VivaAerobus places Latin America’s biggest Airbus aircraft order

By BA Staff

CGI of VivaAerobus A320neo with PW GTF and CFM LEAP

The VivaAerobus Group has signed a purchase agreement for 52 Airbus A320 Family aircraft, 40 A320neo and 12 A320 classic, representing the biggest Airbus aircraft order by a single airline in Latin American history.

VivaAerobus, a Mexican low-cost carrier, will announce the engine selection at a later date.

VivaAerobus, part-owned by IAMSA, one of Mexico’s largest transportation companies, and Irelandia Aviation, a global low-cost-carrier airline developer, will replace its entire fleet of 737-300 to become an all-Airbus carrier by 2016.

Juan Carlos Zuazua, VivaAerobus CEO said:

“After evaluating the latest aircraft technology with the objective of further reducing our costs, improving our reliability, punctuality and the overall passenger experience, today we are proud to announce that the Airbus A320 has been our final choice. This is an important milestone for our customers, shareholders and staff. This decision will support our growth strategy, as it will allow us to further reduce our industry leading fares, and will increase the cost-per-seat advantage we currently have among our competitors.”

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AirAsia is Business Traveller’s ‘Best Low-Cost Airline’ for two years in a row

By BA Staff

AirAsia was once again distinguished as the best in its class, when the airline was awarded with the ‘Best Low-Cost Airline’ award at the 2013 Business Traveller Asia-Pacific’s Awards ceremony, held at the Conrad Hotel in Hong Kong recently.

AirAsia, 'Best Low-Cost Airline' Award 2013

This is the second successive win for AirAsia, a nod to the airline’s growing power and its stature as the market leader in the low cost carrier segment. AirAsia first won the ‘Best Low-Cost Airline’ award category last year, when it was first introduced by Business Traveller Asia Pacific in recognition to the growing force of budget carriers in the region.

AirAsia Group CEO, Tony Fernandes said:

 “This second ‘Best Low-Cost Carrier’ award win represents the unwavering support and belief from our guests towards our services and products. We thank them for choosing AirAsia as the airline of choice for their travels. We will continue to work hard to maintain our leadership spot and uphold our pledge to present our guests with unbeatable low fares and exceptional products and services. This win is also due to the collective contributions of our ‘AirAsia Allstars, whose hard work, passion, dedication and creativity made this recognition possible."

AirAsia was chosen as the inaugural award winner through votes by Business Traveller readers, recognizing the airline as a service provider which has maintained impeccable standards and making journeys seamless and productive. This comprehensive survey was conducted annually among Business Traveller subscribers, and the 2013 results are based on data collected between April and June this year.

AirAsia is a household name which has flown over 200 million guests since it was established nearly twelve years ago with a mission to democratize air travel in the region and has been operationally profitable from day one of its launch as a low-cost carrier. The airline now has operations based in Malaysia, Indonesia, Thailand and the Philippines, servicing the most extensive network with 85 destinations.

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Air France - KLM provides update on Transform 2015 progress

by BA Staff

European airline group Air France - KLM has provided an update on its Transform 2015 plan, which aims to transform the airline and restore profitability by 2015 by slashing unit costs excluding fuel by 10% and shedding €2 billion worth of debt. The following details were provided by Air France - KLM in a release:

• Tranform 2015 measures drove an improvement of €100 million in first half operating results
• Air France has judged that it has 2,800 "excess staff" who will be progressively eliminated over the course of 2013-14 via voluntary departure plans
• Wage moderation will continue in 2014
• Point to point operations at Paris Orly will be handed over to low cost carrier (LCC) wing Transavia France
• Five new aircraft will be based at Orly by Transavia France from 2014 onwards, and Air France's full service point-to-point network will be adjusted downwards accordingly
• Seasonal adjustment of schedules and capacity will be used more heavily
• More outsourcing will occur at French stations and customer service processes will be reorganized
• Air France will retire all of its dedicated Boeing 747 freighters by 2015, leaving two Boeing 777Fs as the only dedicated cargo aircraft in its fleet
• Cargo operations at Paris Orly will be outsourced
• Growth in the route network will be focused on long haul only
• Fleet wise, the seven 747-400s will leave the fleet by 2015, to be replaced by four Boeing 777-300ERs and 3 Airbus A380-800s, though the final two A380s have been deferred to 2016 or beyond. The first 787s will arrive at KLM in 2017, followed by Air France's first A350s in 2018
• A new "Future hub" plan is being set up at Paris Charles de Gaulle, which will see the carrier invest in new technology and facilities so as to give passengers flying through Charles de Gaulle into a smoother connecting experience

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Kingfisher lawsuit against IAE shows Vijay Mallya's desperation

by Vinay Bhaskara and Devesh Agarwal

Earlier this month, defunct Indian carrier Kingfisher Airlines, which has been grounded since 20th October, 2012 when the Indian regulator, the Directorate General of Civil Aviation (DGCA) suspended its flying license, filed its annual report for fiscal year 2012-2013.

Instead of focusing on finding a way to pay off the nearly Rs. 7,000 Crore debt the airline owes to a consortium of lenders led by the State Bank of India, Kingfisher used the annual report as a mouthpiece to announce a lawsuit filed in the City Civil Court at Bangalore against engine manufacturer International Aero Engines (IAE) for $235 million (damages of $210.4 million plus $24.6 million in punitive damages), claiming that the IAE V-2500 A5 engines used to power Kingfisher’s once 32-strong fleet of Airbus A320 family aircraft were “inherently defective, both in design and manufacture.” The Kingfisher annual report says.

United Breweries (Holdings) Limited has filed a suit in the City Civil Court at Bangalore against International Aero Engines AG, its shareholders / joint venture partners and your Company being O.S. No. 6406 of 2012, alleging that the IAE V-2500 A5 engines supplied to your Company were inherently defective, both in design and manufacture, and has claimed damages of USD 210,400,000 plus Rs. 1,621,000,000 (aggregating to approximately $24.557 million as per the current exchange rate of approx Rs. 66  per US Dollar) and has reserved liability to claim further damages. No relief is sought against your Company in the said suit.

This lawsuit smacks of desperation on the part of Kingfisher and its management, as the carrier continues to flounder.

Considering that it did not operate for most of the year, if Kingfisher still managed to find enough cash to pay CEO Sanjay Aggarwal US $591,000 in an annual salary, clearly demonstrates a carefully managed business strategy will allow the airline to slowly pay off debt without resorting to doomed strategies such as this lawsuit.

Kingfisher restart would be a strategic mistake

Kingfisher also continues to pursue the flawed idea that the carrier should “restart” operations with up to 20 aircraft, or that the carrier will make back the money by selling itself to an investor. This is a mistake. Re-launching operations in today’s Indian airline industry would be a tragic mistake. For starters, the Indian macroeconomic picture is very poor; the Indian Rupee has continued to decline and growth projections for the fiscal year have slipped beneath 5%. This has driven demand for Kingfisher’s premium style product lower than when Kingfisher shut down, and that too up against a somewhat re-vitalized Air India, a re-capitalized Jet Airways, a market leading IndiGo, and a soon to arrive behemoth AirAsia India. 

