Video: Behind the scenes at Boeing chalet at the Paris air show

by Devesh Agarwal

A quick 2m30s video showing the Boeing chalet and the highlights of the Paris air show from Boeing's perspective

Read more »

Analysis: Will Jetihad lop-sided deal favouring Etihad be corrected or be an eye-wash?

by Devesh Agarwal

Last week's deferral by the Foreign Investment Promotion Board (FIPB) of the proposal of Abu Dhabi based Etihad Airways to buy a 24% stake in Jet Airways has brought to light how the middle-eastern carrier will have an equal or higher say in the functioning of Jet despite owning just 24%.

The deferral has also shed light on the lack of clarity in the government's rules with regards to permitting foreign direct investment (FDI) by airlines in Indian carriers.

The Economic Times reports, the existing shareholders' agreement between the two airlines is structured in a manner to give Etihad the upper hand in the decision making at Jet. Without giving Etihad any specific rights or veto power, by requiring approval of two-thirds majority of the board for even routine decisions, the agreement equates the 24% owning airline to the 51% owning promoter, Naresh Goyal.

In normal circumstances, under the Companies Act, 1956, two-third majority is only required in matters such as capitalisation and dividend declaration issues. Any joint management of an Indian company automatically invites additional regulatory scrutiny, like from the Securities and Exchange Board of India (SEBI).

Some of the aspects of the agreement that were questioned by the FIPB include

• Re-location to Abu Dhabi and co-location of the network and revenue management functions of Jet
• The vice chairman will be nominated by Etihad but no mention on nomination of chairman's post
• If Goyal ceases to be chairman, new chairman to be nominated by the board, not selected by shareholders
• Chairman will not have a casting vote
• Two-thirds majority approval required for appointment and removal of CEO, independent directors, and senior management, and to pass any resolution in the board meeting i.e. for routine issues, contrary to existing law

Operational control too

Operationally too, the agreement shows how Etihad is dominating its Indian 'partner' right from the word go. The agreement stipulates that Jet will, at its expense, re-locate and co-locate its network and revenue management operations to Abu Dhabi. In the first phase functions that will shift include, international and domestic network planning, international pricing for non-India points-of-sale, and management of joint fare filing, and inventory control of the Abu Dhabi hub routes. In the second phase, all functions will shift to Abu Dhabi, including, international revenue management, domestic scheduling and pricing, international pricing for Indian points-of-sale, and inter-line pricing.

Many legal analysts feel the Jetihad deal has been constructed in this manner to afford Etihad almost complete management and operational control of Jet, while helping the middle east carrier to avoid triggering the 'takeover code'. The code is activated either when the investment crosses 25% of a company's shareholding or when the investing company gains ‘control’ of the target company. It is the definition of ‘control’ as per the Companies Act which is now becoming the bone of contention in approving the deal.

All of this is hardly surprising. Jet was in dire straits when it went around looking for whoever was willing to invest, and has acceded to virtually every condition demanded of it.

Policy confusions

Another legal issue muddling the deal is the word "effective control". The new FDI guidelines allowing for investment by foreign airlines say that 'substantial ownership' and 'effective control' should be vested with Indian nationals. There is confusion since the term 'effective control' has never been officially defined. The Companies Act, SEBI's takeover code, and the overall FDI policy, have defined the word 'control, but are silent on 'effective control'.

To prod the Jetihad deal along, the civil aviation ministry has reportedly submitted a long list of comments to the FIPB clarifying what it means by 'effective control'. A copy of this has been marked to the ministry of corporate affairs (MCA), the final arbiter of all matters related to company affairs.

For the Indian government, plagued by reforms policy paralysis, this is fast becoming a desperate situation. On one hand, to prove the progress of the few new policy reforms it has announced, it is bending almost every rule in the book, even going so far as to plan allowing foreigners to bypass FIPB approval for investment in the country. On the other hand the Jetihad deal is so lop-sided favouring Etihad, approving will set a bad precedent in law, allowing foreign companies to completely disregard the rights of Indian shareholders.

Jet is in a hard place. Its need for funds is desperate and no one can fault Etihad for trying the most bang for its buck. Even with the most intense lobbying, Jet and Etihad will need to re-work parts of the agreement to make it more palatable, but will this be a real change protecting all shareholders or just an eyewash to get this lop-sided agreement through the scrutiny of an equally desperate government?

Please share your thoughts on this subject via a comment.

Read more »

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

by Devesh Agarwal and Vinay Bhaskara

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

Video and analysis at the end of the article.

