stronger till the rising costs and global meltdown hit them hard with each of the entity losing about Rs 10 crore a day.

Announcing the alliance, Jet Airways Chairman Naresh Goyal and Kingfisher Airlines chief Vijay Mallya had insisted the alliance had no equity involvement.

As per the alliance, the two airlines were also looking for code-sharing on both domestic and international flights, subject to DGCA approval, cross-utilisation of crew on similar aircraft types and reciprocity in Jet Privilege and King Club frequent flier programmes.

According to a Press Trust of India (PTI) report, the downturn in the aviation sector yesterday brought the differences among UPA ministers into full play on issues like the bailout for the beleaguered industry.

The Labour Ministry convened a tripartite meeting to discuss the sacking of 1,900 Jet Airways employees. “We will seek details of employment and inspect the work contracts of the employees to decide if action can be initiated against the airline,” said a Labour Ministry official from Mumbai. This decision was taken after Union Labour Minister Oscar Fernandes sought and got a report from the Chief Labour Commissioner on the Jet episode.

After yesterday’s meeting of the Union Cabinet a senior minister said that the government had little to do with the internal decision of an airline, and said that Jet Airways did not figure in the Cabinet discussions. But senior ministers differed publicly on the demand of airlines for official succour in the form of massive cuts in taxes and levies, primarily on jet fuel - blamed for the poor financial health of the companies.

Batting for concessions to the ailing sector, Civil Aviation Minister Praful Patel said that unless ministries work together and come out with solutions, there will be no relief. “As a politician, I would also not like anybody to lose jobs,” said Patel. Apparently irked by Patel's comments that he was disappointed that ministries were not cooperating, Petroleum Minister, Murli Deora hit back by saying that he had helped broker a deal between Jet and Indian Oil Corp for a 60-day fuel credit facility.

“But they have not kept the agreement,” said Deora, adding that Jet had defaulted on payment of Rs 259 crore on bills raised more than two-and-half months back. But Jet said that their payments were being made within the stipulated time. When asked about Patel's statement R S Pandey, Secretary, Petroleum said, "If there are demands for reduction in taxes, the issue is to be addressed by the Finance Ministry and the respective state governments.”

Deora separately criticised the timing of the decision - the middle of the festival season. “I do not approve of (the retrenchment) you just cannot do such a thing. This is not the right time to retrench people, particularly before Diwali,” said Deora.

Patel further informed that on a personal level he will try to talk to people and see how maximum number of people could be accommodated. But the airlines say they have to protect the employment of 11,000 permanent staff and in that context, the jobs of 2,000 temporary employees may have to foregone. The CPI(M)-affiliated trade union, Centre of Indian Trade Unions (CITU), registered a complaint with the Labour Commissioner's office in Mumbai regarding the layoffs, while the Aviation Industry Employees' Guild (AIEG) threatened to boycott the airline across all airports.

Jet Airways, which has struck an operational alliance with Kingfisher Airlines to cut costs, expects the lay-offs to result in savings of USD one million a month. ATF or jet fuel price, which account for a major chunk of airlines' operating costs, have been reduced twice in two months to Rs 56,447.80 per kilo litres (in Delhi) as of September 30, 2008. But Wolfgang Prock-Schauer, CEO, Jet Airways had said that despite the decrease in ATF prices, the prices remain around 50 per cent higher compared to a year ago.

Despite the deregulation of pricing of ATF on April 1, 2001 the control of supply by government owned oil companies, and ridiculous taxes, ensure that ATF in India is about 170% of the international price. Over the base price, customs duty of 5%, excise duty at 8%, education cess of 3%, and state sales tax at an average of 25% is levied. State taxes and excise duty amounts for about one-third of the price of ATF.

Praful Patel justified the demand for reduction in taxes on fuel by saying that the airline industry was a job creator like any other and needed attention. The government is awaiting the report of an expert group, which is looking into the demand of the industry for a Rs 4,750 crore ($1 billion) bailout package.

In a major move to reducing emissions and traffic, while increasing reliability and purity, Indian Oil, commissioned its 36 km long pipeline from its bulk storage terminal at Devanagonthi to Bengaluru International Airport at Devanahalli, where its joint venture with Skytanking GmbH of Germany, IndianOil Skytanking Ltd. (IOSL), is the primary Aviation Turbine Fuel (ATF) vendor.

The underground pipeline costing Rs 330 million, has a capacity to pump over 156,000 litres of ATF per hour which can be further scaled up to over 220,000 litres in the second phase.

The pipeline will replace the over 80 tanker trips up and down, drastically reducing the traffic congestion and the resultant pollution being pumped in to the air around Bangalore. Safety at the airport will also increase, as previously, the tankers would be lined up on the road in front of the upcoming cargo village.

The new pipeline will ensure the supply of uninterrupted and pollutant-free ATF to the Bangalore International Airport meeting international quality standards, and will avoid supply issues, during bad weather, strikes, and other disruptions.

