A disappointing budget for the aviation industry

by Devesh Agarwal


Finance minister P. Chidambaram disappointed the Indian aviation industry in his budget presented before the Parliament yesterday.

Last year, then finance minister Pranad Mukherjee, had offered a small relief to the fledgling aviation MRO (Maintenance, Repair, Overhaul) industry by giving a waiver in customs duty for import of spare and testing equipment, but required the spares be used within three months. Other than extending the time limit from three months to a year, Mr. Chidambaram has done nothing for the industry.

More knowledgeable members of the aviation industry realise the importance of keeping spares ready, especially in the aviation industry, where the capital equipment (airplane) is so expensive. A time limit is impractical and should be removed completely.

Despite expectations to the contrary, there has been zero movement on the ridiculous fuel taxation and pricing policy (fuel companies have huge mark-ups on aviation fuel), the short-sighted taxation structure that is ensuring Indian carriers go overseas for their MRO needs, or the ambiguous service tax policy on MRO's which is leading to prolonged litigation.

The government has also failed to define any financial policy that will enable regional airports to raise funds for their expansion, which defeats the regional airports policy focus of the civil aviation ministry.

Should industry just be content with the fact that they were at least mentioned in the budget. We think not.

Your comments are welcome.

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MAPS and Analysis: Kingfisher Shrinks Yet Again

