Saturday, January 21, 2006

Competition pains

A note outside the above subject about Mysore Airport: Nothings happening on this front. The State Government is supposed to have completed the handover of additional land to the AAI this month. AAI was to then call for tenders for the various works. With the Karnataka State Government now bereft of ministers and tottering on the brink of a collapse, I foresee another delay. Mysore Airport has been jinxed from a long time, though successive Governments have been assuring the citizens that an Airport ison the cards. Our docile citizens have been duped as usual. Watch this space for updates on this issue.

Now let me deal with the subject at hand and the competition pains that some of the Airlines are facing due to the take over of Sahara Airlines by Jet Airways. I urge my readers to go through my previous article regarding M&A Jet Sahara. Now, the other contender for the Sahara buyout, Kingfisher, is crying foul of this takeover. They are now trying a loose alliance of sorts to "counter" the biggest Airline in India. The group of four includes, as mentioned in the news, Go Airways (promoted by Jeh Wadia), SpiceJet (erstwhile Modiluft, Royal Airways etc), IndiGo (not yet started operations) and Air Deccan. Air Deccan however, has opted out of the "alliance". The alliance has mentioned that MRTP should investigate the takeover while the MRTP has already said that there is no threat of a monopoly when so many Airlines are currently flying and more are to arrive on the scene.

The alliance, as I shall call the group mentioned above, is not going to be effective in countering Jet Airways. What they are trying to do, in my opinion, is to consolidate amongst themselves with the view of sharing sectors, spares, ground support equipment, slots (perhaps), pool personnel for handling and so on. Such a consolidation has already been predicted by me in my first article titled "2005 Year End Aviation Review" posted last December.

The operators coming in are also going to create more competition and that’s the name of the game. Will there be passengers for all the Airlines on the sectors they fly? Absolutely not and that brings me to the other article I wrote called "Wake up Airline investors in India". If the new entrants come in on the same sectors that Jet, Indian and the alliance members are flying, there are going to be plenty of Airlines going bust. Investors beware; some of these chaps are going to go public to raise funds. This has happened before with Vif, NEPC, East West Airlines, Damania Airways etc. You don't want your shares to plummet to 10 paisa per share value when some of these chaps close shop and disappear, do you?

I suspect that some members of the "alliance" are on shaky ground and that’s why they fear competition. Some of them will have to merge, be bought out and may even close. The way to face big guys such as Jet Airways, Indian and so on is to consolidate, expand, plan, market and deliver quality service. I still feel that, if not for the appalling infrastructure at our Airports, there's still plenty of potential for more serious operators.

Wednesday, January 18, 2006

M&A Jet Sahara

I had written and had forecast about the possibility of a mergers and acquisitions in my first aviation article on this blog site titled : "2005 Year End Aviation Review". At the time of that writing talks were not going on between any one for mergers and acquisitions. However, some Airlines were linking some of their services with other operators in those areas where a synergy existed, such as pooling of spares, ground handling and so on.

It is being announced now, January 19th 2006 that Jet Airways has taken over 100% of Air Sahara stock and the board of Jet Airways has approved the take over. The market share of the combined entities will be a little over 50%, making this, the Airline with the majority of the market share in India. Market share, ofcourse, does mean some positives for the Airline sector but not so good for the consumer in terms of low fares in the long run.

Latest information from a TV interview with Naresh Goyal, CMD Jet Airways is that they will not retain the Air Sahara brand. He goes on to say that their occupancy levels are around 73% on an average and therefore the remaining seats could be sold at much cheaper prices without incurring any additional cost. This indeed will be a blow to any so called LCC since the passenger on Jet, even while securing a low fare, will still end up getting full service and would not need to buy bottles of water and snacks on board.

Watch this space for more information on what’s going to happen after all the dust settles. I don't want to sound like a doomsday prophet but the next couple of months will see some of the so called Low Cost/budget Airlines tottering on the brink of closure forcing perhaps more mergers and acquisition. The ability of most the current crop of players (except Jet Airways in my opinion) to raise additional and crucial money for their acquisition of Aircraft and equipment, is very suspect. I am sure that some of the IPO's of these carriers will not fetch them the value that these companies are looking for. That will force some Airlines to cut their expansion plans, consolidate and in the worst case scenario, even shut down.

