Jet Airways to lease three A330-200s to Turkish Airlines

by Devesh Agarwal and Vinay Bhaskara

In a December 12th filing with the Borsa Istanbul stock exchange (BIST), national carrier Turkish Airlines has said it will lease three Airbus A330-200 aircraft from India's Jet Airways for a period of six years. The financial details of the proposed lease were not made available. The middle-eastern giant will lease another five A330s from Dutch lessor AerCap for a period of eight years.

Bulk of Jet's A330s sitting on the ground. Photo copyright 2012 Devesh Agarwal.

Turkish Airlines (THY) has been leasing aircraft from Jet Airways since 2008 and once again in 2013, as the Indian carrier found it difficult to fill most of its international wide-body fleet. At one point 70% of Jet's Boeing 777-300ER fleet was leased out, with four aircraft leased to Turkish Airlines and three to Thai Airways. Jet even sold one of its Boeing 777s, strangely a money spinner for most of the world's airlines, but not for Jet.

Till recently, much of Jet's A330-200 fleet was grounded at Indian airports thanks to aggressive route rationalisation by the airline. In the second quarter of this fiscal year, Jet lost a whopping Rs.123 crores, just on the costs of keeping its aircraft on the ground.

Five of the ten grounded A330-200 aircraft have been leased by Jet, though on a short term basis, to 24% stake-holder, Abu Dhabi based Etihad Airways PJSC. The deal with Turkish was expected, after a deal to sell the remaining five A330s to Kuwait Airways fell through last month.

Repeated requests to Jet Airways for comments on this story were not answered.

It is an economically sensible deal for Jet Airways. In one stroke it is addressing a major cash drain, and ensuring long term dollar denominated revenue for itself. While a sale which would have brought in one-time income which would have reduced long-term lower cost debt, a lease will give Jet a long term hedge against potential rupee devaluations and the ability to pay off its $400 million high interest rate debt. Jet is reeling under a total debt load of about $1.9 billion.

As Jet Airways continues to turn over its long haul operations to Etihad and Abu Dhabi via the Jetihad partnership, look for the carrier to continue to seek out incremental opportunities to earn rent on its under-utilised assets.

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AirAsia X orders 25 additional A330-300

by Devesh Agarwal

AirAsia X, the long haul, low fare airline affiliate of the AirAsia Group has placed an order for 25 more A330-300s with European airframer Airbus.

The order is valued at US$ 6 billion at list prices. This order increases AirAsia X’s total orders to 57 A330-300s, which are scheduled to be completed by 2019. Fifty-one direct on Airbus and six to be leased from the International Lease Finance Corporation (ILFC).

(L-R) John Leahy, Chief Operating  Officer, Customers, Airbus, Fabrice Brégier, Chief Executive Officer, Airbus, Kiran Rao, EVP Sales, Strategy and Marketing, Airbus, Tan Sri Tony Fernandes, Co-Founder and Director of AirAsia X, Jerome Causse, Sales Manager, Airbus and Azran Osman- Rani, Chief Executive Officer of AirAsia X. AirAsia X image.

AirAsia X will start taking delivery of its newly-ordered A330-300s in 2015. It is expected to be deployed on the carrier's Asia-Pacific network. However, the new order includes the latest extended range versions of the A330-300, providing the carrier with the ability to offer non-stop service to destinations in Europe or one-stop service to the US.

AirAsia X currently operates 15 A330-300s on services linking its Kuala Lumpur base to 18 destinations in Asia, Australia and Saudi Arabia. In addition to A330s, the carrier also has 10 A350-XWB aircraft on order for future delivery. The AirAsia Group is one of Airbus’s largest airline customers in the world. In total, it has ordered 536 Airbus aircraft including 475 A320 Family single aisle aircraft for AirAsia’s short haul operations based out of Kuala Lumpur, Bangkok, Jakarta and Manila, plus the 51 A330s and 10 A350 XWBs for AirAsia X.

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Kuwait Airways Chairman suspended for announcing plans to buy five A330s from Jet AIrways

by Devesh Agarwal

Yesterday, Reuters quoting Kuwait Airways Chairman Sami Al-Nesif, reported that Kuwait Airways is buying five A330-200 aircraft from India's Jet Airways. According to Mr. Al-Nesif, Kuwait Airways wanted to take 11 jets from its old fleet of 17 out of service and use the Jet Airways' aircraft as a stop gap measure till its order of new Airbus aircraft commence delivery in 2018. Kuwait's present fleet average age is 18 years.

This would have been another major financial boost for the financially beleaguered airline, which finally concluded its deal with Abu Dhabi-based Etihad Airways PJSC for a 24% stake sale recently.

In its second quarter FY2014 earnings conference call, Jet Airways' executives had indicated the airline was trying to lease out much of its A330-200 fleet which has been sitting idle at airports across India, as the airline pulled out international flights due to poor performance. The airline lost over 123 crores in fees and costs relating to the non-utilisation of its A330 fleet in the second quarter alone.

However, later in the day, in another report, Reuters said the Kuwait Airways chief, has been suspended, after he had announced plans to buy five used aircraft from India's Jet Airways. The report went on to quote an unnamed source who said the deal was in doubt.

Talk about bizarre developments.

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Air Algérie orders three A330 passenger aircraft

By BA Staff


Air Algérie has signed a Memorandum of Understanding for three A330-200 passenger aircraft as part of the carrier’s continued growth plans. This order has been placed at Dubai Airshow 2013.

The new aircraft will be deployed on medium and long haul routes from the Air Algérie hub in Algeria. Air Algérie has already ordered a total of five Airbus A330, which have all been delivered to date.

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Qatar Airways orders Rolls Royce Trent 700 engines

By BA Staff

Qatar Airways has placed a $300 million order on Rolls-Royce for Trent 700 engines, with long-term TotalCare® support, to power five recently ordered Airbus A330 freighter aircraft.

The Trent 700, the only engine specifically designed for the A330, is the market leader on the aircraft with a 70% of new orders over the last four years. It is also the most popular Rolls-Royce engine type for wide-bodies currently in service, powering more than 530 A330 aircraft with 58 operators. More than 1,400 engines are either in service or on order.

