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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Air traffic plunges 11.5%, as air fares rise. Jet Airways group crashes almost 21%, IndiGo down 11%.

Talk about irony. In March this year, Dr. Dinesh Keskar and Bangalore Aviation were discussing the double digit, yet profitless growth occurring in the Indian airline industry.

Less than six months later, air traffic continues its fifth consecutive month of decline. Within, just the third calendar quarter, (second quarter of the fiscal year 2012~13), air traffic plunged over 11.5%, from 4.537 million passengers in July, to 4.018 million in September. August at 4.369 million passengers was down 3.7% from July, and September was down 8.03% from August.

No airline could avoid the contagion. Jet Airways group is down a whopping 20.63% for the quarter, dropping from 1.207 passengers in July to 0.958 passengers in September. Even market leader IndiGo which is steadily growing its fleet, is down a significant 10.77%. SpiceJet is down 8.04%, Air India down 5.95%, and Kingfisher down 9.62%. GoAir performed the best, losing 2.85% of its passengers.

Year on year for the nine month period January to September this year 43.839 million passengers travelled by air domestically, compared to 44.218 million last year. Down 0.9%.

For the month of September, IndiGo continued its market leadership, but it appears the fare war unleashed by Air India has gained it passengers at the expense of all other airlines. Air India even beat Jet Airways, carrying 0.775 million passengers compared to 0.729 million by Jet Airways.

Put the blame for this contraction on the significant increase in airfares over the last six months, driven by the collapse of Kingfisher Airlines. Airlines are reducing the excess capacity, which has already increased fares over 20%. For the winter schedule which commences October 28, Indian carriers will fly 20% less flights than last year. 10,935 vs. 13,541 flights per week. Experts, expect air fares to rise another 10%~15% during the winter season which is also highest in terms of demand.

No airline crossed a passenger load factor of 70%, even the traditional leader IndiGo which used to regularly be in the top of the eighties or low nineties.

How will this capacity decrease impact passenger numbers? What is your view? Share a comment.

Also, do you think such major fare increases bodes well for the Indian consumer? Share your thoughts.

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Coincidence in the registration series of Jet Airways' 737s VT-JFx and IndiGo's A320s VT-IFx

This is an interesting snippet and for the interest of plane spotters.

At present, the two leading airlines in India are Jet Airways and IndiGo; and they also happen to be aggressively adding aircraft to their fleet. By sheer coincidence, the registration sequences for the new aircraft for both these airlines happen to be very similar. Jet's new Boeing 737s are in the VT-JFx sequence, and IndiGo is in the VT-IFx sequence. VT-JFA (see picture here) joined the Jet fleet a couple of weeks ago, and VT-JFB just couple of days ago. IndiGo will expect its A320 VT-IFA (see picture here) within this month.

The registration number of aircraft is much like a car number plate, except in the case of aircraft it is on a national basis. All aircraft in India have their registration number commence with VT, followed by three alphabets.

Airlines, with the exception of Air India and the erstwhile Indian Airlines, try to use the next three alphabets as a branding of the airline's number or abbreviation.

VT-VJM on take off

So Jet Airways has VT-JAx, VT-JBx, VT-JCx (ATR-72s), VT-JEx (Boeing 777s), VT-JNx, and VT-JWx (Airbus A330s), and now VT-JFx. JetLite has VT-JLx and also VT-SJ (from the acquired Air Sahara).

Kingfisher has VT-KAx (ATR-72s), VT-KFx, VT-ADx, VT-DKx and VT-DNx (from the acquired Air Deccan), and their A330 fleet was VT-VJx (Dr. Vee Jay mallya perhaps). Dr. Mallya's private A319 Corporate Jet is registered VT-VJM and his Boeing 727 is registered in the USA as N727VJ (all US registrations begin with N). Incidentally, VT-VJM used to always operate as Kingfisher flight 11.

SpiceJet has VT-SJx, VT-SGx (the IATA airline code for SpiceJet is SG), and VT-SUx (Q400s).

IndiGo began with VT-INx, then VT-IGx, then VT-IEx (IndiGo's IATA code is 6E) and now VT-IFx. I wonder what passengers will make of VT-IFE, considering IndiGo's A320s do not have an In-Flight Entertainment (IFE) system, or VT-IFK or VT-IFU?

Air India's sequences appear to be less about the airline and more about individuals. For example the current A321s in the fleet are VT-PPx (Praful Patel perhaps?). However, the Air India Express subsidiary has its 737-800s registered VT-AXx which have some wonderful tail art. Read our stories explaining the tail art of each aircraft.

Please share your interesting anecdotes or thoughts via the comments section below.

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Infographics: April Data for the Indian Airline Market

The image above shows the load factors at each of India's airlines. Considering that Kingfisher has shrunk so much, it is surprising that their seat factor has not elevated past its pre-downsize levels.

The image above shows on-time performance for April. Two interesting things to note about the data. First, Kingfisher's OTP has come back down to earth. In earlier months after the downsizing, Kingfisher had recorded an OTP of up near 90% but this appears to have been an outlier caused by too many cancellations at Kingfisher. Also interesting to note is GoAir's superb performance. We have personally reviewed GoAir's schedule, and it is heavily concentrated on rush hours in the Metros; I wonder how they manage to outstrip their competitors who have a more balanced schedule?

Market Share data is pretty much as expected, though IndiGo continues to encroach on Jet Airways' position at #1. To give these figures a bit of color, overall domestic traffic figures were 5.1 million for the month, meaning that Jet Airways and IndiGo each carried more than 1 million passengers in April. It's also sad to see Kingfisher as a shell of its former self, stuck in last place - almost the opposite of Gordon Bethune's book "From Worst to First - Behind the Scenes of Continental's Remarkable Comeback"- at Kingfisher they went from First to Worst.

And finally, cancellations and complaints. Air India was predictably atrocious in the cancellation department (and this will only get worse with the IPG strike in May), but held up surprisingly well in the Passenger Complaints department. IndiGo and GoAir on the other hand performed the worst; one has to wonder if under-staffing has become an issue at these two frugal carriers.

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"How can you save money, except by getting the 787?" Interview with Dr. Dinesh Keskar, President, Boeing India

On the sidelines of the India Aviation 2012 show at Hyderabad, Devesh Agarwal had an exclusive one-on-meeting interview with Dr. Dinesh Keskar, President, Boeing International Corporation India Pvt. Ltd., and Senior Vice President of Sales, Asia-Pacific and India, Boeing Commercial Airplanes. Dr. Keskar also chairs the Committee on Aviation at the Federation of Indian Chambers of Commerce and Industry (FICCI) which organises this show.

The interview was held on-board the 787-8 Dreamliner, N1015B, in Air India configuration, line number 35, specially brought in for the show. (See cabin photos and video walk through here.)

Dr. Dinesh Keskar

Bangalore Aviation covered a wide variety of questions with Dr. Keskar, from the 787 to 737 MAX to 747-8i to 777-X, and not just in his official capacity at Boeing, but also as a seasoned and well informed observer of the Indian commercial aviation industry. Dr. Keskar answered all the questions posed to him, and gave us a frank opinion, on what he sees happening in the ailing Indian airline industry.

Q: Please give us an update of what’s going on at Boeing, from an India, Asia-Pac, to a global perspective?