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

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

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

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

Boeing 787-10 launch video

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

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

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

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

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

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

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

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

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

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

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

Read more »

Trip report: Iberia domestic business class Barcelona Madrid Lisbon

by Vishal Mehra

Last week, I reviewed Iberia’s domestic Business Lounge in Barcelona.

Today, I focus on my first flight with Iberia from Barcelona to Lisbon, via Madrid. This was also my first flight in business class.

Barcelona El Prat - Madrid Barajas
Flight IB2713. Airbus A320. Seat 5F. Business Class
Departure - 18:50, on-time

For intra-Europe and many north African flight, most European airlines don't have a separate cabin for business class passengers. Instead, they use a mobile curtain that is moved after each flight in order to separate both according to the number of passengers flying business class in each flight. This allows airlines to be more flexible, since an Economy class seat can be converted into a business class seat just by moving the curtain.

My Iberia business class seat was essentially an upgraded economy seat with increased seat pitch (34 inches, instead of 31 in economy) and an empty middle seat for increased comfort.

As I settled into my seat I was offered water and something to munch on, while the cabin was getting ready for departure to Madrid. Our departure was smooth, and looking down at Barcelona I saw the beauty of the city once more albeit with an aerial view, bathed in sunshine.

Soon after reaching cruising height, a purser came over and asked for my choice of drink. As this was a short one hour flight, and it was early evening, there was no specific meal service. I must have waited for fifteen minutes for my apple juice to arrive before drifting off for a short nap.

I woke up while we were on our landing approach to Madrid Barajas and I never got my drink, and considering we were on approach, I did not bother reminding the crew of their slip-up. Humans tend to forget things and considering it was my first ever outing in semi business class, I was in good enough humour to forgive as well, but Iberia should take note of such slip-ups, which while minor, have large impact on passenger impression when they occur in the premium cabin.

Looking through the magazine I chanced upon Iberia giving out Pizza at 36000 feet to its passengers, which I thought was pretty unique.

We landed in Madrid on time, disembarkation was quick and I went to explore the airport's famous wavy-roof terminal and the flagship Iberia lounge.

Madrid Barajas – Lisbon Portela International
Flight IB3118. Airbus A320. Seat 1A. Business Class
Departure 2245, on-time
Seat 1A

I was excited about sitting in seat 1A, that magical number in airline seating wanted by enthusiasts, which was automatically allotted to me by Iberia. Business class was the same upgraded economy class with increased leg room, but this time there was just two rows of business class seats, and two out of the eight available seats remained unoccupied, including the aisle seat in my row i.e. 1C, giving me a full three-seater to myself.

Flipping through Iberia’s magazine, I came across this print ad featuring the Taj Mahal and promoting Incredible India. Bought a big smile to my face.

The pre-departure service consisted of a drink and nuts. I chose to go for a tried and tested cerveza, or beer (in English). Service on this flight was better, may be because it was a Schengen flight and I was surprised to find a full-blown dinner served during this short one hour hop to Lisbon. The fish and salad did not appeal to my taste buds, and I moved quickly to dessert.

As soon as I finished dinner we were descending to Lisbon and the beautiful city came in the view with bright lights and hills around it. The landing again was a smooth affair and within five minutes we were at the disembarkation point.

The only negative aspect of this flight was the exit through stairs and buses ferrying passengers to the main terminal. May be it was a short-coming of the airport, considering it was past 11pm at night, but then a full service airline like Iberia should work closely with airport authorities to ensure no dilution in their service offerings.

- Vishal Mehra is a digital marketer at a global agency, smitten by travelling and commercial aviation. He tweets a lot and off late has taken to blogging as well. Follow him on Twitter and visit his blog.

Read more »

Air France and KLM partner with Jet Airways to expand India connectivity

Air France and KLM Royal Dutch Airlines, have entered in to a unilateral code-share agreement with India's Jet Airways which will allow them to extend their connectivity to Indian cities which are currently not served by them.

At present Air France and KLM operate 27 flights a week to India. Air France has flights from Paris Charles De Gaulle (CDG) to Bangalore, Mumbai and New Delhi, while KLM operates from Amsterdam Schipol to New Delhi. From June 19, 2013, Air France will place its marketing code (AF) on Jet Airways’ domestic flights to Chennai from Bangalore, New Delhi or Mumbai and Kolkata and Hyderabad via Bangalore and Mumbai. Likewise, KLM will place its marketing code (KL) on Jet Airways’ domestic flights to Bangalore, Chennai, Hyderabad and Mumbai via New Delhi.

