Marginal decrease in August US passenger traffic from a year earlier

By BA Staff

The U.S. Department of Transportation’s Bureau of Transportation Statistics (BTS) reported that U.S. airlines carried 67.7 million systemwide (domestic and international) scheduled service passengers in August 2013, 0.1 per cent fewer than in August 2012. Domestic passengers decreased 0.9 percent to 58.1 million, and international passengers increased 5.5 per cent to 9.6 million compared to August 2012.

Total U.S. airlines' passenger traffic for the first eight months of 2013 increased 0.4 per cent 502.7 million, compared to the same period last year. Domestic passengers remain virtually unchanged at 435.3 million, while international passenger traffic increased 3.1 per cent to 67.4 million.

System-wide and domestic load factors, the proportion of capacity measured Available Seat-Miles (ASMs) vs. utilisation measured in Revenue Passenger-Miles (RPMs), remained below the all-time August highs reached in 2011, while international load factors hit record highs of 87 per cent as RPM growth far exceeded ASM capacity expansion.

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Emirates group first half fiscal 2014 net profits up 4%. Airline net profit up 2% to $475 million

by Devesh Agarwal

Emirates A380. Photo copyright Devesh Agarwal.

The Emirates Group, the aviation holding company of the Al Maktoum family which rules Dubai, and the parent of Emirates airline, announced its first half (April to September) results of the fiscal year 2014 (ending March 31, 2014) today.

Group

The Emirates Group revenues reached AED 42.3 billion (US$ 11.5 billion) for the first six months of its current fiscal year ending September 30, 2013, up 13% from AED 37.5 billion (US$ 10.2 billion) at 30 September 2012.

Net profit for the Group rose to AED 2.2 billion (US$ 600 million) an increase of 4% over the last year’s results.

The Group’s cash position on 30 September 2013 came down to AED 18.2 billion (US$ 4.9 billion), from AED 27.0 billion (US$ 7.3 billion) six months earlier. This is after a AED 1.8 billion bond repayment which matured in July 2013, a AED 367 million first instalment payment on a USD one billion Sukuk (Islamic equivalent of bonds), and a AED 7 billion injection back into the business to fund new aircraft, engines, spares and other projects across the Group.

His Highness Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline and Group said

“The global business environment continues to be challenging. We have stayed agile even as we grow, and this ability to adapt and act quickly has been key to our success. Our investments in the infrastructure of both Emirates and dnata continue to pay off,”

Group employee numbers increased 11.7% to over 75,800 from six months earlier.

Emirates airline

Capacity measured in Available Seat Kilometres (ASK), grew 16.9% on the addition of ten aircraft – six A380s, three 777s and one 777 freighter in the reported six month. 15 more new aircraft scheduled to be delivered to the airline before March 31, 2014, the end of the current fiscal year FY2014.

Passenger traffic carried measured in Revenue Passenger Kilometres (RPK) was up 16.1% with a load factor averaging 79.2% down from last year’s 79.7%. In number, Emirates carried 21.5 million passengers in the six months, since 1 April 2013, up 15% from the same period last year.

Cargo volumes increased 5.2% but the airline has not released the actual performance nomrally measured in FTK (Freight Ton Kilometre) or capacity in ATK (Available Ton Kilometre) .

Emirates airline's revenue, including other operating income, for the six months was AED 39.8 billion (US$ 10.8 billion) up 12% from last year's first half revenue of AED 35.4 billion (US$ 9.6 billion) to return a 2% increase in net profit of AED 1.7 billion (US$ 475 million).

Fuel prices constituted 39% of the airline's expenditures. The Union and state governments of India would be well advised to observe the disadvantage they put Indian carriers to, thanks to their greedy excessive taxation regime which makes fuel between 45%~50% of expenditure.

Emirates launched new routes to Haneda and Stockholm, bringing the total count of new routes launched in the past 12 months to seven including Adelaide, Lyon, Phuket, Warsaw and Algiers. The airline now flies to 137 destinations in 77 countries, up from 126 cities last year in 74 countries. Additional new routes to be added in the remaining part of the fiscal year include Kabul, Kiev, Taipei and Boston.

The airline also celebrated the five year operating anniversary, of its A380 super-jumbo. Emirates' A380s have carried 18 million passengers since its first flight on August 1, 2008 from Dubai to New York.

dnata airport services and infrastructure

dnata (formerly Dubai National Air Transport Association) now operates in 38 countries with revenues including other operating income of AED 3.7 billion (US$ 1 billion), 18% higher compared to AED 3.2 billion (US$ 864 million) last year. Overall profit for dnata rose strongly by 13% to AED 458 million (US$ 125 million).

dnata’s airport operations was the largest contributor to revenues with AED 1.4 billion (US$ 375 million), a 16% increase from last year's first half revenues of AED 1.2 billion (US$ 324 million). The number of aircraft handled by dnata rose 9%, to 141,845

dnata’s in-flight catering operation, which operates the world's largest flight kitchen, in Dubai, United Arab Emirates, recorded strong growth thanks to its acquisition of Servair in Italy in June 2013. Revenues were up 39% to AED 891 million (US$ 243 million). 22.4 million meals were uplifted for the first half of the fiscal year, up a massive 81% from last year.

Revenue from dnata’s Travel Services operation contributed AED 303 million (US$ 83 million), up 16% from the same period last year.

dnata’s cargo handling division grew revenues 4% to AED 546 million (US$ 149 million) on account of increased tonnage mainly for dnata’s UK operation and in Switzerland which rose in total by 2% to 809,236 tonnes.