Moreover, India’s other airlines have committed to firm orders of at least 93 current generation narrow body aircraft, as well as 272 next-generation re-engined products (which doesn’t even include an expected re-engined order from low cost carrier (LCC) SpiceJet. This doesn’t even include the fleet of well-capitalized startup AirAsia India, who we project to grow to a fleet of between 10 and 12 Airbus A320s, and regional startup Air Costa, who is supposedly on the verge of launching operations within the next two months. And all of these orders and startups have locked Indian carriers into domestic capacity growth, even with the persistent demand weakness. LCCs have been flooding major Metro markets with capacity (see IndiGo driving out Jet Airways with a massive capacity dump in the Bhubaneswar market as just one prime example).

Even at the peak of the Indian market, Kingfisher as an airline was not profitable and the one part of their network which was profitable, the regional ATR network in the South, has been co-opted by LCC SpiceJet using a fleet of Bombardier Dash 8 Q400 turboprops. SpiceJet already has 15 Q400s in its fleet, and is working to secure financing to grow the fleet by another 15 frames. For example, one of Kingfisher’s most profitable routes pre-shutdown was the trunk route between Bangalore and the industrial Karnataka city of Hubli, but Hubli is now a SpiceJet monopoly with service to five destinations using the Q400s. And Air Costa is due to start operations, muddying up the waters with even more capacity.

One cannot blame Kingfisher’s investors for the idea that if only Kingfisher were to be re-started and/or sold, they will make back their money over time. This sort of playbook is present all over the global airline industry, most notably with US LCC Virgin America whose investors have continued to swallow persistent losses over the past six years in hopes of making their money back via an initial public offering. This would be a mistake in the Indian market, where the existing carriers are already struggling. SpiceJet, Jet Airways, and Air India have all hiked their fares by more than 25% in recent days to offset the rise in the Rupee, with GoAir and IndiGo expected to follow suit soon. Kingfisher re-launching into this environment would just be a recipe for racking up thousands of crores more, in further accumulated losses.

It is better to leave Kingfisher's aircraft rotting on tarmacs across the country where they could at least serve as a reminder to Dr. Mallya, how he, and his incompetent mis-managers, drove a great airline concept in to tatters.

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Analysis: SpiceJet to launch Delhi-Macau

by Vinay Bhaskara

A report in the Macau Business Daily states that Gurgaon based low cost carrier (LCC) SpiceJet is planning on launching nonstop flights between Delhi and Macau. SpiceJet has already won approval from the Indian government to launch Delhi-Macau, likely using Boeing 737 equipment. But it has not yet filed for approval from the Macau government. A Macau airport statesman had this to say about a potential SpiceJet application:

We have been aware of communications [about the route] between the Macau International Airport Company Ltd and the airline. SpiceJet had previously contacted us to obtain some initial information on the application procedures, which is a common practice for any interested airlines.

No airline currently serves Macau nonstop from India. The current bilateral air service agreement (ASA) between India and Macau allows each side's airline to operate up 600 seats per week with 2 return flights per week. However, both governments have agreed in principle to negotiate an expansion of the ASA later this year.

Macau, China's largest gambling center in the vein of Las Vegas in the United States, is an important and growing leisure destination for the increasingly affluent Indian upper middle class, and India's wealthy. However, demand for Macau is more concentrated in Bangalore and Mumbai than in Delhi, which may bode poorly for SpiceJet's chances on the route. The Macau international market is currently dominated by flag carrier Air Macau, a subsidiary of China's national carrier Air China, who serves 22 destinations on a fleet of 15 aircraft.

If the reports are true, it would mark just the latest step in SpiceJet's international growth track. The carrier now serves five international destinations from Delhi (Dubai, Guangzhou, Kabul, Kathmandu, and Riyadh) with 32 flights per week. Overall, SpiceJet serves nine international destinations (the aforementioned five plus Colombo, Muscat, Sharjah, and Male) with 87 flights per week. And along with the regional operation using Bombardier Dash 8 Q400 turboprops, the international growth has been an important contributor to SpiceJet's swing to profitability.

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easyJet announces new routes out of Belfast

by BA Staff

easyJet, one of the largest low cost carriers (LCC) in Europe, has announced two new routes from its Northern Ireland base at Belfast International Airport. Starting in summer 2014, easyJet will introduce new nonstop flights from Belfast to Bordeaux, France and Jersey in the Channel Islands.

Ali Gayward, easyJet's Northern Ireland head had this to say about the expansion:

We’re pleased to mark this important anniversary for easyJet by announcing two new routes for Northern Ireland. From summer 2014 we will introduce flights to Bordeaux and Jersey to offer a range of new holiday and business connections to and from Northern Ireland.... Since we launched our first flight to Belfast in 1998 over 32 million people have chosen to fly with us. Today we’re saying thank you to all those passengers who have helped make easyJet Northern Ireland’s largest airline. Belfast was one of our first bases outside Luton and we look forward to celebrating many more anniversaries here.

easyJet has six aircraft based at Belfast, and will serve 24 destinations from the airport once the two new destinations are inaugurated. easyJet as a whole has a fleet of 194 aircraft (consisting of 138 Airbus A319s and 56 Airbus A320s) serving 138 destinations across Africa, Europe, and the Middle East. 

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Routes: easyJet to begin services between Jersey and London Gatwick

British low cost carrier (LCC) easyJet has announced new thrice daily service between Jersey and its hub at London Gatwick commencing 30th March 2014 utilizing 156 seat Airbus A319 aircraft. Find out more details below.

28th August 2013

easyJet, the UK’s largest airline has today announced it is increasing its Jersey network with the introduction of a year-round service to London Gatwick.

From 30 March 2014 easyJet will operate three flights per day between Jersey and London Gatwick offering the choice of a morning, afternoon and evening departure in each direction. The new service will go on sale in September 2013 and means easyJet now connect Jersey with five UK airports – London Gatwick, Southend, Liverpool, Newcastle and Glasgow.

The announcement follows a deal secured by easyJet earlier this year to purchase 25 additional slots at Gatwick Airport from Flybe. Since this time, the airline has worked closely with the route development team at Jersey Airport to expand its operation in the Island and enhance connections to London Gatwick. The new flight will be operated by an Airbus A319 aircraft with the capacity of 156 seats.

Group CEO for Ports of Jersey, Doug Bannister, is delighted by the announcement and says the confirmation will offer an excellent and affordable choice for both leisure and business passengers.

UK Commercial Manager for easyJet, Ali Gayward, says: “easyJet is pleased to confirm it will introduce new flights between Jersey and London Gatwick from spring 2014, which underlines our continued commitment to serving Jersey.

“The new early flight will allow business travellers to reach London in time for meetings while the evening departure enables them to travel home on the same day. The introduction of low cost seats will also help to boost tourism to Jersey.

“In developing our plans for London Gatwick we have listened to all the points made by Economic Development and Jersey Airport. Their enthusiasm to work with easyJet has been clear from the start and we hope this support will continue to make the route a success”.

Minister for Economic Development, Senator Alan Maclean, says: “Today’s announcement once again demonstrates easyJet’s continuing confidence in Jersey, which has continued to flourish since it first established services from the Island in 2008. The airline has the capability of delivering in excess of a quarter of a million passengers per year on the Gatwick route alone, which will be of great benefit to the vitally important tourism and business economy”.