A: The bottom line is, the world is a big market with 33,504 sales as a long term forecast. Within that, I think Asia-Pacific has the largest potential. If we come from that perspective, Asia is the booming thing right now, Europe is still struggling, the US is kind of flat, and then you have India at the bottom, which is a good market, but as I said yesterday [at the public Boeing press briefing], the growth is there, still double digits, but it is a profit-less growth, and that is our big problem right now.

Q: You have brought the Air India version of the 787 to India. How has been the response to the aircraft? From the public? from [launch Indian customer] Air India? from Government officials?

A: Tremendous… Everybody who has walked in is absolutely impressed with the airplane. Those people who have seen the airplane from the inside, who have seen the features, who have looked at the full flat business class seats, who have played with the electronic windows; who have looked at the economy seats and are absolutely ecstatic. They cannot wait to have this airplane in India so they can start making money with it.

You can see it for yourself, bigger bins, larger windows, better humidity, we talked about what the passengers can see themselves. Then there is also what they can feel, which is the air filtration system, the dust elimination system, the cabin altitude [787 cabin pressure is maintained at 6,000ft MSL vs. 8,000ft of other aircraft], and I mean you can go on and on. These are not present in any other airplane, and these are all important factors.

Q: Have you been successful in your efforts to persuade the government that the Dreamliner is the aircraft Air India needs to succeed in its efforts to turn around? There has been a lot of talk about the Indian government reducing the order due to financial constraints? Can you please comment on how confident you are in retaining the original order of 27 787-8 Dreamliners? [Editor's note: About a month after this interview, the Government of India, in its financial bail-out package of Air India, confirmed the airline will take delivery of all ordered 27 aircraft.]

A: I cannot comment on the Government of India’s mindset or on the on-going negotiations. It is the government's prerogative on what to do; but I will say that this is the best airplane we have. You can see the data. 850+ planes sold, five aircraft already delivered, 59 customers, one has started taking delivery.

Which other airplane gives the fuel efficiency that this aircraft does? 30% lower maintenance costs, 10% lower operating costs. There is no other airplane like this. It is an amazing airplane. How can you save money, except by getting an airplane like this?

Q: How are the five delivered Dreamliners performing at [launch customer] ANA (All Nippon Airways)? Are there any issues?

A: You should talk to ANA too, but they are clearly very pleased with the plane, and they have made a statement to this effect. Over 100,000 passengers have flown on the different sectors that they fly, and it has over 98% dispatch reliability, which is unthinkable for an airplane which is going into service for the first time in the world.

Q: What are some of the other critical indicators, there are concerns some of the initial airplanes were overweight?

A: That’s true, but the plane is making all the missions. One has to see what are you really getting? On the initial airplanes , instead of 20% improvement in fuel efficiency, you are getting 18%. Airlines kill for 1% and this is straight 18%. We are doing programs and we are continuing to improve the program in such a manner that we will be able to make up for these initial deficiencies, reduce the weight, and we will try to improve the aircraft’s engine and engine integration, so that we will get back to the efficiency that we initially advertised.

Computer generated image Lion Air Boeing 737-9 MAX

Q: Switching tracks now. You led the team that closed the largest aircraft order in history, very recently, with Indonesian LCC Lion Air for the 737-9 MAX. What does this order mean for Boeing in general, and for the MAX program in particular?

A: So obviously, it is the third customer after American and Southwest. These are big orders. People were always worried who Lion Air is, but now they’ve taken delivery of their 60th 737-900ER just about 10 days ago, and they are making a lot of money with these aircraft.

Q: Lion Air was the launch customer of the 737-900ER. Will they be the launch customer of the 737 MAX 9 as well?

A: Yes.

Q: What has this done for the MAX program?

A: First of all, it is a clear indication that people believe in this aircraft, when you have airline’s putting belief in this aircraft [by ordering it] in these quantities of numbers. And again, if you look at it, Indonesia is a perfect market, where there are 17,000 islands, across 7 time zones, bigger than the US. You fly 6 hours and you are still in the country. So they can generate lot of RPKs [Revenue Passenger Kilometres - a measure of airline performance], and that is why they need such airplanes. The ASEAN [Association of South East Asian Nations] is being opened up. When there will be open skies in ASEAN, then there is no limit to where they [Lion Air] can go; and that’s where, if Lion Air can run an efficient airline, a profitable airline, which he does in this environment with the fuel price where it is, they’re going to be the leader in the ASEAN low cost segment.

Q: Please elaborate on Boeing's plans for the 737 MAX in India?

A: Jet Airways [group which includes JetLite, now re-named to JetKonnect] flies a majority fleet of 737s which are NGs [737-700, -800, -900/ER], and then SpiceJet is all NG, and Air India Express is now at 23 737-800s. When you are looking for replacement for these airplanes, clearly you are going to get the same thing. We are showing customers what this [the MAX] is all about, and we are showing them how we’re not changing today’s 737. We’re not changing the body, we’re not changing the interior, we’re just changing the engine. So it is whatever is there today, it’s just becoming 15% more fuel efficient. So it’s going to be an amazing thing for airlines. No cockpit changes, nothing.

Q: Currently, Boeing has 451 orders for the MAX, but you have more than 1,000 commitments (which includes these 451 orders). Lion Air has demonstrated their confidence in the form of an order. Why are other customers hesitating to convert their commitments into firm orders?

A: I won’t say it's hesitating. It takes time to define everything, and people have different things going right now. And they’ve stepped up to say that they want this airplane because, as you can appreciate Devesh, the more they wait, they might not get the early positions. Lion Air has locked up the early positions in 2017, so has Southwest, and clearly there’s an advantage to that. But they have to weigh that with respect to their other things going in their life as an airline. But I don’t put too much stock into that difference (between orders and commitments). Some people might think, it’s 2012 and the aircraft is 5 years away, what’s the big rush?

Q: We understand your competitor is facing some issues with CFM. How confident is Boeing in the LEAP-X engine, especially since its a single source engine for the MAX?

A: We feel pretty good. I have not heard anything other than that, and we have time to fix it. Clearly we have given them [CFM] the numbers. We have told them what missions this airplane has to do. It can only happen if they deliver. After all what is the big change on the MAX? its only the engine, and we if we don't have that, we are left with an NG.

Q: What future does Boeing see for the 787 in India, beyond the 27 and ten orders with Air India and Jet?

A: So you are asking who else, in India, do you think can fly the 787 internationally? The rest of our customers are all regional airlines. The two airlines that are capable of flying it [the 787] internationally have already purchased it. Other airlines are still flying within a zone, that is very small and regional. The 787 is not the airplane to go to Dubai and back.

Once we have those airlines interested, we’ll be talking. Even SpiceJet’s people went through this airplane today. So, it’s not like we’re not talking to them, but you have to be realistic also. When will they have the flight plan for using the 787? When will they be able to fly the airplane, etc.? We are working with the various airlines. In any case, even if they came today, right now I could not give them the airplane till 6~7 years down the line, unless they lease it. So it works out all well.

Q: What future do you see for the 777, and 777-X when it does develop, and your 747-8i?