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SpiceJet posts record Rs. 559 crore loss in Q2 FY2014. Needs urgent capital infusion.

by Devesh Agarwal

Gurgaon based low fare carrier SpiceJet Ltd., continued the record of disastrous performance in the Indian airline industry when it announced a record Rs. 559 crore loss for the second quarter, ended September 30, of the fiscal year 2013~2014.

This compared to the Rs. 163.5 crore loss from the same quarter last fiscal, and a Rs. 50.5 crore profit from the first quarter of this fiscal.

On October 23, India's largest private carrier Jet Airways reported a monstrous loss of almost Rs. 1,000 crore.

The airline blamed the poor performance on the precipitous drop in the exchange of the Indian Rupee vs the US Dollar which occurred in the quarter and contributed Rs. 42 crore to losses. In a statement released late this evening, it said

“The civil aviation sector in India continues to struggle under the burden of several adversities mainly the Indian rupee that saw unprecedented weakness during the quarter,”

Poor demand due to a slowing economy saw a drop in income to Rs. 1,257.22 crore from Rs. 1,701.543 crore in the first quarter, though marginally better from Rs. 1,185.244 crore from the same quarter last fiscal. A 9% growth in number of passengers out-stripped the 17% increase in capacity measured in available seat kilometres (ASK), resulting in a 7% in average passenger yields from Rs. 4,001 to Rs. 3,711. Desperate sales at cut-throat fares have also taken their toll.

A lack of capacity discipline by virtually every Indian carrier, especially domestic leader IndiGo, and Jet Airways, continues to exasperate the soft demand situation, and we see the same indiscriminate financial indiscipline as we did in 2008.

Expenses shot up to Rs. 1,791.623 crore against Rs. 1,641.933 in the first quarter, and Rs. 1,357.305 crore from the same quarter last fiscal. Aircraft maintenance costs shot up almost 64% from Rs. 199 crore to Rs. 325 crore largely driven by Rs. 78 crores in engine maintenance expenses due to a bunching up of shop visits.

Fuel costs fell from 45% of total expenses to 39.7% but thanks to the plunge in income, increased from 43.8% to 57% of income.

Continuing losses have put the airline in a precarious financial position. It is estimated the airline requires a minimum Rs. 1,500 crore capital infusion. While the airline has announced the appointment of Sanjiv Kapoor, the former chief executive of GMG Airlines of Bangladesh, as its Chief Operating Officer, it still lacks a Chief Executive, since the departure of Neil Mills, nearly three months ago.

The silver lining for SpiceJet is that parts of the third quarter and the fourth quarter sees high air travel due to the festival season and returning Indian travel.


The supply-demand imbalance is heading for a precipice with expected the commencement of new airlines AirAsia India, and Tata-SIA.

Share your thoughts via a comment.

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Dubai International’s passenger traffic up 13.1 per cent in September

By BA Staff

Courtesy of Wikipedia

Passenger traffic at Dubai International, the world’s second busiest airport for international passengers, rose 13.1 per cent in September, according to the latest traffic statistics issued yesterday by operator Dubai Airports.

Passenger traffic in September totaled 5,407,326, an increase of 13.1 per cent compared to 4,780,394 during the corresponding month in 2012. Year to date traffic is up 16 per cent to 49,379,165 compared to 42,565,340 recorded during the first nine months of 2012. Aircraft movements totaled 30,746 during September, an increase of 10.2 per cent from the 27,909 recorded during the same period last year. Passengers per aircraft movement in September came in at 193.

All regions recorded positive growth in September with the exception of South America (-6.9 per cent).  Among the strongest markets in terms of percentage* passenger growth were Eastern Europe (+65.1 per cent), driven by flydubai expansion to multiple destinations in the region and Emirates’ new service to Warsaw. Passenger traffic to and from Australasia rose 38.6 per cent as a result of Emirates' expansion and Qantas’ new operation connecting Australia and London through Dubai. On a country level, Australia (+41.7 per cent), France (+23.7 per cent), Saudi Arabia (+22.4 per cent), Thailand (+21.8 per cent) and the UK (+21.7 per cent) saw the largest increases.

In terms of overall passenger numbers, Western Europe traffic took over as the top market thanks to robust growth (+14.8 per cent) during the month. AGCC came in second thanks to 15 per cent year-on-year passenger traffic growth. The Indian subcontinent, which took third spot, continued to show positive growth (+9.8 per cent) due to the expansion of several Indian carriers including Indigo, Spice Jet and Air India Express.

Air freight volumes rose 1.8 per cent in September with volumes of 196,823 tonnes compared to 193,261 recorded during the same period last year. Year-to-date cargo traffic totalled 1,785,539 tonnes, up 6.6 per cent from the 1,674,997 tonnes shipped during the same period last year.

Paul Griffiths, CEO of Dubai Airports said:

“Passenger and cargo traffic growth continue unabated and Dubai International is on track to eclipse our projections for 65.4 million passengers and 2.7 million tonnes of cargo. With the opening of our new passenger terminal at Al Maktoum International at Dubai World Central, and the ongoing expansion at Dubai International, Dubai’s aviation infrastructure continues to make it an attractive destination for tourism, trade and commerce.”

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July 2013 U.S. airline traffic data shows system passengers unchanged from 2012

By BA Staff

Courtesy of Bts.gov

The U.S. Department of Transportation’s Bureau of Transportation Statistics (BTS) reported that U.S. airlines carried 69.2 million systemwide (domestic + international) scheduled service passengers in July 2013, the same as in July 2012. The systemwide total was the result of a 0.7 percent decrease in the number of domestic passengers (59.3 million) and a 4.3 percent increase in international passengers (9.9 million).