When full service carrier Kingfisher Airlines enacted a latest round of route and capacity cuts last week, it represented simply the latest evidence that the carrier is headed for bankruptcy and is in a death spiral. Part of the drawdown involved the cancellation of almost all of Kingfisher’s international operations, which occurred after the airlines lessors began demanding the return of the carrier’s widebody Airbus A330-200 aircraft. The majority of Kingfisher’s international routes will be terminated by the 25th of March, with Mumbai-London Heathrow persisting till early April, and Chennai-Colombo and Mumbai-Dubai remaining indefinitely. Even more damning is the spate of domestic operational changes, which see a further 42 flights cancelled in the Summer Season of 2012, bringing the carrier down to around 100 daily flights using 20 aircraft (a mix of A320 family and ATRs- and down from a previous schedule of ~160 flights using 28 aircraft), a far cry from its proud 350 flights per day with 66 aircraft level in Summer of 2011. The nature of these cancellations is also very troubling, as an airline that wanted to become India’s premium, business travel, has instead vacated many of the most important such sectors in the country. Kolkata, the 3rd largest city in India, and 4th busiest domestic airport has been abandoned entirely, while the carrier no longer serves India’s 6th busiest airport at Hyderabad from Bangalore, Chennai, Delhi, or Mumbai, nor the important Chennai-Delhi sector. Even in former centerpiece Bangalore (where the carrier once had its single largest operation), Kingfisher operates just 25 flights per day, a far cry from the almost 60 flights per day that they operated two years ago. Other important cities around India, including wealthy Ahmedabad and Amritsar are being canned as well, and the confluence of such cuts will simply force high-value frequent flyers and business travelers into the arms of other airlines (primarily national carrier Air India and private sector rival Jet Airways). See the bottom of the story for a catalogue and map(s) of Kingfisher’s route changes. International cancellations a financially prudent move Beyond these capacity reductions, the carrier’s dance with its various creditors and lenders continues. Fuel and other supplies have been hit and miss over the past few days, leading to random flight cancellations. The easiest comparison to make for Kingfisher’s current situation is that of a wounded deer; Kingfisher’s creditors and lessors are surrounding the wounded airline like wolves, and it is only a matter of time before they pounce (resulting in a Kingfisher shutdown). But that impetus will not be coming from the DGA or Civil Aviation Ministry, as they cannot legally (or ethically) shutdown Kingfisher so long as the airline continues to meet the bare minimum standards of operation (5 aircraft, a base amount of equity, et. al). Either way, the international drawdown is (finally) a move that makes strong business sense on Kingfisher’s part. In contrast to Kingfisher’s operationally profitable domestic flights, their international operations have been hemorrhaging cash for a long time now, posting an EBITDAR loss (earnings excluding taxes, depreciation, amortization, and rents) of 36 crores as opposed to an EBITDAR profit of 161 crores on domestic operations in Q3 of FY 2011-2012. By ending international operations and returning the aircraft to lessors, Kingfisher will save crores of rupees in employee, distribution, and maintenance costs. A large chunk of Kingfisher’s maintenance spend was going towards keeping the three A330s operational, and hopefully the carrier can re-instate some of their grounded A320s and ATRs with some of the released funds. Loss-making routes should never persist at a carrier with financial difficulties on the scale of Kingfisher’s. But curiously, Kingfisher has elected to keep serving just two international destinations, meaning that it will have to continue with many of the structural costs and supplier contracts associated with the overall operation. It will need to keep employees in Dubai and Colombo for just one flight per day, and have separate employees at Colombo to handle the ATRs (as the Chennai-Colombo sector will operate 6 times per week with A320 and once weekly with the ATR 72). This will limit the positive effect on Kingfisher’s finances, as they cannot reduce the full 469 crores of international driven expenditure. Domestic draw-down doesn't have as many benefits Whereas pulling down international operations will be beneficial to Kingfisher’s health, we are not so convinced that doing so domestically will have the same healthful effects. Remember, Kingfisher’s financial liabilities and commitments are still those of a carrier 3 times its planned size this summer. While loss making operations are loss making operations, they still provide cash flow for Kingfisher to keep even more of its contracts from defaulting (as they can pay the bare minimum contractually required without violation). The adverse revenue effects of operating just 100 flights per day extend beyond a linear reduction; what frequent flyers remain are likely to abandon the airline as it can no longer take them where they need to go. There is a required “critical mass” in flights to sustain any full service or established carrier, and Kingfisher is rapidly approaching that line. The biggest losers in Kingfisher’s decline will be the airline’s creditors and shareholders (obviously) who are likely to see all or part of their investments turned to dust. But close behind are the aircraft manufacturers like Airbus and ATR, who have lost a significant source of aircraft orders in Kingfisher. When ATR cancelled Kingfisher's outstanding order for 38 ATR 72-500s last year, more than 15% of ATRs backlog of ATR-72s was wiped out in one fell swoop, a paper loss of more than $300 million. While Airbus as a whole, with its broader customer base, will not be affected as much by Kingfisher’s inevitable cancellation of its orders from Airbus, on a program specific level the effects will still be evident. Kingfisher’s order for 15 A330-200s is around 10% of that variant’s backlog, and the loss of 5 A380-800 orders will also push back that program’s planned break-even point. The lessors will survive, as Kingfisher’s aircraft are highly desired assets (especially A320s) that can be placed with other airlines quite easily, but Airbus will accrue a paper loss of a few billion dollars. At this point, it might be more prudent for Kingfisher to simply cancel their entire order book of 92 aircraft and salvage some funds from the deposits placed with Airbus to secure these firm orders. Kingfisher’s withdrawals will have positive effects on the other carriers in the Indian market; Jet Airways and Air India in particular are well positioned to capture some of the premium passengers and frequent flyers who will leave Kingfisher, and Jet’s international operations should receive a shot in the arm. But the effect internationally and within India will be muted so long as airlines continue stepping in to backfill lost Kingfisher capacity. For example, within days of Kingfisher cancelling its service to London-Heathrow, Virgin Atlantic stepped into resume service, maintaining the overcapacity currently seen on India-London sectors. IndiGo, Jet, GoAir, Air India (not likely but…), and SpiceJet will have to resist the urge to replace Kingfisher’s domestic flights; the resultant rise in fares might push the airline sector back towards profitability. Kingfisher should shut down and re-launch For Kingfisher, the best step forward might very well be to shut down, re-structure its contracts and debt, then re-launch as a smaller carrier. While there are many possible forms that a re-launched Kingfisher could take, we feel that the best strategy is to focus on regaining its frequent flyer base. What has become apparent in reading internet commentary (not a perfect source to be sure) by travelers, is that most still have fond memories of Kingfisher and would fly the airline again in a heartbeat if they could be assured of its viability. Our suggested method is for Kingfisher to re-launch as a Metro focused airline with high frequency flights (at least two, preferably three flights per day on most city pairs). The following 15 cities: Bangalore, Mumbai, Delhi, Hyderabad, Ahmedabad, Cochin, Kolkata, Chennai, Pune, Jaipur, Kanpur, Lucknow, Trivandrum, Calicut, and Nagpur, would provide a solid base of destinations, and if the carrier were to focus in particular on Bangalore, Mumbai, and Ahmedabad; they could sufficiently operate up to 120 flights per day connecting these destinations with a mix of around 18 A320 family aircraft and 7-8 ATR 72s. Such a network would allow Kingfisher to provide an efficient dispersion of passengers for British Airways and other OneWorld partners (assuming that they’d be willing to induct Kingfisher), and re-attract at least 50% of its former frequent flyer base. Then, if this operation proved successful, the carrier could slowly add more domestic destinations back into the fold. All the while, they should seek to maintain their peak service levels, while running operations efficiently and limiting employee salaries to prevent cost overruns. International operations, the thing that first drew Mallya into his ill-fated acquisition of Air Deccan, should be pushed 2-3 years down the line, and resumed properly with OneWorld backing. Hopefully, Kingfisher will see the light and pursue these types of changes, keeping one of the world’s greatest service quality airlines alive into the distant future. Kingfisher Domestic Operational Changes for Summer 2012 courtesy of airlineroute.net