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Pakistan routes news and analysis: Gulf Air, Pakistan International Airlines, and Turkish Airlines

by Vinay Bhaskara

Several pieces of routes news from Pakistan emerged over the past week, and Bangalore Aviation has prepared a summary of these changes

Gulf Air increases frequency to Pakistan

• Bahrain based  Gulf Air has added 7 new weekly frequencies on its offering to Pakistan, from mid-December 2013, bringing its total Pakistani operation to 21 flights per week to four destinations. A summary of the changes is shown below
• Bahrain - Islamabad increases from 2x weekly to 3x weekly Airbus A330-200
• Bahrain - Karachi increases from daily to 10x weekly Airbus A320
• Bahrain - Lahore increases from 3x weekly to 4x weekly A330-200
• Bahrain - Peshawar increases from 2x weekly to 4x weekly, split as 2x weekly Airbus A321, 1x weekly A330-200, and 1x weekly A320

Pakistan International Airlines (PIA) increases service to Manchester/Toronto from November 2013

• Total frequency to Toronto increases to 4x weekly with addition of second weekly Karachi - Lahore - Toronto flights using Boeing 777-200LR equipment
• Total frequency to Manchester increases to 6x weekly with addition of third weekly Islamabad - Manchester on Boeing 777-200ER equipment
• Pakistan International Airlines continues to persist in operating a potpourri of routings for its intercontinental flights, by having low frequencies from each of Karachi, Islamabad, Lahore, and even Peshawar. This is certainly not unprecedented; Saudia has a similar setup out of Riyadh, Jeddah, and Dammam. But it would likely be more efficient for PIA to choose just one airport to serve as its gateway for long haul flights; either Karachi, which has the highest yielding traffic, or Islamabad, which has the highest volume of passengers. 

Turkish Airlines switches to 737-900ER

• Istanbul based Turkish Airlines is planning on switching aircraft for some of its flights to Pakistan, replacing the Boeing 737-800 with the Boeing 737-900ER
• Interestingly, the decision to replace the 737-800 with the 737-900ER actually represents a downgrade in capacity, as the 737-800s are configured with 165 seats (12Y+ / 153Y), while the 737-900ERs are configured for 151 seats (16C / 135Y) including a true regional business class product. This is an indication that Turkish Airlines is seeing strong premium demand on its Pakistani routes, but volumes are a bit soft (understandable given the residual weakness in the Pakistani economy)
• The routes affected are:
• All 4x weekly flights to Karachi, Pakistan's business capital
• One of 3x weekly flights to Islamabad, Pakistan's political capital

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Analysis: SriLankan Airlines to grow its Indian operations

by Vinay Bhaskara

According to a report from the Press Trust of India, newly minted oneworld alliance member SriLankan Airlines is eyeing an expansion of its Indian operations by adding 12 new weekly flights to tap into its burgeoning hub at Colombo's Bandaranaike International Airport.

SriLankan Airlines chairman Nishantha Wickremasinghe had this to say about Sri Lankan's plans

We have not exhausted all the routes given to us under the bilateral agreement and have room to include more destinations." "The travellers come to Colombo for onward connection to West Asia and Far East as we plan to make Colombo an important hub... We cover most of the cities in India. For instance we fly four times a day from Chennai to Colombo and once a day from Madurai, Tiruchi and Kochi and also from Delhi and Mumbai with near full capacity on every flight. We also operate flights to Budha Gaya and Varanasi to cater to Buddhist passengers.

After facing challenges earlier this decade as the guerrilla war with the Tamil Tigers crescendo-ed to a close, SriLankan has rapidly remade itself into an aggressive international player on the Indian sub-continent and today has the farthest reaching European and Asian network of any airline on the subcontinent.

The carrier is scheduled to join the oneworld alliance of airlines later this year, and now operates a fleet of 23 aircraft (8 Airbus A320, 7 Airbus A330-200, 6 Airbus A340-300, 2x DHC-6-100) serving 33 destinations across Europe, Asia, and the Middle East.

India is a key part of the carrier's growth strategy, and in conjunction with LCC subsidiary Mihin Lanka (both carriers are owned by the Sri Lankan government), operates 92 flights per week from Sri Lanka to India, serving 10 destinations and 11 routes as shown below.

Route	Frequency	Aircraft	Notes
Colombo-Bangalore	10	A320
Colombo-Chennai	7	A340-300
	12	A320
	2	A330-200
Colombo-Delhi	3	A321	*Operated by Mihin Lanka
	7	A320
Colombo-Kochi	14	A320
Colombo-Mumbai	7	A320
Colombo-Trichy	14	A320
Colombo-Trivandrum	7	A320
Colombo-Madurai	4	A321	*Operated by Mihin Lanka
Colombo-Gaya	2	A321	*Operated by Mihin Lanka
Colombo-Varanasi	2	A321	*Operated by Mihin Lanka
Hambantota-Gaya	1	A320	*Operated by Mihin Lanka
TOTAL	92

As for the new flights, it would make sense for Sri Lankan to expand its operations into new Indian cities. In 2008, the carrier had pulled out from Hyderabad, Coimbatore, Kozhikode, and Kochi (before resuming Kochi in 2011) citing demand weakness.

Today, though, SriLankan is a much stronger airline today, with a better local economy and a bigger pool of connectivity to draw upon at Colombo. Any (or all) of these three destinations would make sense as expansion points for SriLankan.

Kolkata likely does not have enough origin and destination (O&D) demand, even though the market is currently un-served. Madurai might be able to support SriLankan, but it also has existing competition from low cost carriers (LCCs) SpiceJet and sees service from partner Mihin Lanka. It might also make sense to achieve part of the growth by using Mihin Lanka to grow flights from Hambantota's Mattala Rajapaksa International Airport.

Currently Sri Lankan's third largest operation by available seat kilometers (ASKs - trailing Colombo and the Asian mini-hub in Bangkok), Hambantota already sees international service to Bangkok, Male, and Gaya. Adding, say a twice weekly Hambantota-Chennai utilizing A320 equipment might make sense for SriLankan.

