SpiceJet and TigerAir collaborate via interline agreement

by Devesh Agarwal

Two budget carriers, India's SpiceJet and Singapore's Tiger Airways, have signed a three-year interline agreement to carry passengers on each other's networks through Hyderabad Rajiv Gandhi airport (RGIA).

From January 6, 2014, SpiceJet customers from 14 Indian cities Ahmedabad, Bangalore, Bhopal, Chennai, Kolkata, Coimbatore, Delhi, Goa, Indore, Mangalore, Madurai, Pune, Tirupati, and Visakhapatnam, can connect to TigerAir's Singapore flights from Hyderabad. From January 12, 2014, TigerAir passengers can connect to destinations on SpiceJet's domestic network.

RGIA, operated by GMR Hyderabad International Airport Ltd. (GHIAL) will be the first Indian airport to facilitate the connecting flights between SpiceJet and Tigerair. The airport will provide a free porter service to facilitate the collection and transfer of checked-in baggage for passengers travelling on connecting flights between the two airlines.

SpiceJet is the first Indian budget carrier to establish such an arrangement with a foreign airline. SpiceJet is offering an introductory promotional fare, starting from Rs 4,699 one way and return starting from Rs 9,998 both all inclusive.

The agreement was concluded by SpiceJet's new Chief Operating Officer, Sanjiv Kapoor, with TigerAir Group Chief Commercial Officer of Alexander Knigge, in the presence of SGK Kishore, CEO, GHIAL

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Opinion: Kingfisher Airlines' license suspension actually helps Vijay Mallya

On Saturday India's civil aviation minister Ajit Singh, announced that aviation regulator, the DGCA had suspended the operating permit of Kingfisher Airlines, after the carrier failed to respond to their show-cause notice.

With mountains of unpaid debts, the airline has been on life-support for some time now. Unpaid employees have been striking since October 1, resulting in a suspension of all flight operations by the Dr. Vijay Mallya promoted airline.

While many proclaimed their eulogies, the PR folks at the airline, called the suspension temporary

"We would like to clarify that this is not a cancellation but a temporary suspension which is valid only till such time that we submit a concrete and reliable revival plan to the satisfaction of DGCA."

The alcoholic beverages (alcobev) business in India is at the intersection of public relations, sexually aspirational marketing, board-room machinations, manoeuvring around the hundreds of contradicting laws, gratification and slush funds of administrators and politicians.

Call me a conspiracy theorist, but I refuse to accept that a man who made his billions in this tricky business, will just fold up his airline, risking his personal assets and those of the UB Group, which have been given as surety on the loans to the airline.

Going out on a limb, I suspect, this suspension may be one last, desperate move by team Mallya, to scare the stakeholders, employees, banks, vendors, and government, into saving the airline.

The striking employees who have been unpaid for seven months have been taking a hard line. With the management offering only one month salary, reconciliation meetings till now have proved futile. Ahead of their meeting with the management on Monday, the suspension suddenly gave the employees a preview of cold, hard reality. If the airline goes under, not only will they not get their unpaid salaries, but they will have to look for new jobs in a shrinking Indian aviation market.

The banks which are refusing to lend any more funds, demanding the Mallya bring in about $500 million (Rs. 2,500 Crore) to re-capitalise the airline, were given a preview of Kingfisher going under. Banks have collateral for only about 10% of their loan exposure. A lengthy, expensive, legal recovery process is not a desirable situation for them. Recovery proceedings may also bring to the surface undesirable information and questions, about potential political influence in these government owned banks granting loans to the airline.

The vendors, especially the airports, the fuel companies, and lessors, who will have to commence lengthy and expensive litigation to recover their dues if Kingfisher goes under. The mess will get further complicated due to cross litigation between the various vendors. For example the lessors who own the aircraft will have to pay the dues of airports before they can take away their aircraft.

The Government, by ordering the suspension or cancellation of Kingfisher's permit, has given Mallya the perfect escape route. He can now dump the entire problem in to the government's lap, saying "What can I do? I did my utmost to save the airline, but the government cancelled the permit. Now they must deal with the consequences."

The spin doctors are UB Group are masters in PR. We recently experienced how well they diverted the media's attention away from the Rs. 60 Cr. humanitarian loan extended by banks. Get a Kingfisher stewardess out in protest saying she is out on the streets, and all the TV news channels will cover it from head to toe. In no time, public opinion will be turned, that the government must be humane and take care of those poor unpaid employees who are now out on the streets.