Bangalore – Chennai 2 of 6 Daily service Cancelled
Bangalore – Hyderabad 2 of 5 Daily service Cancelled
Bangalore – Kochi 10 of 24 weekly service Cancelled
Chennai – Coimbatore 2 Daily service Cancelled
Chennai – Hyderabad 1 Daily service Cancelled
Chennai – Mangalore 1 Daily service Cancelled
Chennai – Tiruchirapally 1 Daily service Cancelled
Chennai – Vishakapatnam 1 Daily service Cancelled
Delhi – Ahmedabad 1 Daily service Cancelled
Delhi – Amritsar 2 Daily service Cancelled
Delhi – Chandigarh – Srinagar 1 Daily service Cancelled
Delhi – Chennai 2 Daily service Cancelled
Delhi – Gauhati – Bagdogra – Delhi 3 weekly service Cancelled
Delhi – Jammu 1 of 2 Daily service Cancelled
Delhi – Kolkata 2 Daily service Cancelled
Delhi – Lucknow 2 of 3 Daily service Cancelled
Delhi – Pune 1 of 4 Daily service Cancelled
Delhi – Ranchi – Patna – Delhi 1 Daily service Cancelled
Delhi – Srinagar 1 of 2 Daily service Cancelled
Hyderabad – Pune 1 of 2 Daily service Cancelled
Hyderabad – Rajahmundry 1 Daily service Cancelled
Hyderabad – Vishakapatnam 2 Daily service Cancelled
Kolkata – Aizawl 1 Daily service Cancelled
Kolkata – Bagdogra 1 Daily service Cancelled
Kolkata – Bhubaneswar 2 Daily service Cancelled
Mumbai – Ahmedabad 1 Daily service Cancelled
Mumbai – Coimbatore 1 Daily service Cancelled
Mumbai – Delhi 2 of 11 Daily service Cancelled
Mumbai – Goa 1 of 3 Daily service Cancelled
Mumbai – Kolkata 1 Daily service Cancelled

Kingfisher International Operational Changes for Summer 2012
Routes that will continue marked in blue

Chennai – Colombo 1 Daily service RESUMES from 25MAR12. Airbus A320 operates 6 times a week, ATR72 once a week. This represents capacity increase prior to temporary suspension

IT061 MAA1125 – 1315CMB ATR 3
IT061 MAA1250 – 1405CMB 320 x3

IT062 CMB1415 – 1605MAA ATR 3
IT062 CMB1505 – 1640MAA 320 x3

Mumbai – Dubai 1 Daily service is MAINTAINED on/after 25MAR12, 2-class A320 operating
IT043 BOM2030 – 2200DXB 320 D
IT044 DXB2330 – 0405+1BOM 320 D

Other International routes remains to be cancelled for the moment.
Bangalore – Dubai 1 Daily service Cancelled eff 25MAR12
Delhi – Bangkok 1 Daily service Resumption eff 25MAR12 is Cancelled
Delhi – Dubai 1 Daily service Cancelled eff 25MAR12
Delhi – Hong Kong 5 weekly service Cancelled eff 15MAR12
Delhi – Kathmandu 1 Daily service Resumption eff 25MAR12 is Cancelled
Delhi – London Heathrow Operation until 10APR12
Kolkata – Bangkok 1 Daily service Cancelled
Kolkata – Dhaka 1 Daily service Cancelled
Mumbai – Bangkok 1 Daily service Resumption eff 25MAR12 is Cancelled
Mumbai – Hong Kong 1 Daily service Cancelled since 12MAR12
Mumbai – London Heathrow 1 Daily service Cancelled since 14MAR12
Mumbai – Singapore 1 Daily service Cancelled since 14MAR12
Tiruchirapally – Colombo 1 Daily service Cancelled eff 25MAR12