BTS, a part of the Department’s Research and Innovative Technology Administration, reported that U.S. airlines carried 0.4 percent more total systemwide passengers during the first seven months of 2013 (435.0 million) than during the same period in 2012. Domestically, U.S. airlines carried 377.2 million passengers, 0.1 percent more than 2012. Internationally, they carried 57.8 million passengers, up 2.7 percent from 2012. See Tables 2, 8 and 14 of Air Traffic Press Releases for previous-year data.

The July 2013 international load factor of 86.9 percent was a record high for the month of July as year-over-year growth in revenue passenger-miles exceeded international capacity expansion. Systemwide and domestic load factors remained below the all-time July highs reached in 2011. Load factor is a measure of the use of aircraft capacity that compares Revenue Passenger-Miles (RPMs) as a proportion of Available Seat-Miles (ASMs).

 

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Alaska Air group reports record third quarter fiscal 2013 results

By BA Staff

Alaska Air Group, Inc., reported third quarter 2013 GAAP net income of $289 million, or $4.08 per diluted share, compared to $163 million, or $2.27 per diluted share in the third quarter of 2012. Excluding the impact of mark-to-market fuel hedge adjustments of $20 million ($12 million after tax, or $0.17 per diluted share), and a one-time special revenue item of $192 million ($120 million after tax, or $1.70 per diluted share) that primarily resulted from the application of new accounting rules associated with the modified affinity card agreement, the company reported record adjusted net income of $157 million, or $2.21 per diluted share, compared to adjusted net income of $150 million, or $2.09 per diluted share, in 2012.

Alaska Air Group CEO Brad Tilden said:

"These results represent our best quarter ever and mark Alaska's 18th consecutive quarterly profit. This is noteworthy given significant additional competition in some of our core markets. The balance and strength of our network combined with the ability of our people to respond quickly to changing business conditions are enabling us to succeed in this highly competitive industry."

The following table reconciles the company's reported GAAP net income and earnings per diluted share (EPS) during the third quarters of 2013 and 2012 to adjusted amounts:

	Three Months Ended September 30,
(in millions, except per share amounts)	Dollars	Diluted EPS	Dollars	Diluted EPS
Reported GAAP net income	$289	$4.08	$163	$2.27
Mark-to-market fuel-hedge adjustments, net of tax	-12	-0.17	-13	-0.18
Special revenue item, net of tax	-120	-1.7	----	----
Non-GAAP adjusted income and per-share amounts	$157	$2.21	$150	$2.09

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Boeing reports robust third quarter fiscal 2013 results. Raises full year earnings guidance

by Devesh Agarwal

Chicago based, US aerospace and defence giant The Boeing Company reported earnings of $1,160 million, a massive 12% jump in its third-quarter profit compared to $1,030 million from the same period a year ago. The company has also raised its 2013 financial performance outlook, based on an increase in commercial aircraft deliveries.

Key highlights of the quarter

• Core Earnings Per Share (non-GAAP)* rose 16% to $1.80 on strong operating performance; GAAP EPS of $1.51
• Revenue increased 11% to $22.1 billion reflecting higher commercial deliveries
• Backlog grew to a record $415 billion, including $27 billion of net orders during the quarter
• Operating cash flow before pension contributions increased to $4.3 billion
• 2013 Core EPS guidance increased to between $6.50 and $6.65 (previously forecast of $6.20 to $6.40); GAAP EPS to between $5.40 and $5.5

Boeing Chairman, President and CEO Jim McNerney said

"Consistently strong operating performance is driving higher earnings, revenue and cash flow as we deliver on our record backlog and return increased value to shareholders,"  "During the quarter, Commercial Airplanes completed the first flight of the 787-9 and delivered 170 airplanes, while Defense, Space & Security maintained solid performance and captured $7 billion in new orders. Despite the uncertainty of the U.S. defense market, overall our customer-focused business strategies and disciplined execution on our programs are producing the results we expect, and our strong year-to-date performance and positive outlook allow us to increase our 2013 guidance for earnings and operating cash flow."

Boeing Commercial Airplanes was the star performer with third-quarter profits of $1,620 million, up 40%, on revenue of $14 billion, and operating margin improving to 11.6%. During the quarter, the 787-9 completed first flight. The company intends to increase the 787 production rate from 10 to 12 per month in 2016, and to 14 per month before the end of the decade. The division booked 200 net orders during the quarter with a backlog of nearly 4,800 airplanes valued at $345 billion.

Boeing Defense, Space & Security's third-quarter revenue was $8 billion ($8,000 million), while operating margin was 8.4%. Profits fell by 19%, mainly due to a profit fall of 48% in Boeing Military Aircraft (BMA) whose third-quarter revenue was $3.5 billion, primarily reflecting lower delivery volume. Operating margin at BMA decreased to 6.2%, impacted by mix and one-time charges on the F-15 and C-17 programs. During the quarter, BMA was awarded a low-rate initial production award for 13 P-8A Poseidon aircraft.

Network & Space Systems (N&SS) third-quarter revenue was $2.2 billion, reflecting higher sales of Delta inventory and revenue in the Space Launch System program, and operating margin was 8.7%. During the quarter, N&SS was awarded a contract by Mexico's Satmex for an additional 702 small satellite.

