Falling rupee spells fresh trouble for airlines

A sagging rupee has compounded the problems of loss-making Indian airlines, as 35 per cent of their operating cost is in dollar terms.
The domestic currency on Tuesday closed at a new low of Rs 55.39 for a US dollar. It has shed 11.51 per cent value since February, increasing dollar-denominated expenditure by a similar amount, especially for carriers with less international operations.

Lease and maintenance rentals of aircraft, salaries to expatriate pilots, parking and landing rates at international airports and jet fuel prices are all dollar-denominated costs.

However, carriers like Air India and Jet Airways that operate a large number of international flights have been able to offset the impact of rupee depreciation by international revenues. “Normally, a depreciating rupee does not impact us much, as the increase in cost is offset by the revenue from the international sector. That is not exactly the case now, as our international operations are hampered because of the pilots’ agitation,” said a senior Air India executive, who did not want to be identified.

DOLLAR'S DOMAIN

* Salaries of expat pilots are paid in dollars

* Parking and landing charges at international airports are calculated in dollars

* Aircraft lease rentals are also paid in dollars

* Aircraft maintenance rentals are paid in dollars

* Fuel cost is calculated in dollars

* Airlines like Jet Airways and Air India, with large international operations, are able to offset the increase through international revenues

Both Air India and Jet Airways get over 60 per cent of their revenue from international operations. IndiGo and SpiceJet get a substantial part of their revenue from domestic operations, while Kingfisher and GoAir do not have international operations.

The rupee depreciation is set to impact the bottom line of airline companies further. Losses of the country’s three listed carriers stood at Rs 2,462 crore in the nine months to December 2011. Jet Airways made a loss of Rs 937 crore on a revenue of Rs 10,773 crore, while SpiceJet and Kingfisher incurred losses of Rs 350 crore and Rs 1,175 crore on revenues of Rs 2,886 crore and Rs 4,751 crore, respectively.

Though airlines do not have much room to offset the increase in cost, they are trying different things, including efficient operation of aircraft and renegotiation of contracts, to have some control.

“Things like not taking the plane to high altitude, taxing the aircraft with only one engine and cleaning the plane with limited helps are saving around two per cent of the fuel cost,” said an executive of a low-cost carrier.

Airlines are also able to save on fuel by paying dues to oil marketing companies on time, which fetches a discount of 10-15 per cent.

“We keep negotiating with our various vendors, ensuring that every time there is some cost benefit without compromising on the quality,” said a senior executive of a full-service carrier.

Airlines like Jet Airways have stopped sourcing of on-flight meals from certain international airports and decided not to hire foreign pilots to save costs. Jet estimates these measures could result in savings of Rs 1,000 crore annually.

http://business-standard.com/india/news/falling-rupee-spells-fresh-trouble-for-airlines/475149/

AI defers Ajit Singh's U.S. visit by 2 weeks

Finally, the crisis-ridden Air India, which is still grappling with the two-week old pilots' strike, has put off a visit of Civil Aviation Minister Ajit Singh to the United States to take delivery of the brand new long-range Boeing 787 ‘Dreamliner' aircraft.

The Minister, along with an entourage of officials and invited journalists, was to travel to Seattle and Charlston, U.S. from May 28 to 31. Journalists, who were invited to join the Minister on the trip to the U.S., were informed by the Civil Aviation Ministry officials on Tuesday that the visit was being postponed by two weeks. Air India has ordered 27 Dreamliners and the first of the lot was scheduled to be delivered at a ceremony in the U.S. this month-end. Air India's order of Dreamliners has already been delayed by more than two years.

The postponement of the visit of Mr. Singh, along with officials and journalists, came four days afterThe Hindupublished a news story, questioning the rationale, scale and timing of the visit when cash-starved Air India had already incurred a loss of Rs. 200 crore due to the agitation by a section of its pilots, owing allegiance to the Indian Pilots Guild (IPG). International flights of the national carrier have been in total disarray and Air India is operating a curtailed flight schedule on some West-bound sectors.

Official figures showed that Air India's market share has declined sharply to 17.6 per cent, making it only India's fourth largest airline measured by passengers carried, ahead only of private domestic carrier Go Air with 7.3 per cent and troubled Kingfisher with 5.4 per cent.