Friday, January 13, 2006


There’s a lot of news coming out about aviation in India. Not all of them good ones in terms of the growth and the lack of ground infrastructure needed to sustain these new entrants. The other thing that comes out of this is the fact that most operators currently and those coming in new are all focusing on the main cities in India that we call Metro or trunk routes. That’s where the clogging occurs and airplane circle overhead for long periods of time waiting to land.

The regional routes are where the growth lies, using smaller Aircraft. That’s not where the Airlines, by and large, are headed. That’s another bad news. This country needs connectivity and we cannot wait for the Government to provide Air Services all the time. There are many routes that are feasible and profitable and there are routes that are not. This is true even in the United States of America. In the U.S. there are communities and cities and even a federal grant provided to operators to connect smaller towns to larger ones on a schedule basis. These grants are a part of the “Essential Services” grants provided by the Government. RegionsAir, Mesa Airlines and others in the U.S. provide these services under these provisions and are doing very well, thank you very much.

We in India sometimes are light years behind others when it comes to learning, planning and executing ideas although we are proud to call ourselves brilliant among all the others on this planet. There are so many things that can be done in aviation and the will to fund these types of business is lacking.

Parking a large Boeing 737 or the latest Airbus A320 and posing with a few cabin crew (of the female kind by the way) gets to the cover of any newspaper, magazine or T.V. Almost no other business in India commands the type of awe, respect or exposure that an Airline business does. That’s the wrong reason to get into this business because, no matter how big some of these chaps promoting Airlines in India are, this business has a nasty habit of backfiring.

So, wake up, you who are investing in Airlines in India, don’t ignore the teeming masses in the hinterland that are also looking for safe, reliable and convenient transportation. The real boom is yet to begin and it's not in the Metros.

Saturday, January 07, 2006


I used to be the head of a scheduled Airline in the Maldives and the team that I had put together was multi-national. We had a US pilot, a German pilot, a Burmese pilot, Sri Lankan Accountant, all engineers working on the Aircraft from different parts of India (Bengalis, Malyalees, Kannadiga and Tamilians) and of course local Maldivians working in the operations and other departments.

Needless to say, there were all these people speaking in English with one another, but with their own ways and accents. There were many hilarious moments while working with all these people because of the lack of understanding between them with respects to various terms and accents. This was true not only among the foreigner and Indians, but also between Indians themselves. The Bengalis would pronounce everything “V” with a “B” and the natural Malyalee accent was misunderstood by the others etc.

One time, one of the cockpit instruments was not working as per specs and the pilot reported the same to the Indian Avionics engineer (he’s the one who fixes avionics – instruments and radios in the cockpit). The pilot was American. The pilot told the engineer that the particular instrument was “broken and needed to be fixed”. As is normal, after the pilot reported the matter to the engineer and went home, the engineer went on to remove the instrument and check it, and re-installed it. He made an entry in the logbooks that he found the instrument to be OK and nothing broken. The pilot came back again on the next days flight and told the engineer that the instrument was still broken. Perplexed, the engineer this time dismantled the instrument completely and refitted the same and reported to the pilot that the instrument was OK and he did not find anything broken. I happened to be on the scene during this conversation and found the hilarity in the misunderstanding between the two people speaking more or less the same language. As most American readers would know, when something is not working, the common place term for it is that it is broken. Even a car has a breakdown you see, not necessarily that the car has split in half! Same situation here. The pilot meant to say that the instrument was not working properly (not a critical part, though) and the engineer understood as some part of the instrument had broken loose. That’s why he had repeatedly removed the instrument and re-installed after making sure nothing was broken and loose inside!

During our weekly meetings with heads of all departments, issues were brought up, even mundane ones, to ensure that everyone understood the other properly and that safety was never compromised due to any misunderstanding.

The problem of understanding each other is still an issue with so many foreign pilots (due to shortage of Indians) flying the domestic Airlines. Their communications with ATC (Air Traffic Control) have been a problem, not only due to faulty communication systems on the ground but also due to misunderstanding of various accents and ways of speaking the same language – English. This has been highlighted by CNN-IBN news “fear in the sky” that was running for the last few days. However, I assure all my readers that flying is safe and that I found some parts of the program alarmist in nature and not entirely objective. Till next time, have a good one.