Global Services & Support (GS&S) third-quarter revenue was $2.3 billion, due to higher volume in maintenance, modifications and upgrades. Operating margin was 11.4%. During the quarter, GS&S achieved first flight on the QF-16 unmanned aircraft and was also awarded a contract by the U.S. Air Force for 56 additional replacement wings for the A-10 aircraft.

Backlog at Defense, Space & Security was $70 billion, of which 38% represents orders with international customers.

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Boeing to begin modifying 787s for return to service

Boeing image

Today's approval of battery system improvements for the 787 Dreamliner by the U.S. Federal Aviation Administration (FAA) clears the way for Boeing and its customers to install the approved modifications and will lead to a return to service and resumption of new production deliveries.

The FAA's action will permit the return to service of 787s in the United States upon installation of the improvements. For 787s based and modified outside the United States, local regulatory authorities provide the final approval on return to service, but it is expected the local bodies will follow the FAA's lead.

Approval of the improved 787 battery system was granted by the FAA after the agency conducted an extensive review of certification tests. The tests were designed to validate that individual components of the battery, as well as its integration with the charging system and a new enclosure, all performed as expected during normal operation and under failure conditions. Testing was conducted under the supervision of the FAA over a month-long period beginning in early March.

Boeing, in collaboration with its supplier partners and in support of the investigations of the National Transportation Safety Board and the Japan Transport Safety Board, conducted extensive engineering analysis and testing to develop a thorough understanding of the factors that could have caused the 787's batteries to fail and overheat in two incidents last January. The team spent more than 100,000 hours developing test plans, building test rigs, conducting tests and analyzing the results to ensure the proposed solutions met all requirements.

Boeing also engaged a team of more than a dozen battery experts from across multiple industries, government, academia and consumer safety to review and validate the company's assumptions, findings, proposed solution and test plan.

The improved battery system includes design changes to both prevent and isolate a fault should it occur. In addition, improved production, operating and testing processes have been implemented. The new steel enclosure system is designed to keep any level of battery overheating from affecting the airplane or even being noticed by passengers.

Boeing has deployed teams to locations around the world to begin installing improved battery systems on 787s. Kits with the parts needed for the new battery systems are staged for shipment and new batteries also will be shipped immediately. Teams have been assigned to customer locations to install the new systems. Airplanes will be modified in approximately the order they were delivered.

Boeing will also begin installing the changes on new airplanes at the company's two 787 final-assembly plants, with deliveries expected to resume in the weeks ahead. Despite the disruption in deliveries that began in January, Boeing expects to complete all planned 2013 deliveries by the end of the year. Boeing further expects that the 787 battery issue will have no significant impact to its 2013 financial guidance.

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INFOGRAPHIC: Airline-wise share of international passenger traffic, to and from India, 2011 to 2012

Based on a report in The Economic Times we have prepared this infographic showing the airlines' market share of international passenger traffic to and from India during fiscal 2011~2012.

The chart throws up some surprises. SriLankan Airlines and Oman Air feature on this list, but Singapore Airlines does not. Hard to accept? and where is AirAsia? Share your thoughts via a comment.

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Boeing deliveries for Q1 2013

US air-framer Boeing reported its deliveries for the first calendar quarter for the year 2013. The impact of the 787 Dreamliner grounding is noticeable in the figures.

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Cathay Pacific Group - financial and operational results for 2012

by Devesh Agarwal

Cathay Pacific Group FY2012 overall results

Hong Kong based, Cathay Pacific Group reported an attributable profit of HK$916 million (approximately $118.08 million) for 2012 – an 83.3% fall compared to the profit of HK$5,501 million reported for 2011, even though turnover for the year increased by 1.0% to HK$99,376 million (approximately $12.81 billion). Earnings per share fell by 83.3% to HK23.3 cents. (US$1=HK$7.75. 1HK$=INR6.99).

With a strong presence in the air cargo services area, the continuing slowdown in the Eurozone countries during 2012, and their resultant impact on the exports from China and Hong Kong, affected the group. The Group was also adversely affected by the high price of jet fuel, and pressure on passenger yields due to increased competition. The Group has investments in Air China, which also showed a significant decline due to similar reasons.

Cathay Pacific results FY2012 - pperating statistics

Annual passenger revenue for 2012 was HK$70,133 million, up 3.5% from 2011. Capacity was increased by 2.6%. The Group's two airlines (Cathay Pacific and DragonAir) carried 29 million passengers, up 5% from 2011. Passenger load factor fell 0.3%. Yield increased by 1.2% to HK67.3 cents, largely due to higher fuel surcharges but fuel prices increased 1.7%.

Economic uncertainty caused corporate customers to belt tighten, which pressured yields in the premium classes, while strong competition on key routes and the same economic FUD (fear, uncertainty, doubt) factor squeezed the economy class yields. Cathay does have a reasonably portion of its fleet as older fuel guzzlers, which made long distance operations under cost pressures. Cathay Pacific announced measures designed to protect its business in an environment of high fuel prices and weak revenues. The group accelerated the retirement of the less fuel-efficient Boeing 747-400 passenger aircraft and withdrew four Boeing 747-400BCF (Boeing converted freighters) from service.

Annual cargo revenue fell 5.5% to HK$24,555 million. Capacity decrease of 3.1%, helped keep yield for Cathay Pacific and Dragonair, unchanged, at HK$2.42. Cargo load factor dropped 3% to 64.2%.

Cathay Pacific Group FY2012 - sales by geography. Indian sub-continent and middle east is the smallest contributor

Fuel remained the most significant cost, and even discounting the effects of fuel hedging, increased by 0.8% to account for 41.1% of total operating costs. Fuel, as a percentage of total operating costs decreased 0.4%.