A: The 747-8i, I feel, the potential may only be with Air India, if at all. The reason for that is, you just look at Bombay London, or the India London routes for that matter. Six to seven years ago, we only had 25 to 30 frequencies a week. Today we have 120, just on India London. With that kind of number, you clearly can see that you can’t take a big 747 and fly it because there are five other airlines that are flying a flight within the same hour.

So you got to have an airplane that is right-sized that is more efficient, and that’s what 777 and 787 are all about. We think that the 777 has a tremendous future. As we build variants like the 777X going forward they too will have a solid future. Once you have the base, and we have the base, as an example look at the cockpit; people that fly the 777 can fly the 787 with just five days of training. The 777X is not going to make a radical change either. Whereas, to go to an Airbus requires a long training period and a complete change in philosophy.

We’re going to continue to work with all our airline customers and keep them informed; in fact I am doing that as we speak right now, to airlines about what's coming in the future, and also taking their inputs so the airplane is what they want and like, as opposed to what we tell them it will be.

Q: What kind of demand do you see for new build freighters within the India market?

Not much, though, there is a market for used conversion freighters. That is already happening with Blue Dart, and we only have one dedicated freight airline, in India, today, and that too is regional and small. The reason for that, is that we’ve created a 777 that carries 15 tons of cargo in its belly, that’s half of the 737 freighter’s capacity. 787 is another good example, it’s got 14 tons of belly cargo capability. With that kind of capability, we are creating airplanes which already have a mini-freighter built in the belly, allowing airlines to leverage their passenger operations better.

Q: The Indian economy is growing fast, the passenger market at double digits. It has one of the highest growth rates in the world at 15-20%, yet Indian carriers are losing money, hands over fist. Why?

A: Simply put, because the airlines are pricing lower to artifically stimulate demand. If they continue this behaviour, it is not an industry that can be sustained.

Q: This question is for you, not as a Boeing person, but rather as an informed observer of global aviation. Many Indian airlines are leasing out their 300 plus seat aircraft out to foreign carriers, who then make a lot of money with the aircraft, before returning them back. In your opinion, what factors, are specific to the Indian market, that are holding back Indian carriers from making money with the very same aircraft? [Editor's note: For the last two years, bulk of Jet Airway's Boeing 777-300ER fleet has been leased out to Turkish Airlines, Gulf Air, and Thai Airways. Air India too, is considering leasing its 777s.]

A: So the fundamental answer to that question is that fares from India are a lot different than fares from another country. Dubai and Singapore [Emirates and Singapore Airlines, the two largest operators of the Boeing 777], with the same aircraft make billions of dollars of profit, while we have trouble filling that aircraft because they’re taking away the market. And why is that? it’s because of their connectivity. Once you go to Dubai, you can go anywhere in the world nonstop. Jet Airways will take you to London and then what happens. You don’t go anywhere. When they take you to Hong Kong, you don’t go anywhere. When I fly SQ [Singapore Airlines] from here to Singapore, 75% of passengers connect to somewhere else. So if you understand the fare segment, if you buy Jet Airways up to Singapore and other airline after that, you’ll pay 30% higher fares, so the only way to solve this is the connectivity.

Q: So you’re saying that the Indian carriers have to drastically expand their network to make these larger aircraft work for them?

A: Through Brussels Naresh [Goyal, Jet Airways] does okay. He has a scissor hub, What does Air India do? They go to New York and stop, they go to Chicago and stop, which is better than going just to London, but it still falls way short of the global connectivity offered by SQ and EK [Emirates]. The secret is the connectivity along with the fare.

Q: These last questions are for you in your capacity as Chairman of the Aviation committee at FICCI. What, in your opinion, are the critical steps to correct the problems in the Indian aviation market?

A: We’ve got to find money for the airlines, FDI [foreign direct investment] is one way, but the second thing is that you’ve got to find ways to reduce their cost, fuel being an important one. We also ought to find how they can rationalise their routes. There’s no point having 45 flights between Bombay and Delhi when the demand is only for 35 flights. Finally, there has to be cooperation at the airports. You come to Hyderabad, there’s a ladder from SpiceJet, there’s a ladder from IndiGo, and every airline has its own. Why can’t we have an airport provide those implements, charge for it, and reduce everybody’s costs? If the costs of the consolidated ground handler is high, it needs to be talked and looked into, as to why it is high. We should not abandon the idea.

Q: What about the airport charges? Some people say, India does not need gold plated five star airports with high charges.

A: Great question. You either increase the fare or the airport charge, the effect is the same, you lose the passenger. And this is why AERA [Airport Economic Regulatory Authority] was created, it’s a tough job, I don’t envy them at all.

Thank you Dr. Keskar, a pleasure as usual.

Thank you, Devesh.

Special thanks to Vinay Bhaskara for helping with the transcription.

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Jet Airways consolidates low cost Konnect and JetLite brands but increases brand confusion

Rishul Saraf and Devesh Agarwal

India's largest domestic airline Jet Airways, has announced a unification of its two low cost brands JetLite and Jet Airways Konnect to be called JetKonnect from March 25, 2012.

• As per the airline, a "gradual rebranding" of the JetKonnect brand will commence on March 25, manifesting itself on letterheads, the JetKonnect website, boarding passes, tickets, stationery.
• Signages at all check-in and ticketing counters will have dual branding reflecting the existing Jet Airways and the new JetKonnect logos.
• Ticket sale for JetKonnect flights will commence from March 20 2012, with travel validity from March 25, 2012 onwards
• Effective March 26, 2012 guests to jetlite.com would be automatically redirected to the new, re-branded jetkonnect.com
• Some JetKonnect flights will operate under the S2 code, while others will have flight numbers prefixed by the 9W code. 9W and S2 will also continue their existing Codeshare agreement.

This is definitely a step forward for Jet which has long battled brand dilution and confusion due to presence of multiple brands which frequently overlapped each other.

One step forward, two steps back

Without enlarging, is this a Jet Airways plane or a Konnect?

Our special correspondent Rishul Saraf had proposed, in his earlier article, that Jet Airways should merge its two low cost brands to remove brand confusion.

To eliminate the prevailing brand confusion in the Jet Airways setup, Jet has uplifted Konnect from a temporary sticker on mainline full service Jet Airways planes into a full fledged “JetKonnect” LCC brand, and merging the colour schemes of the JetLite brand (see picture of the new livery here.)

Over the long term this will result in brand recall, but, Jet Airways appears to have taken one step in the right direction, and two steps backwards in the confusion department.

Two airlines, one brand ..... confusion

One has heard of one airline operating two brands, but for reasons unexplained, the JetKonnect brand will be operated under both the low cost JetLite airline code (S2) and the existing full service Jet Airways airline code 9W.

Two airlines, one brand? How will the passenger differentiate the two?

Unfortunately, there is no clarity from Jet Airways. The airline's answer "we will put a small tag line showing Operated by JetKonnect".

This is already being done, which then begs the question, why this branding exercise?

LCC to drag down mainline full service brand ........ what is Jet thinking?!?!

If the confusion between the two existing LCC brands Konnect and JetLite isn't enough, the crew on the new JetKonnect LCC flights will wear the same uniform as the mainline full service Jet Airways, and JetKonnect will offer the same business class cabin on certain routes where guests will receive identical services as on the mainline full service Jet Airways Club Premiere class.