Last, but not the least, is us passengers and tax payers. Thanks to capacity reductions, fares are already up 20% in the last few months, and over 50% compared to last year. With the Dussera festival this week, kicking off the peak travel season till mid January, and Kingfisher out of the picture, fares will rise to astronomical levels. There will be a public outcry and the government will be forced to defend the situation with the Kingfisher spin doctors saying "See, we tried to save the airline. The government closed us down. These fare increases are due to that."

The situation is being unfolded exactly how the King of Good Times wants it.

What are your thoughts on the suspension of Kingfisher's permit? On my conspirator theory? Your thoughts and comments are always welcome.

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Government approves fee hike by Airports Authority of India

The Indian government has approved a ten per cent increase in aeronautical charges at 84 airports across India operated by the state owned Airports Authority of India (AAI).

This at a time when airports across Asia and in many parts of the world, are reducing airport and passenger charges to stimulate air travel.

These charges include landing, parking and terminal area navigation fees that airlines pay for using airports. Naturally, one should expect the airlines will pass on the costs to us passengers, in the form of higher fares, but at a time when airlines globally are in meltdown, will they be able to ? Conveniently, the ministry expect airlines to absorb the increases. They are already bleeding so what difference will a little more make.

Since the start of this year, the Civil Aviation ministry headed by Mr. Praful Patel, has approved increases in aeronautical charges at the now privately operated brownfield airports at Mumbai and Delhi, which account for close to 60 per cent of India's total air traffic.

The three privately operated greenfield airports at Bangalore, Kochi, and Hyderabad can also be expected to increase their charges, since they are allowed, by contract, to charge what AAI charges.

The government is also expected to clear AAI's proposal for charging development fees from departing passengers at places like Thiruchirapalli, Trivandrum, Goa, Amritsar and Ahmedabad. Reflecting a warped thinking at the ministry, as demonstrated by the exorbitant fee differential between domestic and international passengers, we can be certain that airports with higher international traffic will have their development fee proposal cleared cleared first.

Airport developers claim a resource crunch in implementing their development plans during the current economic slowdown. The sharp fall in passengers and freight have affected revenue and business plans. Thanks to its lopsided planning, the government has created monopolies and cartels out of airports. Let us not forget, this is the same government which screamed "cartelisation", just two weeks ago, when private airlines raised their fares.

Risks are inherent in any business, and in a competitive scenario economic downturns are great drivers of efficiency maximisation, leaner organisations and cost effective operations.

Indian passengers have no problem paying for facilities -- once they are built; but asking us to pay for them in advance and cover the business risks of these monopoly airport operators is not acceptable. Instead of protecting passengers, the government is only aiding this huge cartel of monopolies called airport operators.

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Air India and Kingfisher biggest defaulters at Indian airports

In the Rajya Sabha today, the Minister for Civil Aviation, Shri Praful Patel informed the Parliament today that airport developers both in public and private sectors are not getting their dues from the airlines on time which is causing them financial problems.

As per the minister's statement in the house

In respect of Airports Authority of India’s (AAI), the dues, in Rs. Crore (Rs. 5 Cr = $1 million) of defaulting airlines are :

NACIL-Air India - 739.50; Kingfisher Airlines / Kingfisher Red - 286.62; Jet Airways / Jetlite - 32.78; Spicejet - 15.76; Paramount Airways - 12.50; Interglobe Aviation - 6.00; Go Air - 8.81. Total dues are Rs. 1,101.87 Cr.

Mumbai International Airport’s dues are as follows: NACIL-Air India - 52.90; Kingfisher Airlines / Kingfisher Red - 14.11; Jet Airways / Jet Lite - 7.51; Go Airlines - 2.29; Air Indian Charters Ltd - 0.80; Lufthansa Airlines - 0.80; Malaysia Airlines - 0.63; Emirates - 0.61;
Indigo Airlines - 0.57; Spicejet Ltd - 0.55; Singapore Airlines - 0.42; British Airways - 0.30;
Kuwait Airways - 0.27; KLM Royal Dutch Airlines - 0.26; Airlines Allied Services - 0.25; Kenya Airways - 0.25; El-al Israel Airlines - 0.23; Qatar Airways - 0.21; Saudi Arabian Airlines - 0.20; Ethiopian Airlines - 0.20; Other airlines - 3.18. Total dues are Rs. 86.54 Cr.

The total dues of airlines as on date owed to Hyderabad International Airport Limited (HIAL) is Rs. 48.75 Cr.

The total dues of airlines as on 15.12.2008 on Delhi International Airport Limited (DIAL) is Rs. 84.50 Cr.

The total dues of airlines on Bangalore International Airport Limited (BIAL) is Rs.41 Cr.