Through 2012, the Cathay Pacific Group kept a clear focus on its key strategic goals: developing its network and its Hong Kong base; maintaining and enhancing the quality of its services; strengthening its relationship with Air China; and maintaining a prudent approach to financial risk management.

On the passenger side, Cathay Pacific added frequencies on routes to India, Japan, Malaysia, Singapore, Taiwan, Thailand and Vietnam and introduced a new service to Hyderabad in India last year. Dragonair added frequencies on routes to secondary cities in Mainland China and introduced or resumed flights to eight destinations in 2012. In the first quarter of 2013, Dragonair is launching another four new destinations. On the cargo side, Cathay Pacific introduced freighter services to Zhengzhou, Hyderabad and Colombo last year.

Cathay Pacific Group FY2012 - capacities, load factors, and yields by geography

During the year, Cathay Pacific introduced a new Premium Economy Class product, a new long-haul Economy Class seat and a new Regional Business Class seat. See images and read details here and here.

Cathay Pacific and Dragonair received 19 new aircraft as part of their fleet upgrade plan. At the end of the fiscal, the Group had 92 aircraft on order for delivery up to 2020. An order was placed for six Airbus A350-900 aircraft in January 2012. In August the Group ordered 10 Airbus A350-1000 aircraft and converted an existing order for 16 Airbus A350-900 aircraft into an order for 16 Airbus A350-1000 aircraft. In March 2013, Cathay Pacific entered into an agreement with The Boeing Company under which it agreed to buy three Boeing 747-8F freighter aircraft and cancel the agreement to purchase eight Boeing 777-200F freighters that were entered into in August 2011. Under the agreements, the Company also acquired options to purchase five Boeing 777-200F freighters and The Boeing Company agreed to purchase four Boeing 747-400BCF converted freighters, which were taken out of service in 2012 and early 2013. The transaction is part of a package of transactions between the Group, The Boeing Company, Air China Cargo Co., Ltd and Air China Limited.

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Air India to receive another Rs. 5000 Cr. equity infusion in fiscal 2013~14

by Devesh Agarwal

As per the budget for fiscal 2013~14, presented yesterday in parliament, the Indian government has earmarked another Rs. 5,000 crore (about $900 million) for equity infusion into ailing national carrier Air India.

This is the second tranche of a nine year, Rs. 30,000 crore (about $ 5.5 billion) tax-payer funded equity infusion, which is part of a turn-around plan for the carrier. The current budget initially provided Rs. 4,000 crore, which has been subsequently increased to Rs. 6,000 crore in the revised estimates. In fiscal 2011~12 the carrier was given Rs. 1,200 core as extra-budgetary support. The budget documents also claim that Air India will additionally generate Rs. 1,318.60 crore through internal and extra budgetary resources in 2013~14.

Civil aviation minister Ajit Singh informed the Indian parliament via a written reply that Air India has turned EBITDA (Earnings Before Interest, Depreciation, Taxes and Amortization) positive of Rs. 48.75 crore between April and December 2012. A drop in the ocean of red, as the carrier had annual losses of Rs 7,853 crore in fiscal 2011~12, has debt exceeding $10 billion, and current operating losses of Rs. 2,554.02 crore for the period from April to December 2012. (Air India has operating revenues of Rs. 11,400.44 crore and operating expenses of Rs. 13,954.47 crore).

The Economic Survey for 2012-13, tabled in Parliament yesterday, claimed that Air India is expected to achieve positive EBITDA in the current fiscal, and the carrier has registered performance improvement such as on-time performance at 85 per cent, passenger load factor at 70.9 per cent and yield at Rs. 4.31 per revenue passenger kilometre during the April~October 2012 period.

Share your thoughts via a comment.

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Happy Holidays from Bangalore Aviation as we cross 3 million annual hits

The entire team at Bangalore Aviation joins me in extending our warmest wishes for your safe and happy holiday celebration.

We thank you for your consistent support. A few days back we crossed the 3 million annual page views mark. Making us the dominant aviation enthusiast site in India. You can see the annual views in the right column mid way down the page, right above our global ranking.

- Devesh Agarwal

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Ajit Singh's desire for Air India to be number one unleashes a fare war amongst Indian airlines

Less than a week ago the Union Minister of Civil Aviation Mr. Ajit Singh asked Air India to submit a plan to enhance its share in the domestic passenger market, with the ultimate goal of being number one. This desire, against a continuing decline in domestic air passenger numbers. In August only 4.369 million passengers travelled, down 4% from the 4.537 million of July, thanks to surging airfares and a slowing economy.

Jet Airways (down 1.4%) and Kingfisher (down 0.3%) were double hit, as more passengers shifted towards the low fare carriers IndiGo, SpiceJet and GoAir, but Air India kept its market share steady; an decent performance for a full fare carrier, in these trying times.

Mr. Ajit Singh asked Air India to come out with innovative and customer focused strategies to achieve optimum utilisation of all planes and also maximum utilisation of each plane, but it appears the folks at Air India seem to know only one way to increase market share, a method on which, my fellow analyst, Vinay Bhaskara, made a telling comment

"Once the chase for market share commences, industry-wide bankruptcy looms"

Yes, you guessed right dear readers; to meet the minister's "wishes" Air India has unleashed a fare war to gain market share. It promptly dropped its 30 day advance purchase fares by 15%. The very next day, the country's largest private full service carrier, Jet Airways, followed suit with fare drops on 30 day and 21 day advance purchase APEX fares. Yesterday, other Indian carriers, including, IndiGo and SpiceJet have joined the fare slashing party.