If you can imagine what the planners at Jet are/were thinking, please do post a comment, for we cannot. Talk about downgrading the mainline carrier?

Who is a target customer of Jet for the premium cabin (previously called Konnect Select)? Low fare or premium buyer?

As an Low Cost brand, JetKonnect cannot command the same fare as the mainline Jet Airways, even though it is the same identical cabin, cabin staff, and service offering. At the same time, by offering the same cabin at a lower fare in the LCC brand, the mainline Jet Airways passenger will come to expect the premium cabin for lesser fares, and then over time, will value it less. It is a lose-lose scenario for Jet.

Two airline codes, three brands, complete confusion

Imagine a passenger steps on-board a JetKonnect stickered aircraft, operated under the S2 code, served by a Jet Airways attired crew. How is a passenger supposed to absorb and differentiate the triple combination of airline code, aircraft, and crew attire?

Step back, review, and revise.

The consolidation of the two LCC brands within the Jet stable is desperately needed, and JetKonnect as a permanent brand is welcome. However, the manner in which Jet Airways has chosen to proceed with this brand merger appears to create more confusion instead of removing it.

May be Jet should take a step back, re-think and revise some of its actions, and implement a plan with much more clarity.

What are your thoughts? Post a comment.

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Middle East Loses its Luster for India's Airlines

Will the majority of future of India-Gulf flights go through Dubai?

The first 9 months of 2012 will see a major re-shuffling by India’s airlines on the heavily trafficked India-Gulf sector, as airlines respond to higher fuel prices and a poor regulatory environment, and Air India continues to re-align its network strategy.

Air India will be enacting the most significant changes, primarily in Dammam. The third city of Saudi Arabia has a huge Indian population to work in the numerous oil fields and ancillary industries that dot the world’s most oil-rich region, Saudi Arabia’s Eastern Province. Despite this large traffic base, traffic from Dammam is mostly junk-yield VFR travel, especially for a carrier of Air India’s (non-existent) caliber, which is unsustainable for Air India in the face of rising costs and fuel prices. Thus Air India has announced a consolidation of Dammam services to its primary hub at Delhi. Dammam-Delhi will be served daily with an A319, replacing the current twice weekly service with Boeing 777-300ER. However, more than half of Air India’s remaining Dammam flights will all be cancelled, including Mumbai-Dammam. Air India has had direct flights between Mumbai and Dammam since the 1960s, and the end of this route is indicative of Air India’s continual shift towards a Delhi-centric airline since the decision was made to turn India’s capital into Air India’s primary hub in 2009. Along with the thrice weekly A320 service from Mumbai, current 4 weekly Hyderabad-Dammam A320 service will also be cancelled. Daily tag on service Sharjah-Dammam (linked to Varanasi and Lucknow flights) is cancelled as well. Dammam will continue to be served from Kozhikode and Trivandrum.

Meanwhile, other notable changes include the addition of a Bahrain tag to daily Delhi-Abu Dhabi services, which represents a return for Air India to Bahrain after the destination had been previously given over entirely to Air India’s low cost wing Air India Express. 2nd Daily Mumbai-Dubai flight will be re-instated with Airbus A330-200 equipment, enabled by substitution of 777-300ER for A330-200 on 7 weekly Mubai/Delhi-Jeddah frequencies (3 ex-Delhi, 4 ex-Mumbai). This 777-300ER meanwhile, is freed up by substitution of 747-400 and A320 family for 777-300ER on select Kerela-Gulf, as well as the removal of 777-300ER from Delhi-Dubai daily services in favor of Airbus A321. A full catalogue of Air India’s Middle East changes can be found at the bottom of this post, courtesy of airlineroute.net.

India’s largest private carrier Jet Airways, meanwhile, has been more muted in its response to the rising fuel prices and increased competition, but it is of course much smaller than Air India to and from the Gulf. Apparently seizing on the same trends as Air India, Jet Airways has announced a temporary reduction in many Kerala-Gulf sectors from daily to 5 weekly. The routes affected are from Trivandrum to Sharjah and Muscat, and Cochin to Muscat and Doha. On Kerala-Gulf sectors, the majority of the traffic is considered VFR or visiting family and relatives, with a smaller tourist component, and very limited business traffic. This breakdown is very consistent with variance in traffic across the various days of the week, meaning that it is not necessary for Jet to maintain services every day of the week. Jet currently has reduced service only till the end of March, but we feel that it would be prudent for them to extend these reductions further in order to boost profitability.

More troubling is Jet Airways’ subsequent addition of 4 weekly Delhi-Dammam services from mid March 2012 (17th March to be exact) using Boeing 737-800 equipment. Considering that Air India will be consolidating to the same route later in 2012, does it really make sense for Jet Airways to go head to head with Air India on a yield-limited sector? Moreover, Air India is ending Mumbai-Dammam, and Jet Airways is perhaps strongest in Mumbai. It might be more effective for Jet to target the limited business and high yield leisure traffic between Mumbai and Dammam as opposed to splitting a smaller full service market with an irrational pricing agent such as Air India. The schedules for Jet Airways Delhi-Dammam can also be found at the bottom of this story, once again courtesy of the excellent airlineroute.net blog.

Dealing with its own fiscal and operational issues, India’s third full service carrier Kingfisher has cut its Gulf operation down to almost nothing; 3 daily flights to Dubai (one each from Bangalore, Delhi, and Mumbai). Kingfisher had once operated to Saudi Arabia and other Gulf destinations as well, and the drawdown in India-Gulf mirrors Kingfisher’s overall capacity pull down, which has seen the carrier slash more than half of its capacity down to a level of around 200 flights per day. Neither GoAir nor SpiceJet operates to the Gulf (though the latter might begin to do so soon as domestic avenues for growth dry up), but the third Low Cost Carrier (LCC) of India, IndiGo is likely to add further flights to the Gulf, as it evolves towards a model of around 20% capacity deployment abroad, and adds frequencies later this year. Muscat was already mentioned as a potential destination, and further destinations are likely to complement the carrier’s existing Dubai service. Only Saudi Arabia is fully saturated under current the current bilateral agreement, so IndiGo’s possibilities are virtually endless.

Even amongst India’s full service carriers, the trend for Gulf flights is to use their LCC wings as the primary tool. Air India Express has already taken over many non Mumbai/Delhi flights to the Gulf (excluding Saudi Arabia b/c of the bilateral), and indeed Air India Express’ lower costs and more efficient 737-800 aircraft are more suitable for the VFR heavy Gulf Sectors. Jet must first integrate its Jet Konnect and JetLite brands before considering international expansion, but they too can use an LCC wing effectively to carve out a niche in this huge market. Gulf based LCCs are expanding even more exuberantly than Indian ones, with carriers such as FlyDubai adding capacity to India at exponential rates.

At the same time, the full service market between India and the Gulf has been all but ceded to airlines on the Gulf end. Emirates has, for the most part, saturated its allotted capacity, but Etihad, Turkish Airlines, and Qatar Airways to a lesser extent, all have room for expansion. Even secondary carriers such as Gulf Air are sending their most up-to-date premium products, with Gulf Air substituting its new amenity-filled A321s onto their Mumbai and Delhi routes. Whether or not government malfeasance is at the root of this imbalance, the future of Gulf service on India’s airlines increasing appears to be of the no-frills variety.

