Driven by the whopping discounts offered by airlines, domestic passenger traffic in India, increased very marginally, to 3.336 million in February 2009, up from 3.326 million in January.

Kingfisher Airlines retained the top spot as India's largest domestic carrier for the month with 904,000 passengers representing a 27% market share. Jet group which includes the low cost subsidiary Jet Lite had a combined traffic of 846,000 or 25% market share.


IndiGo jumped to the top spot with passenger load factors of 82 per cent.


Airlines are expecting better results in March, the fiscal year end, and in April-May-June, the traditional summer holiday travel period. The massive fare discounts offered in February have also resulted in sales for travel during the holiday period.

Qantas announced plans for its new Indian services via Singapore, which will replace the discontinued direct services between the two countries.

From June 2, flight QF51, will fly to Mumbai via Singapore on Tuesdays, Thursdays and Saturdays. The return flight QF52 to Singapore will operate on Wednesdays, Fridays and Sundays.

Qantas will use its Singapore hub to offer passengers connections to seven Australian cities. Adelaide, Brisbane, Melbourne, Perth and Sydney flights will be on Qantas, Cairns and Darwin will be on Qantas' low-cost subsidiary Jetstar.

In addition to its Mumbai services, Qantas has a code-share arrangement on Jet Airways flights between Delhi and Mumbai to Singapore.

Singapore Airlines (SIA) on the most profitable airlines in the world, announced today further route adjustments as part of the 11 per cent reduction of capacity from April 2009 to March 2010.

While Bangalore remains unaffected, for now, most other gateways of New Delhi, Mumbai, Chennai, Kolkata, Hyderabad, and Ahmedabad have already been or are being affected by this latest announcement.

I cannot help but compare the withdrawal of services by most international carriers to the massive ramp-up by Emirates and other middle-east airlines in India.

When I visited the airport yesterday, during discussions with various friends, I was informed that the two of the three Emirates flights were going full, and the third was also respectable.

A number of changes have already been announced and some effected, including the withdrawal of service to Amritsar (from Feb 09) and Vancouver (from Apr 09), lower frequency of flights to India, as well as a cutback on the non-stop flights between Singapore and the USA.

A whopping 17 aircraft will be decommissioned from the operating fleet, up from an earlier forecast of four aircraft to be phased out.

The new changes shown below will be in effect from March 29 to October 24, unless specified otherwise:

Europe

For the London route, one of the three daily flights will be replaced with a B777-300ER plane from end-March.

The change in aircraft from the B747-400 will result in a seat count reduction of 97, a minus 7.5 per cent difference a day.

Flights to Manchester will be at three times weekly from May, down from the present five times weekly.

Australia

The frequency of service to Sydney will be reduced from four to three times daily till July.

North Asia

Services to Seoul will be reduced to twice-daily, from its already-reduced schedule of 17 times weekly. One flight will continue on to San Francisco.

Japan, the Singapore-Bangkok-Tokyo service will reduce from six to five flights per week.

China, flights to Beijing will decrease from 21 to 17 weekly. Guangzhou and Nanjing services will reduce to five and two per week respectively.

Flights to Hong Kong will be reduced from a weekly 42 to 35.

West Asia

Aside from already announced changes affecting Indian gateways (see details below), Colombo and Male will each be served by five flights per week, down from seven.

Southeast Asia

In the region, the Jakarta route will see a reduction from 56 to 49 a week, while Bangkok flights will be cut from 41 to 33 per week.

Other routes, such as Brisbane, Perth, Fukuoka, Nagoya and Rome will now be operated with variable frequencies depending on the season.

---

Flights to India

Hyderabad-Singapore services, SQ439 and SQ438, will be reduced from four to three times weekly, with the suspension of the Saturday service from February 21.

SQ405 and SQ406, between New Delhi and Singapore, will be reduced from a six times weekly service, to five times weekly service. Changes will apply from March 10 to 24, as flights on Tuesdays during that period will be suspended.

For Mumbai and Singapore, services SQ421 and SQ422 will be progressively reduced from five to four times weekly services, starting February 27. Flights on Fridays will be suspended.

Morning flights to Chennai will be cut.

The Indian Ministry of Civil Aviation reported that the domestic airline passenger traffic in January 2009 has remained virtually unchanged at 3.326 million when compared to 3.323 million in December 2008.

Kingfisher took the top spot from Jet group (Jet Airways and JetLite), with 0.919 million passengers and 28% market share.

The steep fare cuts and sales announced by airlines have not provided the required jump in passenger load factors, which resulted in the airlines withdrawing the special fares, prompting rumours of cartelisation by the government.

Indigo remained the leader amongst nation-wide carriers in passenger load factors at 72.2%, while regional specialist Paramount kept the overall top spot at a whopping 83.1%. It will be interesting to understand how load factors are calculated.


The images are my copyright but may be used freely, with a credit link to Bangalore Aviation.

2008 was a torrid year for domestic airlines in India, as recently released figures by the Ministry of Civil Aviation (MoCA) show.

Domestic passenger traffic for the year 2008 fell 5% from 42.58 million to 40.77 million (Fig. 1), driven by the increase in fuel costs, and the massive hikes in air fares, which are yet to fully retreat, and capacity reductions by the airlines.


The Low Cost Carriers (LCCs) Indigo, SpiceJet, and JetLite, improved their market shares at the expense of Full Service Carriers (FCCs) Air India, Jet Airways, and Kingfisher Airlines. IndiGo is the big winner this year with a four per cent market share gain. Air India (the former Indian Airlines), gave up a big three per cent share. (Fig. 2)

The notable exception is Go Air (now called No Go Air due to its numerous flight cancellations), and the former Air Deccan, now christened Kingfisher Red after their acquisition. Kingfisher Red lost five per cent market share, while Kingfisher Airlines gained only three per cent, resulting in an overall loss of two per cent market share to competitors. Clearly the strategy at Kingfisher is not working.


