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.

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.

British Airways released it performance figures for January 2009. In the month, passenger capacity, measured in Available Seat Kilometres (ASKs), was 2.6 per cent below January 2008. Traffic, measured in Revenue Passenger Kilometres (RPKs), fell by 1.3 per cent. This resulted in a passenger load factor increase of 1 per cent, to 73.2 per cent.

Reflecting the deepening impact of the recession and cost cutting by passengers, premium traffic (first and business class) dropped 13.7 per cent compared to a 1.4 per cent rise in non-premium traffic. A direct barometer of industrial manufacturing ouput, cargo performance, measured in Freight Tonne Kilometres (FTKs), fell by 16.7 per cent, which should be a cause of concern to all of us, as even post 9/11, when global airline fleets were grounded, cargo output fell only 13.7 per cent. It appears global manufacturing has just stopped, because we consumers have stopped buying.

We have to fight the "FUD factor" (Fear Uncertainity, Doubt).

Also, British Airways has re-cast its financial performance and restated it performance for the 9 months ending December 31, 2008

• Operating profit of £89 million (2007: £744 million - restated) down 88 per cent
• Loss before tax of £70 million (2007: Profit £816 million - restated)
• Revenue £7,046 million (2007: £6,634 million - restated) up 6.2 per cent
• Passenger revenue at £6.2 billion was up 6.6 per cent
• Cargo revenue at £537 million up 18.8 per cent, before the recession kicked in
  
• Cargo performance, (measured in FTKs) down 1.7 per cent primarily due to effects in last quarter of 2008
  
• Passenger Capacity (measured in ASKs) up 0.2 per cent
• Passenger seat factor 78.4 per cent down 2.3 per cent
• Fuel costs £2,244 million up 48.4 per cent

Cash at the end of December was £1.6 billion, £278 million lower than at March 2008. Net debt was £2.2 billion, up £0.9 billion since the year end, £0.6 billion of this increase due to exchange.

British Airways has responded by adding more discounted fares to its World Offers sale for travel between January and September 2009 with reductions on a range of longhaul destinations including New York, Cape Town and Grand Cayman and shorthaul destinations including Paris, Venice, Milan, Vienna and Prague.

Statements from British Airways clearly indicate the airline is looking at the medium to long term.

The new Club World longhaul cabin has been fitted on 19 of 42 Boeing 777s in addition to all 57 of Boeing 747s. The fitments will be completed by the end of 2009.

For shorthaul passengers, Club Europe will be in a new configuration to guarantee a window or aisle seat from February 23, 2009, with the removal of the use of the middle seat.

Fitments of the new First class cabin will start later this year and will added to the pending Boeing 777-300s due for delivery in 2010.

The recent "hijack" incident involving Indigo airlines flight 6E344 from Goa to New Delhi, has created the furore all over India, and even on to the international stage.

I am glad, Jitendra Kumar Mohala, a 42-year-old chartered accountant, and son of a retired air commodore of the Indian Air Force, has been booked under sections 336 (endangering life and personal safety of others) and 506 (criminal intimidation) of the Indian Penal Code, as well as Suppression of Unlawful Act Against Safety Of Civil Aviation Act, 1982, which is non-bailable. Now let us hope the authorities throw the book at him.

In the last 15 days alone, there have been three other reported instances of passengers creating trouble on board an aircraft.

• January 14th. An Air India passenger, Valli Panikker (42) got so drunk on the flight that he started abusing and misbehaving with fellow passengers, and hit two cabin crew members on board a New York-Mumbai flight. He was handed over to Mumbai police after the plane landed. Penalty ? Rs. 1,200 fine. News report here.


• January 30th. A 72-year-old man, on a Chennai-Delhi flight, was completely drunk and started groping some women and tried to 'feel up' some of the stewardesses. Penalty ? He was de-planed. As per a police official at Chennai "As he was an aged man, the crew decided to not file a complaint against the man. We warned him not to repeat such activities and let him leave after some time." News report here.


• January 30th. A passenger, Prashant Imene, on board a Jet Airways London-Mumbai flight, molested a woman co-passenger, assaulted the cabin crew and hurled cuss words at them, threatened to throw his passport out of the window (I wonder how, at 30,000ft), tore his boarding pass, threw water on a flight attendant's face and hit an elderly passenger with a spoon. He was not drunk. Penalty ? The police booked him for outraging the modesty of a woman, threatening and assaulting. He was produced in court on January 31st. Sentence unknown. News report here.