Yet, this is no fun party. These airlines, for all practical purposes, are eating their young to survive. In this war of attrition, everyone is going to be the loser. As passengers we maybe getting a good deal in the short term, but in the long term, it will be us passengers, who will have to make good the losses of the airlines by paying higher fares.

Additionally, as tax-payers, our tax Rupees are being forcibly wrested to infuse Air India with an unlimited lifeline, and if anything, the carrier, and its political masters, have a moral obligation to be more careful and judicious in the use, some may say, waste, of our money.

Surely a well educated Ajit Singh, an alumnus of the prestigious I.I.T. Kharagpur and Illinois Institute of Technology, Chicago, realises what his well intentioned comments are resulting in, and reigns in this disastrous fare ware before it gets out of hand.

What are your thoughts on this situation? Please share a comment.

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INFOGRAPHIC: Three years Passenger Load Factors and On Time Performance 2009~2011

In parliament, the Indian civil aviation minister Mr. Ajit Singh released the historical information on the passenger load factors and the on-time performance for domestic operations of Indian carriers for the last three years i.e. from January 2009 to December 2011.

The annual average for each airline is given, as is the average for all airlines for a given year, average for each airline over the three years, and an industry average of all airlines across the three years.

There are some interesting observations to be made, and we will welcome your views by means of a comment. Consider it, a quiz of sorts, did you catch the subtleties?

The opening question we would pose to you - with your knowledge of the Indian airline industry, does this data look accurate? If not, where do you see possible errors?

Go ahead, we are awaiting your comments.

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IndiGo and Jet lead performance and market share but also in passenger complaints

India's Directorate General of Civil Aviation reported domestic performance metrics of the seven Indian carriers for February 2011. Overall traffic was up 18.46% to 4.576 million passengers from 3.863 million passengers a year earlier. Cumulative traffic for 2011 is up 19.62% to 9.511 million from 7.951 in 2010.


The Jet Airways group, comprising of Jet Airways, Jet Airways Konnect and Jet Lite, led the industry with a market share of 21.6%. IndiGo led the low cost segment with an 18.7% share.

Compared to a year ago, the value carriers GoAir, IndiGo, and SpiceJet have captured significant market share from national carrier Air India and Dr. Vijay Mallya promoted Kingfisher Airlines, both of whom have been facing financial problems and have not expanded their fleet with the resurging market.

In a recent survey, many passengers place a high priority on on-time performance (OTP), and most airlines have been working hard to address this. Certain guidelines imposed by the regulator, the Directorate General of Civil Aviation, have resulted in a streamlining of operations at Mumbai and this is reflected by the industry leading performance of Jet Airways. Kingfisher, which was facing a steady erosion of customers due to a poor OTP, appears to have pulled up its socks to rank second, ahead of traditional punctuality leader IndiGo.


On flight cancellations, IndiGo was the best in the industry at 0.1% and Jet Airways at 0.6% was below the industry median 0.8%. Kingfisher (0.9%), Air India (1.3%) and JetLite (1.4) were the three most unreliable airlines.


Passenger seat factors dipped as the traditional winter travel concluded in January. IndiGo continued to be industry leader filling 87.6% of its capacity, while Air India was the laggard at a pathetic 68%.

In complete contradiction to their industry leading performance, Jet Airways and IndiGo also topped the month on the negative; with the most passenger complaints. Jet received 4.1 complaints per 10,000 passengers and IndiGo was close behind at 3.1, both well ahead of the industry median 2.5.

Contradicting its stereotypical poor image, Air India has the best record in the industry with 1.1 complaints per 10,000 passengers and Kingfisher posted a second best at 1.7 complaints per 10,000 passengers.

What reasons would you attribute to this contradictory performance by both Jet and IndiGo? Conversely why are passengers not complaining about Air India? Post a comment.

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Air India reports operational profit. True long term improvement or just a peak month jump?

National carrier Air India has recorded it’s second consecutive month of operational profit.

The carrier posted an operating surplus of Rs 49.48 Crores ($11.22 million) in December 2010, up from Rs 21.66 crore in November 2010.

While the carrier feels this is largely due to recent efforts at improvement in efficiency parameters and adoption of better yield management strategies, most analysts attribute this to the fact that November through January are the peak travel months of the year in India. It will be interesting to see Air India's results for month of February 2011.

A company spokesperson said,

“Air India’s combined passenger load factor [PLF] during December 2010 was 70 %. While the domestic operations recorded a high 79.8 %, the international routes also registered a PLF of 67.1 %.”

Air India still has a very long way to go. One can compare the 67.1% PLF to the 80.6% reported by private sector Jet Airways on its international operations just two days ago, and keep in mind this was for the whole quarter which includes a relatively slow October, whereas Air India is reporting only December, the peak month in Indian air travel.

Air India’s network passenger revenue for the first nine months of fiscal 2011 (April through December) rose up 21% to Rs. 7,941 Crores ($1.802 billion) from Rs. 6,564 crores during the corresponding period from the previous fiscal. From this international services contributed 63% or Rs. 5,008 crores up 14.3% from Rs. 4,380 Crores in the previous year. Domestic services contributed 37% earning Rs. 2,933 crores up 34.3% from 2,184 crores last year.

The carrier though reported that there was an increased in routes profitability with 106 of 179 routes making a cash profit. The question which naturally arises is why is the the airline operating the other 73 routes? Political compulsions or any other reason?