While most airlines and airline groups lost in actual passenger numbers, LCCs IndiGo, SpiceJet, JetLite (the former Air Sahara now a subsidiary of Jet Airways), and Paramount, gained passengers. (Fig. 3).

The capacity swapping at Kingfisher group is clearly visible, and when performance of both Kingfisher Airlines and Kingfisher Red is combined, actual passenger numbers went down 10.5 per cent, from 12.56 million to 11.25 million.


The first two quarters of 2008, provided no clue to the excess capacity in the Indian airline industry. The "perfect storm" of increased fuel prices and reduced economic activity started rearing its ugly head towards the end of Q2 (April, May, June), and kicked the industry in it's teeth in Q3, with a mind numbing 25 per cent drop in traffic. (Fig. 4). Q4 has provided some seasonal relief, but Q1 of 2009 will see numbers dropping back again.


With the exception of Paramount, which has a small niche regional market, all the airlines saw massive drops in passengers in Q3. (Fig. 5). Most airlines staged a recovery in Q4, but the surprise is Jet Airways. It's passenger numbers tanked almost 20 per cent in Q3 and continued the downfall by another 15 per cent in Q4.


The market share of LCCs followed the increase in air fares, as passengers shifted from the FSCs. SpiceJet share in Q3 reflected its financial problems, prior to the Ross bailout. (Fig. 6)

It is an ignominious performance that the pioneer in the air travel bubble, Air Deccan (now Kingfisher Red) has lost over six per cent market share over the year. Clearly many of the "first time flier" passengers have chosen not to repeat, either returning back to trains and buses, or moving to other carriers like IndiGo and SpiceJet.


The data highlights the price sensitive nature of the Indian traveller. IndiGo appears to have a winning formula with its low prices and efficient service. Fancy gimmicks do not work. At a time of economic slowdown, the FSCs have to get their act together quickly. By holding fuel surcharges to unjustifiably high levels, they are surrendering ground to the LCCs and surface transport.

The recently announced results by The International Air Transport Association (IATA), is nothing short of shocking.

International air cargo is down by a whopping 13.5 per cent in November when compared to November 2007, and passenger growth is down by 4.6 per cent.

Graph legend
RPK - Revenue Passenger Kilometres (sales)
ASK - Available Seat Kilometres (capacity)
FTK - Freight Ton Kilometres (sales)
ATK - Available Ton Kilometres (capacity)


Even for year to date comparisons January to November between 2008 and 2007, global air cargo is down 2.2 per cent


Globally air cargo transports about 35 per cent to 40 per cent of global trade, by value. The negative growth in air cargo clearly shows the rapid fall in global trade, and the broadening impact of the deepening economic slowdown.

Even the middle east, the region showing consistent growth, slipped in to negative territory at -1.6 per cent. The largest air freight zone, Asia Pacific, which contributes 44.6 per cent to global air freight, contracted by the largest -16.90 per cent. Capacity cuts of 1 per cent in passenger and 3.7 per cent in cargo, could not keep up with the rapid declines.

India
As per data from the Airports Authority of India, available till October 2008; India year-to-date passenger performance is significantly worse than the rest of Asia Pacific and global performance. Passenger growth is down to -3.4 per cent vs. -0.8 per cent (Asia Pacific) and +2.2 per cent global.

However on the freight front, India has a Y-T-D growth of 4.2 per cent based on actual tonnage, compared to -4.7 per cent in Asia Pacific and -2.2 per cent globally.


Bangalore
For some unexplainable reason, Bangalore's performance is way below the national standard, at -14.8 per cent and -5.3 per cent for monthly passenger and freight performance, and -8 per cent and -7 per cent for year to date passenger and freight performance.

Highlights of the IATA report :

International Passenger Traffic

• The November passenger decline of 4.6% is a considerable worsening from both the 1.3% demand contraction in October and the 2.9% fall in September.
• Asia-Pacific carriers face the most difficult operating environment with a 9.7% decline in November, following a 6.1% contraction in October. The region also had the most aggressive capacity cuts at -5.1%. While Chinese domestic traffic rebounded after the Olympics, travel to and from international markets continues to decline, reflecting the weakness in both global trade and consumer confidence.
• North American carriers saw international traffic decline by 4.8% - the second largest drop among the regions. Until August, the region’s carriers had been shifting capacity to international markets. With the near collapse of the investment banking sector and consequent reductions in business travel, North Atlantic travel slumped. Carriers have started to cut international capacity with a 0.8% drop in November (following 0.4% growth in October)
• European carriers saw international traffic drop by 3.4% as all the region’s major markets (intra-Europe, North Atlantic, and Asia) slumped.
• Smaller emerging markets fared better. African carriers saw traffic decline by 1.6%. This is a considerable improvement from the 12.9% drop in October, resulting from stronger intra-African traffic. Middle Eastern carriers saw traffic increase by 5.6%. This is up from 3.5% growth in October, but represents a step-change from the double-digit expansion that characterized growth prior to the current financial crisis. Latin American carriers saw a slight decline in growth to 3.3% (compared to 4.5% growth in October), buoyed by the region’s positive, albeit slower, economic growth.

