Airlines Deals

A slew of low-cost carriers are waiting to take to the skies. But the real buzz has been created by IndiGo, which stunned the market by placing an order for 100 aircrafts. CNBC-TV18 reports that though bookings are open for its August 1 launch, the fleet is yet to arrive.

IndiGo surprised many aviation watchers when it announced it was ordering 100 aircrafts from Airbus. It is one of the biggest orders for any domestic airline at the 2005 Paris air show. All these aircrafts are single aisle carriers and most of them are A-320s.The turbulence at Airbus globally does not seem to be worrying the IndiGo management.

IndiGo, however, is anxious to get the green signal from the Civil Aviation Ministry. IndiGo hopes that the arrival of their fleet will ensure all regulatory approvals. November 2005 was the take-off date for IndiGo but their decision of using their own aircrafts instead of leased ones forced them to push it to the August 1 this year.

The IndiGo management considers SpiceJet as their closest competitor. While they haven’t given details about their pricing strategy, they hope efficiency will be the differentiator. