Touch Base with Indian A&D Industry

It’s been a good new year for air travellers. As aviation turbine fuel (ATF) prices fell sharply last year, most airlines
reduced their
fares during the new year. But Kingfisher’s yet to come up with a fare cut announcement.

In fact, Kingfisher’s delay in announcing the percentage of fare cut has benefited Jet Airways. Passengers have quickly moved over to Jet, and have started bookings tickets on sectors where both airlines have flights. It’s not yet known why the delay in announcing the cuts but an industry source said there were some miscalculations between Jet and Kingfisher alliance on the fare cut decision.

It was learnt that Jet-Kingfisher alliance had agreed to similar amount of fare cuts to be implemented on the same day. But now, Kingfisher is considering both basic fare and fuel surcharge cuts of around Rs 600 and Rs 400, respectively, which would be implemented next week, the industry source added.

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Turning a deaf ear to aviation minister Praful Patel’s plea to cut airfares as jet fuel prices have crashed by almost half in past
three months, Vijay Mallya-owned Kingfisher on Monday ruled out any such move for now.

The airline reiterated its old condition that fares would be dropped as and when the government notifies aviation turbine fuel (ATF) as a declared good so that it attracts a uniform 4% sales tax across the country.

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India’s two largest private airlines — Kingfisher Airlines and Jet Airways — are actively contemplating another round of fare cuts if the
Aviation

government puts aviation turbine fuel under the "declared goods" category.

In a statement on Monday afternoon, Kingfisher Airlines said: "Once the government brings ATF under the declared goods category, we will immediately and significantly reduce fares."

Sources said Jet Airways, which has an operational alliance with Kingfisher, may also take a similar decision if ATF comes under declared goods.

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Turning down Civil Aviation Minister Praful Patel’s plea for a fare cut, full service carrier Kingfisher Airlines today said that at present there was no case for reducing air fare.

Other airlines like SpiceJet and IndiGo also said that after the recent round of cuts in fuel surcharge, customers should not expect further benefits in the short term, though there would be some advance purchase packages in January.

“The sharp and continuous rise in aviation turbine fuel prices earlier in the year has left a lasting impact on the bottom lines of the airline companies, leading to an accumulation of huge outstandings and liabilities with oil companies. As such, keeping in mind that the cash flow needs to settle these accumulated liabilities, there is currently no case for reduction in fares,” said an official spokesperson for Kingfisher.

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Private air carriers Kingfisher Airlines and Jet Airways, which have entered into an operational alliance recently, may reduce flights
as they tighten belts to overcome financial crunch.

"We are not going to unnecessarily deploy capacity which we cannot fill…if in non-peak hours Jet flight is not full and Kingfisher flight is not full, it makes sense for us to co-operate and fly one aircraft instead of two. (With this) the economics of airlines will improve substantially," Kingfisher Chairman and CEO Vijay Mallya told reporters here.

He also said the two private carriers would co-operate on international routes, even as Kingfisher’s plans to start non-stop flights to San-Francisco has been put on hold.

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With Jet Airways and Kingfisher Airlines struggling to combat the rising costs, employees of both airlines have begun scouting for jobs in competing, low-cost airlines such as SpiceJet and GoAir.

“We have started sending our resumes to the low cost carriers as our take-home salaries will be almost at par with low cost carriers once Jet’s plan to shift a major portion of our fixed income to the variable component comes into effect in November,” said a ground handling staff member of Jet Airways. Full-fledged airlines currently pay higher salaries compared to the low-cost carriers.

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Kingfisher Airlines head Vijay Mallya on Monday indicated that if the slump in the market continues, more job cuts and lay-offs may take place in the aviation industry.

"If the slump in the market continues then the number of flights will have to go down…. and when we ground the planes it will have effects," Mallya, a former MP, told reporters outside Parliament. He was responding to a question on whether airlines may lay-off more employees in the near future.

He, however, refused to say whether he had met any minister or government official over the crisis in the aviation sector. Jet Airways chief Naresh Goyal today held a meeting with Finance Minister P Chidambaram.

Jet had recently removed 1900 employees only to reinstate them a day later, allegedly due to government pressure. However, Goyal had said that he changed his decision on humanitarian grounds.

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Kingfisher Airlines has put an end to its pilot recruitments for now, and has opted not to honour the ‘letters of intent’ it had issued to its co-pilots earlier this year.

Reports quoted unnamed sources while saying that the airline had issued letters of intent to young pilots promising them jobs as co-pilots once they completed their Type Rating training from institutes abroad. They reports say that a number of these trainee pilots have since then completed their training programmes successfully and have even received their Indian licences, but have not heard from Kingfisher Airlines.

Reports quoted sources as saying that the trainee pilots had been informed that Kingfisher Airlines does not need crew and that the communication was given to the students as and when they completed course and thereafter contacted the airline for the job promised to them earlier.

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The world’s fastest growing aerospace, manufacturing and services corporation, Dubai Aerospace Enterprise (DAE), has acquired three Airbus aircraft ordered by Kingfisher Airlines in a sale and leaseback deal.

DAE Capital, the aircraft leasing and financing business, announced the completion of the acquisition of three new Pratt and Whitney-powered Airbus A330-200 wide-body aircraft ordered by Kingfisher Airlines from Airbus.

Delivery of all three aircraft concluded in August 2008.

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Private air carrier Kingfisher Airlines plans to revise basic fares from October 1, an airline official said on Friday.

“The special off-peak fares that we were offering will now revert back to their original levels,” a Kingfisher Airlines spokesperson said here.

This will be applicable to the basic fares and would be effective from October 1, the spokesperson said adding “the fare are being revised in view of the festival season.”