Schedule Changes

Air India Summer 2012 Middle East Changes

Abu Dhabi / Bahrain

Delhi – Bahrain – Abu Dhabi – Delhi Abu Dhabi service on outbound operates via Bahrain, where AI is resuming operation
AI941 DEL1745 – 1915BAH2015 – 2225AUH 320 D
AI940 BAH2015 – 2225AUH0005+1 – 0515+1DEL 320 D

Mumbai – Abu Dhabi Airbus A319 replaces A320, Daily service

Dammam / Sharjah

Delhi – Dammam Service changes from 2 weekly 777-300ER to Daily A319. Operational schedule moves from morning/noon to red-eye.
AI913 DEL0810 – 1010DMM 77W 37 -24MAR12
AI913 DEL0130 – 0345DMM 319 D 25MAR12-

AI912 DMM1250 – 1855DEL 77W 37 -24MAR12
AI912 DMM0445 – 1115DEL 319 D 25MAR12-

Amritsar – Sharjah – Dammam Sharjah – Dammam sector cancelled. Service to Sharjah remains at 4 weekly with schedule changes on return flight and will originate to/from Delhi

Hyderabad – Dammam 4 weekly A320 service cancelled

Lucknow – Sharjah – Dammam Sharjah – Dammam sector cancelled. Service to Sharjah remains at 3 weekly with schedule changes on return flight and will originate to/from Delhi

Mumbai – Dammam 3 weekly A320 service cancelled

Dubai

Delhi – Dubai AI995/996 Airbus A321 replaces 777-200LR/-300ER
Kozhikode – Dubai Airbus A321 replaces A320, Daily service
Mumbai – Dubai 2nd Daily service restored with A330-200
AI957 BOM1445 – 1605DXB 332 D
AI983 BOM2030 – 2155DXB 321 D

AI956 DXB1710 – 2130BOM 332 D
AI984 DXB2340 – 0405+1BOM 321 D

Jeddah (Previously reported on this site)

Delhi – Jeddah Boeing 777-300ER replaces A330-200, 3 weekly
Mumbai – Jeddah Boeing 777-300ER replaces A330-200, 4 weekly

Muscat

Delhi – Muscat Airbus A319 replaces A320/321, Daily service

Riyadh

Delhi – Riyadh Introduction of 3rd weekly service with Boeing 777-200LR
AI925 DEL1525 – 1730RUH 77W 16
AI925 DEL2010 – 2215RUH 77L 4

AI924 RUH0710 – 1355DEL 77W 16
AI924 RUH2330 – 0615+1DEL 77L 4

Mumbai – Riyadh AI927/920 (Day 24 from BOM, Day 35 from RUH) operates with 747-400, replaces 777-300ER

Thiruvananthapuram – Kochi – Riyadh Boeing 747-400 replaces 777-300ER, 2 weekly

Jet Airways Delhi-Dammam Schedules

Jet Airways from 17MAR12 is starting 4 weekly service on Delhi – Dammam route, on board Boeing 737-800 aircraft. The airline already operates Daily Mumbai – Dammam service.

Schedule from 25MAR12:

9W568 DEL2000 – 2150DMM 73H x245
9W567 DMM2250 – 0530+1DEL 73H x245

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Jet Airways must remove brand confusion by consolidating its low cost Konnect and JetLite services

TURBOCHARGING JET AIRWAYS PART 1
By Rishul Saraf

Jet Airways is a pioneer in Indian aviation. From the earliest stages of India’s economic liberalisation, with a fleet of just four Boeing 737-300 and 737-400, Jet Airways grew to reach a fleet size of over 92 aircraft, by 2008, and become a dominant force in Indian aviation.

Since then, due to recession, competition and some say waning political clout, the airline and its brand have been on a downward slide. Jet’s finances look bleak and their operations, especially domestic, appear muddled.

Despite these setbacks, Jet is, in my opinion, the Indian carrier with the highest potential to bounce back to consistent profitability and become the iconic brand of Indian aviation once again. To achieve this, the airline needs to re-energise its operations, remove brand confusion, and address some major hindrances it is facing, and will encounter, in overseas markets.

Along with the main brand, Jet Airways offers two low cost brands – JetLite and Jet Konnect. These two low cost brands, which operate only domestic flights, constitute over 75% of Jet’s total domestic available seat kilometre (ASK) capacity; and one can infer by extension, the revenues.

The Jet Airways flights, offer a full service Economy, i.e. meals and soft-drinks included, and Club Premiere, the business class. The erstwhile Air Sahara acquired by Jet, was renamed to JetLite and is operated as a low cost service, but with a separate air operator’s permit (AOP). All Jet Airways flights are coded 9W while JetLite is S2.

During the 2008 economic slowdown, the low fare brands of IndiGo, SpiceJet and GoAir experienced a meteoric rise. To address rapidly eroding marking share, Jet wanted to increase its low cost capacity, but did not want to dilute the main Jet Airways brand. Jet could not increase JetLite capacity, since it was involved in litigation with the previous owners of Air Sahara at that time. Jet Airways instead came up with Jet Konnect service in which, under its existing air operator permit (9W), it converted much of its mainline dual class Boeing 737 fleet in to an all economy class low cost service. Once the market recovered, Jet converted some of the Konnect aircraft to feature business class seating (2+2 in each row), but, to prevent confusion with its mainline Club Premiere, labelled this class as Konnect Select, and called it an “economy plus” cabin, even though for all practical purposes it is a business class seat.

While Konnect helped Jet Airways compete with the low fare carriers during lean times, and Konnect Select enhanced incremental revenues, this flooding of new brands on a less than stable base, confused passengers, and has resulted in fragmenting the unified and powerful brand the carrier once commanded.

The first Jet Airways Konnect flight lands at Bangalore International Airport

Now, both Konnect and Konnect Select brands’ have run their course, very rarely will one find a Low Cost Carrier running under the same brand as the parent full service carrier. For any organization to have various brands makes sense only if they are differentiable in terms of product prices, features, etc. Jet has failed in both these aspects.

Going forward, Jet must eliminate its low cost brand confusion by consolidating and developing a distinctly separate and strong low cost brand. The additional air-operator permit (AOP) of JetLite is the perfect vehicle. It has the needed separation from the full service Jet Airways, can compete with low cost carriers not just from India but from overseas, like AirAsia, flyDubai, and others.

This will also allow Jet to focus on full service and premium traffic and compete with mainline carriers like Emirates, Qatar, Etihad, Thai, Singapore Airlines, and others.

JetLite continues to be a liability for Jet, apart from having a poor brand image in the market, JetLite continues to lose money year after year. A single unified low cost carrier, will help Jet remove these negative JetLite impacts once in for all.

Rishul Saraf is an aviation enthusiast for the last three years when not engaged as an Engineering student. He has a keen interest in Jet Airways.

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Podcast: The chaos in the Indian airline sector and suit by ATA to block US Ex-Im bank funding to Air India

India has the world's fastest growing airline sector - yes faster than even the Gulf, much of whose traffic is again driven by India. Year on year growth is 17%.

