Estimated reading time for this article: 4 – 5 minutes
I know that every reader of the blog is fully aware that Kingfisher Airlines is having serious financial problems. It is nearly a weekly headline. Back in early January, I took the bold step of making what was a very controversial prediction at the time. I said,
Kingfisher Airlines will not exist in July 2012.
Liquor Baron (Read: Drunkard) Vijay Mallya, the Guy Behind Kingfisher
At the time, some people thought my prediction was crazy. People argued that Vijay Mallya will save the airline somehow, that it will get a bailout, that it will join oneworld and everything will be alright, that that British Airways will invest once FDI gets passed.
Well, none of those things happened. Vijay Mallya hasn’t done anything. The government has (thankfully) decided not to bail the airline out. Its oneworld alliance membership was suspended, and British Airways has shown no inclination whatsoever to help the airline. Not that it matters – the FDI proposal is sitting in some desk gathering dust anyway.
In the meantime, more planes have been grounded and repossessed, staff still haven’t been paid, many staff have decided to leave the airline, the airline has closed more routes, and the income tax department has frozen their bank accounts due to non-payment of taxes.
So, now I’m here thinking that maybe I was too generous. I wouldn’t be surprised if Kingfisher isn’t around in March, forget July.
Anyway, let me bring you guys up to date.
Last week, Kingfisher announced that it had made a 435 crore (almost $100,000) operating loss for last quarter. Not a surprise – their loads factors have been dismal, their yields at all time lows, and their schedule took a major haircut. They’ve also been cancelling a lot of flights. With all these problems, there is no way in hell that they could have made any money. So this announcement is not a surprise in any way. Regardless, it hasn’t exactly been the kind of announcement which inspires confidence in investors or the banks.
Over the weekend, Kingfisher closed operations at Kolkota, the third largest metro area in India. Flights were zeroed out on GDS, and cancelled at the airport. Reportedly, Kingfisher declined to give refunds, instead instructing people to dispute the charges on their credit cards. Those who paid through cash? They’re SOL.
In addition to Kolkota, it appears that Kingfisher is winding down Lucknow, Bhubaneswar, Patna, Srinagar, Pune, and Hyderabad. These are major cities. Kingfisher shutting them down is not good at all.
More Kingfisher aircraft have been repossessed and grounded. It appears that their operating fleet is down to 20 Airbuses and 8 ATRs. That’s out of what was a fleet of 64 aircraft just a few months ago…
More Kingfisher employees have walked off their jobs. While Kingfisher maintains that they have enough crew to fly their current schedule, the massive number of cancellations indicates otherwise. I suppose those cancellations could be for reasons other than crew shortage, but either way, it’s not good.
Finally, the biggest problem for Kingfisher: the income tax department has frozen their bank accounts because they haven’t paid their taxes. Unlike other airlines, they are forced to pay for fuel upfront because the fuel suppliers don’t trust them. They are also forced to pay landing fees up front at some airports. Not having access to their bank accounts means that they can’t operate their schedule. As you can imagine, this has wreaked havoc at airports around the country.
Today, some executives have been called to the office of India’s aviation regulator, the DGCA to explain what is going on with the carrier.
Hopefully, they will be arrested there and sent to jail where they belong. Tax evasion, not paying employees, looting the government’s loan money is all criminal conduct. Sadly, that is unlikely to happen. However, I suppose it is more likely that Kingfisher surviving much longer…
Oh, and there is a bright side to this mess as well: Air India’s revenue is up over 30%, their load factors are up 5%, and their yields have increased by almost 20%. While the government will likely never get their loan money back from Kingfisher, at least they might get it back in the form of Air India. Even with this, we taxpayers are still going to get ourselves stuck with a nice large bill.
Posted in Rohit Rao | 
Tags: Air India, bankrupcy, DGCA, Kingfisher, Oneworld, Regulation, vijay mallya | 
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Estimated reading time for this article: 3 – 4 minutes
Garuda Indonesia will soon have some new competition in the form of Pacific Royale Airways when the new carrier begins service next month. The airline will begin with a fleet of 2 Airbus A320s and 2 Fokker 50s, with Airbus A330s to be introduced later on. The airline will be competing with Garuda for marketshare in the full service carrier segment of the market. Indonesia, which has very low (<10%) domestic low cost carrier penetration, has reasonably high yields. Geographically, the country is on an archipelago, meaning that air travel is necessary to carry people around the country. This means that Indonesia is a massive market, which is willing to pay extra for a good product. That is the market that Pacific Royale plans to serve.Pacific Royale will be partnering with Lumexis to bring top class FITS in-flight entertainment technology to its passengers on its A320 aircraft. This lightweight fiber-optic technology is of the most modern technologies out there. It will keep costs low while providing passengers top-quality entertainment.
The carrier plans to grow rapidly to over 20 A320s within the next few years, connecting major Indonesian cities using multiple focus cities. The carrier will also base their Fokker 50 turboprop aircraft at these focus cities, using feed from smaller markets to feed jet services. The carrier also plans to serve regional international destinations soon using A320s, and later on A330s. The carrier is also considering using A330s for longer international routes.
Pacific Royale plans to grow their Fokker 50 fleet to 5 within the first year. This is because Indonesian regulations require that all airlines operate 10 aircraft and own at least 5 within the first year of operations. Fokker 50s, which are relatively cheap to obtain, will allow Pacific Royale to meet this requirement.
Asked why Pacific Royale will be successful, Chairman Tarun Trikha said, “[Pacific Royale will be] a modern airline which brings together a full service experience combined with friendly technology and advanced entertainment. And at a pricing that’s affordable; giving right value for money to customers.”