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Employee Relations, Payment Defaults Hinder Kingfisher's re-structuring

The damning evidence against Kingfisher continues to mount, as a new report from the UK High Court claims that the embattled airline owes $21.6 million (Rs. 109.06 Crore) to the Bank of Scotland for overdue lease payments on 10 ATR 72-500 aircraft. The action was brought by Bank of Scotland on behalf of a consortium of lenders against Kingfisher parent UB Holdings, who had guaranteed Kingfisher's obligations. The judgment, brought by Justice Eder, paves the way for potential action in India or elsewhere, and enables Bank of Scotland to pursue United Breweries Holdings' assets to recover the outstanding sum.

Bank of Scotland is owed money because it helped fund KF Turbo Leasing, a special purpose vehicle incorporated in the Cayman Islands that purchased the ATR aircraft to lease to Kingfisher. Each ATR aircraft was then leased by KF Turbo Leasing to Kingfisher for a period of 10 years, dating from an agreement signed on 29 March, 2007.

The troubles with the Bank of Scotland represent only the latest credit issue for Kingfisher, who has been grappling with lessors off and on since the carrier first entered a state of crisis back in November. Since that point, Kingfisher has shrunk its operations at a rapid pace, operating around 175 flights per day (versus 340 at the same time last year). However, the decline in revenues has further eroded Kingfisher's cash flow, making it difficult for the carrier to pay for contracts entered into when its operations were more than two times their current size. Adding to this is the fact that Kingfisher is almost Rs. 7,000 Crore in debt (US $1.26 billion), and interest payments are now an astronomical 25.9% of nominal revenues. At this point, Kingfisher has defaulted on most of its interest and supplier obligations, and is essentially operating on a cash-and-carry system for critical charges such as landing fees and fuel. Thus it was not surprising that Kingfisher had its bank accounts seized by the income tax department; though the question of whether Kingfisher should even be taxed at all given its gargantuan losses and refusal to pay employees is a valid one?

India's aviation regulator DGCA (Directorate General of Civil Aviation) too has continued to repeat its concerns over potential safety violations in the face of Kingfisher's financial difficulties. Late last week, the DGCA threatened to de-register another Kingfisher plane as the carriers maintenance technicians went on strike from Thursday onwards. As of now, the strike has not yet caused major operational disruptions, but as time goes on, the situation will continue to worsen. The DGCA has already de-registered 3 Kingfisher A320s (VT-KFA, VT-KFD and VT-KFE), according to a report in The Live Mint.

More seriously, Civil Aviation Minister Ajit Singh threatened Sunday that a suspension of Kingfisher's operating license might be in order as the ministry continues to worry that non-payment of dues and employee salaries will compromise safety. "Closing an airline will impact passengers, employees," said Singh, "So cancellation of license won't happen. Suspension, however, gives a chance to restart operations once the issues have been sorted out,"

Employees indeed may be the most immediate threat facing Kingfisher. As we mentioned above, Kingfisher's technicians have been on strike at Delhi Airport since Wednesday. MRO service technicians perform routine and scheduled maintenance on aircraft engines, air conditioning systems, brakes, cockpit instruments, valves and other components. They also replace worn-out or defective parts, rebuild engines maintain service records, and perform aircraft inspections. While this maintenance work can be performed by technicians at other airports for the time being, Kingfisher's large Delhi operational base will eventually necessitate a resolution.

Kingfisher's pilots also feel threatened according to a recent report from the Times of India. According to the paper, Kingfisher had a confrontational meeting with its pilots Thursday, as the exodus of pilots to India's other airlines continues. Kingfisher hasn't been on-time with salary payments to pilots since early 2011, and with India's other airlines hungry for qualified pilots, many of Kingfisher's pilots have fled for greener pastures. Remaining pilots in Mumbai have reportedly begun calling in sick in droves in a form of industrial action that does not qualify as a formal strike, while up to 20% of Bangalore based employees have simply quit. If such industrial actions were to spread amongst the rest of Kingfisher's 510 odd pilots, management has claimed that Kingfisher may have to temporarily shut down as Australian carrier Qantas did back in October in response to strike threats from unhappy employees.