Provisional schedule for summer 2014 – timings to be confirmed in September.

London Gatwick – Jersey             Jersey – London Gatwick
Depart Arrive                     Depart       Arrive
07:00 08:00                      08:30       09:30
14:30 15:30                      16:00       17:00
17:30 18:30                      19:00       20:00

The introduction of a London Gatwick service brings the total number of routes the airline serves from Jersey to five. In addition to its exiting year-round services to Liverpool, Glasgow and London Southend, the airline also introduced a summer service to Newcastle earlier this year.

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Dutch Antilles Express suspends operations

by Vinay Bhaskara

A Dutch Antilles Express ATR 42-300 on the ground at its largest hub - Hato International Airport in Curacao

According to several news reports (see here and here), Caribbean low cost carrier Dutch Antilles Express, the second largest airline in the Dutch country of Curacao has suspended operations.

Formed in 2005 via the merger of Bonaire Express and Curacao Express, Dutch Antilles Express had been bleeding cash for several months before the shut down. Earlier this month, the carrier approached the Curacao Parliament for a cash loan of 5 million guilders; a request denied on 16th August. The Curacao government had previously stepped in to save the airline from closure in 2011. With its operations bleeding money, the airline was forced to shut down operations for the time being.

At the time of suspension, Dutch Antilles Express served 10 destinations across 9 countries (including Orlando and Miami in the United States) on a fleet of five aircraft (1x ATR 42-300, 3x Fokker F100, and 1x McDonnell Douglas MD-83). It had previously been forced to suspend services to Caracas, Maracaibo, and Valencia in Venezuela in May of this year over safety concerns.

Service in Curacao will continue to be provided by several airlines, including low cost carrier (LCC) Insel Air, which operates a hub at Hato International Airport, the primary airport of Curacao. Insel Air serves 16 destinations across 10 countries(15 from Curacao - including Miami, Orlando, San Juan, and Charlotte) on a fleet of 13 aircraft (with 7 more Fokker 70s on order - current fleet includes 3x Embraer 110s [two temporarily grounded], 3x Fokker F100s, 4x McDonnell Douglas MD-82s, and 2x McDonnell Douglas MD-83s). 

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GOL and Delta achieve alliance milestones

Atlanta based American full service carrier Delta Air Lines and Brazilian low cost carrier (LCC) GOL Linehas Aereas Inteligentes recently detailed the benefits of their alliance 20 months after its inception. Find the details below.

22nd August, 2013

SAO PAULO, Aug. 22, 2013 /PRNewswire/ -- Twenty months after Delta Air Lines (NYSE: DAL) and GOL Linhas Aereas Inteligentes (BM&FBovespa: GOLL4 and NYSE: GOL) announced their enhanced, long-term, exclusive alliance, the companies highlight the milestones achieved.  Delta and GOL leveraged the strengths of both carriers to create additional value by establishing a seamless customer experience.

The Delta and GOL commercial team accomplished its immediate objectives: (1) expand the codeshare agreement; (2) provide additional benefits to the airlines' loyal customers; and (3) offer a consistent experience at airports.   

Codeshare Agreement

"Our strategic partnership with GOL greatly enhances Delta's network, providing access to 23 destinations in Brazil," said Ed Bastian, Delta's president and member of GOL's Board of Directors. "The codeshare will continue to expand pending regulatory approvals. Delta and GOL offer a U.S.-Brazil network unrivaled by any other U.S. flag carrier."

Currently GOL has the ability to offer its customers access to the 5 markets Delta serves between the U.S. and Brazil which are: Brasilia - Atlanta, Rio de Janeiro - Atlanta; and between Sao Paulo and Atlanta, Detroit and New York JFK.  Additionally, GOL's customers from the following local markets currently have access to Atlanta and will soon have access to Detroit and JFK: 

• Belo Horizonte
• Curitiba
• Goiana
• Porto Alegre

The Delta-GOL codeshare agreement provides Delta customers access beyond Brazil as well, including connections to Asuncion, Paraguay and Montevideo, Uruguay.

"We are achieving our goals and this is just the beginning," said Paulo S. Kakinoff, GOL's Chief Executive Officer. "The alliance has driven significant growth in traffic, with 28 percent of all Delta customers that travel to Brazil continuing on their journey with GOL. This represents an increase of nearly 100 percent more traffic year-over-year."

As of July, GOL started to offer Delta flights on GOL's website, voegol.com, Voe GOL stores, GOL's call center and travel agents. The alliance benefits commercial customers with joint contract agreement to serve corporate customers allowing them to have a single contract for service on both carriers.

Furthermore, the airlines have initiated a joint marketing campaign to promote GOL's ability to sell Delta on their channels.  As part of the joint branding efforts, customers traveling with GOL will now see the Delta logo and the phrase "in partnership with Delta" illustrated close to the boarding door of the GOL airplanes.  All GOL planes will soon carry the Delta brand.

Brazil is expected to become the fourth-largest aviation market in the world by 2014, with more than 100 million passengers.  The FIFA World Cup in 2014 and the Summer Olympics in 2016 will spotlight Brazil across the world. 

Airport Co-location and Customer Experience

One of the additional milestones of the alliance is the co-location of the airlines.  In April, Delta moved from Terminal 1, A Wing to Terminal 2 C Wing of the Sao Paulo-Guarulhos International Airport. For GOL and Delta customers co-location increases ease of connectivity and facilitates the process of re-checking bags after clearing customs since gol counters are located immediately after leaving the secured customs area.

"We want to offer our customers a premium check-in area, improved signage to enhance customer experience and an enhanced VIP lounge," Kakinoff said.  "GOL has a significant presence in Brazil's main airports and together with Delta we will continue to provide customers a seamless experience."

Customer Benefits

The alliance set in motion a plan to increase shared benefits to Delta's and GOL's most loyal customers. Along with the ability to accrue and redeem flight awards, Delta customers now enjoy complimentary access to GOL's VIP Lounges in São Paulo and Rio de Janeiro-Galeão International airports.  Likewise, Delta Sky Clubs in Atlanta, New York-JFK and Detroit are available to SMILES Diamond members at no charge. 

GOL's SMILES Diamond elite members have now access to priority check-in and boarding on Delta's flights through Delta's Sky Priority. Delta's Diamond, Platinum and Gold Medallion members have access to the same benefits. Delta's Sky Priority is a series of distinctively branded priority airport services designed for high value customers, allowing them to move quickly through the airport.

"This is a period of rapid growth and transformation for Delta and GOL. Brazil is the leading engine for economic growth in Latin America and an increasingly popular travel destination from the U.S.," said Bastian. "These joint achievements represent furthering Delta's goal to become the best U.S. airline in Latin America and the Caribbean.  Our alliance is based on shared values, leveraging strengths and learning to benefit from each other to better serve our customers."

As part a $3 billion investment in enhanced global products, services and airport facilities, Delta offers fully flat-bed seating with direct aisle access in the BusinessElite cabin on its routes from Sao Paulo to Atlanta and JFK, as well as from Rio de Janeiro to Atlanta. These flights also offer Delta's popular Economy Comfort seating in the forward section of the economy cabin. Economy Comfort offers additional legroom and 50 percent more recline compared to standard economy seats. All cabins offer in-seat audio and video on demand with a broad range of in-flight entertainment options. Delta also will introduce in-flight Wi-Fi service on international flights beginning in 2014.

