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Posts Tagged ‘India’

Estimated reading time for this article: 2 minutes or less

Happy Republic Day to all the Indians out there!

To celebrate, a group of Finnair cabin crew danced to “Om Shanti Om” aboard Finnair’s flight to Delhi before the flight took off.

Ms. Helena Kaartinen, the crew-member of Finnair who coordinated this event, explained how it happened on the Finnair Blog.

This is great marketing, which will likely give Finnair free advertising airtime in India, and endear itself to its Indian customers.

Finnair is no stranger to using social media to improve its branding. Last year, they launched their Singapore route by having an Angry Birds competition on-board, which went viral.

This also reminds me of the Cebu Pacific flight attendants who greatly increased awareness of the airline with their dancing, which also went viral.

Estimated reading time for this article: 2 – 3 minutes

Yesterday, American Airlines, in an email to employees, announced that it will be cancelling it’s longest route from Chicago to Delhi.

Today, January 9, American Airlines announced two schedule adjustments and previously announced operational changes.

1. We will cancel the Chicago-New Delhi service effective March 1, 2012
2. We will also stop flying between DFW and Burbank, Calif., effective Feb. 9
3. Some operational and business changes that occurred prior to the company filing for reorganization will result in a reduction of approximately 150 airport-related (Airport Services workgroup) employees

ORD-DEL
The historical financial performance of the route and its future outlook given the global economic climate and high oil prices has resulted in a decision by American to cancel its New Delhi (DEL) – Chicago (ORD) service.

The last flight to leave for India from Chicago will be on February 28, 2012, while the last return flight from India to Chicago will operate on March 1, 2012.

AA will continue to offer travel choices between the US and India in conjunction with oneworld partners British Airways, Kingfisher Airlines and Finnair, via either London Heathrow or Helsinki (summer only), and through its codeshare partner Jet Airways via Brussels.

I’m not really surprised about this decision at all. Chicago to Delhi is an ultra-longhaul route, which means that it is very expensive to operate. As a flight gets longer, it not only needs to pay for the fuel to go that extra distance, but also has to pay for additional fuel to be able to carry the additional weight of the fuel already added! That means that flight costs go exponentially up as flight distances get longer. In addition, American Airlines can use the 777 equipment that they fly to India for 2 daily flights to Europe, which would generate much more revenue than the one ultra-longhaul flight. In addition, American Airlines has high labor costs, and a relatively inefficient aircraft type in the 777.

Ultra-longhaul flights can work if the airline manages to generate sufficiently high yields to cover the additional costs. Unfortunately for AA, India is a relatively low yield market. A lot of the traffic is VFR (Visiting Friends And Relatives) and leisure travel, which involves passengers that tend to be relatively price conscious. In order to fill up its planes instead of letting its passengers go to the likes of Emirates, Air India, and Lufthansa, American is forced to sell the route rather cheaply. This means that their revenue doesn’t cover the costs of operating this route.

I think that American would be better off operation to Delhi through a European tag flight to India, similar to what Delta used to do (not sure if they still do). For example, they could fly Chicago-London-Delhi-London-Chicago, which would allow or better aircraft utilization and would allow them to carry more cargo (since they wouldn’t have to sacrifice payload for fuel). Also, operating costs would be lower, allowing them to better compete in the marketplace.

Overall, it’s sad that American now no longer serves South Asia, but it was a route that was losing money and needed to be cut. Now, in bankruptcy, is the best time to do it, so they can emerge a stronger airline in the end.

Estimated reading time for this article: 3 – 4 minutes

Source: DGCA

Last Thursday, the DGCA (India’s aviation regulator) finalized their 2011 financial surveillance report. The findings of the report are making waves throughout the industry. The report focused on the financial state of airlines in India, finding that financial issues are endemic in the sector, and that this financial sickness is affecting safety standards.

The most controversial part of the report said: “A reasonable case exists for withdrawal of [Kingfisher Airlines] airline operator permit as their financial stress is likely to impinge on safety.” The report also had similar findings about Air India Express (AIX), a surprise considering that AIX was relatively profitable compared to the rest of Air India and was being hailed as a success story by many aviation analysts. I must admit that I belong to that category myself, considering AIX to be a great step for Air India.