If Pacific Royale is able to turn this vision into reality, it has the potential to be an incredibly successful airline. Indonesia has a market which is growing very quickly. Additionally, the market has very low LCC penetration, with only the Lion Air Group having a major presence in Indonesia. That means that passengers expect and are willing to pay for a full service carrier, even on shorthaul services.
While Indonesia is a major growth market, Pacific Royale won’t have it easy. The airline will face significant competition from Garuda Indonesia, the airline which currently occupies the top end of the market. While the airline does not have the best reputation, it has been improving a lot in recent years. The flag carrier is investing in a major fleet renewal plan, and it has been upgrading its inflight product as well. The airline will be joining SkyTeam early next year, which will also give it an advantage.
In addition to competition from Garuda at the top end of the market, Pacific Royale will be facing Lion Air, another major competitor. Lion Air made major waves in aviation industry circles recently when it ordered 230 Boeing aircraft. It is clear that Lion Air is committed to expansion in the Indonesian market.
Between Lion Air and Garuda, Pacific Royale has some formidable competitors. However, if the airline manages to identify profitable niches and stay away from competition, it has the potential to do very very well.
Posted in Rohit Rao |
Tags: FSC, garuda indonesia, Indonesia, Lion Air, Pacific Royale, Skyteam |
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Estimated reading time for this article: 2 – 3 minutes
Here’s a shocker: Hawaiian Airlines didn’t have the best on time record in December 2011. With the Hawaiian climate, Hawaiian always seems to have the best on-time record in the country.
For December, AirTran edged Hawaiian out with an on-time record a little less than 1% better.
Here is the full list, released by the DOT yesterday:
| Airline | December |
| AirTran Airways | 91.9% |
| Hawaiian Airlines | 91.0% |
| Delta Air Lines | 88.5% |
| Mesa Airlines | 88.0% |
| US Airways | 87.8% |
| Southwest Airlines | 87.2% |
| Alaska Airlines | 85.5% |
| United Airlines | 84.0% |
| JetBlue Airways | 84.0% |
| American Eagle | 82.9% |
| American Airlines | 82.4% |
| Atlantic Southeast Airlines | 82.0% |
| SkyWest Airlines | 80.0% |
| Continental Airlines | 79.8% |
| ExpressJet Airlines | 76.3% |
| Frontier Airlines | 73.2% |
| Average | 84.4% |
| Airline | Full year 2011 |
| Hawaiian | 92.8% |
| Alaska | 88.2% |
| AirTran | 84.4% |
| Mesa | 83.7% |
| Delta | 82.3% |
| Southwest | 81.3% |
| United | 80.2% |
| US Airways | 79.8% |
| SkyWest | 79.3% |
| Frontier | 79.2% |
| American | 77.8% |
| Continental | 77.1% |
| American Eagle | 76.3% |
| Atlantic Southeast | 75.2% |
| ExpressJet | 74.7% |
| JetBlue | 73.3% |
| Average | 79.6% |
Estimated reading time for this article: 3 – 4 minutes
PEOPLExpress 737-100 in original livery; Source: Wikimedia
Back in 1981, an airline named PEOPLExpress began operations. It was one of the first LCCs in the USA after deregulation. It pioneered bag fees, and charged a plethora of other fees. Food was buy-on-board, even for transatlantic crossings. While the fees, tight seat pitch, and poor customer service earned it names such as “People Distress,” the carrier grew attracted many people with its cheap fares, and it grew extremely quickly. From it’s hub in Newark, the airline was one of the most successful carriers in the 1980s. However, the company went on a purchasing spree, buying numerous regional airlines. The pressure of integrating the airlines, along with improved revenue management systems pioneered by American Airlines, put the airline into serious financial trouble. The airline was merged with Continental in 1987, and the brand disappeared. But now the brand is back.
Some businessmen have decided to relaunch the carrier from Newport News, Virginia, with a fleet of high-density, all economy class 737-400s. They’ve put out a press release detailing their future plans. They plan to launch service to Newark, West Palm Beach, and Providence. They also plan to operate a focus city in Pittsburgh.
New PEOPLExpress Livery
In a major turnaround from the original PEOPLExpress, the new carrier will not charge bag fees. Apparently they agree with Southwest Airlines that charging bag fees is not a good idea. They also plan to have complimentary seat assignments. Their route network will be point to point, connecting important markets with their focus cities.
While they may not be copying all the original fees, some things will be common with the original PEOPLExpress. Firstly, the seat pitch will presumably be ~28-29 inches, less than the pitch on regional jets. I say presumably because I can’t think of another way that they will manage to fit in 158 seats into a 737-400, other than perhaps making rows 7 across.
Personally, I’m not too optimistic about the chances for this airline. Everything from the choice of aircraft and base to their product differentiation argument doesn’t add up. The 737-400 is one of, if not the biggest fuel guzzlers in the 737 aircraft series. Even if they are getting the aircraft extremely cheaply, with sky high fuel costs, it will be difficult for them to keep costs, and therefore fares low. The choice of focus cities is also questionable. Pittsburgh is a city where US Airways has a lot of brand loyalty. It also has extremely high costs – that’s why US Airways scaled down their operations at Pittsburgh. With high fees, it will be difficult for the airline to keep fares low. Newport News, on the other hand, is also a head-scratcher. There isn’t a lot of demand for air service in the area, so I’m not sure where the airline plans to get passengers from.
The airline is expected to be pretty small for the next few years. They don’t expect to have more than 50 departures daily for the next few years. However, it is always exciting for a new airline to be founded. Aviation enthusiasts everywhere must be ecstatic about the news. Now, if they would only start working on those FAA approvals, maybe they might actually get flying sometime soon!