International Freight Traffic

• Asia-Pacific carriers (representing 44.6% of global freight) saw freight traffic fall by 16.9% in November - the largest decline of any region. As freight accounts for a larger percentage of revenues for the Asia-Pacific carriers, fourth quarter profits for the region’s carriers will be disproportionately (and negatively) impacted by the downturn in the global air freight market.
• Double-digit freight declines were also experienced by Latin American carriers (-15.7%), North American carriers (-14.4%) and European carriers (-11.0%). Freight traffic for Middle Eastern carriers turned negative (-1.6%), following 1.0% growth in October. African carriers, while being the only region posting freight growth (2.2%), saw a decline from the 3.0% growth posted in October. Plummeting business confidence and the continuing turmoil in financial markets indicates that the worsening trend will be continued in December.

Giovanni Bisignani, IATA’s Director General and CEO said

“The industry is now shrinking by all measures. The 1.0% capacity cut in international passenger markets in November could not keep pace with the 4.6% fall in passenger demand. We can expect deep losses in the fourth quarter,”

“With no end in sight for the worsening global economy, the 2008 gloom will carry over into the new year. Relief in the oil price has been outstripped by the falls in demand and capacity cuts are not keeping pace. The industry is back in intensive care. Improving efficiency everywhere will be theme for 2009,”

While the end to the global economic slowdown is still much further away than expected, the freight performance in India, shows us, the Indian economy is still performing well. We have to defeat the FUD Factor (Fear Uncertainty Doubt) that is in our minds.

Following the announcement by alliance partner, Kingfisher, Jet Airways, announced "substantial" reduction in basic fares on Economy class, on all its domestic flights with immediate effect.

The special fares are lowered by as much as 40%, but fuel surcharges remain high.

The economy class basic fares will be as low as Mumbai – Delhi INR 2,000; Mumbai – Kolkata INR 4,065; Bengaluru – Mumbai INR 1,220; and Mumbai – Ahmedabad INR 500.

The normal chestnuts of Terms and conditions apply.

For further information, customers can contact the airline call centre on (city code) 39893333, or the toll free number 1-800-22-55-22, or visit the Jet Airways website.

Similar fare reductions have been announced by Jet Airways' low cost subsidiary JetLite. For more information visit JetLite website.

As Mumbai recovers from the dastardly terror attacks, all major airports across India, especially those in the western region, have been put on ultra high alert and extra vigil has been mounted.

Image Courtesy FT.com
Extra surveillance has been mounted, with additional Central Industrial Security Force (CISF) and police personnel being deployed to keep an eye not just around the terminals, but around the airport perimeters as well.

Sniffer dogs were being deployed in some airports to assist the checking of baggage and plainclothes security are deployed. Officials added, that sky-marshals were boarding planes flying on specifically identified routes, on a regular basis.

Mumbai's Chhatrapati Shivaji International Airport has been virtually locked down. The security commences at the main highway with vehicles being stopped and completely inspected, along with passengers and their documents, before being allowed to even enter, the airport premises.

Other major metro airports are also in a similar "enhanced inspection" mode.

Airlines, both domestic and international, are informing passengers to arrive at the airports at least one hour before the original check-in time for thorough inspection of their baggage and the vehicles in which they are coming.

Passengers have also been asked by the airlines to carry valid identification documents. I would advise carrying two pieces of identification, and please carry an OFFICIAL ID.

For flight information at Mumbai (Airport Code BOM) I recommend Flightstats

Status of various airlines

Domestic Airlines
Air India, Jet, JetLite, Kingfisher, IndiGo, SpiceJet, etc., are all mostly back to normal.

International Airlines
Almost all airlines schedules have returned back to normal today 28 November 2008. Some quotes from selected airlines' websites for your ready reference. However, I will advise you to please contact the airline for the latest information.

Lufthansa

Lufthansa will resume its flights to Mumbai today Friday, 28.11.2008 according to schedule.

Lufthansa passengers booked to and from Mumbai with a departure date until 01.12.2008 may change their booking to a different Lufthansa destination in India free of charge. Alternatively, the booking can be cancelled without additional costs.

Air France

Further to the situation in Mumbai, Air France has had to cancel the following flights on November 27th, 2008.
AF134 Paris CDG / Mumbai, departure initially planned at 10h30 Local time.
AF135 Mumbai / Paris CDG, departure initially planned at 02h40 Local time.

The flights on Friday November 28th will operate as usual. :
AF134 Paris CDG / Mumbai, departure initially planned at 10h30 Local time.
AF135 Mumbai / Paris CDG, departure initially planned at 02h40 Local time.

Then, AF135 on November 29th Mumbai / Paris CDG is postponed on November 30th at 00h55.( Flight number AF135A)

Emirates

Following the horrifying attacks in Mumbai in several locations across the city on 26th November 2008, Emirates' town, ticketing and finance offices, which are located in South Mumbai, will remain closed on 28th November.

Our contact centre (running on skeleton staff), airport office and cargo operations will function as normal.

Currently, our flights to and from Mumbai are operating as per schedule. We will continue to monitor the situation closely. The safety of our passengers and crew is of utmost importance.

Singapore Airlines

Singapore Airlines flights to and from Mumbai are operating normally at this time.

The Singapore Airlines' town office in Mumbai is closed. Reservations inquires are being supported by our Reservations Centre in Delhi, and ticketing issues will be managed at the airport. Customers may contact the Reservations Centre in Delhi via: 91-11-23356683 or 91-11-23356684.

Customers booked on flights are advised to monitor for news about flights on the Singapore Airlines website.

Singapore Airlines will waive all cancellation and change fees for customers with tickets to and from Mumbai on Singapore Airlines flights as follows:

• Valid for tickets issued prior to 27 November 2008 for travel up to and including 7 December 2008, on a Singapore Airlines flight to Mumbai;
• Customers may change the routing of their journey, defer the date of travel or cancel, without penalty, until 7 February 2009 in the same class;
• Any change of date or routing will be charged at the new fare for that journey less the fare for the journey paid to Mumbai, with no amendment fee (eg, if travel is deferred to a higher season, the seasonal fare difference will still apply);
• The same conditions apply for KrisFlyer redemption tickets.