Cochin International Airport Limited (CIAL) have also informed that there are some dues from airlines, but it appears no details are provided.

Government has given instructions to AAI to take all possible steps including legal action, if warranted against the defaulting airlines.

Just two airlines, Air India and Kingfisher owe 93% of total AAI dues, and 80.5% of MIAL dues. I suspect the trends at other airports will be similar.

Without political directive, it is career suicide for anybody at AAI, which is a government body, to even dream about, let alone execute, pursuing recovery operations against Air India, which is a government owned entity. In any case, Air India, just does not have the money. It is waiting for Sugar-Daddy a.k.a. Government of India to bail it out.

In case of Kingfisher, I am completely stupified. Dr. Mallya runs a global empire, he is astute and I am told, an extremely driven man. Aviation and Kingfisher, the airline, is his passion. What has gone wrong ? Have the liabilities of the Air Deccan merger finally caught up ?

Rs. 1,100+ Crores is not a trivial amount. This is money of the taxpayers of India, that should be put to better use, than left as overdues.

How seriously can we treat the minister's statement about instructing AAI to use all possible means to recover their dues ? It will be a simple step for AAI. All they have to do is stop the airlines from landing at their airfields, and seize the aircraft already parked. It will probably take, all of 2 seconds, before holy hell will break loose.

All the airport operators are suffering due to the economic crisis, and the subsequent reduction in overall aviation activity, be it flights, passengers or cargo.

AAI revenue has decreased by Rs. 228 Cr., April to September 2008, as compared to the corresponding period in 2007. MIAL's aeronautical revenue is down Rs. 79.83 Cr., April, 2008 to November, 2008. DIAL is down Rs. 50 Cr., and is already begging for financial assistance for its ambitious expansion plans, needed to meet the requirement of the Commonwealth Games 2010. HIAL has seen a total revenue decline by 15%. BIAL is down, but has not provided figures. The only other major airport operator, CIAL, has not been affected significantly, due to the constant middle east traffic, the one area of global aviation that is still escaping the global meltdown.

Overdues impose unneeded operational expenses on airport operators, and that ultimately comes back to passengers in the form of decreased services, delayed facilities, and higher fees. MIAL has been given permission for a 10% across the board rate hikes at Mumbai, Delhi can be expected to follow very soon.

Mr. Praful Patel is in difficult position of being the "boss" of both the defaulting airline and the airport operator owed the money. He has to make up his mind, and fast.

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BIA domestic UDF fixed at Rs. 375 on par with RGIA

The Deccan Chronicle reports that the ministry of civil aviation (MoCA) is ready to roll out the User Development Fee (UDF) for Bengaluru International Airport Limited which is likely to cheer air passengers but leave the promoters red faced. While the UDF for domestic passengers will be Rs 375, international travellers will have to fork out Rs 1,000 every time they fly out of BIA. The decision comes as a blow to the private operator as they have said that non-approval of the proposed UDF has caused huge losses to it.

Highly placed sources in MoCA say the long pending decision was taken after scrutinising the capital cost of the airport which was put at Rs 2,470 crore by BIA. “The Hyderabad international airport was considered as the benchmark as it is bigger and better than BIA in many ways and was also being built simultaneously. While GMR Group, the lead consortium for Hyderabad airport pegged their expenditure at Rs 2,370 crore, BIA was on little higher side. So after deliberations we have decided to fix the UDF on par with Hyderabad airport,” sources said.

“The procedure for arriving at the UDF was based on the cost incurred on the project. In this connection, the private operator had earlier sent the internal audit report but we sought an independent engineer’s report and it was carried out by international firm Scot Wilson as the evaluation of expenditure should be done from an arm’s distance. The same firm which gave the completion certificate for BIA,” sources said.

BIAL had sought approval for Rs 675 as UDF for domestic passengers and Rs 1,075 from international travellers. The proposal was pending before the MoCA for the last five months as it was considered high. “After carefully assessing the costs and public sentiments, the officials and representatives of AAI, felt that the charges should be on par with Hyderabad airport,” he said.

“It was felt that it was unfair to further burden passengers who already feel that BIA is inferior to Hyderabad airport. The BIAL hasn’t collected UDF for the last five months and we have to factor in this to make up for the losses incurred. A final decision will be taken after we work out all these modalities,” the officials said. The decision comes at a crucial time when BIAL is rethinking about its expansion plans due to the global meltdown.

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GHIAL commissions new Haj terminal at Rajiv Gandhi International

GMR Hyderabad International Airport Limited (GHIAL) announced that it is all set for its maiden Haj operations from Rajiv Gandhi International Airport.