Despite this, in its 100th year, the civil aviation sector in India is in near total financial chaos. Air India is a political plaything that has no business being a business, but is being kept alive just to cater to the whims and fancies of the political, bureaucratic and labour aristocracy. The two leading private airlines Jet and Kingfisher are hurting financially. After the on-going fiasco at Kingfisher, the auditors of Jet Airways have sounded the alarm bells. There is sole shining star is IndiGo, but even there some tarnish is appearing.

Has Indian aviation reached a tipping point, like the telecom sector did in India, more than a decade ago?

We also discussed the suit filed by the US airlines industry body, Air Transport Association of America (ATA) against the US Exim bank for providing loans to Air India for purchasing Boeing aircraft.

Do take the time to post your thoughts via a comment. We sincerely appreciate your efforts and thank you for your participation.

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Financial analysis of JetLite's Q1 fiscal 2011~12 results

This is the final carrier-specific financial analysis for Q1, covering JetLite. The overall market picture will be studied in a separate analysis.

Previous Analyses: Jet Airways, Kingfisher, SpiceJet

Despite the positive results shown by its parent carrier Jet Airways in the face of rising fuel costs, low fare carrier JetLite succumbed to domestic competitive pressures, posting relatively poor results in the first quarter of fiscal 2011-2012.

In Q1 FY2012, JetLite slipped to a pre-tax loss of Rs. 52 million, down from a profit of Rs. 49 million in Q1 2011. Other performance metrics also showed a general negative trend when compared to the same quarter a year earlier.

• Absolute revenue dropped 9.6% to Rs. 4.29 billion, from Rs. 4.74 billion in Q1 FY2011
• Revenue passengers carried increased 7.9% YOY (year-on-year) to 1.20 million.
• Passenger yield decreased 12.3% to Rs. 3,451
• Absolute non-fuel costs were down 6.5%, while absolute fuel costs increased 46.6%; on capacity growth of 7.5%, a 3.7% drop in total hours flown, and a 2.8% drop in number of departures.
• Average fleet size dropped from 24 aircraft to just 17.2 aircraft
• EBTIDAR loss (which measures operating results before taxes, interest, depreciation, loan amortization, and rent) of Rs. 16.6 Crore
• R/ASK- down 12.9%, C/ASK- up 9.3%, C/ASK excl. fuel- down 13.3% (R is revenue, C is cost per ASK - Available Seat Kilometer - a measure of capacity).
  

Observations
From these results, it is clear that JetLite felt the pain caused by over-capacity in the industry as a whole. In reporting its own results, SpiceJet had mentioned that capacity growth outstripped demand growth by about 5%. With JetLite, it almost seems as if a large chunk of the related loss was accrued to them, as the rest of the carriers studied in this analysis recorded positive revenue growth domestically. Of course IndiGo, Go Air, and Air India all operate in the Indian market as well; and their results may reflect the over-capacity as well.

It’s interesting to note that a lot of the changes in absolute figures were skewed slightly by a contraction of the airline as a whole. While the contraction can help explain the fall in total revenue, it also makes the airline’s total cost figures look much better year over year than they actually are, and mitigates somewhat the increase in absolute fuel costs.

It is to be noted that the carrier maintained strong discipline of non-fuel costs, perhaps by increasing its average utilization per aircraft from 8.2 hours per day to 11. Additionally, the trend towards larger aircraft flying longer distances (ASKs increased while number of departures decreased) may have helped unit costs as well.

Regardless, the results are still disappointing on numerous levels. Perhaps the fact that sums it up best is that JetLite now needs a seat load-factor of 98.2%, just to break even!!! With seat loads at 80.5% in Q1, that number is brought into the proper perspective.

JetLite faces vigorous competition from the various LCCs in India (SpiceJet, IndiGo, etc.), which limits its revenue growth. In the face of high fuel prices, it is then not surprising that they quickly slipped to losses. At the moment, JetLite can hope for marginal profitability in the best of times; never a good situation.

Perhaps JetLite could mitigate the effects of fierce domestic competition with international flights, especially to the Gulf, but given the current uproar on Air India, will the government risk the slightly profitable Air India Express?

This beneficial effect was exemplified in the results of Jet, Kingfisher, and even SpiceJet. However, access to Gulf routes may be seriously curtailed in the coming months, as MoCA wants to “protect” Air India, so international expansion may not be a feasible option.

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Comparison of 1Q operating parameters of Jet Airways, JetLite, Kingfisher, and SpiceJet

India has three airline groups which are listed on the stock market and therefore regularly release information on their quarterly and annual financial and operating performance.

Jet Airways group comprising of full service carrier Jet Airways and its low cost subsidiary JetLite, (the low fare service Jet Airways Konnect's numbers are rolled in to those of Jet Airways), fellow full service carrier Kingfisher which includes its low fare Kingfisher Red service, and low fare carrier SpiceJet.

Instead of the usual droll numerical comparisons, we thought about experimenting by presenting a comparison of operating parameters of these airlines. Vinay is working on comparing the financial numbers and should have his analysis soon.

We request and welcome your feedbackon this method. Please click on any of the slides for a larger view.

Slide 1 compares the basic numbers -- totals, domestic and international,  in terms of numbers of departures, the total block hours the aircraft in the fleet flew, the capacity measured in Available Seat Kilometres (ASKs), and performance measured in Revenue Passenger Kilometres (RPKs), from the first quarter of this Fiscal year 2011~2012, and the first quarter from the last fiscal i.e. 2010~2011.

Slide 1 - Operating parameters - capacity and performance

Slide 2 compares the domestic and international performance of Jet Airways and Kingfisher. JetLite and SpiceJet are not included as JetLite does not have international operations and SpiceJet's international operations are extremely limited. While Jet has remained fairly steady, it is clearly observed how much the international operations of Kingfisher have improved in terms of RPKs from last fiscal to this fiscal and its resultant effects on the percentage shares.

Slide 2 - International and domestic operations comparisons

Slide 3 goes towards the financial angles of operating parameters. Cost and revenue per ASK (available seat kilometer) is measured. The costs of fuel which airlines have little control over and the non-fuel costs, over which they have complete control are compared. For ready reference the cost of fuel as a percentage of total cost is indicated.

Thanks to absurdly high fuel taxes, Indian carriers are forced to pay as much as 59% of their total costs towards fuel. Compare this to a global norm of 20%~30%. This norm is also reflected on the costs and revenues per ASK for domestic operations compared to international.

Slide 3 - Financial aspects of operating parameters

In a nation which constantly seeks value, forcing such high costs on Indian carriers only disadvantages them in their quest to grow the markets. Indian airlines are further disadvantaged as they are unable to reap efficiency advantages over much of their cost -- i.e. a 10% improvement in efficiency will only produce at best a 5% impact on total cost compared to 7%~8% for a non-Indian carrier.

It is also observed that Kingfisher managed to retain its operational profits in the black despite surging fuel costs, by improving its R/ASKs (revenue per available seat kilometer), while every other airline lost money for every ASK it flew. However, the international operations are still a huge money drain on the beleaugered airline. While Kingfisher has the best premium cabin of any Indian carrier, Dr. Mallya should question whether his airline can afford these flights of fancy. Kingfisher is also let down by its astronomical debt servicing costs which eats up an astounding 16.25% of its revenues.

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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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Airbus operators and Air India lead the field in Cat-IIIB certified pilots

Fog and the accompanying low visibility is the bane of air travel across the world, and especially during the peak winter season in north India.