The new pipeline crosses over 18 major roads, four water courses and five highways enroute and has been designed and executed conforming to global standards like ASME and OSD. The entire pipeline system is also protected with dual fusion bonded epoxy (DFBE) coating to protect it from external corrosion.

The the whole supply process is monitored using Supervisory Control and Data Acquisition system (SCADA) with various fail-safe, safety and security mechanisms.

IOSL handles about 160 daily re-fuellings of both international and domestic airlines at Bengaluru International Airport.

Kudos to both IOSL and BIAL for their progressive approach.

SpiceJet announced a drop in its fares on advance purchases of tickets. Apart from a reduction in basic fare for flights booked 10 to 15 days in advance, SpiceJet will also remove the congestion surcharge of Rs 150. The airline is trying to help passengers who plan their holidays and business trips in advance.

Announcing the cut, Samyukth Sridharan, Chief Commercial Officer, SpiceJet Limited said, “Fares on our network will be now significantly lower on advance purchase. We have removed the congestion charge completely. With improved infrastructure available, we do not face this problem anymore and our 'On Time' Performance across the network is also on an all time high at 88 per cent. Since there is no congestion impacting our service, we want to pass on the benefit to the customers."

He also announced, “In addition to this we also launch our Special Spicy fares which will ensure our consumers have up to 15 per cent saving on advance purchases."

“We are also re-launching our services to Jaipur from October 26, 2008. We have seen very good bookings on our newly introduced Mumbai – Jaipur sector. We also offer Mumbai – Goa on a more convenient timing and our flight to Srinagar from Mumbai will now also connect Jammu along with Delhi and help more traffic into the region,” he concluded.

In a complete U turn, Jet Airways Chairman, Mr. Naresh Goyal held a sentimental and emotional press conference and announced a reinstatement of all sacked employees.

In less than 24 hours claiming all staff are family, Mr. Goyal stressed it was an economic decision to lay off, but an emotional one to reinstate. Keeping in view, the criticism by all political parties, he took special pains to stress that this decision was not due to any political pressure.

Signs of pressure appeared when Petroleum minister Mr. Murli Deora, rebuffed the requests of the Civil Aviation Minister Mr. Praful Patel to help bail out the airlines with lower fuel prices. Both Mr. Deora and Mr. Patel are from Mumbai, the home of Jet Airways, and the corporate head quarters of alliance partner Kingfisher Airlines.

Mr. Goyal is known to be extremely concious of his public image and needs a sympathetic ear from government to function well. The sacking of the employees would save only about Rs. 5 million.

Given the extreme negative reaction by the public at large and the politicians in particular, it appears that Mr. Goyal has very correctly decided that the negatives far outweighed any potential savings.

The signal to India Inc., is simple. No matter how bad the economy, large scale sacking of employees is politically very incorrect.

The blood letting in the Indian aviation industry shows no signs of stopping.

After the much publicised sacking of 850 cabin crew early on October 15, Jet Airways announced the retrenchment of another 1,050 staff, which also includes flight crews. News reports indicate that another 1,000 jobs will be cut by the end of this year.

That will bring down the workforce at Jet by 23% from 13,000 to 10,000.

The retrenchments are not limited to people. Jet is returning 7 aircraft to its lessors, and its alliance partner Kingfisher is doing the same. Readers will recall, Kingfisher laid off about 300 employees less than a month ago. Observing the reaction to the Jet layoffs, they have decided to defer their layoffs for some time.

Private airlines really have no choice. Unlike, the over-bloated NACIL (Air India and Indian) who have a sugar daddy called the Government of India, whom they have already approached for another bailout of Rs. 2,000 Crore ($440 million), private airlines are at the mercy of the market. The situation at NACIL is thanks to the constant interference by all the politicians who treat the airline as their personal fiefdom to suck benefits and dispense patronage.

The $ 6 billion Indian aviation industry is facing losses of over 33% this year. An over greedy populist fuel policy of the Union and State Governments, and their controlled Oil Marketing Companies (OMCs), ensure that Indian airlines pay double the price for fuel when compared to the international market. (Read my previous article "Fuel Populism killing Indian aviation").

Not that any of the airlines are themselves are blameless. Following a herd mentality, they rushed in and expanded blindly when oil prices were low. Following a ridiculous policy of trying to compete with the Indian Railways, they had absolutely no contingency plans when they were hit by the "Perfect Storm", of diminishing demand and rising fuel prices.

Governments who are facing elections next year, have resorted to their age old tactics of populism on a grand scale. Thanks to the pay commission increase and farm loan waiver, just two of the many multi-billion dollar expenditure sprees, meant to "help get the votes", the Finance Ministry has no manoeuvring room to accommodate the desperate and logical demands of both airlines and the Ministry of Civil Aviation to reduce the tax rates to a reasonable rate of 4%, uniformly across the nation.

The global meltdown of stock markets have not spared India either, forcing the Government to deploy what few resources are left to rescue the nation. Neither the public, nor the government, has the time, resources, or inclination to bail out the airlines.