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Analysis: Jet Airways to add second daily flight between Mumbai and Singapore

by Vinay Bhaskara

Image Credit: Devesh Agarwal

India's largest full service carrier, Jet Airways, is adding a second daily flight between its largest hub at Mumbai, and Singapore. The second daily flight, effective 1st November 2013, will be served using 154 seat Boeing 737-800 aircraft in a 2-class configuration (16 J / 138 Y).

The proposed new flights, 9W 10/9 will be scheduled very tightly with the existing daily flights on-board the Airbus A330-200; 9W 12/11. Jet Airways Flight 12 currently departs Mumbai at 23:30, arriving at Singapore at 07:25 the next day. The return, Jet Airways Flight 11 departs Singapore at 19:05 after nearly 12 hours on the ground, returning to Mumbai at 22:00. The outbound, Jet Airways Flight 10, will be offset as a morning departure, leaving Mumbai at 09:50 and arriving to Singapore at 18:00. However, the return Jet Airways Flight 9 is currently scheduled to depart Singapore at 20:05 (just one hour after the existing flight), and return to Mumbai at 23:01.

These flight timings make little sense squished so close together on the return to Mumbai. While it is a good idea for Jet Airways to grow its international operations to Asia given the better performance of its international division as a whole. However, placing the return flight so closely with the existing flight is a missed opportunity for Jet. Especially with an integrated terminal coming to Mumbai by the end of 2014, Jet should be looking to maximize connectivity out of Mumbai, especially on international to domestic and vice-versa. A better schedule for the flight would have been a morning departure from Singapore at around 5:50 am, which would have arrived back at Mumbai at 8:50 am, in time for connections with morning departures to dozens of domestic destinations, while still leaving enough time for a turnaround to depart at 9:50 am. Jet already offers double daily flights to Singapore from Chennai and Delhi, and the second dailies to both of those destinations use a similar schedule to the one we propose here.

However, the addition of a second daily Mumbai-Singapore is a good move for Jet, and it points to future international growth opportunities for Jet. Even as the westbound international operations will largely be culled in favor of routing passengers through Abu Dhabi via the Jetihad partnership, there remain opportunities for Jet to grow its eastbound international operations. Air travel demand between India and East/Southeast Asia is growing rapidly, and Jet could offer more flights to the region moving forward, especially with the purchase of 50 737 MAX aircraft offering increased range on tap. 

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Analysis: Qantas more than doubles full year profit as rival Virgin Australia loses money

by Vinay Bhaskara

Image Credit: Paul Spijkers

Australian airline group Qantas Group has reported an underlying pre-tax profit of AUD 192 million (US $171.5 million) for the year ended 30th June 2013, more than doubling from AUD 95 million for the year ending 30th June 2012.

Broken up by segment, profit for Qantas mainline domestic fell 21% year-over-year (YOY) to AUD 365 million thanks to a fare war with Australia's second largest airline, Virgin Australia. Profits also fell 20% YOY at Qantas freight on Asian demand weakness to AUD 36 million, while Jetstar Group saw a deep 32% YOY decline in profit to AUD 132 million thanks to the start up costs of Jetstar Japan and Jetstar Hong Kong. Profits at the loyalty (frequent flyer) division remained strong, rising 13% YOY to AUD 260 million, but the biggest improvement came from the reduction in losses at Qantas' international division, with losses halving to AUD 246 million from AUD 484 million YOY.

Group operating revenues rose 1% to AUD 15.9 billion while operating costs remained essentially flat thanks to a 2% reduction in fuel costs. This contributed to a 5% reduction year over year in unit costs excluding fuel (cost per available seat kilometer - CASK ex. fuel), which was partly offset by a 2% decline in yields.

For the year, capacity as measured by available seat kilometers (ASKs) was essentially flat YOY, while passenger traffic in revenue passenger kilometers (RPKs) was down around 1%. However, passengers carried actually grew 3% YOY to 48.3 million as the Group re-balanced capacity towards shorter haul routes.

For Qantas, the strong improvement in its international results was a partial validation of the turnaround plan announced last year with an eye towards returning the international division to profitability by fiscal year 2015. The biggest part of that turnaround plan, a tie-up with Emirates, has also been partially validated, as it contributed to the results via a doubling of bookings onto code share services to Europe (versus the previous partnership with British Airways). And the partnership's contribution should continue to improve into FY14 as much of the partnership has not been fully implemented and FY13 had to deal with the start-up costs of launching operations in Dubai.

Moreover, the cost-base on international operations improved 5% thanks to reduction of loss-making routes, aircraft retirements, and the reconfiguration of 9 Boeing 747s and 12 A380s improving fleet economics. Qantas International has certainly paid the price for poor strategic vision in the sense of not taking advantage of the rise of Asia over the past decade. But the decision to join hands with Emirates and cut loss-making routes from the international network was the right decision. Bigger is not always better. By reducing some of the lower yielding destinations like Frankfurt and Buenos Aires, Qantas has cut its way towards profitability.

And the turnaround domestically has allowed Qantas to re-focus efforts on the group's primary profit center; Domestic. As Qantas struggled to re-make its international operations over the past few years, Australia's second largest carrier, Virgin Australia evolved from a low cost nuisance into a true full service rival. Having reconfigured its short haul fleet of Boeing 737s and Embraer E190s with a business class cabin, Virgin Australia even took a major shot across Qantas' bow by introducing Airbus A330-200 aircraft with lie-flat business class seats on lucrative transcontinental routes from Perth in 2011.

New Qantas A330-200 business class - Image Credit: Qantas

But Qantas now has the funds and shareholder confidence to fight back. Earlier this month, they announced a new updated product on its own fleet of 10 transcontinental A330s with lie-flat suites aimed at clawing back market share from Virgin Australia. Qantas also announced a new premium product for five Boeing 717-200s, to be flown by subsidiart QantasLink in competition with Virgin Australia Embraer E190s out of Australia's capital Canberra.

Even as Qantas is revving up for a fight, Virgin Australia continues to struggle. With a jumbled strategy of acquisitions aimed at modeling Virgin Australia Holdings after Qantas Group (including the transformation of regional provider Skywest into Virgin Australia Regional and the purchase of a 60% stake in ultra low cost carrier [ULCC] Tigerair Australia) weighing on results, Virgin Australia reported a post-tax loss of AUD 98.1 million for FY13. The competitive tide in the Australian market, for the moment, appears to have shifted back in Qantas' favor.