British Airways

British Airways flights continue to operate to Mumbai. Customers may make changes to their travel plans as outlined below.

Customers who have bookings made before midnight on Wednesday 26 November 2008, for travel up to and including midnight on Wednesday 3 December 2008 may:

Rebook in same class and cabin as the original ticket for a different date to Mumbai.

or

Rebook to an alternative destination in India in the same class and cabin as the original booking at no additional cost to the customer.

If the same booking class is not available, the next lowest class may be booked within the same cabin.Customers will not be offered a refund unless their fare rules allow.Customers currently in Mumbai affected by the situation are advised to contact 1-800 102 FLYBA (1-800 102 35922)

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.

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

WINE PRICES IN BANGALORE HEADED INTO THE STRATOSPHERE !

You might be surprised at a wine article in my aviation blog, but wine is a subject close to my heart.

The convoluted alcoholic beverages policy in India, makes each state, akin to another country, each with their own cumbersome taxes and regulations. The recent collapse of the Doha round of trade talks was not the only failure last month. A trade war is growing between the three wine producing states in India, Maharashtra, Karnataka and Goa, and it is going to send prices of Indian wines up by 46% ~ 100%, in Karnataka. Unfortunately, unlike the world which has the World Trade Organisation, India has no mechanism for settling economic wars between states.

Bangaloreans, along with the rest of India, are increasingly taking to wine as their drink of choice. It is more healthy, low impact, goes great with food, and more fashionable. What ever the reason, the market is growing about 20% year on year. In 2007-8, about 56,225 cases of wine were sold in Karnataka, almost all of it in Bangalore. This does not include the Goan Port "Wines". As consumers' wine tastes evolve, they gravitate from the cheap and cheerful variety to the mid-range and higher quality.

Maharashtra is India's California; the leading producer of wines. About 18 "non-Karnataka", Indian wine producers, Sula, Indage, Reveilo, Nine Hills, Mandala Valley, Big Banyan, sell their wines in Karnataka. There are two wine producers in Karnataka, Grover and Naka, and about 27 foreign (Non-Indian) wine producers whose products are available in Bangalore.

(Click on image for a larger image)

A few years ago, the Government of Maharashtra imposed a special tax of 150% on wines “imported” into the state from outside Maharashtra. It was a purely political decision done at the behest of one of India's most influential politicians in India, who has, for long, been reportedly, the major player in the wine-grape farming and wine producing industry in Maharashtra. The 150% tax made non-Maharashtra wines more expensive in the state. The wine producers of Karnataka, found it hard to compete in Mumbai, the capital of Maharashtra, but more importantly, the economic capital of India.

There have been half-hearted attempts by the Karnataka Government to resolve this issue with their Maharashtra counter-parts. The lack of genuine desire, urgency, or sensibility, on both sides, expectedly, has not yielded positive results. While, I will be the first to say, the nasty actions of Maharashtra deserve a response, the recent actions of the Karnataka Government, are equally nasty. Two wrongs do not make a right.

Effective August 1, 2008, the Karnataka government started levying a tax, just as offensive, to the one in Maharashtra, on all wines of Indian origin “imported” into Karnataka. The new levy raises the import fee on wine from outside Karnataka from Rs. 10 to Rs. 300 per bulk litre, an increase of Rs 217.50 per bottle!!!! Add to this other levies and margins that will subsequently accrue, the final retail price to consumers will rise by approx Rs 250~280 per bottle.

55% of all wine sold in Karnataka is currently priced between Rs. 350 - Rs. 550 a bottle. The increase translates to a 46% - 100% increase in final price. Lower priced, entry level, wines like UB's Zinzi will see their prices go up over 100% from Rs. 250 to Rs. 500~530 per bottle. Dr. Mallya’s fledgling Indian wine business (Zinzi) will be hit hard, in his home town of Bangalore, since all his Indian wines are produced in Maharashtra.

(Click on image for a larger image)

The wines produced by Grover's and Naka in Karnataka, will be spared the tax. I wonder how long will they maintain their original price. Like any opportunistic business house, I am sure they will slip in a few price increases since their competition is more expensive by Rs. 250.

Another most unfortunate consequence: as the entry-level wines will rise 100% in prices, many prospective wine drinkers, who were just taking to wine, will decide wine is suddenly too rich for their blood, and give healthy wine-drinking a go-by, reverting back to high impact spirits.

Observing the antics of their fellow Governments in Maharashtra and Karnataka, the Government of Goa is now talking about similar "protection" for its wine producers and growers.

The market place, consumers and producers, determine usage. Government can implement rules of conduct (procedures) but no one, including the self-proclaimed smartest people in the world, often found working in government, can accurately predict a marketplace. The market place determines itself.

The majority of the wine producers in this country are going to take a hit – the emerging wine drinking segment will take a hit – the retailing industry will take a hit. Even the wine producers of Karnataka will be hit. To get around the new levy Maharashtra wine producers will set up wineries in Karnataka state. There is simply not enough wine-grape grown in Karnataka to meet the needs of the state. Existing farmers will be tempted away from their existing contracts with Grovers and Naka to supply the newcomers.

The only “good news” in this sorry saga ? Fearing the wrath of the WTO, the new Karnataka levy does not apply to foreign wines. With the new higher prices of the non-Karnataka wines, many of the Australian, Chilean, South African, Spanish, and Argentinian wines will now look quite attractive. This retrograde step is helping the foreign brands, while sticking a most cruel knife into the heart of the Indian wine business. How many wineries will close, and as a result farmers going bankrupt, as sales drop and mayhem prevails ?