What is your view on these points?

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Jet Airways posts strong growth in Q3 fiscal 2011 - an analysis

Aided by the resurgent Indian economy, improvement in global business and leisure travel, Mumbai based Jet Airways group (Jet Airways, Jet Airways Konnect, and JetLite) posted strong results for the third quarter of fiscal year 2011, which ended December 31, 2010

Profit before tax for group for the quarter increased a whopping 122% from Rs. 109.8 crore (US$ 23.6 million) to Rs. 243.5 crore (US$ 54.5 million) compared to Q3FY2010 on the back of an 18.8% increase in revenue to Rs. 4001.7 crore (US$ 895.1 million).

Jet Airways domestic and international operational parameters share comparison

Operations highlights for quarter when compared to the same quarter a year ago (excluding JetLite) include:

• Capacity measured in available seat kilometers (ASKMs) up 12.5% to 8,866 million
• Performance measured in revenue passenger kilometers (RPKMs) up 11.5% to 7,032 million
• Number of passengers up 15.3% to 3.94 million
• Average seat factors up down from 80% to 79.3%
• Addition of seven new aircraft (six ATR-72-500s and one Boeing 737-800)
• Overall cost per ASKM (CASK) increased 2.1% to Rs. 2.90 on the back of fuel price increases. Without fuel costs CASK was reduced 3% to Rs. 1.66. Overall revenue per RPKM increased 7.4% to Rs. 3.92 taking gross revenue per km up 25.9% from Rs. 0.81 to Rs. 1.02.
  
• International CASK decreased 3.1% to Rs. 2.27 reflecting the airline's cost efficiency vs. rising fuel prices. International revenue per RPKM increased 6.5% to Rs. 3.01, taking gross revenue per km up 54.2% from Rs. 0.48 to Rs. 0.74.
  
• Domestic CASK increased 7.8% to Rs. 4.06 reflecting the exaggerated effect of domestic over-taxation on fuel prices. Domestic revenue per RPKM increased 6.3% to Rs. 5.69, taking gross revenue per km up 87.34% from Rs. 1.58 to Rs. 2.96.
• Overall average gross revenue per passenger increased 3.7% from Rs. 7,493 to Rs. 7,226. Due to stronger Rupee this increased 7.9% when measured in US Dollars from $155.3 to $167.6.
• International average gross revenue per passenger decreased 0.4% to Rs. 12,652.
• Domestic average gross revenue per passenger increased 6.2% to Rs. 5,210.

Financial highlights (excluding JetLite) include:

• Revenue up 19.7% to Rs. 3,515.2 crore (US$ 786.3 million)
• EBITDAR up 17.4% to Rs. 851.1 crore (US$ 190.4 million)
• EBITDAR Margin at 24.5% in Q3 FY11 versus 25.0% in Q3 FY10
• Profit before tax up 106% to Rs. 217. crore (US$ 48.7 million)
• Profit after tax up 12% to Rs. 118.2 crore (US$ 26.4 million)

Note: Rates of exchange used 1 US $ = INR 44.705 for current quarter and 1 US $ = INR 46.530 for previous year same quarter.

Observations:

• The consistent improvement in EBITDAR margin despite higher fuel costs is mainly due to improved yields, high levels of seat factor and other cost efficiencies.
• Jet Airways achieved a yield improvement of 16% in Q3FY11 over Q2FY11 whilst JetLite achieved a yield improvement of 11% in Q3FY11 over Q2FY11.
• This performance is despite higher costs of fuel during the quarter, where the price of fuel went up by 5.0 % as compared to Q2FY11 and by 12.0 % as compared to Q3FY10.
• The Jet Group continues to maintain its leadership position in the Indian aviation industry with the highest market share of 25.9 % for the quarter ending December 2010.

The airline released the following outlook statement

The robust growth in the Indian domestic market is on the back of healthy GDP growth and continued business confidence. Airlines have achieved high levels of seat factors as well as yield growth. The industry traffic grew by 19.0 % in Q3 FY 2011 as compared to Q3 FY 2010. Q4 passenger bookings show encouraging trends, however it will reflect seasonality.

Our International operations which continue to achieve seat factor of over 80% for more than a year is now experiencing a healthy operating margin which augurs well for the future. The routes which we started in the last few quarters are fast maturing and with the help of strong hub network, they will get to profitability much sooner than our earlier routes.

Crude oil prices, in the recent past have been increasing and we believe that the impact of such costs will be passed on to the customer in the short to medium term without unduly affecting demand growth. The demand – supply equation in the domestic market continues to be under control and over time, this will result in improved revenues per departure for the industry.

Jet Airways currently operates a fleet of 97 aircraft, which includes ten Boeing 777-300ER (out of which seven are leased to Turkish Airlines and Thai Airways), 12 Airbus A330-200 aircraft, 55 Boeing 737-700/800/900 aircraft and 20 ATR 72-500 turboprop aircraft.

The full investor presentation can be read below.

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Bangalore grows 23% to surpass Chennai and become third largest airport in India

On the back of strong economic growth in the region, Bangalore has grown its passenger traffic 23% to 11.24 million for calendar 2010 surpassing Chennai to become the third largest airport in the country. For the last five years, Bangalore had been leading Chennai as the third largest in domestic passenger and freight traffic, but this year in May the Bengaluru International Airport has helped the city reach the number three slot in overall passenger traffic.