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Thai Airways makes wholesale changes to India service in winter 2013-14

by Vinay Bhaskara

Bangkok based full service carrier Thai Airways International has announced a series of changes in its Indian services in the winter 2013-14 season as per the Airline Route blog

On its Bangkok-Delhi services, beginning 30th September, services will increase from 11 weekly to 14 weekly.

Daytime Thai flights TG323/TG324 will increase from four flights per week to daily using a 299 seat Airbus A330-300 aircraft in a two-class configuration (36J / 263Y). TG-323 departs Bangkok at 07:35, arriving at Delhi at 10:30. The return flight TG-324 departs Delhi at 11:55 arriving at Bangkok at 17:25.

The red-eye flights TG315/TG316 are also seeing an increase, with Boeing 747-400s replacing the existing Boeing 777-300s, an increase from 364 seats (34J / 330 Y) to 374 (49J / 325 Y) or 375 seats (50J / 325 Y), depending on the day. The up-gauge represents a large increase in premium cabin capacity by almost 45% regardless of the 747 configuration used on the route.

TG 315 departs Bangkok at 20:40, arriving at Delhi at 23:40. The return red-eye (overnight) TG 316 departs Delhi at 00:55, arriving at Bangkok at 06:20, in time for connections to Thai's morning departure bank to Asia and Australia. Both flights are operated daily.

Bangkok - Hyderabad was planned to increase from four flights per week to five using the A330-300, but these plans have been shelved, with services remaining at four per week this winter.

The daily Bangkok-Mumbai services have been down-gauged from Boeing 747-400 to Airbus A330-300s for the winter season, a capacity downgrade of around 20% (roughly 35% in premium cabins).

Additionally, Thai's low cost wing Thai Smile, which by January 2014 will serve 19 destinations across India, China, Laos, Macau, Myanmar, Sri Lanka, and Thailand, is also shaking up its India operations. Thai Smile has a fleet of six 174 seat (30Y+ / 144 Y) Airbus A320-200s with its primary hub at Bangkok and a secondary hub at Phuket. Thai Smile is shifting its flight numbers to and from India, and increasing services as well.

Flight Number Changes

• Bankgok-Ahmedabad flights are shifting from TG 765/766 to TG 2935/2936
• Phuket-Delhi flights are shifting from TG 761/762 to TG 2931/2932
• Phuket-Mumbai flights are shifting from TG 763/764 to TG 2933/2934

Frequency Increases

• Bangkok-Ahmedabad increases from two to four weekly flights
• Phuket-Delhi increases from two to four weekly flights
• Phuket-Mumbai increases from two to three weekly flights

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Delta ending Seattle-Osaka

by Vinay Bhaskara

A Delta Air Lines Boeing 767-300ER - Image Credit: Delta Air Lines

As per Airline Route, Atlanta-based full service carrier Delta Air Lines is cancelling its 4 weekly services between Seattle-Tacoma and Osaka-Kansai. The flight, which was scheduled to operate throughout the IATA Winter 2013/14 season with a Boeing 767-300ER, was started in 2010 and will now end November 4th. Over the past three years, the flight has operated using a mix of Boeing 767-300ER and Airbus A330-300 aircraft. The route was served by pre-merger Northwest Airlines using a Douglas DC 10-30. But that flight was canceled in 2001.

Since its merger with Northwest Airlines in 2009, Delta has steadily grown its long haul presence in Seattle (with help from domestic code share partner Alaska Airlines). The carrier now serves six long haul destinations excluding Osaka, and will begin its seventh on 29th March 2014 with new nonstop services to London Heathrow in conjunction with equity partner Virgin Atlantic. At the time of the Northwest merger, Delta only had intercontinental service to Amsterdam, and Tokyo-Narita.

The cancellation of Seattle services marks another stage in the slow decline of long haul services from Osaka-Kansai. Today, Osaka-Kansai is down to 13 flights per week to the mainland - a daily Boeing 787 Dreamliner from San Francisco on United, thrice weekly Boeing 777-300ER to Los Angeles on Thai Airways, and thrice weekly Boeing 747-400 to New York JFK on China Airlines. Osaka-Kansai once had services from Los Angeles on United, Detroit on Northwest, and Dallas-Fort Worth on American (twice). But high airport operating costs thanks to the high construction costs at Kansai rendered much of the service unprofitable. Operating costs are no longer the main challenge. Kansai has reduced its costs sharply since opening (5% in the last year alone), and the airport has even become a favored base for Japanese low cost carriers (LCCs). However, the Kansai area as a whole has stagnated economically in the past few years, and this reduced demand has curtailed possible long haul flights. 

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Malaysia Airlines posts operating profit in Q2 2013

by Vinay Bhaskara

Newly minted oneworld alliance member Malaysia Airlines saw progress in Q2 2013 in its corporate turnaround plan as the carrier swung to a RM (Malaysian Ringgit) 8 million (US $2.4 million) operating profit from an operating loss of RM 102 million (US $31.0 million) during the same period a year prior.

The performance was buoyed by 14% revenue growth on a 19% increase in capacity. Traffic grew 29% pushing seat load factors to a 10 year high of 80%. Q2 marked the fourth consecutive quarter of positive cash-flow from operations and Group cash balance improved to RM 5.4 billion (US $1.64 billion).

Net losses for Q2 were reduced 50% to RM 176 million ($53.5 million) as the carrier increased productivity and controlled costs; especially fuel expense, which fell 7.5% year-over-year. For the first half of 2013, operating loss was RM 157 million (US $47.7 million) and net loss was RM 455 million (US $138.3 million - down from RM 409 million [US $124.4 million] and RM 521 million [US $158.3 million] respectively).

Said Malaysia Airlines Group CEO Ahmad Jauhari Yahya:

With the encouraging performance at the revenue generation level, we can now focus on implementing more structural improvements, including enhancing our administration and support services. We will continue to improve operational effectiveness such as continued improvement in our On Time Performance, turn times on our aircraft, better engineering service turnaround, reducing service disruptions, precise material and inventory management, and much more which will further contribute to the bottom-line in the future.