Expressing concern over the state of the economy, Union Finance Minister Pranab Mukherjee has also announced that the government was embarking upon some austerity measures.

The IPG pilots have been demanding that they alone should be retrained to fly the long-haul Boeing 787 jet, as allowing pilots from the erstwhile sister-carrier Indian Airlines would adversely affect their career prospects.

Battling deep financial crisis and losses of nearly Rs. 7,000 crore annually, Air India is hoping to survive on the government's bailout package of Rs. 30,000 crore which comes with strings attached. The government wants the national carrier to perform satisfactorily on a number of parameters.

Meanwhile, the pilots' strike and its impact on passengers also evoked concern from MPs in the Rajya Sabha on Tuesday. The Civil Aviation Minister said that the pilots had not heeded the government's appeals to withdraw their stir even after the promise that there would not be any victimisation.

“I committed in the House that no victimisation would be done...but pilots are not listening. That is where the situation stands today,” Mr. Singh told the House.

Maintaining that Air India's image had been “dented” by the strike, he said the stir had come during the peak season and at a time when its revenue had gone up to 35 per cent and on-time performance was improving.

Mr. Singh pointed out that the Delhi High Court had stuck down the strike as “illegal.” He regretted the fact that the pilots who reported sick were neither ill nor had visited doctors.

He said that the Civil Aviation Ministry was ready to discuss all issues as the government had announced the huge bailout package. “This bailout is not without strings. They have to meet strict standards. If they meet these standards, we will release public money,” he said.

His statement came as members in the Rajya Sabha demanded an early end to the strike.

---

·  The Hindupublished a report questioning its rationale, scale and timing

·  First of the lot of Dreamliner to be delivered at a ceremony in the U.S.

http://www.thehindu.com/todays-paper/tp-national/article3447514.ece

Passenger handling up 20% at Mangalore airport

Mangalore, May 22:

Passenger handling at Mangalore airport witnessed 20 per cent growth in the first four months of 2012.

The airport handled 3.21 lakh passengers in the first four months of calendar year 2012, against 2.68 lakh passengers in the corresponding period of 2011, registering a growth of 19.87 per cent.

Speaking to Business Line, Mr M. R. Vasudeva, Airport Director, Airports Authority of India, Mangalore, attributed this growth to Mangalore's connectivity with more locations.

Mangalore airport is now directly connected with locations such as Hyderabad and Chennai. The connectivity between Mangalore and Hyderabad is attracting more passengers, he said.

International operations from Mangalore airport began in October 2006. The Indian population in West Asia contributes more than one-fourth to the total passenger handling at the airport.

International passengers

The airport — which is connected to locations such as Dubai, Muscat, Kuwait among others — handled 86,544 passengers from January-April 2012. This contributed 27 per cent to the total passengers handled at Mangalore airport.

In the first four months of 2011, the airport handled 79,469 international passengers, contributing 29.61 per cent to the total traffic during that period.

Mr Vasudeva said the number of international passengers handled at the airport is 7000 more compared to the first four months of 2011.

Mr Rajesh Sequera, co-ordinator of the UAE-based Karnataka NRI Forum, said direct connections between Mangalore and locations in West Asia have helped save time for passengers. This helped increase international passenger traffic.

Stressing the need for a direct connection between Mangalore and Saudi Arabia, he said it would further increase the air traffic from Mangalore.

However, he said more international airlines should be connected with Mangalore. For this, Mangalore should be declared as an international airport, he added.

Mangalore airport is a customs aerodrome with permission to handle international flights.

The total number of passengers handled at the airport increased from 6.74 lakh in 2007 to 8.47 lakh in 2011.

http://www.thehindubusinessline.com/industry-and-economy/logistics/article3446403.ece

Question mark hangs over Air India's B 787 delivery

Management extends contingency plan till June 1

New Delhi, May 22:

A question mark hangs over when Air India will take delivery of the first of the 27 Boeing 787 Dreamliner aircraft.

Initially, the Union Civil Aviation Minister, Mr Ajit Singh, was to travel to Seattle at the end of the month to attend a function for the induction of the first B 787 into the Air India fleet. But on Tuesday, the programme was called off. While declining to give details on why the Ministerial trip was being postponed, officials said it will be wrong to say that the aircraft delivery has been delayed.