This squabble, in many ways, reminds me of the days of the British Raj. While the Indian states are busy fighting each other, the winners are the foreign wines.

I wonder if Indian wine producers can go to the WTO and beg for protection from their own governments.

Thanks to Stanley Pinto for the inspiration and some of the data.

India, the world's largest democracy, has a sorry record in sound and bold economic administration. Populist measures abound, and nothing is sacred or immoral in the perpetual quest to obtain and then secure the "gaddi".

Fuel pricing in India is a prime example.

Officially, the "Administered Price Mechanism" was abolished in 2002, but today, the Indian government has a greater control on the fuel market and prices than ever before. Private operators have been driven out of the market, and only the Government owned companies survive.

Government have become addicted to their windfall fuel tax income. In the last 6 years, fuel tax collections have increased almost 250% to a staggering Rs. 170,000 Crores (Rs. 1.7 trillion or US$ 41 Billion).
Indian bureaucrats have learnt well from the Europeans and their "tax and spend" Keynesian economic models. Fuel taxes are greater than the cost of the fuel. In Bangalore, when we pay Rs. 57 for a litre of Petrol, Rs. 32 is taxes, only Rs. 25 is the cost of the actual fuel. Internationally, the cost High Speed Diesel ex-refinery (excluding taxes, duties, levies, etc), is marginally higher than Petrol. Yet, in India, Diesel costs 35% less than Petrol, thanks to lopsided tariffs and populist driven subsidies.

The one fuel that is truly free in pricing is Aviation Turbine Fuel (ATF). Thanks to the government induced haemorrhaging, and the traditional, but wrong view, of air travel being a luxury, oil companies are using deregulation on their favourite whipping boy -- ATF. In India, ATF costs double than prevailing international prices.

The results are plain to see. Despite being leaders in the global airline growth story, airlines in India, today, are bleeding, and bleeding bad. Losses in 2008-9 fiscal, are expected to cross $2 billion. Unable to sustain, in sheer desperation, airlines are hiking air fares, cutting back schedules, deferring aircraft deliveries, laying off staff, even considering importing their own fuel.......... in short, anything, to cut down losses.

This has resulted in air traffic crashing all across India. In Bangalore, the shining example of India's air traffic growth, from an annual growth rate of 33% year on year, for the first time since 2001, air traffic is actually falling to levels below that of the previous year.

Additionally, due to the remoteness of BIAL airport, regional air traffic is decimated, with air passengers switching to trains and buses instead. We might be tempted to say "so what". But we overlook the productivity aspects in the slower transit time of trains and buses. And in today's globally competitive economy, productivity matters.....a lot.

The operators of the Bengaluru International Airport, BIAL, now face an additional quandary. The airport terminal is reportedly, under capacity, and needs immediate expansion. Till now, their primary source of revenue, has been landing charges levied on flights. Thanks to a reduction in flight operations by the airlines, their income stream and cash flows have been reduced. So BIAL is increasingly forced to rely on passenger based User Development Fee (UDF), which has both the Government and passengers united in their opposition.

An imposition of UDF by BIAL on domestic passengers will only aggravate the already bad situation, and result in a further compression of air traffic. A downward spiral into a bottomless pit.

A possible solution requires bold decisions. Something both the political and administrative establishment in India are not known for.

• Government has to pledge at least 10% of its fuel taxes towards public transportation infrastructure. My friends in the auto industry will hate me for this suggestion, but our cities are choking in their own growth.
  
• ATF pricing should be reduced to international price parity. Ex-refinery, and taxes, union and state. Everyone should share the burden, including the airports and airlines. They must pass on the savings and re-invigorate the market, not use it to butress their bottom lines. The downstream impact of the aviation industry is far greater than the losses sustained by price reduction. We must not forget, every aircraft purchased by India, results in huge "offsets" i.e. mandatory exports of other goods and services.
  
• A moratorium on UDF for at least 12 months by all airports in India. Keep costs low. It will pinch, but the increase in flight operations will butress some of the revenue loss.
  
• Allow HAL airport to handle regional air traffic. By sticking to its hardline, BIAL will only continue to drive passengers away from the air, to trains and buses. A negative for all stake holders, including the citizens of Bangalore.
  
• Diverting part of the regional traffic to HAL will also give BIAL breathing room, and delay the need for investment in a costly second terminal, till global economic conditions improve.
• Forget a "temporary terminal". Passengers will not accept travelling 50km, paying a UDF, and then using a "tent".

This is just one view point. Other constructive suggestions are welcome via the comments section.

An official study by the Airports Authority of India assesses the annual passenger capacity of HAL Airport at 8 million passengers. 6.5 million domestic terminal and 1.5 million international terminal.

This is contrary to popular belief of 3.5 million passengers.

According to Mr. B.R. Sena, General Manager, AAI, Bangalore, the figure of 3.5 million is based on extremely old assessments. AAI has added the international terminal building, and increased the size of the existing domestic departure terminal since then.

Paramount Airways adds new routes to its network
Will enhance operations from 62 flights to 66 flights a day in the following weeks
By TBM Staff | Chennai

Madurai based, Paramount Airways is planning to enhance its operations from 62 flights a day to 66 flights a day in the following weeks. The new routes include Bangalore-Vishakapatnam (direct), Chennai-Vishakapatnam (direct) and Chennai-Tiruchipalli (daily). Paramount Airways will also double the frequency of its flights on the Chennai-Tiruvananthapuram route. The airline also plans to launch flights on Chennai-Pune route by July end or first week of August this year. It will induct two new Embraer aircraft in its fleet by end of next month, taking its fleet size to nine. The airline is expanding its route network at a time when most carriers are cutting routes to reduce losses on account of the rising cost of Aviation Turbine Fuel (ATF).