Quarters three and four are traditionally the strongest for Malaysia Airlines, and the carrier has made its first Q2 operating profit in several years. The carrier still hopes to reach net profitability by the end of 2014 and claims that it is on track to meet that metric. Having taken delivery of 6 A380s, 7 A330s, and 8 Boeing 737-800s over the past 12 months, passengers carried grew to 4.2 million passengers.

Premium cabin demand received a boost on the introduction of the 494-seat Airbus A380, with premium cabin (First and Business) demand up 36% year-over-year on a 17% increase in capacity. The A380 has already been deployed to London, Paris, and Hong Kong from Malaysia Airlines' hub at Kuala Lampur.

Malaysia Airlines is one the largest overseas carriers in India, and is slated to launch services to Kochi in September

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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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Jet Airways Q1 FY2013~14 performance analysis - part 1 - Financials

by Vinay Bhaskara and Devesh Agarwal

Earlier this week, Mumbai based Jet Airways announced a net post-tax loss of Rs. 355.4 Crore (US $ 59.8 million) for the first quarter of Fiscal Year 2014, reversing from a Rs. 24.7 Crore net profit during the same period a year prior.

Total revenues declined a whopping 12.3% to Rs. 4, 064.4 Crore on a 15.0% decline in revenue passengers to 4.13 million, and an 11.3% capacity decline measured by available seat kilometres (ASKs) to 9.13 million ASKs. Seat factors cratered to 78.4% from 82.7% year-over-year (YOY).

Jet Airways recorded a large operating loss of Rs. 111.2 Crore in Q1 versus an operating profit of Rs. 223.5 Crore the year, translating to an operating margin of -2.8% versus +4.9% in Q1 of Fiscal Year 2013.

The nominal average fare paid by Jet Airways customers rose 2.3% to Rs. 8,278, but fell 4.2% on an inflation adjusted basis. Revenue per available seat kilometer (RASK) fell 0.8% year over year to 3.60 Rupees from 3.63 Rupees a year prior while cost per available seat kilometer (CASK) increased 8.7% to 3.92 Rupees. CASK and RASK are used to adjust revenue and cost figures for segment length.

Looking segment by segment, Jet Airways’ full service domestic operations once again performed abysmally, with a net pre-tax loss of Rs. 263.0 Crore versus a profit of Rs. 16.8 Crore the year prior. Operating margin domestically was an astoundingly poor -7.9% versus +6.8% a year prior – a swing of 14.7 percentage points! Domestic revenues fell 13.1% year over year to Rs. 1763.5 Crore, and while domestic RASK actually increased by 0.9% (down 3.3% on an inflation-adjusted basis), it was more than offset by a 17.6% increase in CASK.

Domestic operations continued to suffer from the poor Indian macroeconomic environment, as growth for Fiscal Year 2014 is projected to fall to 5.5% by the Reserve Bank of India. India’s growth prospects seem doveish for the next few years and airline will see growth plateauing over the next few months.

Importantly, fuel is not a major contributor to Jet Airways’ woes, as moderating fuel prices around the globe in Q1 meant that fuel cost per ASK fell 7.5% year over year. Despite the slowing economy, domestic capacity amongst Indian carriers was up 0.1% in Q1 and passenger demand rose 1%.

Low Cost Carriers (LCCs) SpiceJet, GoAir, and IndiGo have continued their rapid expansion despite slowing Indian growth, which has put increased fare pressure on Jet Airways at the lower end. At the same time, the expected fare bump amongst high yield business travellers and first class passengers after the demise of full service rival Kingfisher Airlines largely has not materialized thanks to aggressive pricing on the part of beleaguered national carrier Air India. Despite spotty operational reliability, LCC SpiceJet has continued to profit (Rs. 55 Crore in Q1 of FY14) and its maturing Q400 operation is taking away business from Jet Airways’ regional ATR operations, especially in the South.

International financial performance also weakened year over year, falling to a Rs. 92.4 Crore pre-tax loss from a Rs. 16.5 Crore pre-tax profit the year prior. Revenues fell 11.7% to Rs. 2300.9 Crore as Jet Airways continues to restructure its international operations in advance of the implementation of the newly designed Jetihad partnership with Etihad Airways. Revenue per available seat mile fell 2.1% (7.8% on an inflation adjusted basis), while cost per available seat kilometer grew 2.3%. The operating margin on international operations fell to 0.8%, from 5.6% in Q1 of Fiscal Year 2013.

Despite all the hubbub and media drama surrounding Jet Airways’ international operations, they are actually the better performer within the company on an operating and net basis. International operations came under some pressure thanks to the continued de-valuation of the Indian Rupee since many costs on international operations are accrued in US dollars. That pressure, which contributed nearly a third of Jet Airways’ losses in Q1 at Rs. 134.3 Crores, looks like it should subside to some degree as the Indian government is taking steps to increase in-flow of US dollars.

Bulk of Jet Airways' A330-200 fleet idle at New Delhi

The airline withdrew from many international routes like Mumbai Johannesburg, Chennai Brussels, Brussels New York JFK, and New Delhi Milan. The contraction in operations led to a severe under-utilisation of Jet Airways’ wide body fleet, especially the Airbus A330-200s, (as captured by Devesh Agarwal at New Delhi IGI airport), which led to a Rs. 128.2 Crore adverse impact on finances.

During the analysts earnings call, Jet Airways management indicated that the airline had already leased two A330s to investor Etihad Airways PJSC of Abu Dhabi, and is "close to signing" a deal with another west Asian carrier for five A330s. So the cost impact will reduce in the quarters moving forward.
 