• February 1st. Jitendra Kumar Mohala, 42, passenger on board Indigo 6E 344 misbehaved with an stewardess over some issue and threatened her, saying that he was armed. He said he had two accomplices on the board and they would hijack the plane. He also said that he was official of the Director General of Civil Aviation (DGCA) and will inspect the plane. Penalty ? Let us see what develops.
  

Outside this 15 day window,

• July 12, 2008, a drunk Kuwaiti national, Bilal Ahmed, 40, forced a Doha to Bangkok Qatar Airways flight. to make an emergency landing in Mumbai. Sources said his hands and feet had to be tied together to bring him under control. The Mumbai police meekly returned Bilal Ahmed to Doha on the very next Qatar Airways flight, instead of meting out any punishment.

Airlines, including those in India, hire attractive young ladies as customer service and cabin crew to inject glamour in to an otherwise tiresome travel experience. The Singapore Airlines' "Singapore Girl" is renowned globally. Virgin Airlines is considered "Still Red Hot" with its glamorous red uniformed female cabin crew, a theme followed by Kingfisher airlines in India. The crews of Jet, Indigo, SpiceJet, and some in Air India, are no less, in the glamour quotient.

Indian air crews, particularly, females, have to put up with troublesome passengers some who are over-aggressive, often hostile, many times drunk and lecherous, believing that the stewardess is their personal property to abuse, grope, and fondle.

In the land when 'Devi', the female goddess, is worshipped, this lack of respect for women in the air, is utterly disgusting.

It is not just passengers, just yesterday (February 3rd), in a most shocking incident, an Andhra Pradesh Home Guard attached to the Rajiv Gandhi International Airport, B Vinod Reddy, was arrested for eve-teasing some girl students and then beating up their male classmate when he attempted to intervene and get Reddy to stop. Reddy was finally arrested and charged under sections 323 (Voluntarily causing hurt) and 509 (Insult the modesty of a woman) of the Indian Penal Code, after the students went on a protest at the airport.

Despite India having the laws under the Indian Penal Code, and being a signatory to all United Nations' conventions and treaties covering civil aviation, recent incident indicate a pattern of not levying punishment.

Compare the minor penalties in India, to the penalties in the United Kingdom which mandates a penalty of £5,000 or 2 years’ imprisonment. In the United States, criminal penalties are a fine of up to US$ 11,000 or 20 years imprisonment, civil penalties aside.

India has to enforce its laws, and severely punish offenders, only then, will passengers learn to control their mouths, their hands, and their behaviour.

What also surprises me is the lack of complaints from the airlines or the crews. I refuse to accept that a stewardess is not disgusted to the point of making a complaint, after being groped, abused, or 'felt-up'. An airline looses a lot of money by making emergency landings, and looses passengers who have to put up with a horrible experience.

It is time for all of us to stand firm with a "zero tolerance" policy against these maniac passengers, and also empower the crew by supporting their complaints. Otherwise, we risk the typical knee-jerk reaction, one can expect from the government -- to ban serving of alcohol on board any flight, which will only inconvenience 99.9% of passengers instead of punishing the offending 0.1%, and still leave cases like Prashant Imene (who was not drunk) and Jitendra Kumar Mohala (who drank before the flight) un-addressed.

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.

British Airways today, reported its performance for December 2008. The airline's performance is in line with IATA's November 2008 report, which highlights a deepening of the global economic slowdown.

Capacity declines are in line with actual performance. Compared to December 2007, passenger capacity, measured in Available Seat Kilometres (ASK), was down 3 percent, Actual passenger performance, measured in Revenue Passenger Kilometres (RPK), fell by 3.4 per cent, passenger load factor decreased by 0.2 per cent to 76.7 per cent.

It also appears that corporate passengers are belt tightening, and moving to the back of the plane. Premium passenger traffic (first and business class) decreased by 12.1 per cent while economy decreased by a comparatively modest 1.7 per cent.

The alarming fall, which highlights economic slowdown, is in cargo performance, measured in Freight Tonne Kilometres (FTK), fell by 14.3 per cent.

Globally air cargo transports about 35 per cent to 40 per cent of global trade, by value. Globally, air cargo FTK fell by 13.5 per cent in November 2008, when compared to a year ago. The December fall by British Airways, highlight the continuing and rapid decline of global trade, and deepening of the already significant economic slowdown.

2009 will see economies become a lot worse before improving.

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.

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.