Can you spot the faux pas on British Airways' Boeing 747-400 fleet information website?

by Devesh Agarwal

As I type this post, I am laughing my rear-end off. Christmas week is fun and frolic and I guess British Airways is thinking of combining the holiday cheer with April Fool's Day.

See below the screen capture taken today at 18:31 (13:00 GMT) from British Airways' website offering fleet information on the Boeing 747-400.

Screen capture of British Airways website showing fleet information on their Boeing 747-400

Can you figure out the faux pas made by one of the world's oldest airlines? Share your observation via a comment?

Need a clue? Think of how to improve fuel efficiency.
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Still not sure? Looks like BA engineers have managed to get their 747s equipped with just two engines instead of the normal four.

Reminds me of the article on Kingfisher's four engined wide-body A320.

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Analysis: Strong first quarter for Etihad bodes well for Jetihad deal

by Vinay Bhaskara

Abu Dhabi based full service carrier Etihad Airways reported record results for the first quarter of 2013.
Revenues grew a whopping 18.7% year over year to $900 million, up from $758 million in Q1 of 2012. In its 10th year of operations, Etihad also saw cargo revenues grow 17% to $193 million. Passenger figures also reached a new high of 2.8 million, growing 13% year over year from 2.3 million. Average seat factors grew 4 percentage points over 2012 to 80.5% despite a 12.5% increase in capacity. See the table at the bottom of the story for a full overview of key metrics for Etihad’s first quarter.

Said Eithad President and Chief Executive Officer James Hogan, “Our Q1 2013 results have again outstripped global trends, with our strongest ever first quarter results for passenger revenue… This performance demonstrates that Etihad Airways’ strategy of organic growth, wide-ranging partnerships, and strategic equity investments is delivering for us and our partners.”

More importantly for a future “Jetihad” partnership and equity investment, Etihad’s existing equity stakes are beginning to pay handsome dividends, with revenues growing 34% from $136 million to $182 million, and accounting for 20% of Etihad’s overall revenues.

The success of Etihad’s existing equity investments in airberlin, Air Seychelles, Virgin Australia, and Aer Lingus, who all reported profits in the first quarter of 2013 bodes well for a potential equity investment in Jet Airways because it shows that such an investment is viable.

However, the current macroeconomic pressures in India do give some pause. Demand growth continues to slow, with domestic demand falling 9% year over year in February. This, to some degree reduces the value of Jet Airways, and Naresh Goyal and other Jet Airways decision-makers will need to realize this and adjust their expectations accordingly.  Some of the valuation figures of Jet Airways at over a billion US dollars are unrealistic and out of line with the current strength of the industry and the Indian investment environment as a whole. That being said, the Indian Diaspora and international demand remain relatively robust, and thus Jet does offer significant value to Etihad as an Indian partner.

Jet Airways could sorely use the additional capital in order to solidify its restructuring efforts at a time of flux in the industry. Air India continues to flounder (and indeed a recapitalized Jet could win away some of Air India’s passengers), and Kingfisher is dead. SpiceJet appears to have found a pair of winner in its regional network of international destinations and fleet of Q400 turboprops serving Tier II/III destinations - while GoAir continues to fly under the radar as a presumably profitable airline. IndiGo meanwhile, is still humming along, though it has begun to rethink its growth strategy and must continue to do so. AirAsia’s new venture threatens to usurp the delicate balance of power that has emerged in the domestic industry, though much is yet to be determined.

We will learn a lot from the first quarter results of SpiceJet and Jet Airways. The domestic results in particular will indicate if the shrinking of demand has been made up for with increased fares on aggregate (a sign of a healthier industry). Regardless, a Jetihad deal is slowly getting closer and closer to fruition.

Etihad Key Metrics: First Quarter 2013

Key indicators	Q1 2013	Q1 2012	Variance
Passenger revenue	US$ 900 million	US$ 758.1 million	+19 per cent
Cargo revenue	US$ 193.1 million	US$ 165.4 million	+ 17 per cent
Total revenue	US$ 1,136.5 million	US$ 989 million	+ 15 per cent
Passengers	2,767,789	2,340,356	+ 18 per cent
Revenue passenger kilometres (RPKs)	12.9 billion	10.9 billion	+ 17 per cent
Available seat kilometres (ASKs)	15.9 billion	14.3 billion	+ 12 per cent
Seat factor	80.5 per cent	76.5 per cent	+ 4 points
Aircraft	73	66	+ 7

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DGCA made a bad financial decision in shutting down Kingfisher Airlines

Earlier this month, now shutdown Kingfisher Airlines, once India’s largest private domestic carrier, reported a huge net pre-tax loss of Rs. 1115.5 Crore for the second quarter of Fiscal Year 2012-13. The performance was by far and away the poorest quarterly financial performance out of any Indian airline in the last few years, though that is to be expected given their shutdown at the end of the quarter.

Revenue performance was abysmal, falling 87.1% on a year over year basis (keeping in mind that FY 11-12’s Q2 was the last quarter of full Kingfisher operations – the first really big capacity cuts hit in November of that year). Fuel expenses were better year over year on a per ASM basis (mirroring the performance of the general industry), and operating margins as a whole did not decline as much as one would have expected (from -98% to -127.5%), though they were obviously atrocious. The main culprit was, as usual, interest, finance, and restructuring charges which contributed the remaining 850 odd Crores worth of net loss. But at this point, the drivers behind Kingfisher’s poor financial performance are well known.

What is more interesting to consider is the question of whether the DGCA made the correct move in shutting down Kingfisher pending a recovery plan. Keep in mind that the Indian government, through its network of state owned banks, is the primary holder of Kingfisher’s more than US $1.4 billion worth of debt. Thus it is in the government’s best interest for Kingfisher to minimize its losses, thereby limiting the further accumulation of debt as well as making Kingfisher slightly more attractive (though still a money pit) for foreign investors. While the DGCA is not operating in response to the same incentives as the general government of India (GOI) and State Bank of India, the two can certainly act in concert to minimize the impact on the public. First, let us simply throw away the ridiculous assertion that financial troubles would drive safety concerns at Kingfisher; this sort of event rarely occurs outside of the hellholes of the Third World, and the incentives for Kingfisher to skimp on safety are simply not in place. Notice that even as it cut the rest of its expenses by hook or crook, the level of maintenance expenses per available seat kilometer remained constant for Kingfisher over the past year. Any airline knows that the minute it compromises safety is the minute it loses viability as an airline in the eyes of the public. But even absent this factor, it would still make sense for the DGCA to shut down Kingfisher if the airline loses more money operating than shut down.

Since the financial and “restructuring” costs will remain regardless of whether Kingfisher carries passengers or not, we can focus our analysis entirely on the operating results on the balance sheet. Based on the data presented in the quarterly results, we can conclude that shutting down has cost Kingfisher around Rs. 220 Crore worth of revenue for Q3 (typically among the strongest Indian quarters). On the flip side, Rs. 160 Crore worth of fuel expenses are no longer accrued, as are a certain percentage (around 35% based on the auditor’s notes to Kingfisher’s financial statement) of the “other operating expenses.” Remaining expenses, including aircraft lease rentals, maintenance, depreciation and amortization, and longer term ground leases will still be accrued. So the total savings that Kingfisher gets from not operating is around Rs. 215 Crore, whereas they are forgoing Rs. 220 Crore worth of potential revenue, not to mention the benefits of operating in increasing the attractiveness to foreign investors. Thus the math suggests that the DGCA made a bad financial decision in shutting down Kingfisher.

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