According to M Thiagarajan, Managing Director, Paramount Airways, they have not been affected due to the rising ATF prices, since they do not cater to the train passengers like most other low cost carriers. Paramount Airways, which caters to the top end of the market feels, that the price elasticity of their customers is better and an increase of Rs 500 or Rs 1,000 in the fares does not affect its target group. As per the Ministry of Civil Aviation (MoCA) statistics, Paramount Airways recorded the highest seat factor for May, 2008. The seat factor for Paramount was 81.2 per cent, while that for Air India (domestic), Jet Airways, Deccan and Kingfisher Airlines was recorded at 61.2 per cent, 73.9 per cent, 71.5 per cent and 70.1 per cent respectively.

Source : TravelBiz Monitor

The high prices of ATF (Aviation Turbine Fuel) have the airlines in India in a tizzy. They are cutting back services, begging for a reduction in fuel taxes, sub-leasing their aircraft, basically, anything, which will help stop their haemorrhaging losses.

Karnataka has one the highest prices of ATF in the country due to its high taxes, and faces pressure for their reduction. The Government of Karnataka has an ace in its sleeve that can help airlines flying in to Bangalore save some money. An ace, they are unaware of -- HAL airport.

Many times, weather conditions, ATC congestion or an airport closure, does not allow a flight to land immediately. International aviation safety rules require a flight to carry enough extra fuel to hover over the destination airport, for a certain amount of time, and then fly on, to an "alternate airport". We have seen flights being diverted from Mumbai to Ahmedabad, Delhi to Jaipur, and Bangalore to Chennai.

These diversions add about 30~45 minutes of flying time, which translates to about 2 tons of fuel for an single aisle jet like the Boeing 737 or Airbus 320. For shorter flights this means the flight carries double the actual fuel required.

In the air, weight equals money. Even if a flight does not go to the alternate airport, it still has to carry the extra fuel and its consequent weight. Weight that could be otherwise utilised for commercial gain like carrying cargo, or savings by not carrying it.

In the rush of closing HAL for commercial flights, the Ministry of Civil Aviation, seems to have overlooked the fact that HAL is still, a fully functioning airport for all non-commercial flights. i.e. private, charters, defence, and has all the needed infrastructure to act as an alternate airport. To top it off, HAL is just 7 minutes flight time from BIAL.

If HAL airport is permitted to act as an "alternate" airport to BIAL, flights can reduce their "alternate airport" fuel requirement. Today, they would be grateful for the savings this will realise.

Monday June 16 2008

Monica Jha

BANGALORE: Pilots from two airlines (one domestic and one international) have reportedly complained about problems in landing using instrument landing system (ILS) at the Bengaluru International Airport.

The runway (27 orientation, which is being used presently) at the new airport has a 3.4 degree glideslope for an ILS approach while the international standard for the same is 3 degree. The 3 degree glideslope (the angle of descend with respect to horizontal plane) is an acceptable descent profile world over and, therefore, auto pilots are designed for this profile. At BIA, which has a glideslope of more than 3 degrees, auto pilots do not work and pilots need to resort to manual landing, that can cause hard landing at times.

A three-degree glideslope gives a descent of approximately 318 feet per nautical mile (NM) while for a 3.4-degree glideslope, the descent would be about 370 feet per mile which means an aircraft would descend at a higher speed than recommended.

When an aircraft on ILS follows a 3 degree glideslope, passengers do not feel any discomfort but a 3.4 degree glideslope may result in a steep landing causing discomfort to passengers. The operator of BIA, Bangalore International Airport Limited (BIAL), apparently made a mistake in assessing the elevation of glide path location.

On a continuous descent, an aircraft must maintain a height of 50 feet at the threshold of a runway. Due to errors in calculating the elevation this height at BIA was found to be less than 50 feet. So, BIA had to increase the glideslope to maintain a height of 50 feet at the threshold of runway. However, the glideslope for runway when used in 09 orientation is 3 degrees.

To ratify the problem, BIA would need to relocate its glide path antenna further up, an expert from the aviation industry told this website's newspaper. "But, changing the position of glide path antenna at a live airport and a live runway is not possible as landing without ILS for a few days that would be necessitated for calibrations, would be extremely difficult. BIAL can do it when they change from 27 to 09 runway in November," he added.

Source : The New Indian Express

The managements, of both, Bengaluru International Airport Limited (BIAL), and, of their partners, have been going hammer and tongs for the last 18 days, correcting problems. Many of the "teething problems" have been addressed, the few others, hopefully, very soon.

However, the passenger terminal building (PTB) is not a "teething issue", and needs to be expanded on a war footing.

I am comparing the PTBs of Singapore's Changi Airport, Beijing Capital International Airport (BCIA), Rajiv Gandhi International Airport (RGIA), Hyderabad, and Bengaluru International Airport (BIAL), Bangalore.

The graph below shows a comparison in terms of terminal area and annual passenger capacity.

Airport terminals are becoming larger in terms of area per passenger. Case in point, Singapore Changi, consistently rated as the best airport in the world. Despite an acute shortage of land in tiny Singapore, Changi's new Terminal 3, is considerably bigger than the equally luxurious Terminal 2, despite having a lower rated capacity.

Click on the image to enlarge.

Delving in to the details, some startling truths come forth.

Singapore Changi Terminal 2 and Terminal 3, and Beijing Capital International Terminal 3 (which holds the record as the single largest terminal in the world), have a per daily passenger terminal area, THREE times larger than BIAL.