Indian officials conceded that there were some issues connected with the interiors of the first Boeing 787 aircraft that Air India was to receive that promoted cancellation of the Ministerial visit. But they added that there was still a chance that the aircraft will be delivered as planned. Officials did not specify the date on which the aircraft will be delivered to AI.

In-flight entertainment

Sources indicated that there were some issues with the in-flight entertainment systems and the cabin interiors, which needed to be sorted out before Air India accepts delivery of the aircraft. Officials claimed that the new aircraft is air worthy and has all the certification to fly.

Industry analysts point out that another reason the aircraft is not being delivered as earlier planned is because the issue of compensation to be paid to Air India is yet to be decided. The aircraft was initially supposed to be delivered in 2008. Officials confirmed that some legal issues were holding back deciding on the compensation amount.

Any delay in taking delivery of the aircraft could also cost the airline. Globally, the final sale price of an aircraft is decided on the first of every month, after taking into account escalation. Therefore, Boeing will be well within its rights to seek a higher price for the aircraft if delivery is pushed to June instead of the end of this month, sources indicated.

Strike by pilots

The new aircraft has been caught in the eye of a storm with sections of pilots going on an agitation, against the management decision to allow pilots from erstwhile Indian to get trained to fly the B 787.

The 19-day-long ongoing pilot agitation has seen Air India curtail its long-haul international operations. The agitation is leading to a daily revenue loss of between Rs 12-15 crore for the airline.

Meanwhile, to combat the pilot agitation, the airline has extended the contingency plan for operating international flights till June 1. The earlier plan was in place till May 25.

“Till June 1 the airline will only accept booking on international flights that are scheduled under the contingency plan,” an official added.

http://www.thehindubusinessline.com/industry-and-economy/article3446486.ece

India opens up air links to Myanmar

New Delhi, May 22:

Indian carriers will soon be able to operate unlimited flights from Gaya, Thiruvananthapuram, Kozhikode, Visakhapatnam, Port Blair and 13 other Indian cities to Mynamar.

This follows the two Governments agreeing on a revised agreement on allowing flights between the two countries. Official sources told Business Line that the agreement will be initialled during the forthcoming visit of Prime Minister, Dr Manmohan Singh to Myanmar which is expected to take place towards the end of the month. The agreement also proposes allowing Indian carriers to fly onwards from Myanmar to Bangkok, Kuala Lumpur and Singapore. At the moment Indian carriers are only allowed to fly between India and Myanmar. “The real money spinner for Indian carriers is likely to be the decision to allow unlimited flights from 18 Indian cities to Myanmar. The Myanmar-Gaya sector is likely to see a lot of interest given the interest among Buddhists to travel there,” a senior Government said.

http://www.thehindubusinessline.com/todays-paper/tp-economy/article3447204.ece

Citibank ends card pact with Jet Airways

Mumbai, May 22:

Citibank announced the exit of its 12-year-old co-branded card partnership with Jet Airways on Tuesday even as it launched an airline agnostic credit card.

The foreign bank cited changing consumer preferences for ending the partnership with Jet. The bank's co-branded partnerships with Shoppers Stop and Indian Oil Corp, however, stay intact.

Jet Airways and Citibank will continue to support all Jet Airways Citibank credit card features until July 15.

The new Citibank PremierMiles Credit Card will earn and redeem miles across seven domestic and over 100 international airlines, the bank said.

“With fragmentation in the aviation industry, there is a significant increase in the domestic traffic vis-à-vis international traffic. Also, consumer preference has shifted to low cost airlines and spontaneous travel has increased,” Mr Anand Selvakesari, Country Business Manager, Global Consumer Group, Citi India said.

Low-cost carriers (LCCs) account for about 50 per cent of the total air travel in the country as on 2011, Mr. Selvakesari added.

The existing Citibank Jet Airways customers will be given a choice to transfer to Citibank's new card programme with privileges, including a special 10,000 bonus miles free credit to their PremierMiles account.

Jet Airways plans

Jet Airways is planning to introduce a JetPrivilege programme with its co-branded credit card. “JetPrivilege will enable its members to earn and redeem JPMiles to over 600 worldwide destinations,” a Jet Airways spokesperson said.

http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3447275.ece