The three airlines already have a full fledged network-wide accrual and redemption partnership for their frequent flyer programs, Jet Airways’ JetPrivilege and Air France-KLM’s Flying Blue, for many years.

The announcement did not indicate if there will be a reciprocal code-share arrangement where Jet Airways would put its flight numbers on Air France and KLM operated flights between India and Europe. A spokesperson for Air France indicated the agreement was unilateral. Jet Airways did not respond.

Read more »

What are "Hot and High" operations? Why airlines prefer four engined jets.

by Vinay Bhaskara

Image Credit - International Airlines Group (IAG)

One of the most interesting challenges in aviation arises from operations in severe conditions, extreme cold, short runways, and more commonly, operations from so-called “hot and high” airports; airfields with high temperatures that are situated at a high altitude.

This curious phenomenon is actually the impetus behind several seemingly incongruous strategic decisions by airlines. It is the reason that Iberia has not yet abandoned its gas-guzzling fleet of Airbus A340s, and the reason that Aeromexico’s Asian flights originate in Mexico City but make a technical stop along the way in Tijuana.

The problem occurs primarily due to constraints on take-offs and landings, which harken back to the basic physics of aerodynamics. Aircraft generate lift by using power from the engine to flow air over the wings. More specifically on takeoff, the engine burns fuel to heat up the air and flow a large mass of air through the engines; generating thrust, which allows the aircraft to speed up down the runway and climb away from the airfield.

However, hot and high operating conditions change this simple calculus in several ways. Firstly, if the airport is located in a region of high altitude, the air pressure is lower and the air is less dense. This means that, at any given speed (all else being equal), a smaller mass of air is flowing through the engines; so a higher airspeed is required to develop enough thrust to take off with a given payload versus at a sea-level airport. The easiest way for an aircraft to make up for this deficit is to roll further down the runway before taking off; thus high-altitude airports tend to have some of the longest runways in the world (e.g. Denver International Airport, with an altitude of more than 1,655 meters, has a 16,000 foot runway designed to handle larger aircraft with high payloads). Even after taking off, aircraft will struggle to climb away from the airfield due to the lower density of the air (again relating to a dearth of thrust).

A similar problem plagues airports with high temperatures. Once again heating air decreases its density, which causes the same mass of air limitations driven by high altitudes. However, high temperatures present an additional challenge in that jet engines have a maximum temperature that they can heat gas up until (The exhaust gas temperature or EGT). On hotter days, there is less difference between the air temperature and the EGTs, meaning the engine adds less heat through the air than in cooler conditions, once again affecting thrust. Thus, airports in high temperature regions also tend to require longer runways (examples include airports in the Southwestern United States, the middle east, North Africa, and the Indian sub-continent). The current standard estimates that the adverse effects of high temperatures kick in en-mass when temperatures rise above 30 degrees Celsius.

It is when these two conditions are combined, that a particularly dangerous cocktail arises; the hot and high airport. When temperatures are high at high altitudes, engine thrust performance deteriorates heavily because the air density is even lower. It is little wonder that such conditions are amongst the most challenging in the world for airlines to operate to and from, even more so when their central hub is located at such an airport. Perhaps the most famous hot and high airports in the world are Mexico City and Johannesburg, home to Aeromexico and South African Airways respectively, as well as several airports in Africa and South America (the core markets for Iberia’s long haul operations).

Bangalore, the home to this site, is another challenging airport for hot and high operations. Located at an altitude of 3,000 ft and thanks to indiscriminate development which has denuded the green cover, the former temperate paradise, frequently tops 35 degrees Celsius or 95 degrees Fahrenheit. It is not uncommon to see smaller Code-C aircraft (Boeing 737s and Airbus A320s) have take-off runs exceeding 3,000 meters (approx. 10,000 ft) during the peak hot hours from around noon to 4pm.

This explains why Iberia and South African Airways have held onto their fleets of 4-engined Airbus A340 aircraft longer than other airlines; quad-jets perform better in hot and high conditions. The reason is mainly due to a worst case scenario; loss of power in one engine.

It really comes down to the fact that if a quad-jet loses one engine, it still has 75% of its maximum thrust, while twin-jets like the Boeing 777s and A330s in the same situation will have only 50% of their engine power available in a failure scenario. Thus the quad-jets can carry more payload given runway length constraints at many of these airports (this used to be a major problem at Mariscal Sucre Airport in Quito).

Read more »