Read 2009 performance here

The passenger traffic in the last quarter was 3.06 million and just six days ago, on December 17, the airport handled 38,134 passengers, the highest ever reported since airport opened in May 2008.

Flight movements grew 8.2% to reach 110,437 averaging 312 movements per day and airlines fly to 30 domestic and 19 international destinations from Bangalore. Air Asia, Air China, Silk Air, Qatar Airways, and FedEx commenced operations to Bangalore during 2010.

The Best Managed Airport in India
The entry of the GVK group has energised airport operations which were facing a resource crunch. The airport won the title 'Best Managed Airport in India' in the CNBC AWAAZ Travel Awards 2010.

The airport operations group led by President Marcel Hungerbuehler and Director Hari Marar have been pushing for continuous improvements in efficiency. The airport maintained flight punctuality of over 85%, within 15 minutes of the scheduled time of departure. Baggage delivery has averaged six minutes from arrival time of aircraft on stand, for the first bag. Check-in wait times too are short at two and a half and four minutes for domestic and international flights respectively. (Read related story on the airport operations control centre.)

However, the management of the airport is going to have to work extra hard with government agencies to reduce the lines and wait times at immigration and to some extent security.

Air Cargo
With the resurgence of manufacturing activity in the hinterland, the airport's two cargo operators Menzies-Bobba Aviation and Air India-Singapore Airport Terminal Services (AI-SATS) saw an impressive 33% growth over last year to 210,000 metric tonnes. FedEx Express commenced direct flights to Bangalore and one can look forward DHL following suit, considering it has a major operations hub at the airport along with partner Blue Dart.

Due to the nature of its high-technology, pharma, food, floriculture, aviation and precision engineering industries, Bangalore has always led India in percentage of GSDP shipped by air. The local Customs commissionerate has traditionally been highly efficient compared with the rest of the country and many an industry from as far away as Chennai has considered importing cargo via Bangalore due to it faster clearing times.

The future
Based on economic projections and the accepted rule of thumb that air traffic grows at twice the GDP growth rate, one can safely estimate a growth of 15% year-on-year for the next two years.

Bangalore Aviation readers may recall the over-crowding in the departure halls soon after the airport opened in 2008 when traffic was at 10.3 million. The economic slowdown of 2008 and 2009 provided a breather to then promoters of the airport, but they chose not to invest in terminal expansion when they had the time.

Luckily for Bangalore, the airport operating company Bengaluru International Airport Limited, was acquired by the GVK group. The re-jiged management led by Managing Director Mr. Sanjay Reddy has fast-tracked the expansion of the existing terminal which is expected to be completed by 2012 and will increase the capacity by about 35%. See photos and video of the proposed expansion.

Indian carriers miss the international bus
The economic slowdown of 2008 and 2009 saw a 20.5% year-on-year contraction in domestic passenger traffic, while international traffic grew at 6.68%.

Despite this strength in international passenger traffic, while Indian carriers are increasing their domestic operations to capitalise on the growth, the three Indian carriers with significant international operations, Jet Airways, Kingfisher and Air India, have largely chosen to ignore Bangalore for their international operations, handing over the international passenger market to foreign carriers. Emirates still remains the largest carrier to Bangalore with 20 wide body operations per week, followed by Lufthansa, British Airways, Singapore Airlines, Thai Airways, Air France and DragonAir.

Abu Dhabi based Eithad will commence a daily Airbus A320 service to Bangalore joining Qatar Airways to complete the gulf carrier troika.

The airport authorities are hopeful of snagging Thai Air Asia, Thai Tiger, DHL cargo, TNT cargo, China Southern and ANA, though I doubt Thai Tiger, TNT cargo and All Nippon commencing operations any time soon.

Related articles

• Jet flight delayed, flyers fume at Delhi's T3 (ibnlive.in.com)
• Despite healthy patronage, lone Salem flight cancelled (thehindu.com)
• Breakfast at Bangalore International Airport (kish.in)
• Appeal for more flights out of Mysore (thehindu.com)
• For Air Cargo, a Screening Conundrum (nytimes.com)

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Indian domestic traffic surges 18% to 42 million for the first ten months of 2010

Domestic air traffic in India surged a whopping 18.3% to almost 42 million for the first ten months of the year compared to 35.5 million for the same period last year. For the month of October which marks the start of the peak travel period third quarter of the fiscal, the growth was 16.3% to 4.62 million compared to October 2009 when traffic was 3.91 million.

The break-up for airlines measured in lakhs (hundred thousand) is:
Air India – 8.16 lakhs, Jet Airways –8.70 lakhs, Jet Lite – 3.43 lakhs, Kingfisher – 8.77 lakhs, Spice Jet – 6.30 lakhs, Go Air – 3.06 lakhs, IndiGo – 7.75 lakhs.

The share percentage is:
Jet Airways – 18.8%, Jet Lite – 7.4% (combined 26.2%)
Kingfisher – 19.0%
Air India – 17.7%
IndiGo – 16.8%
SpiceJet – 13.6%
Go Air – 6.6%.

Growth in capacity measured in Available Seat Kilometres (ASKM) lagged growth in demand measured in Revenue Passenger Kilometres (RPKMs) 11.5% vs 18%. With the exception of market leader Jet Airways, national carrier Air India, and low fare GoAir, all domestic airline recorded seat factor above 80%.

Air India – 70.8%, Jet Airways – 73.6%, JetLite – 80.7%, Kingfisher Airlines – 87.1%, Spice Jet – 84.4%, Go Air –77.4% and IndiGo – 86.1%.

More detailed reports can be read here and here.

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