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Arch-rivals Jet Airways and Kingfisher Airlines are on the battlefield again, this time over flight numbers.

Naresh Goyal-owned Jet Airways has put in a complaint with the aviation regulator—Directorate General of Civil Aviation (DGCA)—against Kingfisher Airlines for operating flights on similar code numbers.

Jet has claimed that rival Kingfisher is doing so to attract Jet travellers. It has also claimed that this could lead to air-safety problems and confusion. DGCA has set up a committee to look into the matter. Kingfisher has, however, rejected Jet’s charge and claims that clashes over flight numbers among competitors are common in most aviation markets.

“Clashes over flight numbers are a reality in the aviation industry around the world. Typically, airlines, regulators and national air-traffic management organisations work closely to deal with this issue. In India too, this is an industry-wide issue and is not just restricted to one or two airlines. Flight numbers are usually decided by an airline based on certain operational parameters, and no airline can claim right of usage over a particular flight number as is being claimed,” a Kingfisher Airlines spokesperson said.

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India’s leading private carrier Kingfisher Airlines plans to launch from Nov 1 its direct flight from Bangalore to San Francisco, connecting this IT hub with the Silicon Valley, its chief executive Vijay Mallya said here on Tuesday evening.

"We will launch our direct flight to San Francisco from Nov 1, connecting the Silicon Valley in the US with India’s IT hub. As there is an open-sky policy in the US, we will have no problem in getting operational clearances after we acquire more brand new Airbus aircraft (A330-200) for the long-haul flights," Mallya told media.

Kingfisher is making its international debut Wednesday with a non-stop daily flight on the Bangalore-London route.

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Kingfisher Airlines’s inaugural flight between Bangalore and London touched down at Heathrow airport, marking the commencement of international operations of liquor baron Vijay Mallya’s Kingfisher Airlines.

Vijay Mallya, Kingfisher Airlines chairman and CEO said, "I am delighted about Kingfisher’s maiden international service between Bangalore and London’s Heathrow airport. Our customers are our guests, not passengers with the warmest Indian hospitality offered."

Mallya said that international routes that would be serviced by Kingfisher have been carefully selected. He said that Kingfisher Airlines believed the Bangalore-London route to be under served, and the launch of a daily non-stop service would capitalise on this sector.

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Kingfisher Airlines, the merged airline operations of Kingfisher Airlines and Deccan Aviation, is looking to raise $400 million through equity, possibly by March 2009. The announcement comes nearly eight months after UB Holdings-owned Kingfisher Airlines announced that it will raise $300 million, a move which has not yet fructified.

Liquor baron Vijay Mallya, who owns the airline, said on Tuesday the company planned to raise $400 million and the instrument for this was yet to be finalised. “A rights issue is also an option, which is open to us,” he said.

UB Holdings controls around 65 per cent in the merged aviation company. The company has been trying to raise equity to fund its operations for quite some time as there is hardly any private equity investor willing to risk his money at high valuations, an industry analyst noted. The company currently has a debt of around Rs 4,000 crore and the combined losses are close to Rs 2,500 crore.

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The national consumer redressal body has pulled up Kingfisher Airlines for adopting an unfair trade practice by misinforming passengers about the airline they were flying by.

J.K. Mittal bought a Delhi-Bhubaneswar return ticket on a March 8 Kingfisher flight over the internet from the airline’s website. He paid Rs.4,800 each way.

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UB Group chief Vijay Mallya’s Kingfisher Airlines wants to be the country’s first airline to allow use of mobile services on board. The airline has sought permission from the Directorate General of Civil Aviation (DGCA) for offering inflight mobile services. Current DGCA rules do not permit use of mobile phones once the aircraft gets ready for take-off.

“We have made provisions in the new aircraft for all high-tech features. To provide mobile services, we have changed the configuration of the aircraft to allow use of cellphones in such a way that they do not interfere with navigation controls. Each mobile emits 100 watts of power, but the new technology incorporated in the aircraft will allow them to emit only 1 watt, which will allow all kind of seamless operations in the aircraft,” a Kingfisher Airline executive said.

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The National Consumer Disputes Redressal Commission (NCDRC) has found UB Group-owned Kingfisher Airlines guilty of making its passengers travel by Air Deccan, which provides low-cost services. These passengers had purchased tickets of Kingfisher that operates full-service flights with hot meals and in-flight entertainment. Cost of travel by Kingfisher is usually higher than Air Deccan, which is well-known as a budget airline.

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Kingfisher Airlines, one of the country’s leading airlines, has successfully started using Technopark-headquartered IBS’s iCargoNet thereby getting IBS its first Indian customer.

iCargoNet provides a unified, enterprise-wide solution to help manage the entire cargo business of the airline from planning, sales, operations, ground handling to cargo revenue accounting and revenue optimization functions in an integrated and cost-effective manner.

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To defer deliveries of 29 narrow-bodied aircraft.

Weighed down by rising crude prices, Vijay Mallya-promoted Kingfisher Airlines is in negotiations with international carriers to sell two of the five A340-500 aircraft it had committed to buy from Airbus last year. The airline may also defer taking deliveries of 29 narrow-bodied A320s, airline sources said.

The list price for A340 aircraft is $160 million, but insiders said Kingfisher might have negotiated the price at $90 million. “We might think of selling more A340s if fuel prices stay this way,” sources in Kingfisher said.

When contacted, Kingfisher Chairman Vijay Mallya did not comment on the delivery schedule of the narrow bodied aircraft but said the delivery of 10 wide-bodied aircraft will be taken this year.

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