During the call, the airline announced “load factors for the North American routes were at 79.1%, the UK routes were at 84.1%, Asian routes were at 82.1%, Gulf routes were at 83.4%, SAARC routes were at 75.1%.” However, thanks to its contraction on long haul routes, Jet has been unable to capitalize on recovering Western economies in the United States and in the European Union. Still, the outlook moving forward for the international operations. from a purely financial perspective (ignoring strategic considerations), the feeder operation with Eithad, which appears likely to be Jet Airways’ plan as the carrier undertakes a 10 year network planning study, is likely to return Jet to profitability on its international operations at least.
But the domestic operations remain challenging. In our opinion, from a financial perspective, Jet must solve its lagging domestic revenue and market share before the company as a whole can return to profitability. Structurally, the debt load facing Jet Airways, including US $300-400 million in high-cost shorter term debt, is the major challenge. Finance charges stood at Rs. 234.1 Crore in Q1, and with Jet Airways recently committing to order 50 737 MAX, as per a report in the Live Mint, the capital expenditures plan over the next 10 years only looks set to exacerbate that.

Stay tuned for Parts 2 and 3 of our analysis coming later this week, covering JetLite results, analysis of fleet and network plans, and a plan to tackle the debt load.

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Air China ends Shanghai-Chengdu-Bangalore

by Vinay Bhaskara

Yesterday, Sunday, August 4th, marked the final nonstop flight for Air China limited, the world’s 10th largest airline by passenger traffic, between Bangalore and Chengdu. Flights have been zeroed out from the global distribution system (GDS) and are no longer bookable via AirChina.com. The nonstop flights, which began in early 2010, had actually been increased in frequency by Air China from twice to thrice weekly on March 31st, and had been planned to operate as thrice weekly flights until late October. Service was offered on 128 seat Airbus A319 equipment in a 2-class configuration (8C/120Y), and was structured as Bangalore-Chengdu-Shanghai Pudong and return. Flights departed Bangalore Wednesday, Friday, and Sunday and arrived in Bangalore on those same days of the week after departing Shanghai Tuesday, Thursday, and Saturday. The same plane journey from Shanghai to Bangalore took over 7 hours and 40 minutes to complete in either direction.

It is surprising that Air China elected to cancel services between Bangalore and Chengdu given the strong business ties between the two cities. Bangalore is India’s information technology (IT) hub, while Chengdu is China’s electronics manufacturing center; and several multinational tech corporations have major operations in both cities. In particular, this route was often dubbed the "Cisco-Huawei Express". Networking Equipment Manufacturer Cisco’s “East” Headquarters are located in Bangalore while their largest manufacturing base in China is located in Chengdu. Meanwhile, electronics manufacturer Huawei has a major IT research and development (R&D) center in Bangalore and massive manufacturing operations in Chengdu (as does rival Chinese telecom firm ZTE). These firms often formed the base of demand for the nonstop services, and when combined with the incremental demand between Bangalore and China’s financial capital of Shanghai, the route seemed to be a strong performer for Air China.

But global macroeconomic conditions have certainly shifted in the past few months. Both India and China are seeing slowdowns in growth that are causing tapering in travel demand between the 2 nations – as firms scale back expansion plans and begin to curtail employment growth. India’s projected GDP growth for 2014 has fallen to a new low of 5.2% (after running at 8% or above for nearly the last decade; even through the global financial crisis) tied to a similarly projected GDP growth for China of just 6.9% in 2014, the lowest total in more than 20 years. In addition to these macroeconomic factors, Cisco, a major US manufacturer of Telecom equipment, is also facing a major slowdown in its core market, the US, as firms increasingly turn away from its services and put off purchasing new network equipment due to uncertain economic conditions. Even in India, the economic slowdown is contributing to a reduction in demand for telecom equipment. All of these factors certainly contributed to a reduction in demand for the route.

Beyond the macroeconomic forces, there is increasing tension between China and India thanks to labor disputes and border issues in India’s Northeast. Additionally, ZTE and Huawei are coming increasingly under suspicion of playing a role, if only indirectly, in increased Chinese hacking of Indian government web servers, thanks to their close ties to the Chinese government. The added security concerns have led to increased scrutiny for ZTE and Huawei – and forced the two firms to cut back on their Indian operations. Given the relatively close ties between the Chinese government and Air China, these political disputes may have also played a role in the cancellation of the route.

Air China will continue to service India with 7 flights per week; 4 weekly Mumbai-Chengdu-Shanghai Pudong on board the same Airbus A319 equipment, and 3 weekly Beijing-Delhi on-board 301 seat Airbus A330-300 equipment in a 2-class configuration (30C/271Y). Beijing-Delhi had previously been increased to 4 weekly till October 26th, but those plans appear to have been scrapped.

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Analysis: Air India to begin several new routes - including San Francisco and Madrid?

by Vinay Bhaskara

Earlier this month, erstwhile Indian national carrier Air India placed a tender asking for fuel supply contracts at 9 different stations as seen below. The tender includes Sydney, where Air India is planning to launch 4 weekly nonstop and 3 weekly one-stop flights (in a triangle routing with Melbourne) on-board the carrier's new Boeing 787 Dreamliner. Australian services are scheduled to commence August 29th as of press time.

As the document states, just because the destinations are mentioned in this fuel tender, it does not necessarily mean that they will in fact be operated. The airline business is transitory, and airline plans are rapidly changing. That being said, if we take this document at face value, it represents a major international expansion, both for Air India's under-utilized fleet of Boeing 777-200LRs (5 are currently being shopped) and Boeing 777-300ERs, as well as for the 27 787 Dreamliners on order.


Sydney is already a known quantity, but Jakarta is an interesting destination. Indonesia and India recently revised their bilateral air service agreement (ASA) in 2011 to allow carriers from either side to operate up to 28 flights per week with aircraft of size up to a Boeing 747-400. Indonesian carriers are allowed to serve Mumbai, Delhi, Kolkata, and Chennai, while Indian carriers are allowed to serve Jakarta, Medan, Bali, and Surabaya. Garuda Indonesia was reportedly planing on serving Jakarta - Mumbai/Delhi with 737-800 aircraft but those plans never materialized. The largest Indian population in Indonesia is actually on the island of Sumantra, and India-Medan demand is under-served. Even so, Air India would have the first mover's advantage on connecting these two burgeoning regional powers.

The addition of Nairobi on this list raises an interesting question - the biggest demand center from Nairobi is with India's commercial hub in Mumbai thanks to historical ties of Indian expats to Africa and the type of business traffic on the route. However, Air India looks committed to building a proper connecting hub in Delhi, where there is some demand to Nairobi, but low yields and existing competition in the form of SkyTeam member Kenya Airways. It will be interesting to see where Air India chooses to route its Nairobi services from. Perhaps a nonstop Nairobi-Mumbai service that continues on to Delhi could work; as the 787 is the right aircraft for the job but all of the 787s are currently based in Delhi.