Even the low featured stripped down Changi Budget Terminal, which serves only the Low Cost Airlines (LCAs), and Hyderbad's Rajiv Gandhi International Airport, have a passenger-terminal area ratio 33% greater than BIAL.

Is it small wonder, why the BIAL airport terminal appears so crowded from the day it opened ?

Click on the image to enlarge.

A similar shortfall in capacity, when compared to international airports, is evident, in the baggage handling capacity, but that can get addressed during the expansion.

One reads wildly differing figures on BIAL's terminal capacity, annual passenger capacity claims range from 11 million to 15 million. The BIAL official website claims "The current airport infrastructure is designed to handle over 11 million passenger movements annually. Once the final master plan has been achieved, it can accommodate upto 50 million passenger movements annually".

Bangalore achieved 10.12 million passengers in the financial year Apr 2007 - March 2008. With an 11 million annual capacity, BIAL's terminal, allows for less than 10% expansion. In the past 3 years, 2005 - 2008, Bangalore has achieved 250% growth, in passenger traffic. Admittedly, there has been a contraction in the growth rate, due to the high fuel prices, and loss of passengers on the short haul flights to rail and road, but a 10% increase in passenger traffic is expected in the next 12 months.

The chart below shows the passenger traffic over the last 2 years at Bangalore.

Click on the image to enlarge.

Using the data from the financial year Apr 2007-March 2008, I extrapolated the average number of passengers per domestic flight. As per BIAL, the maximum number of passengers per hour it can handle is 2,733. We also know, during peak hours, the maximum number of flights per hour is 30.

Modelling the peak hour traffic, at 30 domestic flights per hour, using last year's average passengers per flight, and BIAL terminal's peak capacity of 2,733 passengers, a startling figure emerges.

Click on the image to enlarge.

BIAL will be at 90% and above capacity for 11 of the 12 months in the year, and at 95% for the year as a whole. For 4 months, BIAL terminal is close to 100% of capacity.

Running so close to capacity will work only if the situation runs perfectly like a Swiss watch, and we know that is not the case in India. It also does not allow for any any future expansion, a situation, that is equally unpalatable to BIAL as it is to many of us.

I am sure, the BIAL consortium wants an airport that promotes Bangalore's progress, not impede it.

The expansion of the Passenger Terminal Building has to be taken up on a war footing.

All the images are my copyright.

Govt may not implement new ground-handling policy
BS Reporter / New Delhi June 05, 2008

The recent dispute between the Bengaluru International Airport Limited (BIAL) and Indian carriers may make the government go back on its decision to implement the new ground-handling policy next year.

According to sources in the civil aviation ministry, Bengaluru International Airport Limited (BIAL) has said that no domestic airline with a market share of below 25 per cent will be allowed to do its own ground-handling at the airport. This means that none of the Indian carriers will qualify for ground-handling. Because, even Jet Airways, the largest airline in terms of passenger numbers, commands a market share of only 21 per cent as per April 2008 figures.

BIAL has reportedly taken this stand despite the fact that the government had recently decided to allow domestic carriers to do their own ground-handling till the end of this year.

The BIAL issue was brought up today by Delhi-based low-cost carrier IndiGo, one of the airlines to be prevented by the airport authorities from ground-handling last week. According to civil aviation ministry sources, Director General of Civil Aviation (DGCA) Kanu Gohain shot off a letter to BIAL yesterday, insisting the airport has to adhere to the government policy of allowing airlines to do ground-handling. In today's meeting with airport executives, including BIAL representatives, Chawla made it clear all airlines would have to be allowed to carry on with their own ground-handling till the end of this year.

When asked, a BIAL executive said, "BIAL has always maintained that having at least two professional ground-handlers not only makes for a competitive environment in terms of service quality and price, but also has a direct impact on the airside safety and security. However, post the meeting with the ministry today, BIAL supports the decision taken."

Industry sources said that with airlines reacting strongly to the new ground-handling policy, the government might take a second look at implementing it from next year.

"The ministry will look at whether self-handling is more economical for airlines than getting the same job done by external agencies. If yes, it might work towards letting the old policy of allowing airlines to do their own ground-handling continue," said a ministry official.

Under the new ground-handling policy to be implemented across all airports in the country from January 1, 2009, the airport operator or a joint venture company, subsidiaries of Air India or Indian Airlines, or their joint ventures, or any other ground-handling service provider selected through competitive bidding on a revenue-sharing basis will only be allowed to offer the services.

Airlines have been opposing the policy saying that outsourcing the work to an external agent will considerably increase their expenditure, pushing them further into the red.

As an interim measure to settle the problems of airport charges before the Airport Economic Regulatory Authority (AERA) is set up, the civil aviation ministry today announced the constitution of a 10-member committee comprising members of the Airports Authority of India (AAI), private airports and airlines. This was announced at a meeting held between the ministry, airline and airport executives to look into issues like price hike in aviation turbine fuel (ATF) and high airport charges among others.

"The body will look at what can be done to ease the problems faced by the airlines due to high airport charges," said a ministry official.

A picture is worth a thousand words. So I will let the images do the talking of my visit to BIAL on May 28, 2008.

While much is said about the passenger terminal building and the passenger experience, the support facilities are in a sorry shape, and partly explain the problems, plaguing the passenger terminal.

The cargo terminal building of Air India - Singapore Airport Terminal Services (AI-SATS) is an unmitigated disaster. How Customs authorities permitted a warehouse, that is at least 2 months away from even basic inhabitation, to function as a high security bonded warehouse, is a mystery.