About GOL Linhas Aereas Inteligentes SA

GOL Linhas Aereas Inteligentes S.A. (BM&FBovespa: GOLL4 and NYSE: GOL), the largest low-cost and low-fare airline in Latin America, offers around 970 daily flights to 65 destinations in 10 countries in South America, Caribbean and the United States under the GOL and VARIG brands, using a young, modern fleet of Boeing 737-700 and 737-800 Next Generation aircraft, the safest, most efficient and most economical of their type. The SMILES loyalty program allows members to accumulate miles and redeem tickets to more than 560 locations around the world via flights with foreign partner airlines. The Company also operates Gollog, a logistics service which retrieves and delivers cargo and packages to and from more than 3,500 cities in Brazil and eight abroad. With its portfolio of innovative products and services, GOL Linhas Aereas Inteligentes offers the best cost-benefit ratio in the market.

About Delta Air Lines

Delta is working to become the best U.S. airline in Latin America and the Caribbean and was just recognized with the Best Airline to North America award by Premio Destaque Companhia de Viagem,  by Grupo Companhia.  As part of that goal Delta has established a long-term exclusive alliance with GOL Línhas Aereas Inteligentes investing more than US $100 million in GOL. Likewise, Delta has invested more than US $65 million in Aeromexico as part of a long-term exclusive commercial alliance and entered a code sharing agreement with Aerolineas Argentinas solidifying its footprint in Latin America. Executive Travel magazine recognized Delta with the Gold Leading Edge Award for the Best Flight Experience to Mexico. Delta provides service to 28 countries and 44 destinations in the region offering more than 1,200 weekly flights between Latin America/Caribbean and the U.S. Spanish speaking Delta customers can receive real-time, on-the-go travel assistance in Spanish and Portuguese through its Twitter channels @DeltaAssist_ES and @DeltaAjuda 9 a.m. to 7 p.m. EST. Brazilian customers can also access Delta´s dedicated Brazil Facebook page visiting http://www.facebook.com/DeltaAirLinesBrasil.

Delta Air Lines serves more than 160 million customers each year. Delta was named by Fortune magazine as the most admired airline worldwide in its 2013 World's Most Admired Companies airline industry list, topping the list for the second time in three years. With an industry-leading global network, Delta and the Delta Connection carriers offer service to 327 destinations in 63 countries on six continents. Headquartered in Atlanta, Delta employs nearly 80,000 employees worldwide and operates a mainline fleet of more than 700 aircraft. The airline is a founding member of the SkyTeam global alliance and participates in the industry's leading trans-Atlantic joint venture with Air France-KLM and Alitalia. Including its worldwide alliance partners, Delta offers customers more than 15,000 daily flights, with hubs in Amsterdam, Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-LaGuardia, New York-JFK, Paris-Charles de Gaulle, Salt Lake City and Tokyo-Narita. Delta is investing more than $3 billion in airport facilities and global products, services and technology to enhance the customer experience in the air and on the ground. Additional information is available on delta.com, Twitter @Delta, Google.com/+Delta and Facebook.com/delta.

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Ryanair enhances consumer security on Ryanair.com

Earlier today, European ultra-low cost carrier (ULCC) Ryanair launched a new customer verification system on the Ryanair.com website. Find the details below. 

20th August 2013

Ryanair, Europe’s only ultra-low cost carrier (ULCC), today (20 Aug) launched a new consumer verification security system on the Ryanair.com website, which offers increased security when booking Ryanair’s lowest fares on Ryanair.com.

Delivered through CardinalCommerce’s Centinel® technology platform, the new system has been introduced across all Ryanair markets and provides consumers with enhanced fraud protection during the payment process, delivering increased security for all Ryanair passengers.

Ryanair’s Robin Kiely said:

“Ryanair is continually striving to improve the customer experience of our 81.5m passengers and we have introduced a new consumer verification system on our Ryanair.com website, which will further improve the security of Ryanair.com for our 81.5m passengers – and make booking our ultra-low cost flights even more secure.”

CardinalCommerce’s Alasdair Rambaud said:

“We’re delighted Ryanair recognises the ongoing value of deploying Verified by Visa and MasterCard® SecureCode®, and chose Cardinal because of our years of experience, understanding and knowledge as pioneers of consumer authentication. We look forward to working with Ryanair and providing their consumers with an even better booking experience.”

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Jet Airways Q1 FY2013~14 performance analysis - part 2 - JetLite, aircraft utilization, and ancillary revenues

by Vinay Bhaskara

JetLite continues to be a (modest) bright spot in Jet Airways’ broader operations. The low cost wing of Jet Airways, which was recently merged with the JetKonnect brand to streamline low cost operations, reported a net post-tax profit of Rs. 6.9 Crore, down from Rs. 11.7 Crore a year prior.

An increased proportion of JetKonnect’s fleet was contained within the mainline operation, and standalone JetLite’s fleet declined to 13 frames from 19 last year. Thanks to this reduction in fleet size, revenues declined 17.2% on a 17% decline in available seat kilometers (ASKs) and revenue per available seat kilometer (RASK) declined 0.3% with cost per available seat kilometer (CASK) increasing 1.4% year over year (YOY). CASK and RASK are used to adjust revenue and cost figures for segment length. Operating margin for JetLite stood at 5.1%, up from 3.8% the year prior.

The low cost wing of Jet Airways continues to outperform the full service wing domestically. And given the economic slowdown, weakening salary growth, and heavy inflation, customers, even business travelers are likely to pinch pennies and be more frugal in consuming air travel. At least on domestic sectors, the Indian purchasing behavior pattern has skewed more heavily towards low cost carriers. It probably makes sense for Jet to focus on expanding its low cost operations as a proportion of overall operations. For example, JetLite (and by extension JetKonnect) have unit costs that are roughly 23.5% lower than those of mainline Jet Airways; a significant advantage in challenging the low cost carriers (LCCs) who have only grown in stature as Jet has shrunk in parallel.

Turning to a structural analysis of Jet’s business, one of the key factors dragging down financial performance for Jet is now its large net debt, as we mentioned in Part 1, which stands at Rs. 12,100 Crore ($2.1 billion). Commensurately, financial charges increased to Rs. 234.13 Crore for Q1. But Jet’s problems do not necessarily end there; the network may be an even bigger challenge. On the conference call, Jet mentioned that in the domestic market, it has no immediate plans to cut capacity from its Q1 levels, on which it operated 32,500 quarterly departures utilizing 42 737s split between the 737-700/800/900 variants (12 for JetLite) and 14 ATR 72 (one for JetLite). The remaining 19 737s, 14 A330s (10 A330-200s, 4 A330-300s), and seven 777-300ERs are used to operate the 9,350 quarterly departures internationally. 

On international sectors, we asked why Jet had chosen not to operate the A330-200 on shorter haul sectors as several of the aircraft are underutilized, and their Vice President of Commercial Strategy and Investor Relations K.G Vishwanath responded by stating:

From a financial standpoint, we have always seen that the 737 or a single aisle aircraft is the most suitable airplane for any flying distance between zero to five hours. And you have been in this business for four, five years and you know very surely that the margin you are able to make on the 737 is significantly higher as compared to the A330. The A330 airplane is basically an overkill for a short-haul given that fuel costs are very expensive and the fact that the flying distance is very short, you end up running more fuel and it does not give you the right kind of revenue per RPKM to be able to make a decent margin.