GHIAL has provided all facilities at the new Haj Terminal for the convenience of the pilgrims this year. The facilities are meant for both the passengers and the visitors.

The Saudia Airlines Airbus A300 flight to Hyderabad will land at Rajiv Gandhi International Airport at 4 a.m. on October 30, 2008 from Jeddah. The flight will take-off from Hyderabad to Medina with 300 passengers at 5:30 am.

The facilities include:

• Separate area for passengers and visitors.
• Separate toilets for male and female passengers are provided at the passengers and visitors area.
• Departure Lounge is provided.
• Security Hold Area has Tea/Coffee & snacks joints, telephone booth with local / STD / ISD, Forex Counters, & Duty Free area.
• First Aid facility.
• Paid Parking for the vehicles of passengers and greeters.

A Prayer Hall is also provided for Male and Female Passengers with facilities for Vazu (ablutions).

The airport is also providing buggies for elderly passengers besides wheelchairs for those who need this facility.

“An exclusive terminal for the first time in Hyderabad has been constructed with all integrated facilities like customs, immigration, security, food & beverage, retail / duty free, an exclusive car park for Haj travellers, which will bring down the processing time and enhance the standards of service provided by GHIAL”, said Mr. Viswanath, Chief Commercial Officer, GHIAL.

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Parliamentary committee recommends UDF withdrawl, re-open HAL and Begumpet

In what is sure to be a shock, to both the BIAL and HIAL consortia, the Deccan Chronicale reports, the parliamentary standing committee on transport, tourism and culture, on Thursday October 23, recommended immediate withdrawal of user development fees (UDF) being charged by Hyderabad and Bengaluru airports.

It said the private operators had invested only Rs 330 crore and Rs 240 crore at Hyderabad and Bangalore respectively to develop the airports. The rest of the amount came from the AAI, state governments and through debt from financial institutions.

Observing that the government’s policy was to make air travel more affordable, the committee said the UDF imposed on passengers “may be withdrawn immediately and no more UDF may be imposed on passengers in any of the airports.”

The committee has also recommended that the HAL airport in Bangalore, and the Begumpet airport in Hyderabad be used for short-haul domestic flights.

The committee, headed by the CPI(M) leader, Mr Sitaram Yechury, said any future greenfield or brownfield airports should be developed with the Airports Authority of India (AAI) having a majority stake in a joint venture.

What impact this recommendation will have on the pending UDF requests of the consortia at Delhi and Mumbai is also to be considered.

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GMR to copy Memphis airport model to increase non-aero revenues

The volatility in aviation turbine fuel (ATR) has triggered GMR Hyderabad International Airport (GHIAL) to change gear from aero to non-aero operations.

Currently, revenues from aero operations contribute to three quarters of us total revenues. The rest comes turn non-aero operations. GHAIL is looking at reversing this ratio to offset the turbulence in global ATF prices. It is trying to emulate best practices adopted by some of the leading international airports in the world such as Memphis airport, which get a large chunk of their revenues from non-aero operations.

As part of its new strategy, the airport is exploring a tie-up with Agriculture and Processed Food Export Development Agency (APEDA) and freighter companies to enhance revenues from this segment according to a senior official in GMR.

“Our teams have gone to Memphis airport In the US, the global cargo centre, to study the cargo operation models. They will submit a detailed report after studying other airports in the US and Europe in the coming three months. We will rope in a consultant to design a plan to take the idea forward,” he said. With the presence of Federal Exchange and the largest cornea bank in the world, Memphis airport is the nerve centre of cargo operations across the world. For instance, 5,000 faulty laptops are brought to Memphis each day and airlifted overnight after repair at the airport. The GHIAL is exploring such a model here.
The airport will also open a separate website to facilitate banking transactions and cargo operations online. The Greenfield airport in Hyderabad has seen a drastic dip in air transport movements (ATM5) during the last few months due to the volatility in prices of aviation turbine fuel (ATF).

The airport had 260 to 270 ATMs a day in Jun-08. This has dropped to 210-220 in August, leading to a dip of 50 ATMs a day. Several airlines planning to start new trips have also defined their plans. “British Air for instance, has postponed new trips from Hyderabad from October to December this year said a GMR official

‘According to him, the airport expects a 15% increase in passenger traffic this year against 35% last year “ATF sale volumes have also come down from 800-850 kilo liters a day to 500 kilo liters a day in August” he said. Although the state-owned oil marketing companies cut ATF prices by over 16% on Sunday, this may not translate into cheaper airfares. The airport currently records eight million passengers a year and it is forecast to reach l2 million by20l0.

(c) Centre for Asia Pacific Aviation.

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