What is even more sad, is that fact that SATS is renowned for it good service, and is a subsidiary of the world famous Singapore Airlines, of whom, I am still a very loyal customer. It appears they were pressed in to commencing operations before they were ready. This is an answer the BIAL management, and the Indian Customs Authorities in Bangalore should answer.

AI-SATS Cargo terminal serves the following airlines :

• Air India
• Indian Airlines
• Singapore Airlines
• Jet Airways
• Malaysian Airlines
• Emirates
• Etihad
• Dragon Air (subsidiary of Cathay Pacific)

The incomplete cargo village meant to house cargo and customs agents. Right now they are working by the roadside.

The building meant to house the airlines' staff. Right now they are having to "make do" in the BIAL administrative building (in white to the left).

Traffic congestion just to enter the passenger terminal building. Given the lack of self control of Bangalore driver, note the lack of any police or security guards to control the traffic, and signs to guide visitors to the correct lane. (The left lanes are meant for the 10 minute pick-up /drop-off).

Police, Army, and other government vehicles "hogging" the parking space in the pick-up / drop-off lanes, adding to the congestion. Of course, the 10 minute rule does not apply to them, only us poor souls who actually pay for using the airport.

A temporary shed, serving as the airport staff canteen, opposite the BIAL office, about 500 meters west of the Passenger Terminal Building. I have said before, if we do not ensure the comfort, of those who ensure our comfort and safety, we are heading for a systemic failure.

The narrow service road leading from the passenger terminal building to all the service and auxiliary buildings (BIAL administrative offices, airline offices, flight kitchens, cargo terminal buildings (CTBs), fuel farm). It was completely choked. It took me 30 minutes to travel the 2 km.

In the absence of any public toilet facilities in the auxiliary buildings, employees and workers at the airport, have to "make do", with an Indian touch to the International airport.

The narrow service road is completely jammed. It took me about 30 minutes to travel 2 km from the PTB to the CTB. There is no alternate road. I saw works of ground handling agents AI-SATS, getting off their shuttle bus, and running the 1 km to the terminal, in order to report to work on time. This narrow service road cannot handle the all vehicles. It is having unintended consequences on passenger operations since the flight kitchens, airport and airline offices are all on this service road.

Due to overloading of the cargo warehouse parking, and the lack of any policing or security control, vehicles are parked haphazardly, encroaching upon the already narrow service road.

Absolutely mayhem on the road with no policing or security to control the chaos.

Export cargo dumped outside the AI-SATS Cargo Terminal Building (CTB) in the rain.

More cargo just lying already soaked in the rain. Notice all the civil construction in progress, and the cargo and customs agents having to use boxes and cartons as tables for work.

Zinc sheets and flapping plastic making up a temporary wall, of what is supposed to be the AI-SATS Customs bonded "high security" warehouse. Customs is required to grant permission, only after a thorough inspection.

Workers on the roof of the AI-SATS warehouse. Welding was being done directly overhead the cargo. The roof is incomplete and this is the rainy season.

A temporary and naked heavy electrical outlet, with valuable cargo just dumped all around it. A major fire and safety risk.

Valuable export cargo, damaged by poor handling and storage before it is has even left our city.

Over 70% of the floor space of the AI-SATS warehouse is being used to store building construction materials. Welding is being done, right next to cargo. Due to sheer un-preparedness, over 100 tons of cargo is lying outside the warehouse on the tarmac waiting to be brought in. What cargo was brought in, is just haphazardly dumped all around, and is not traceable. Both the Menzies and AI-SATS warehouses are badly understaffed. Cargo agents, and even airlines' managers were seen trying to help AI-SATS locate cargo to pacify irate importers and agents.

An high view of the choked service road. BIAL has blocked the entrance to the service road on the fuel farm side, without notice or explanation to any of the operators, adding to everyone's misery. Over 50 tons of export cargo in still on trucks, LCVs and lorries, waiting for the last 24 hours to enter the warehouse to unload cargo.

Another view of the choked service road. Observe the incomplete civil construction of the AI-SATS terminal.

Taking a cue from other statutory bodies like the Airports Authority of India (AAI), and Central Industrial Security Force (CISF), the Indian Customs authorities have demanded payment for their services rendered at the private operated airports like Bengaluru International Airport (BIA) and Rajiv Gandhi International Airport (RGIA).

Up till now, while AAI and CISF used to be paid for services like air traffic control and security services, even at AAI operated airports, Customs and Immigration were seen as a sovereign function, and no airport operator had to pay for it. But then, all airports in the country had been developed and/or operated by the state-owned AAI.

As per a news story by DNA of Sify, "The Central Board of Excise and Customs (CBEC) is seeking payment of salaries for its staff to be deployed at the new airport as well as expenses on fittings and fixtures, housing and transport for these people. As per existing policy, no airport operator is permitted to conduct certain operations (including security of the airport, customs and immigration) on its own so it has no choice but to approach the designated central agency for the purpose."

This demand poses an additional cost for both GMR and BIAL, the promoters of RGIA and BIA respective, and puts the Ministry of Civil Aviation in an embarrassing position. While the ministry has lodged a strong protest with the Finance Ministry, the operators at RGIA, are paying the demand "under protest". When BIA opens up, BIAL will also have no choice but to accept and pay.

I am in favour of this approach. For too long, we in India, have been used to getting services from the Government "gratis". We need to move to a lower tax regime, with a "payment for services", even for Governmental services. Customs have the right to demand their costs be re-imbursed, however, then, the airport operator should also be given the ability, to demand responsibility on the Customs authorities to follow rules of commerce and deliver the required services for payment received.

The rupee should cut both ways.

Part of this story was sourced from Sify.com and DNA Money