Friday, January 06, 2006


Let’s dwell a bit into the history of private Airlines in India first and then work our way down to the part where I come up with some thoughts on Low Cost Carriers.

Aviation has come a long way in India since the Government opened up the skies for private players in the 1990’s. In the early days, the regulation still did not suit the entrants to the airline business. In fact, Airlines that were licensed those days were known as “Air Taxis”. The move to encourage private sector in India at that time prompted a lot of investors, mainly local, to invest in a business that they knew very little about. A few of them fell by the wayside real early and some managed to stay afloat for a few years.

Ultimately it was a matter of which Airline had the better business plan, better long term views, that survived. In the jet Aircraft segment, the survivors were Air Sahara as it is now called and Jet Airways. Jet Airways better success in the business and managed to keep a public visibility of being a “premier” airline. There was no concept of a “LCC” (Low Cost Carrier – for non industry readers) in India at that time and hence the carriers mentioned come under the banner of “legacy” carriers (full service carriers). Several “feeder” Airline also started at the same time and the only one that stayed the course was Jagson Airlines based at New Delhi and offering short haul flights using Dornier 228 Aircraft.

A note on LCC’s in India. The “pioneer” here is Air Deccan that started flying ATR 42 on regional short haul routes, expanding to Airbus A320 family for medium and long routes. They started a revolution of sorts by offering fares as low as Rs. 500 (US$10 roughly) on sectors as long as two and half hours. Following their lead, several carriers have now taken to the skies, calling themselves LCC’s, some in the traditional mould of an LCC such as having a no frills service. These Airlines today include SpiceJet (a new avatar of erstwhile Royal Airways and Modiluft) and Go Airways. Kingfisher Airlines, another startup promoted by the Beer and liquor Conglomerate UB Group also positioned itself in the market as an LCC while offering full service on board and portraying their cabin crew as models (as in fashion model!).

An Airline with a different business plan started flying in the latter part of 2005 called Paramount Airways. This Airline has leased Embraer ERJ 170 family as positioned themselves as an “all business class” Airline offering direct routes from its Coimbatore base to some of the Metros in India. Several Airlines are due to take to the skies this year and the next, in India. The infrastructure and ATC facilities are woefully inadequate to handle the influx of Airlines and that is a separate subject for discussion.

The number of flying passengers, in a country of one billion people, rose by 24% to 11 million in 2004 compared to the previous year. The growth is further estimated anywhere between 20 to 30% annually over the next several years, depending on which agency one talks to. Therefore, there is certainly a requirement for additional capacity in the form of existing players adding Aircraft and new ones coming in to service regional airports. The potential is definitely there.

The definitions of a true LCC in India is lost or confused, in my opinion. There is a mix up between offering low fares and being low cost. The cost of operating an Airline is almost the same for any carrier whether LCC or legacy, except for the fact that some LCC’s don’t offer in-flight catering and the passenger has to purchase the same. The other point is that the LCC’s have high density seating as opposed to the legacy carriers that offer more legroom in the same type or class of Aircraft.

LCC’s in India don’t have the same benefit as those, for example, Ryanair in Europe or SouthWest Airlines in the US. These Airlines can keep their cost down further by being able to hedge their fuel requirements, at a lower price, something that no Indian carrier has been allowed to do. LCC’s abroad have another benefit. They maintain low costs by flying into secondary airports of the same city and by signing agreements with the Airport owners to have very low fees at those airports and also making these Airports actually pay for construction of terminals and getting other such benefits. There are no such secondary Airports for any city in India at this time. So, all carriers have to fly into the same airport and use the same terminal regardless of whether they are an LCC or a legacy carrier and pay the same rates published. Since pilots and other qualified personnel are in short supply, all carriers are resorting to hiring foreign pilots, engineers and even top executives. Obviously due to demand outstripping supply, pay scales are going through the roof for qualified personnel. LCC pilots don’t get lower pay than legacy ones because of this demand supply gap.