The optimistic predictions by both Boeing and Airbus about the tremendous growth in India driving demand for their aircraft has hit ground reality with a thud. Officials of both manufacturers, are reportedly "concerned" about the near term outlook.

Airport operators across India, are facing a crisis. The need to recoup their investments and for that they need to fees. Airlines are major customers and cannot be touched. So the axe falls on you and me, the individual passenger to shell out "User Development Fee", which further increases travel costs and drives passengers from the air to the trains, buses and cars.

All I can say is, "Stay Tuned, the worst is yet to come".

Dr. Vijay Mallya and Mr. Naresh Goyal have just announced an alliance between Kingfisher Airlines and Jet Airways.

They announced only rough contours using very broad strokes. Details are awaited. At this point, no equity investment will be made.

The alliance will include synergies in routes, sharing ground handling and infrastructure, cross-selling of seats, code shares, crews, and frequent flier programs.

A coordination panel, comprising officers of the two airlines, has been formed, to work out the details, towards the goals of the alliance.

CNBC-TV18 reports that Kingfisher has suspended its US operations.

Both airlines are still in the midst of their own mergers. Jet of Air Sahara (now Jet Lite), and Kingfisher of Air Deccan (now Kingfisher Red).

There are concerns of cartelisation given these two airlines control over 60% market share, and the lack of any aviation regulator in India.

Only time will tell. But for now, the advantage is clearly with Jet Airways.

**UPDATE**
Press release received at 23:45 IST October 13, 2008

Jet Airways and Kingfisher Airlines are pleased to announce an agreement to the formation of an alliance of wide-ranging proportions that will help both carriers to significantly rationalize and reduce costs and provide improved standards of service and a wider choice of air travel options to consumers with immediate effect. The two airlines will be able to rationalize their operations and derive the maximum synergies and thereby offer the best possible fares for the benefit of the consumers. However, there will not be any mutual equity investments between the two companies.

The downturn in the world economy has severely impacted the world aviation industry. The rapid increases in and the volatility in the crude oil prices and that of aviation turbine fuel and the slowdown in economic activity has resulted in a decline in air travel both on international and domestic segments of the air travel market.

Worldwide the airline industry has sought to tackle the difficult environment through alliances and joint provision of the best possible standards of service and connectivity to the travelling public by achieving cost and operational synergies and providing extensive connectivity and by offering economical fares. Civil aviation is the keystone of infrastructure development and a key priority of the Indian Government for the development of the economy. The proposed alliance between Jet Airways and Kingfisher is in the national interest by incorporating the international best practice to strengthen the Indian aviation industry.

The alliance will also enable a stabilization of the Indian aviation industry in the larger public interest for the benefit of the customer during the current downturn of the world economies.

The Scope of the alliance will include the following areas:

• Code-shares on both domestic and international flights subject to DGCA approval.
• Interline/Special Prorate agreements to leverage the joint network deploying 189 aircraft offering 927 domestic and 82 International flights daily.
• Joint fuel management to reduce fuel expenses.
• Common ground handling of the highest quality.
• Cross selling of flight inventories using the common Global Distribution system platform.
• Joint Network rationalization and synergies.
• Cross utilization of crew on similar aircraft types and commonality of training as also of the technical resources, subject to DGCA approval.
• Reciprocity in Jet Privilege and King Club frequent flier programmes.

In the current environment of high costs and declining growth this alliance has potential for substantial savings resulting in a benefit to the consumer.

Commenting upon this path breaking alliance, Naresh Goyal, Chairman of Jet Airways said:
“All over the world Airlines have formed alliances in order to become more efficient, improve revenues and provide seamless travel opportunities for their customers. India has witnessed tremendous growth in the past which has slowed down considerably. In this environment the Jet Airways – Kingfisher alliance represents a completely new industrial model for aviation in India which would be based on an unprecedented depth of cooperation between the two companies. There will be huge cost savings and revenue enhancement opportunities arising from this alliance.”

Dr. Vijay Mallya, Chairman, Kingfisher Airlines said:
“This is a quantum leap forward in the evolution of Indian aviation which will benefit customers by delivering the most comprehensive integration in the industry. Both Jet and Kingfisher fully realize that better understanding of supply and demand in this capital and labour intensive industry is the key to profitability and enhancement of shareholder value. I look forward to this alliance delivering superior quality, cost savings, flexibility and enhanced consumer value which is the hallmark of all successful alliances.”

While maintaining their separate legal entities and brand entities both Jet and Kingfisher will examine co-branding opportunities and have formed a core committee of senior management personnel from both companies who will drive the various identified initiatives forward with immediate effect under the overall direction of Mr. Naresh Goyal and Dr. Vijay Mallya.

Signed

NARESH GOYAL
Chairman
Jet Airways (India) Limited

VIJAY MALLYA
Chairman & CEO
Kingfisher Airlines Limited