The higher the category, the lower are the minima for visibility. So for a foggy Delhi, a Cat-IIIB is most suited. However it is an integrated system. i.e. to be able to land in just 50m visibility, the runway instrument landing system (ILS) infrastructure AND the aircraft AND the pilot, all three have to be Cat-IIIB capable and certified. Maintaining the highest Cat-IIIB certification of a pilot requires regular scheduled checks, which is an expensive affair for any airline.

Source: Delhi International Airport Ltd.

Passengers accrue the benefits from the fact that an airline with a Cat-IIIB pilot is able to operate in poorer visibility at a Cat-IIIB equipped airport like New Delhi's Indira Gandhi International, while an airline with a Cat-IIIA pilot may be forced to divert to an alternate airport causing delays.

Earlier today, the minister for civil aviation Mr. Vayalar Ravi provided information to parliamentarians about the availability of Instrument Landing System (ILS) Cat-II, Cat-IIIA, and Cat-IIIB certified pilots in the employ of various airlines in India as of December 31, 2010.

For their international services all three wide-body aircraft (Airbus A310 & A330, Boeing 747 & 777) operators, Air India (NACIL-A), Jet Airways, and Kingfisher Airlines have their pilots Cat-IIIB certified. Not surprising since these aircraft are Cat-IIIB capable.

On the domestic side, only the A320 operators Air India (NACIL-I), GoAir, IndiGo, and Kingfisher have most of their pilots Cat-IIIB certified. Boeing 737 operators Jet Airways, JetLite, and SpiceJet have their pilots certified to the lower Cat-IIIA standard (175 metres runway visibility).

Again, not surprising since the Airbus A320/A319/A321 comes with Cat-IIIB capability built-in, while the Boeing 737 requires additional optional equipment to make it Cat-IIIB capable, something most airlines do not order.

The exception is Air India Express which for some inexplicable reason has Cat-IIIB capable Boeing 737 aircraft but not the pilots.

What is also surprising is that cargo operator Blue Dart only has Cat-II (300 metres visibility) certified pilots. Compare this to global cargo leader FedEx Express which has fitted an enhanced flight vision system based on military technology to its aircraft to help its pilots land in the worst of visibilities to keep the cargo moving. After all FedEx's motto is "The World On Time".

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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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Winter schedule brings a host of new routes to India

The Winter 2010 schedule for airlines commenced from Sunday and as expected major airlines, domestic and international, have announced a raft of new flights.

Austrian Airlines
Lufthansa group member has introduced five flights a week between Mumbai and Vienna and increased its five a week New Delhi Vienna flights to six. The Mumbai Vienna flight will be operated by a Boeing 767Recent feedback, to Bangalore Aviation, from frequent Star Alliance fliers about the airline and the quick transit at Vienna, highlight the airlines selling proposition

Kingfisher Airlines

Will feature 22 more flights covering four winter routes, four additional frequencies on existing routes and reinstatement of two routes.

The key highlights of the 2010 Winter Schedule are:

• Four new routes: Varanasi- Khajuraho, Udaipur-Jaipur, Jaipur-Jodhpur and New Delhi-Agra
• Two additional flights on the Mumbai-Ahmedabad route increasing the total to three flights daily
• An additional flight on the New Delhi-Lucknow route increasing the total to three flights daily
• An additional flight each way between Mumbai and New Delhi
• One flight each on the Mumbai–Kolkata–Mumbai route and the New Delhi–Indore–New Delhi route have been reinstated.

Kingfisher Airlines is leveraging its partnership with British Airways and targeting the tourist traffic by being the only domestic airline to provide connectivity between New Delhi and Agra, Jaipur and Udaipur, and Jaipur and Jodhpur, all major winter tourist destinations. The airline is also the only airline currently operating on the Bangalore-Mysore sector.

Jet Airways

Will introduce forty-six new flights across India. This is in addition to the high profile launch of the New Delhi Milan, Malpensa "fashion" route on December 5th.

In addition to the launch of new flights on existing sectors, the airline has introduced services on nine additional sectors across India - direct services between Vishakhapatnam and three important Indian metros- Mumbai, Delhi and Hyderbad. It will also connect Delhi with Bhopal and Ahmedabad, and Aurangabad with Pune.

Jet Airways Konnect will inaugurate a daily service on the tenth sector, Aurangabad - Pune, on March 1, 2011.

Jet Airways is reaping the benefits of a strong Indian economy and return of the premium business passenger. There has been a strong up-shift in demand towards twin-cabin services on several routes and the airline has re-introduced their Premiere (business class) and Konnect Select (essentially a business class but called economy premium) products on these new routes.

JetLite
The all-economy subsidiary of Jet Airways has introduced thirty new domestic flights, including the launch on eight additional sectors across India, effective November 1, 2010.

The airline will connect Mumbai and Hyderabad with Raipur. Nagpur with Bangalore, Delhi and Indore respectively. JetLite will also connect Delhi with Pune and Chandigarh, and launch a daily service between Bengaluru and Chandigarh. More information is available on their website.

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Analysis of fleet share vs. passenger share in the Indian airline industry

Every month passengers are bombarded with statistics by various airlines in India. Best on-time performance, largest market share, most preferred airline ...... the list is endless.

Mathematical logic would dictate that an airline with the largest fleet of aircraft will have also have the largest share of the market, but an analysis of the passenger market share vs. the fleet share, based on the number of aircraft in each airline's fleet, throws up some very interesting results.

Indian domestic airline market - Fleet share (based on number of aircraft) vs. market share (based on number of passengers)

The airline with the largest fleet in the domestic market is Air India, but its market share of the number of passengers is low, and therefore results in a low fleet hare to passenger share ratio of 0.62.

Kingfisher leads the full service carrier segment with a fleet to market share ratio of 0.95, but this also includes figures from their low cost Kingfisher Red service. Passenger market share leader Jet Airways is at 0.82 and this includes their low fare service Jet Konnect.

For a better comparison between Jet and Kingfisher, if we add-up the numbers of Jet's other low fare subsidiary JetLite, the total group ratio of Jet at 0.865 still remains well behind Kingfisher's 0.95, suggesting a far more aggressive fleet utilisation strategy by Dr. Mallya's airline.

Expectedly, the low fare carrier side, shows much higher ratios, due to their higher usage of aircraft and also the higher number of seats offered per flight due to an all-economy configuration. The laggard is JetLite with a ratio of 1 while SpiceJet and IndiGo are neck and neck at 1.75 and 1.76. In defence of SpiceJet, their figures appear lower since they inducted their 22nd aircraft only at the end of the month which skews the results.

The surprise of the whole exercise are the results of industry minnow GoAir, who have an industry leading, fleet to passenger share ratio of 2.04. Clearly the airline has shaken off the demons of the past and is aggressive in their fleet utilisation.

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Plane spotting photo: the two low cost Jet Airways siblings at Bangalore

As I was coming towards the terminal at Bengaluru International Airport, VT-JGA a Boeing 737-800 of the low cost service Jet Airways Konnect was pulling in to its parking bay. I managed to grab a picture while in the background another Boeing 737 of its low cost sibling, JetLite takes-off from runway 27.