In our view, under-utilization of the A330 fleet is not justified by the (slightly) higher operating margins that can be driven on the 737. When you include the financing costs (leases and/or debt costs) of the A330 fleet, the airline is likely losing more money on the underutilization of the A330s, than it is gaining from the higher margins on the 737s. Moreover, the idea that the A330 is very expensive on shorter haul routes is correct to a degree, but not overall. The A330 has lower unit costs (CASK) than the 737s, which Jet needs volume to profit on. An expensive, unused asset is more costly in the short term than imperfect alignment of asset with mission.

Mr. Vishwanath also tackled ancillary revenues during the call:

So currently our ancillary revenues appears in the other income line you will see in the P&L. We’re currently at roughly 4 to 5% of our top line revenues. We would like to take this number up to 10% of top line in the next two to three years.

This is a very positive strategy on the part of Jet. Looking at the global airline industry, the West in particular, sustainable profitability for full service carriers has occurred over the past 4-5 years primarily because of ancillary revenues; especially checked baggage fees and change fees. Growing ancillary revenue is a good way for Jet to tackle the profitability issues that have cropped up in the domestic market.

Read Part 1 of this analysis here

Stay tuned for Part 3 of this analysis, in which we tackle Jet Airways’ fleet plans and a way to reduce their debt load.

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SpiceJet to launch Bangalore-Mysore; Q400 order complete

From 14th January 2013, low cost carrier (LCC) SpiceJet will launch thrice weekly Bangalore - Mysore services using Bombardier Dash 8 Q400 turboprops. The schedule of the flights will be as follows:

SG3305 BLR - MYQ ~ 1220 – 1310 ~ Q400 135
SG3306 MYQ- BLR ~ 1330  – 1420 ~ Q400 135

The new route marks the beginning of the next round of Q400 expansion for SpiceJet, as the carrier recently took delivery of the final three Q400s in its initial order of fifteen. The three most recent Q400s for SpiceJet were inducted as: VT-SUP, VT-SUJ, VT-SUK. While SpiceJet does have options for another fifteen Q400s, it is having trouble finding financing for those deliveries at the moment. However, the next year will give SpiceJet ample time to evaluate the Q400 operation as it reaches maturity, and since none of the other major Indian carriers has any turboprop fleet growth (Jet Airways' order for ATR 72-600s is primarily for replacement purposes) in the next year, SpiceJet can afford to slow down its regional expansion. 

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SpiceJet to launch services to Guangzhou

Indian low cost carrier (LCC) SpiceJet will be launching flights 4 times per week between Delhi and Guangzhou, the hub of the Chinese Pearl River Delta. Services will begin on 8th February, 2013 with the following schedule:


SG 81 -- DEL - CAN -- 1720-0035+1 -- 2467 --  737-800
SG 82 -- CAN - DEL -- 0155-0525 -- 1357 -- 737-800

SpiceJet's competition on this route will be SkyTeam member China Southern, who operates a daily 757-200, and is the only other airline to ply the route between India. While the timings are far from optimal, they do offer good connections to Chennai in both directions, which is an important connection between India's manufacturing center and the hub of Chinese manufacturing.

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Lufthansa to re-launch new Germanwings budget airline with a la carte service-fare concept

German major, Lufthansa will re-launch its budget airline Germanwings on July 1, 2013, with a new brand and product concept allowing all passengers to enjoy “à la carte flying”.

Passengers will then be able to create their own package and adapt it in detail to their individual needs, from low-cost flying without add-ons to a high-quality passenger experience with lots of amenities and extras.

Keeping to its motto “Reasonably priced but not cheap”, passengers will be able to choose from three basic Economy Class fare-service offerings – Best, Smart and Basic.

The Best fare, similar to GoBusiness offered by Indian low fare carrier GoAir, offers the highest product currently available on inter-European low-cost routes. Passengers will be seated in the first three rows of the cabin with a seat pitch of 32 inches (36 inches in GoAir), and with the middle seat empty. The fare includes access to Lufthansa lounges, priority check-in and the use of the fast lane at security checks, more miles in the Miles & More programme, HON Circle miles, double the baggage allowance (two items weighing 23 kilograms each), à la carte catering on board, flexible rebooking and ticket cancellation.

The Smart fare will correspond to a conventional Economy product, seating towards the front of the aircraft with the same 32-inch seat pitch as those on the Best fare. Smart includes catering in the form of a snack and non-alcoholic drinks as well as a 23-kilogram baggage allowance. Ticket changes will be allowed for a fee.

The Basic fare, is the lowest and will compete with conventional low-cost products. No food or drink, and no baggage allowance. Seating with 29 inch seat pitch, will be from row eleven back.

Basic fares start at €33 one-way, Smart fares from €53, and Best will be in the €199-€399 range.

Germanwings will also offer passengers the ability to add extras to the Smart and Basic fares to simply and flexibly build a product they desire. For example Smart fare passengers can add on lounge access for €25.

Along with the new product concept, the Germanwings logo will also change. The core element will be a stylised “W” in blackberry and yellow colours, a succinct symbol chosen to convey the wings from the Germanwings brand. All of the airline’s aircraft will gradually be painted in the new livery following the launch of the new brand concept on 1 July 2013.

The airline will increase direct interaction with customers by further developing mobile booking and information systems. All prices will be communicated fairly and without hidden costs, while a cheaper 0180 telephone number will replace the previous 0900 number.

AviationWeek reports Germanwings will operate 32 Airbus A319s and A320s that have formed the fleet of the current low-fare airline. Lufthansa is shifting over 29 A319/320s for a fleet of 61 narrowbodies. The unit also is wet-leasing 23 Bombardier CRJ-900s from Eurowings, one of the group’s regional subsidiaries. The new Germanwings is to reach €1.8 billion in annual sales and 16 million passengers with a combined fleet of 84 aircraft, slightly fewer than the 90 originally envisaged. Lufthansa has decided not to transfer all of the existing non-hub fleet to the new unit. Some aircraft are shifted to hub flying, and the company has decided to accelerate the retirement of its Boeing 737-300 and -500 fleet.

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Analysis: IndiGo plots international and domestic expansion

Less than a year after it commenced international operations, India’ s largest low cost carrier (LCC) IndiGo, is planning a massive expansion of its Dubai operations, adding four new flights to its current two daily flights (one each from Mumbai and Delhi). Additionally, the carrier will add a second daily flight between Delhi and Bangkok.

The carrier, which operates 57 Airbus A320-232 aircraft and holds a 24.9% share of India’s domestic air travel market, currently serves 5 international ports (Bangkok, Singapore, Muscat, Kathmandu, and Dubai) as well as 27 cities across India.

IndiGo will commence daily flights between Chennai, Cochin, Hyderabad and Dubai, as well as add a second daily flight between Delhi and Dubai.