Kingfisher's current method of salary deferral while continuing operations (which has also shown up at Jet Airways and Air India in recent times) would not be valid in the US, where contracts (which employee salaries fall under) are absolute until a company shuts down or enters bankruptcy reorganization. But in India, the situation is not so cut and dry, and Vijay Mallya recently sent out a letter (presented at the bottom of this post) to his employees, urging them to maintain their faith in the company and accept proposed changes. However to many, Mallya's words ring hollow in the face of his huge personal wealth and possessions. All those photo shoots with statuesque models and the time spent at Formula One races and IPL matches do not mesh with Mallya's message of sacrifice by the employees, and we fear that his efforts may thus prove unsuccessful. When labor resents management, the results range from severe financial issues to full-on bankruptcy (see Qantas and American Airlines).

One of the ironic things about this entire sequence of events at Kingfisher is that the ATR aircraft adding to Kingfisher's woes are in all likelihood grounded. Kingfisher's cancellations have brought the airline closer in size to Go Air than to Jet Airways, and customer confidence and perception has continued to erode. Foreign travelers have for the most part sworn away from booking Kingfisher for their Indian flights, and we fear that the problem may no longer be easily solvable. Recognizing this issue, Kingfisher recently sent out the following letter to its travel agent partners in the United Kingdom seeking to re-assure them.

Dear Trade Partner,

On behalf of all of us at Kingfisher Airlines, I deeply regret the inconvenience many of your customers, who were booked on Kingfisher between 17th and 26th February, faced due to the unforeseen schedule disruption in our domestic network. Please do accept my sincere apologies to you and your staff for the anxiety and extra effort caused by these sudden cancellations. I totally appreciate the crucial and valuable role you and your team play between us and the guest. In order for us to be successful and bounce back on our feet, we need your support more than ever. Please be assured we are reaching out to all our valued guests who were affected during this period and personally apologizing to them. Kingfisher Airlines is on its way to normalcy. We are currently operating approximately 200 daily flights to 46 domestic and 7 international destinations. In the coming week, we will be adding more flights and our teams will keep you updated on the same. I reiterate that operating our schedule at its utmost consistent level is mine and my team’s endeavor. I request you to continue doing your valued business with Kingfisher Airlines. Your support and belief in us is something I am counting on.

Best Regards,
Sanjay Aggarwal
Chief Executive Officer

Ultimately, these issues have all arisen because Kingfisher's business fundamentals are poor; they are not a profitable carrier, or even a solid one by any stretch of the fiscal imagination. Kingfisher may be able to work its way out of this current rut, especially if either British Airways parent IAG or Etihad Airlines invests in the carrier under India's new foreign direct investment (FDI) regime. But in order to do so, it must first restore customer confidence, get its fiscal house in order, and win back the loyalty of its employees.

Vijay Mallya's Letter to Kingfisher Employees

Dear Colleagues,

I want to take this opportunity to update you on our current situation amidst all the media frenzy that is taking place. The Indian media and the "paid" media that even the Prime Minister referred to are unscrupulous and they will do whatever it takes, part fact or fiction, part true or untrue to achieve their sensationalist objectives.

I have organised funding so that we can pay your seriously overdue salaries which is a source of great personal sorrow for me. We are currently handicapped as our bank accounts are frozen by the tax authorities. I have been working tirelessly to urgently resolve this issue through negotiation and I hope that these efforts will be successful early next week. We fully intend to pay our tax dues as much as we commit to paying your salaries.

Government policies can make or break any Industry. So far it has been downhill for Civil Aviation except for one Airline that defies the odds and claims to be profitable however unlikely that may be.

Finally, there seems to be light at the end of a long dark tunnel. Government has issued a notification allowing direct import of Aviation fuel which promises to save us about 15 percent of our current fuel costs.

I am hoping that the next positive move would be the formal notification permitting Foreign Airlines to invest upto 49 percent of the equity in Indian carriers. This has already been widely announced by the Minister of Civil Aviation and according to reports, has been decided upon at a Empowered Group of Ministers meeting. Recently, last week, the promoters of our airline, The UB Group and its associates acting in concert, converted its loans for an additional 5 percent equity in Kingfisher Airlines. This is the maximum permitted under law in any one financial year but clearly demonstrates the faith that I have in all of you and in our Company.

I have been overwhelmed and emotionally moved by all the widespread expressions of support and appreciation for our Company despite the turbulence we are flying through. Despite media reports, we have many many supporters, well wishers and loyal guests. And all these words of appreciation are dedicated to you. Whilst many may have left our family and many may be in the process of leaving, our family may have become smaller for now. But our family will grow with those who have the pride in their hearts of having stood by our Company through ups and downs, sometimes with great personal sacrifice. That is the true test of loyalty dedication and commitment which I am going to reward.