Audits of Jet Airways, JetLite, SpiceJet, and GoAir also yielded poor results. The DGCA found “major financial distress issues” that could lead to safety issues. The reports also talks of “some rapid growth issues” about IndiGo Airlines. The audit of Air India is not yet finished.

Source: Kingfisher Airlines

When I look at that list, I’m not really shocked. The report seems to list every single Indian airline as under “financial distress.” It’s great that the DGCA is finally figuring this out. The Indian aviation market is structurally challenged. Despite being one of the fastest growing economies in the world, Indian airlines are unable to make profits. This is due to high fuel prices, extremely high taxes, and poorly negotiated bilateral treaties, among other issues. It is excellent that the DGCA is actually investigating these issues before it becomes too late and safety standards crash.

What may seem really surprising is that the DGCA is considering taking the extreme step of revoking operating permits. However, after looking closely at the financial issues that Kingfisher is facing, it may not seem that drastic of a step at all. A post tomorrow will go into more detail about Kingfisher’s financial woes.

Source: Wikimedia

With regards to Air India Express, it is surprising how scathing the report is. 2 years ago, the airline was involved in the Mangalore air crash which claimed 158 lives. However, it wasn’t clear to me how poor the safety culture at the airline is until today when I did some more poking around during research. There is shortage of pilots, check airmen, instructors, examiners and cabin crew… The airline is not able to operate its entire fleet due to shortage of pilots. Flight duty time limitation monitoring is carried out manually (unlike most airlines, including its parent Air India, which use computerized systems). Training of pilots is carried out on Jet Airways’ simulator as AI Express simulator remains unserviceable most of the time.”  This is a bad situation to be in for any airline.

Other airlines have been having similar issues as well. Jet Airways, JetLite, IndiGo, SpiceJet, IndiGo, Air India Regional, and GoAir all were found to be experiencing “financial difficulties” and “growing pains” in their operations. Crew shortages, poor quality training programs for pilots and cabin crew, and a lack of important software that can improve safety were found in some of these airlines, among other problems.

Any safety issues are always extremely worrying. However, despite all these concerns, the airlines of India are still some of the safest in the world. The fact that the regulator is being vigilant enough to ensure that these problems don’t become too severe is an extremely good sign.

Tune in tomorrow for a closer analysis of Kingfisher Airlines’ financial problems.

Estimated reading time for this article: 2 – 3 minutes

In the couple weeks since I wrote about the EU’s Emissions Trading Scheme (ETS), the controversy hasn’t died down at all.

Delta Airlines 777-200LR; Source: Delta Airlines

On Monday, Delta Airlines announced that they are adding $3 to the fuel surcharge on USA-Europe flights to help cover ETS costs. Different groups have anticipated very different costs to comply with the ETS. The European Commission (the executive body of the EU) has estimated that the plan could increase the cost of a single trip ticket by between €2 and €12 (roughly between $2.75 and $15.50), depending on the length of the flight. In contrast, various industry analysts have expected an increase of $50 to $90 to comply with the scheme. That’s a pretty major difference. If the European Commission is correct, Delta’s fare increase may more or less cover the costs. However, I am inclined to believe that the costs are much higher. That means that more surcharge increases are coming soon. Lufthansa also announced on Monday that they plan to increase fuel surcharges to cover costs as well. Yesterday, Emirates and Etihad also announced that they will be increasing fares soon.

Source: Carmoc News via. Hainan Airlines

While the American, Gulf, and European airlines are grumbling about the ETS, they are complying with the rule and instead trying to pass on the costs to consumers. In sharp contrast, China’s airlines, fully backed by the Chinese government, have decided that they won’t comply at all.

“We deeply regretted that the United States lost the lawsuit,” China Air Transport Association deputy secretary Chai Haibo told the Economic Observer this week. “China will continue to steadfastly pursue a lawsuit.” In another interview, Chai Haibo made it clear that Chinese airlines don’t plan to pay a dime for the ETS. Deciding not to comply opens China up to penalties, many of them severe. However, the EU may find that the pressure is too much to keep fighting. The USA and India have also announced that they will be fighting the lawsuit, and India’s regulator, the DGCA, has also threatened to publish an executive order banning Indian carriers from submitting Emissions data.

It’s clear that the EU has jumped into a heated battle by trying to charge airlines more at a time when the aviation industry is already in quite a bit of trouble. It will be interesting to watch who will blink first indeed.