Thanks to smart scheduling, IndiGo has managed to schedule all 4 daily Dubai flights on just two aircraft – affording it a high level of utilization, with rotations as follow:

Aircraft 1
6E 66 - Dubai – Chennai-- D: 22:20 A: 04:15(+1) -- Daily -- Effective 25th August
6E 65 - Chenai – Dubai -- D: 07:30 A: 10:30 -- Daily -- Effective 25th August
6E 68 - Dubai – Kochi (Cochin) -- D: 11:30 A: 17:15 -- Daily -- Effective 25th August
6E 67 - Kochi (Cochin) – Dubai -- D: 18:15 A: 21:15 -- Daily -- Effective 25th August

Aircraft 2
6E 23 - Delhi – Dubai -- D: 02:30 A: 04:35 -- Daily -- Effective 7th August
6E 25 - Dubai – Hyderabad -- D: 05:35 A: 11:05 -- Daily -- Effective 7th August
6E 26 - Hyderabad – Dubai -- D: 13:20 A: 15:45 -- Daily -- Effective 7th August
6E 24 - Dubai – Delhi -- D: 16:45 A: 21:50 -- Daily -- Effective 7th August

The flight schedule for its Bangkok flights are as follow:

6E 43 - Delhi – Bangkok -- D: 18:25 A: 12:10 (+1) -- Daily -- Effective 10th August
6E 44 - Bangkok – Delhi -- D: 01:10 A: 04:10 -- Daily -- Effective 10th August

These flights in turn complement the current daily Bangkok flights and allow all Bangkok flights to be operated with one aircraft, whose only down time is a 2 hrs 50 minutes period in the mid afternoon in Delhi.

6E 41 - Delhi – Bangkok -- D: 05:35 A: 11:20 -- Daily
6E 42 - Bangkok – Delhi -- D: 12:35 A: 15:35 -- Daily

IndiGo has given indication that it has received all the required regulatory, government, and airport approvals from relevant authorities in India as well as from Dubai, United Arab Emirates and Thailand to launch these services and it has already put tickets on sale via its website. Introductory fares will begin at Rs. 11,200 return (round trip) for all flights in question.

Taking advantage of Kingfisher’s fall 

Image courtesy and copyright U. Krishna

Undoubtedly, IndiGo has been one of the largest beneficiaries of the 65% capacity reduction, earlier this year by Dr. Vijay Mallya promoted Kingfisher Airlines. The only profitable Indian airline has grown its market share from under 20% to a robust 25%, all the while benefiting from the rise in fares caused by the constriction in capacity.

IndiGo has indeed taken the opportunity to fill the void left by Kingfisher through prudent expansion in large markets from the Metros, whereas competitor SpiceJet has instead focused on filling in the gaps left behind in Tier II and Tier III by the withdrawal of Kingfisher’s fleet of ATR 72-500 turboprop aircraft. For example, the airline added two more daily flights between Mumbai and Delhi on May 25th, bringing their total offering on the route to 11 daily flights.

Upon the announcement, IndiGo CEO Aditya Ghosh said;

“In line with our endeavor to meet the requirements of both business and leisure travellers, we have introduced two new daily direct flights between Delhi and Mumbai. We are looking at providing affordable fares on these new routes for 6E travelers. IndiGo will continue to expand its network to meet the requirements of both business and leisure travelers wherever they demand it. It is our constant endeavour to provide more flexibility of choice for our customers as IndiGo continues to offer them on time, hassle free and always affordable flying experience.”

Beyond these new rotations, IndiGo also took advantage of a recent slot auction at Pune Airport in Western India near Mumbai to add a second daily Delhi-Pune rotation, as well as add new daily Hyderabad Pune services.

The schedules for the new Pune flights are as follow:

6E405 - Delhi – Pune -- D: 18:25 A: 20:30 -- Daily -- Effective 25th June
6E402 - Pune – Delhi -- D: 21:00 A: 23:05 -- Daily -- Effective 25th June

6E313 - Hyderabad – Pune -- D: 14:25 A: 16:00 -- Daily -- Effective 25th June
6E306 - Pune – Hyderabad -- D: 16:30 A: 17:50 -- Daily -- Effective 25th June

On the international front, SpiceJet too saw some opportunity, and added its own set of daily flights from Mumbai and Delhi to Dubai recently, marking the first foray for India’s second largest LCC outside of the SAARC countries.

For IndiGo and SpiceJet both, there is no question that Dubai has the potential to be a very lucrative route with its humongous base of migrant, tourist, and VFR (visiting friends and relatives) traffic, not withstanding the enormous business ties with India. Yet at the same time, there may be signals that the India-Dubai market might be reaching saturation, with private operator Jet Airways recently cancelling its Hyderabad-Dubai and Chennai-Dubai services.

IndiGo recently won approval from the Ministry of Civil Aviation for services Kathmandu, Dubai, Bangkok, Singapore, and Jeddah. The carrier was given rights to add up to 20,000 weekly seats on these routes, and the currently announced routes

1000th 777 built. Boeing image

add just 6,300 weekly seats. So there is definitely room for IndiGo’s expansion. In particular, more services to Dubai can be expected, as the carrier won approval for eight daily flights to Dubai but has added just six ( two from Delhi, and one each from Mumbai, Chennai, Hyderabad, and Kochi).

There is definite potential for IndiGo to expand further Dubai services, it could consider services from India’s technological capital and third economic city, Bangalore, or a second daily from Mumbai, or even Chennai, however, in all these cities IndiGo will face fierce competition from Dubai based behemoth, Emirates airline, which operates multiple wide body flights between these Indian cities and Dubai, besides offering global connectivity.

Share your views and thoughts on this subject via a comment.

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Topic of the Week - Air India Express as a True LCC

Open publication - Free publishing

Above you can find my article in Orient Aviation India magazine (pages 9-10: reading link is http://issuu.com/orientaviation/docs/oamagindia_may12/3) on Air India Express' hypothetical shift towards an LCC business model. Readers, what are your thoughts on Air India Express' plan? Will you stop flying Air India Express because of these service cuts? Can this model be modified to fit the domestic Indian market? Please post a comment with your thoughts below. P.S. I will finally be resuming posting after a month's leave

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Kingfisher CEO justifies Kingfisher Red LCC service withdrawl

By Devesh Agarwal

At Kingfisher Airline's annual general meeting last week, Chairman Vijay Mallya announced a drastic change in strategy by the stoppage of the Kingfisher Red low cost service for a focus on the full service segment.

Kingfisher Red Airbus A321 all economy cabin

In response to the myriad of media articles, many of which speculated on the possible reasons for the announcement , airline Chief Executive Officer Sanjay Aggarwal clarified and justified the change in strategy. We have reproduced the statement below without comment and edit for your unbiased reading.

We will analyse the statement at a later date.

Following an announcement made last week about Kingfisher Airlines’ (Kingfisher) focus on the full service segment of air travel, there has been a lot of speculation in sections about the media around. I would like to set the record straight and clear up any misconceptions around this announcement.

It is important to carefully analyse and understand the low cost or low fare segment of the Indian aviation industry. Let me begin by answering the most common question: Why focus on the full service product?