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JetLite unveils new crew uniforms and cabin branding

JetLite, the former Air Sahara and now wholly owned subsidiary of Jet Airways India Ltd, has unveiled a new uniform for its staff as the airline commences a strategy of brand enhancement.

Unlike the very modern and western look projected by the cabin crew uniforms of parent Jet Airways, the new blue and white uniforms of JetLite, with their embroidered hip length 'bandh-gala' or closed collar jacket, designed by Italian fashion designer Roberto Capucci, draws from the traditional Jodhpur style from the state of Rajasthan, blending it with a contemporary look. Capucci has also designed the uniforms of the Jet Airways cabin crew. The badges are in the airline's base colour of light sky blue colour.

Since its acquisition of Air Sahara in 2007 and subsequent renaming to JetLite, the branding of the carrier has been in limbo. Industry watchers were unsure of Jet's plans for its low cost subsidiary and whether the airline would be absorbed in to the parent. Ongoing litigation between Jet Airways and the original Sahara group forced Jet to commence another all economy service called Jet Airways Konnect. It appears that Jet has taken a decision to keep JetLite as a clear separate brand as JetLite aircraft cabins are also being refurbished in line with the new colour scheme. However the airline has not provided any details.

JetLite operates a fleet of 23 aircraft, which includes 17 Boeing 737 series and 6 Canadair Regional Jets 200 Series. The airline flies to 25 domestic destinations and 2 international destinations (Kathmandu and Colombo), operating over 110 flights a day, on average.

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SpiceJet review - Q3 results, preparations for international operations, new aircraft

India's second largest value carrier, SpiceJet, has been in the news over the last ten days with a variety of announcements.

Maintenance contract with MAS-GMR Aerospace Engineering Company Ltd. and MAS Aerospace Engineering (MAE)

SpiceJet has signed a three year maintenance support agreement with MAE for the carrier's fleet of all Boeing 737-800 and 737-900ER aircraft. SpiceJet is the launch airline customer of MAS-GMR Aerospace Engineering Company Ltd (MGAEC); a 50:50 joint venture company between MAE and GMR Hyderabad International Airport Ltd. to provide airframe MRO services at Rajiv Gandhi airport at Shamshabad. The agreement will commence this year and conclude in 2013.

SpiceJet’s current fleet of 19 aircraft and future aircraft will be initially sent to MAE in Subang, Malaysia, and later to the MGAEC facility at Shamshabad, once built in the first quarter of 2011, for “C” and "D" checks.

Fleet expansion
SpiceJet will be adding nine more B737-800 aircraft to its fleet over the next two years to build a fleet of 28 aircraft. Four will be added this year in March, April, June and December. Four more will be added during 2011 and one in January 2012.

International operations
Rumours abound about the carrier's international plans since it will complete the mandatory five year of operations and 20 aircraft fleet requirement of the Government of India by May 2010. There are unconfirmed reports that SpiceJet wants to fly to SAARC countries like Sri Lanka, Bangladesh, Nepal and the Maldives initially.

The airline is taking first steps required towards operating international flights like appointing general sales agents (GSA) in overseas markets, registering with the SABRE global distribution system (GDS) of ticketing for overseas sales, and having India's aviation safety regulator the Directorate General of Civil Aviation (DGCA) checking the airline's preparedness including aircraft capability, maintenance procedures, and training levels of crews and engineers.

However, the airline is still proceeding "extremely cautiously". As the first Indian value carrier it will run in to regional value carrier powerhouses like Air Asia, Air Arabia, Jazeera Airways, flyDubai and Tiger Airways.

The airline is seeking the membership of IATA, the International Air Transport Association, the global association for airlines and will commence the IOSA -- IATA Operational Safety Audit, mandatory for all all IATA members. Even if SpiceJet does not commence international operations immediately, IATA membership will allow the airline to enter in to inter-line agreements with global carriers for domestic travel. SpiceJet is also one of the few value carriers which has hot food and beverage service, something market leader and fellow Delhi based carrier IndiGo does not.

Performance and Results - Quarter 3 Fiscal year ending March 2010.
Quarter 3 is always the best quarter for the airline industry in India. Domestic passengers increase for the Dassera-Diwali-Christmas holidays, and overseas Indians return home for their annual holidays as well. Coupled with a resurgent Indian economy, in line with the rest of the industry, SpiceJet recorded a good performance and a profit of Rs. 1,089 million ($23.17 million) compared to a loss of Rs. 180 million in Q3 of the previous fiscal.

Operationally, in Q3, SpiceJet increased passengers 61.6% to almost 1.8 million compared to 1.11 million during the same quarter a year earlier. Aircraft utilisation increased 15.6% to 12.49 hours per day, and despite an increase of one Boeing 737-800 (VT-SGE) to the 18 all Boeing 737-800/900 fleet, capacity measured in Available Seat Kilometres (ASKs) grew 28% to 2,291 million. Average ASK per flight reduced 2.2% to 196,107. Load factors grew 14% to 80%, well above the growth in break-even load factors to 71%, which increased 2% thanks to price pressures resulting in lower fares.

While fellow Delhi based carrier IndiGo led the value carrier segment with a 14.4% market share compared to SpiceJet's 12.5%, the market share growth per aircraft shows SpiceJet leading the market. SpiceJet's Chief Commercial Officer Samyukth Sridharan attributes this to the strong efficiency exercises undertaken by the carrier which has improved aircraft utilisation, while IndiGo has been adding aircraft to its fleet without a corresponding increase in market share.


SpiceJet has also undertaken a drastic cost reduction program which has reduced Cost per ASK (CASK). CASK without fuel was reduced 11.5% to Rs. 1.45, and CASK including fuel reduced 18.7% to Rs. 2.36. Revenue per Revenue Passenger Kilometre (RPK) increased 6% to Rs. 2.80.

Over 2009, full service carriers Jet Airways and Kingfisher Airlines have been steadily moving their capacity in to the low-fare market segment via their subsidiaries JetLite and Jet Airways Konnect, and Kingfisher Red. Today the low-fare/value carrier segment controls 68% of the Indian domestic air travel market -- the largest market share in the world, well ahead of the 55% in Malaysia, the home of low fare giant AirAsia.

Despite the increased focus, SpiceJet feels fairly comfortable to tackle the increasing competition, thanks to its overall system efficiency and lower cost structures. As a comparison, for the same period Q3 FY2010, JetLite, the value carrier subsidiary of market leader Jet Airways, which also has the same all Boeing 737 fleet as SpiceJet, has a CASK of Rs. 2.90, revenue per RPK of Rs. 3.80, which requires JetLite have a break-even load factor of 78% compared to 71% at SpiceJet.

However, market leader IndiGo still holds a strong influence on the market, and till SpiceJet inducts its new aircraft and grows market share, it will be forced, if to a certain degree, to follow IndiGo.

SpiceJet officials still feel the quarterly results are too early to signify a long term turn-around for the Indian airline industry, and while demand is strong till June 2010, it is also "too price sensitive". The X factor for the next six months will be the price of aviation fuel. Aviation fuel prices have been rising sympathetically as economies in India and China recover. An oil price of over $120 per barrel coupled with the irrational over-taxed aviation fuel regime of the both the central and state governments in India, will definitely derail any recovery prospects for the airline industry.

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