It is my contention that Low Cost Carrier is a misnomer in India and these Airlines should be called “Low Fare Carrier” in reality. There will be further pressure on bottom lines of the so-called LCC’s due to rising fuel prices in 2006. How long will ridiculously low fares last in this scenario? Wait for my forecast.

There will be more articles on the lack of infrastructure on the ground and what the Government of India is planning to do to rectify this situation. There will be another article shortly about the growth of carriers, their expansion plans this year, their public offerings to raise money and my forecast for 2006.

Until next time, I wish Happy Landings to all my readers.

Tuesday, January 03, 2006


Yours truly is back in Mysore after a rollicking good trip to Goa (see my previous blog). My wife and I were traveling to visit Vasco, on our rented Honda Activa when we chanced upon a sign board. It mentioned that a Naval Aviation Museum, first of its kind in India and the only one in Asia, was located on Majorda Beach Road.

I know much about the Indian Navy and that they have a Naval Air Arm with helicopters, transport aircraft, reconnaissance aircraft and fighter aircraft such as the Sea Harrier jump jets and so on. What I had never known is that there was a Museum established to showcase the history of Indian Naval Aviation.

For those that are driving from Vasco to any point south on National Highway 17A, there is a turn off road near Dabolim Airport (the only one in Goa) with a sign board that says “Majorda Beach Road”. Take that and keep driving right around the airport perimeter wall and you will be well guided by signboards all along the way to a compound. Entering it, you will be asked to buy tickets for Rs.15 per adult. It’s worth the price of the ticket and more. There are some old Aircraft that used to be in the service of the Navy. There are guides to explain, if one needs a guide. Otherwise, there are information boards next to each Aircraft. These information boards present a comprehensive technical and operational detail of the Aircraft including the time it entered into service and the time that it was phased out.

Some of the older Aircraft on display at the site (outdoors) is the huge Super Constellation (or super connie as it used to be called). This Aircraft with the four big radial engines and four big propellers (not jets!!), in its heydays, used to be the long distance Aircraft carrying one hundred passengers between, say Bombay and London. Air India had inducted them in the early 60’s and before phasing them out, they entered Naval Service, attached with surveillance equipment, to carry out reconnaissance flights. I remember my granddad that went to London by sea those days and returned on the super connie. Travel in an Airline those days used to be first class, there was none of this low cost carrier stuff where you have to buy bottles of water, peanuts and samosas on board. Those were the elegant days of travel. You can actually climb into the airplane and walk inside and even visit the cockpit. Pilots of those days had very little navigational assistance that we have these days and they had to fly in all kinds of weather with very few instruments to help them. With a modern cockpit, it is virtually impossible to get lost and a pilots work load is far less.

There are other Aircraft that were inducted into the Navy including the Alize, a French Aircraft that was propeller driven and used to launch off the Aircraft Carrier INS Vikrant. There are trainer Aircraft, Helicopters and even the currently used Sea Harrier VTOL (Vertical Take Off and Landing).

There is an indoor museum that has rooms exhibiting armaments used, aviator anecdotes hanging on the walls, pictorial depictions of various stages of establishment of the Naval Aviation in India and so on.

At the end of the tour, do stop by at the small shed snack shop aptly named as the “cockpit cafĂ©”. Idlis and Dosas are available!!!

I have twice visited the Smithsonian Air and Space Museum, considered the Mecca for aviation buffs, located in Washington D.C. USA and seen hundreds of airplanes on display, visited the Boeing Air and Space Museum in Seattle a few times, visited many air shows. While this museum is very small and limited displays compared to those mentioned above, it is still a good attempt to showcase at least the Indian Navy’s history and capabilities.

There is always room and scope for improvements and these may be done if enough visitors show interest in visiting this museum. There’s none other in India or anywhere else in Asia that showcases Naval Aviation solely. Go to Goa definitely but don’t just do the beaches, churches, temples. The Sun, Sand and Sea are fabulous but there’s more to Goa than meets the eye. I would encourage people to visit the Indian Naval Aviation museum to understand what we have in this country and how things came about.

For an educational and fun afternoon, the museum is a “not to be missed” on your Goa itinerary. Learn, enjoy and have fun in the Sun.

Happy Landings.