• Operating costs of so called low cost carriers and full service carriers in terms of fuel, airport charges, engineering and maintenance and crew costs are similar. Full service carriers incur additional costs on global distribution, in-flight catering, ground amenities and the frequent flyer programme. These additional costs are more than recovered through higher yields.
• In addition to large aircraft orders placed at time of start up in 2004/2005, the Indian LCCs in the recent months have placed orders for over 250 aircraft. In the last two years, capacity induction of the LCCs has outpaced the demand growth in the domestic market. The induction of so many additional aircraft in the low cost / low fare segment will potentially lead to substantial over capacity and a price war with declining yields.
• With continuing economic growth, business related travel is increasing significantly. Businessmen and executives prefer to fly with full service carriers because of ease of buying tickets, frequent flyer program and convenience offered. They are willing to pay extra and this segment is not as price sensitive as the classic low cost / low fare segment where there is a lot of discretionary travel involved.
• A detailed study over the last six months during the high oil price regime has clearly demonstrated that Kingfisher’s full service product has generated higher yields and load factors which is consistent with the assessment that the business travel segment is more sustainable than the extremely price sensitive low fare segment. The analysis also showed that of the incremental yield, only 25% is spent on providing the extra services associated with a full service carrier. The remaining 75% is net contribution to the bottom line.
• While there are currently five airlines participating in the low cost / low fare segment, there are only three full service carriers namely Air India. Jet Airways and Kingfisher Airlines. While competition certainly exists in this full service segment, such competition is tempered because of the frequent flyer loyalty programmes that are offered by each one. In short, we believe that the competition will be far more intense in the low fare space than in the full service space.
• Kingfisher Airline is widely recognised as a premium carrier and is the recipient of 38 national and international awards. The brand and service quality image is well established. This is evidenced by the higher yields and higher load factors generated on Kingfisher’s dual cabin aircraft. For the first five months of this fiscal year, based on DGCA published data, Kingfisher Airlines has delivered highest load factors of any airline in India.
• Kingfisher currently operates airbus aircraft with two cabin configurations – Dual cabin full service and Single cabin no frills. This also means the Kingfisher does not offer its premium Business Class or full service economy class product on all its routes. As a result Kingfisher is losing a certain amount of business class traffic on many routes.
• Kingfisher’s integration into the oneworld alliance is on track. oneworld is supportive of Kingfisher’s move to focus its energy and resources on a full service and premium product which is in line with the philosophy of oneworld and its member airlines.
• Over the next 4 months Kingfisher will reconfigure all its airbus aircraft including its single cabin aircraft into dual cabin aircraft with a reduced premium business class cabin and an increased number of full service economy class seats leading to a capacity increase of approximately 10%.
• The economy class will offer the same comfort as it does today. The space requirement for additional economy seats will be made available by reducing the number of business class seats.
• The reconfigured aircraft will have the seat equivalency of a low fare carrier but an opportunity to generate much higher revenue as demonstrated by current yields. Kingfisher will achieve incremental business class revenue as a result of wider and uniform availability and the airline will also generate incremental revenue through its increased full service economy class capacity.
• There will be no reduction in Kingfisher’s fleet size or its network. Our guests will continue to enjoy the benefits of Kingfisher’s network that provides connectivity to 60 domestic and 8 international destinations.

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Strategic and execution failures make AirAsia scale back India operations

Earlier this year, many an Indian waited with expectation while all Indian carriers waited with trepidation as the Malaysian low cost behemoth AirAsia, announced and commenced flights to a slew of cities across the nation.

Fast forward six months, and the Indian carriers are breathing easy as AirAsia is quietly withdrawing or dramatically scaling back flight operations from many Indian cities. Hyderabad, Bangalore, Kolkata, Trivandrum, are just a few, even the Chennai-Penang flight where the carrier has a complete monopoly has been quietly withdrawn. No seats are available for booking as much as one month in advance, even though the flight is still officially listed on the time-table.

What caused this low fare juggernaut to falter in a value concious country like India? A market so well suited for a low cost carrier, a market in which domestic low fare carriers are doing so well. It appears to be a combination of an incorrect strategy married to poor execution and a failure to adapt the AirAsia business model to meet the expectations of the Indian passenger.

Not engaging travel agents

Unlike domestic travel, foreign travel involves a variety of services in addition to the air ticket. From passports, visas, hotels, tours, to insurance, there is a gamut of services travellers need when flying overseas, and for these they rely on the travel agent. Travel agents are responsible for over 83% of the international travel bookings.

Even the largest global carriers like Singapore Airlines and Lufthansa realised the power of the travel agent in the Indian market when they tried to impose a zero commission regime and were met with stiff resistance.

The typical passenger on AirAsia would be a first time international traveller, and not well versed with the myriad of documentation and other requirements of foreign travel. many carriers and choices available in the travel market. Unlike Indian low fare carriers SpiceJet and IndiGo, AirAsia has chosen not to engage the travel agents, instead relying on a single call centre.

Ignoring corporates

The Chennai Penang route is a perfect example of the airline's failure to engage with potential customers business. Even with a monopoly on this route, AirAsia was managing a woeful 50% passenger load factors.

There are strong social and business links between the two cities. Penang was the base for the British during colonial times and was the destination of choice for Indian immigrants primarily from the state of Tamil Nadu whose capital is Chennai, since the late 18th century. There are similar synergies in business as well. Penang is one of the largest electronics manufacturing areas in the world, and Chennai is the hub for electronics manufacturing in India. Dell, Flextronics, Jabil, Sanmina SCI, Nokia, Bosch, the list of potential customers, with facilities in both cities, is endless.

Time is valuable for everyone especially the business traveller. I used to fly this route regularly as it was a simple three hour day flight instead of a eight hour overnight ordeal via Kuala Lumpur, yet, I was probably the only business customer on the flight.

Visa pains
AirAsia' point to point model works against it, since Kuala Lumpur and Malaysia are not the final destination for many Indian travellers, and multiple tickets cause confusion for the first time and uninitiated traveller.

The decision of the Malaysian government to remove the visa on arrival facility has also hurt the carrier significantly since most passengers will not want to go through the travails of obtaining a Malaysian visa purely for transit, and after tickets, visas are the foremost services travellers obtain from travel agents, a segment AirAsia does not engage with.

Over-estimation of the AirAsia brand and model

AirAsia may be a household name in Malaysia, but not in India. The airline has chosen to rely more on word of mouth instead of advertising, and therefore remains relatively low on the recall level when someone wishes to travel.

With different value perceptions and expectations, the Indian market is not yet ready for a traditional low-cost carrier with the complete a-la-carte pricing. AirAsia has to learn the finer market nuances from Indian low cost carriers IndiGo, SpiceJet, and GoAir who have spent the last five years building a trust with their passengers. Recent incidents like the Delhi fiasco only lower the airline's brand equity.

To avoid being stuck with only the elderly or labour class passengers, it is important for AirAsia to develop a loyal clientèle of business and middle-class leisure travellers, and for that it needs to engage with them via advertising, brand-building, and the travel agent community.

IndiGo which has a no-fuss service model very similar to AirAsia has recognised the weakness of this model for its upcoming international operations and is modifying it to ensure success.

Impatience
AirAsia runs a very tight ship and expects quick results. Its skeleton teams in various cities are too busy running airport operations to network with potential clients and build business.

AirAsia also need to give its teams longer than the six months, before it downgrades or kills the route or its employees.