The European centers vary in feasibility - Milan and Rome both have strong O&D demand - and Milan in particular has a large North Indian community with more than 76,000 annual passengers (in each direction) demand to Delhi. Rome is a more tourist-oriented destination but it too has a strong VFR (visiting family relatives) traffic component. Delhi-Milan was previously tried by Jet Airways with an A330-200, but Air India is stronger in Delhi than Jet Airways is, and the 787 has a better cost profile for the route than Jet Airways A330s.

Zurich is a premium destination with growing Indian tourist demand to Switzerland. But there isn't the volume required to sustain nonstop services for Air India - the premium segment of the market is already dominated by Swiss. However, the size of the fuel contract indicates that Air India will be likely serving Zurich as a tag-on to one of the other European destinations - likely Rome or Milan.

Moscow has strong demand thanks to growing business ties but will face strong competition from Aeroflot's existing flights to Sheremetyevo. Madrid is an odd one. There are no significant business or leisure ties between Indian and Span, and with Spain in the midst of debilitating recession, demand is not set to grow any time soon.

San Francisco is another interesting case. Air India is the only Indian carrier with the aircraft required to launch San Francisco nonstop from Delhi (a flight of 7706 miles) - the Boeing 777-200LR and the Boeing 777-300ER (Jet Airways' configuration of the 777-300ER is too heavy to do so)  - however, the size of the fuel tender involved implies that San Francisco will be served as a one-stop destination; likely via Milan given the inflated size of the tender in Milan. Delhi-San Francisco is a large market, with 159,520 annual O&D passengers, but yields are extremely low. Meanwhile, Bangalore-San Francisco is a much higher yielding market with still 70,802 passengers of annual demand in 2011 alone (has likely crossed the 85,000 mark given the boom in Silicon Valley). Bangalore-San Francisco is doable on Air India's 777-200LRs.

Regardless, the expansion from Air India is interesting to behold. These routes will likely not return Air India to profitability given the massive debt. But on an operational basis; a few of them could be sustainable and break even.

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Jet Airways request slots at Amsterdam for Winter 2013 season; no flights to Newark

by Vinay Bhaskara

As Bangalore Aviation reported last month, Indian full service carrier Jet Airways is likely to move its long standing trans-Atlantic scissors hub to Amsterdam in conjunction with its new part-owner Etihad Airways. Late last week, Jet applied for the following slots at Amsterdam for the IATA Winter 2013/14 season.

9W 224 - DEL - AMS --> arr: 09.40 333 daily

9W 224 - AMS - YYZ --> dep: 12.10 333 daily

9W 223 - YYZ - AMS --> arr: 09.40 333 daily 

9W 223 -  AMS - DEL --> dep: 12.10 333 daily

9W 231 - BOM - AMS --> arr: 09.40 333 daily

9W 232 - AMS - BOM --> dep: 12.10 333 daily

Interestingly, Jet Airways has not requested slots between Amsterdam and Newark. Currently, Mumbai-Brussels-Newark is the best performing of Jet Airways' North American routes, and it is surprising that Jet Airways has not requested slots for Amsterdam-Newark, though the route is already served by both United Airlines and Delta Air Lines.

Of course, Jet Airways could be moving towards participation in the trans-Atlantic joint venture partnership with Delta, KLM, Air France, and Alitalia. This partnership allows member airlines to proportionally share costs and revenues, jointly discuss strategy, and generally act as one airline across the Atlantic.

Delta's existing flight 35 between Amsterdam and Newark departs at 12:50 pm daily (the return arrives into Amsterdam at 7:35 am) and is locked into that time by slot constraints at Newark Airport. However, this timing fits perfectly with the slots Jet has requested at Amsterdam and would allow for an effective scissors hub while only allocating three aircraft (one each for DEL-AMS-YYZ, YYZ-AMS-DEL, BOM-AMS-BOM) as opposed to the current four, freeing up one aircraft for use by Etihad. On Delta's end, their existing Amsterdam-Mumbai service could be passed off 

However, it also brings up the question of what will happen to Jet Airway's current slots in Newark. They can be potentially used by Etihad to launch Newark services; in fact a Mumbai-Abu Dhabi-Newark routing utilizing a Jet 777-300ER would be highly effective and help boost Etihad's connectivity whilst also ensuring Newark access on Jet Airways metal. 

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Boeing launches 787-10 Dreamliner. An Airbus A330-300 replacement?

by Devesh Agarwal and Vinay Bhaskara

At the Paris Air Show, as expected, US airframer Boeing has launched the 787-10 Dreamliner, the third member of the 787 family. The second member of the family, the 787-9, is in final assembly in Everett, Washington, USA, and is set to make its first flight later this year.

Video and analysis at the end of the article.

Final assembly and flight testing of the 787-10 are expected to begin in 2017 with the first delivery targeted for 2018.

The 787-9 will seat between 250~290 passengers depending on the airline's configuration choices, with a range of 8,500 nautical miles (15,750 km), and a MTOW (Maximum Take Off Weight) of 250,830 kgs (553,000 lbs). The 787-10 has the same MTOW as its shorter variant the 787-9, and will trade range for increased passenger capacity. The 787-10 has a range up to 7,000 nm (12,964 km), with seating for 300~330 which puts it head-on against the Airbus A350-900 XWB which underwent its first flight just last week.

Boeing is banking on the lighter weight of the 787-10 off-setting the range limitations in winning orders. The 787-10 would be used on high demand routes of up to 10 hours making it ideal for trans-Atlantic flights and long regional flights. India to Europe, Middle-East to Europe, Far East, and South-East Asia to Australasia, Northern Asia, etc.

This performance envelope gives good insight to the launch customers for the aircraft and the 102 airplane commitments received by Boeing. Air Lease Corporation (ALC), with 30 airplanes; GE Capital Aviation Services (GECAS), with 10; International Airlines Group / British Airways, with 12 subject to shareholder approval; Singapore Airlines, with 30 and United Airlines, with 20 airplanes.