Please stay committed to our common cause and for good reason to smile happily when this turbulence is over. We were the biggest and best. We may not be the biggest now but we remain simply the best for our guests and our valued King Club members.

I hope to have some good news for you shortly; thannk you for your patience and understanding.

Warm Regards
Vijay Mallya
Member of Parliament
Chairman and Managing Director
KINGFISHER AIRLINES LIMITED

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Latest AMR financial results validate American Airline's large narrow-body order

Earlier today, AMR corporation, the parent company of American Airlines, announced its financial results for the third quarter of 2011. Traditionally, the third quarter is the strongest financial quarter for US airlines. However, AMR posted a net loss of $162 million, $0.48 per diluted share. This stood in contrast to their $143 million net profit in the third quarter of 2010.

American showed singificant strength on the revenue front, with a 9.1% increase to US $6.4 billion. Seat-mile revenues were up by 8.7% as well, reflecting growing demand and broad capacity restraint in the US market. The carrier's Latin American operations showed particular strength, with seat-mile revenues up 20% vs. 2010: 25% in South America alone.

And American looks poised to make continual incremental gains in revenue. The carrier plans to cut close to 3% of its capacity in the fourth quarter of 2011, and has stated that advance bookings are at similar levels to those of 2010. These capacity cuts will limit American's year-over year capacity growth to just 1.2% on a consolidated basis.

But despite these positive indicators, American's financial results were disappointing; primarily due to the sharp rise in fuel prices. In a narrative similar to the one given by Indian carriers to explain their results in Q1 of FY2012, American attributed a large portion of its loss to the increase in fuel prices. American's fuel exepenses rose 39.8% year over year, by US $642 million.

Fuel represents close to 36% of American's operating costs, and consequently AMR's seat-mile costs jumped by 10.1%, more than wiping out the incremental revenue gains. American's fleet of McDonnell Douglas MD-80 aircraft (and to an extent the fleet of Boeing 757-200s) is a severe disadvantage for the carrier. These aircraft are 25-30% less fuel efficient than current generation aircraft, and the potential fuel cost reductions of re-engined 737s and A320s can reach 40%.

Earlier this year, American Airlines announced a large order for 460 narrowbody aircraft, split equally between current and next generation aircraft. When news of the order broke, numerous airline analysts questioned the rationale behind the order, citing American's financial troubles, and large debt load (net debt of $12.6 billion at the end of Q3). While there certainly is validity to the idea that limiting capital expense can be more important than improving fuel burn, American's fleet is so inefficient that improving fuel burn should have a larger positive effect on their financial results than the negative effect of added capital expense.

To illustrate this point, just a 15% reduction in American's overall fuel expenses (which a conversion of the entire MD-80 fleet to current generation narrowbodies could achieve) would have saved the carrier more than US $340 million this past quarter. And maintenance costs, which represennt roughly 5.44% of American's operating expenses, would decrease as well (at least early in the life cycle of the new aircraft as well). aircraft rent represents just 2.6% of American's operating costs, and thus even a 50% rise in rents would have a smaller overall effect on the bottom line than the reduction in fuel prices.

American's latest quarterly loss illustrates the unique challenges faced by the carrier. Already locked into unproductive labor contracts, American's fuel inefficient fleet of MD-80s is the largest restrictor on its overall profitability. While American's recent order might increase capital expenses, their third quarter results illustrate that the fuel efficiency gains are likely too large to pass up.

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AirAsia X signs MRO agreement with Lufthansa Technik Philippines

AirAsia X has appointed Lufthansa Technik Philippines (LTP) as its maintenance, repair and overhaul (MRO) services provider for Malaysian carrier's fleet of eight Airbus aircraft which comprises Airbus A330s and A340s for three years beginning March 2010 at LTP's facility in Manila.

LTP is a subsidiary of Hamburg-based Lufthansa Technik AG, the largest MRO provider in the world and AirAsia X is an affiliate of short-haul carrier AirAsia, Asia’s leading and largest low-cost airline.

LTP will provide for the first year of the contract MRO services including four C-checks and a heavy maintenance check. LTP will also carry out several cabin retrofit tasks to comply with AirAsia X’s new premium and economy seating specifications.

In January 2010, an AirAsia X A340 successfully underwent a 40-hour layover involving a main landing gear seal change at the LTP facility in Manila.

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