India has long been the graveyard of low cost international carriers. Jetstar Asia, Tiger Airways, Nok Air, and others have come, failed, and quietly left the Indian market. Much is expected of AirAsia, and the carrier has excellent business leaders, but if they repeat the mistakes of their predecessors they are doomed to the same failed results.

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Indian airline market overview for 2010

I was recently interviewed by AirObserver on the outlook for 2010 for carriers in India, with a specific focus on the low fare / value carrier segment. Please read the interview here.

For an in-depth feature comparison between various Indian carriers I recommend this article . I also recommend these articles as additional reading for more details on the low fare segment.

IndiGo and SpiceJet - the rise of the value airline and SpiceJet - Q3 2010 review.

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New age low fare carriers – great value for money and a far cry from RyanAir

About two weeks ago, Air India announced it was going to extend its low cost operation Air India Express in to the domestic market. Across Twitter, Facebook and other social networking sites I detected a snigger from many fellow aviation bloggers and enthusiasts – Air India, a national carrier going low cost ? How low can Air India fall ?

It got me thinking, what is the benchmark of a low cost carrier?

Surely this poor view must have come from impressions of RyanAir - an organisation so cheap that it will even sell lavatory facilities or standing room tickets given the chance.

Where do carriers like Southwest Airlines or JetBlue or Virgin America stand? How do these “low fare” carriers compare to the US legacy carriers like American, Continental, Delta, United, and US Air, especially in light of the latter's service cutbacks and “ala carte” pricing?

How do Indian “low fare” carriers IndiGo, SpiceJet, JetLite, Jet Airways Konnect compare to other airlines in the US, or European or Asian low cost/low fare counterparts?

I search of answers I embarked on a two week quest. The answers in my comparison study revealed some very interesting results.

Southwest Airlines, JetBlue, Virgin America, EasyJet and most Indian “low fare” carriers like SpiceJet and IndiGo compare favourably to their “full service” counterparts.

What did surprise me, is despite it's "charge for everything" approach, RyanAir does not offer a significantly lower fare than it's other low fare competitors. Is the RyanAir myth just a creation?

Airline	Seat Pitch	Seat Width	Food	Beverage	Water	Baggage	Airport Check-in	One-way fare
SpiceJet	32”	17”	Buy	Buy	Free	20kg / 44 lbs	Free	$65.90
IndiGo	30”	17.7”	Buy	Buy No hot bev	Free cups. Bottle $0.60	20kg / 44 lbs	Free	$65.90
Kingfisher Red	31”	17.8”	Free	Free	Free	25kg / 55 lbs	Free	$67.94
JetLite	31”	17”	Buy	Buy	1 Bottle Free	25kg / 55 lbs	Free	$67.94
Jet Airways Konnect	30”	17”	Buy	Buy	1 Bottle Free	25kg / 55 lbs	Free	$67.94
Southwest	33”	17”	NA	Free	Free	2 pc	Free	$285.70
JetBlue	34”	17.8”	Free Snacks	Free	Free	1 pc	$2	$209.60
Virgin US	32”	17.7”	Buy	Free	Free	$15 / pc	Free	$225.60
EasyJet	29”	18”	Buy	Buy	Buy	20kg / 44 lbs	Free	$137.75
RyanAir	30”	17”	Buy	Buy	Buy	Pay	Pay	$157.35
Legacy (AA CO DL UA US)	31”	18” Airbus or 17” Boeing	Buy	Free	Free	Per Bag 1st$20 2nd$30 3rd$125	Free	$333.60
Air Asia	30”	17”	Buy	Buy	Buy	Kg. Slab 15$1.50 20$16.50 25$31.44	Free	$56.00

• One way fare was checked for a flight of approximately 2 hours flying time with a six day advance purchase.
• RyanAir does not provide details. However their Boeing 737-800 aircraft configuration is the same 189 all economy seats as most other low fare carriers.
• Indian carriers are prohibited from serving alcohol on domestic flights so beverage comparison is limited to non alcoholic drinks only. Most US and European carriers charge for alcoholic beverages.
• EasyJet charges for baggage check-in and these fees are included in the fare.

Compared to most of the full service legacy carriers across the world, these value carriers offer a fantastic product in terms of value for money. When compared to legacy carriers in the United States in most cases value carriers offer superior services right from the booking to on-board the flight, newer aircraft, and many more included services like baggage allowance and airport check-in, for free in their bouquet.

With the cutbacks in service levels, the introduction of a-la carte pricing coupled with reasonably high fares, should the legacy carriers in the United States be even considered “full service” any more? The answer is a resounding no.

In Europe too, some legacy airlines like British Airways are beginning to experiment the US in service level cutbacks, and will soon feel the pinch of the value carrier even harder.

The expectations from a value carrier is in many ways dictated by the service levels of a full service carrier. In most Asian countries, two factors come in to play.

First is the lack secondary airports, thereby making the airport cost structure the same for the value carrier when compared to the full service carrier. Value carriers have narrower options to obtain better efficiencies than their full service counterparts, which they achieve by :

• turning around their planes faster. 30 minutes compared to 40~45 minutes
• using a lean staff structure. Typically only one gate agent compared to four or five

and other techniques common to value carriers across the world like common aircraft type, single class cabin, less food, less waste, higher aircraft usage etc.

Second, the higher service levels of the legacy carriers in Asia forces the value carriers to offer a superior service and more "freebies". Indian value carriers do not charge for over-sized luggage, unaccompanied minors service, and when connecting to international flights, offer their passengers a two piece baggage instead of the traditional 20 kg allowance.

In India, the only difference I could find between the full service carriers Air India, Jet Airways and Kingfisher was the availability of reading material, a hot meal on flights greater than one hour and free flow of beverages and water on board. The service levels of Kingfisher Red are almost the same as the regular Kingfisher with free hot snacks, mileage accrual, reading material, in flight entertainment system, right down to a valet service, but then Kingfisher is the exception not the norm.

The value carriers like IndiGo and SpiceJet even have a "frequent flier" program for corporate travellers. Both airlines reserve their first five rows which have extra legroom, while SpiceJet adds a hot continental breakfast. GoAir too has introduced a concept of a "Business class" for an additional $20 where the legroom is increased to 34", meals are complimentary, the middle seat is left vacant, free baggage allowance of 35kgs/77lbs, and rebooking fees are waived.

Traditional Indian hospitality, and the concept of Atithee (guest is greater than me) ensure smiling faces, helpful attitudes, and attentive service, regardless of airline.

I was rather surprised at the fares. Indian carriers have surprisingly low fares, despite facing fuel costs which are almost double that of the international rates, and infrastructure and equipment costs in line with international norms. It will be great to hear from some informed readers on the possible reasons other than sheer competition since both SpiceJet and IndiGo both appear to be making profit.

What is an airline? Is it a transport business? or is it a hospitality business?

For RyanAir and most US legacy carriers, it appears to be the former. For the luxurious Emirates and Singapore Airlines it is probably the latter, but the sweet spot appears to be somewhere in between, but regardless it always boils down to Quality, Cost, Delivery, Service i.e. offering your customer the maximum value for their money.

It will be great to hear from Bangalore Aviation readers on what differences you perceive between the "value" and the "full service" carriers.

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