Boeing 787-10 launch video

Boeing 787-10 will compete with the Airbus A330-300

We expect the Boeing 787-10 to serve as Boeing's answer to the wildly successful Airbus A330-300.

The A330-300 initially competed with the Boeing 777-200A (the non-ER variant), but over the past decade, beat the first 777 variant outright.

Cathay Pacific group is the largest operator of the A330-300

For almost every mission under 5,000 nautical miles, the A330-300 carries more payload at a lower seat-mile cost than any other airframe of its size on the market. Thus, for any airline who didn't need the range of the 777-200ER, the A330-300 became the aircraft of choice, and at 613 orders and 424 deliveries for this variant alone, one can see it is a huge market. The delays with the 787 program only benefitted the A333 program more, and Airbus won hundreds of orders in the last three years and still possesses a backlog of 187 frames.

The A333 has been especially popular with Asian carriers looking to use it for regional routes within Asia, like Singapore Airlines retiring its fleet of 777-200s in favour of A330-300s, and for carriers with large trans-Atlantic operations. The world's largest A333 operator is the Cathay Pacific / DragonAir group, which also uses the large belly space of the aircraft for cargo.

The 787-10 will give Boeing the upper hand in this market segment, and we estimate with potential sales of 700 aircraft long term.

The 787-10 can lift a higher payload than the Airbus A330-300, and has a maximum take-off weight of 250,830 kg versus 240,000 for the A330-300. The 787-10 will also have 600 more nautical miles of range than the A330-300, and 1,047 cubic feet of additional cargo space (18.9%), making it especially attractive to Asian carriers for whom strong cargo demand on regional routes is a big driver behind using wide-body aircraft for such flights.

From an operating cost perspective, the 787-10 is a new generation aircraft with updated technology. High composite light weight body, new wing shape, and bleedless and high bypass enginers. It could offer up to 20% savings on operating costs compared to the A330-300, and for an industry that loves even a 2% reduction, this would be huge.

We can also expect most operators to further reduce seat-mile costs by opting for the bone crunching nine-abreast narrow (17.2") seating, which can be justified on the shorter flights that will be operated by the 78J (time-table designation for the 787-10), in comparison, the eight abreast seating on the A330-300 offers 18" seat widths. (AirAsia X uses a nine abreast 16.5" seating on its Airbus A330s and A340s).

Airbus will naturally try to narrow this gap by offering better discounts on the A330, but the largest A330-300 operators like Cathay Pacific/DragonAir, China Airlines, Thai Airways, Delta, and Lufthansa can expect strong sales pitches from Boeing very soon.

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Report: Jet Airways scissors hub moving to Amsterdam

Earlier this week in a press conference at Amsterdam’s Schiphol Airport, Etihad CEO broke the news that Indian full service carrier Jet Airways will be transferring its European scissors hub from Brussels to Amsterdam. Thanks to the recently created Jetihad partnership (Etihad owns 24% of Jet Airways), Etihad exerts significant control over Jet’s international strategy.

Jet Airways currently operates daily flights from Mumbai and Delhi to Brussels, which then continue onwards to Newark and Toronto. Etihad recently signed a cooperation agreement with KLM that covers several destinations under a joint venture agreement. While Etihad (and by extension Jetihad) have no plans to join SkyTeam, they are apparently interested in working more closely with Air France-KLM and Delta. Etihad already places its code on 12 KLM destinations out of Amsterdam and on 15th May launched daily services between Abu Dhabi and Amsterdam using Airbus A330-200 equipment.

No timeline has been set for the transfer and it remains to be seen whether the shift of Jet’s North American services to Amsterdam is an intermediate step, or the final plan for these flights. Most industry observers had predicted that Jet Airways’ long haul fleet would be re-deployed for use on westbound international services through Abu Dhabi; indeed part of the value proposition for the Jetihad deal was the ability to utilize Jet Airways’ wide-body fleet to augment Etihad’s hub in Abu Dhabi via a scissors hub.

Still, Amsterdam makes sense as an intermediate transfer point. Mumbai does have more O&D demand to Brussels, but KLM’s Amsterdam hub is much stronger than the comparable operation for Brussels Airlines in Brussels. So Jet Airways will get some additional feed in Amsterdam. And if they were to launch a joint venture for US-Europe-India with Air France-KLM and Delta, it could be potentially lucrative.

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Hawaiian adds service to Beijing; when will India come on their radar?

by Vinay Bhaskara

Honolulu, Hawaii based full service carrier Hawaiian Airlines has announced new service to Beijing, China, with thrice weekly flights commencing in April 2014 utilizing 294 seat Airbus A330-200 aircraft configured as (18P/276Y).  The new service will be made possible because the existing 3 weekly flights to Manila in the Philippines will be cancelled from July 31st, 2013.

The new flights mark a continuation of the feverish Asian expansion begun by Hawaiian back in 2010, and fuelled by steady stream of A330 deliveries to sustain growth. Since June 2010, Hawaiian has added or announced new flights toSeoul Incheon, Osaka-Kansai, Fukuoka, Tokyo-Haneda, Sapporo, Brisbane, Auckland, Sendai, and Taipei. The flights are in large part a reflection of the changing nature of Hawaii’s tourism market; the traditional American and Japanese tourists are there in droves, but a rising number of affluent East Asians, especially Chinese, are making Hawaii a luxury destination of choice. And they are likely not done with growth to Asia, as Hawaiian has 11 more A330s scheduled for delivery.

As with China, Singapore, and the other East Asian nations, Indian tourism to China has grown by leaps and bounds over the past decade. However, inbound arrivals to Hawaii are still nowhere near enough to support a nonstop flight. However, at current growth rates, within 5-6 years, demand should be strong enough to support direct one-stop flights between India and Hawaii. In fact to some degree, the market has actually been held back by a lack of convenient one-stop options between India and Hawaii. Currently, the only option is to connect onto United in Newark, which entails a journey of more than 28 hours. Especially once Hawaiian begins to take delivery of its Airbus A350 aircraft, with their lower operating costs, a one-stop tag to India from one of Hawaiian’s Asian destinations could be viable.

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