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government’s policy was to make air travel more affordable, the committee said the UDF imposed on passengers “may be withdrawn immediately and no more UDF may be imposed on passengers in any of the airports.”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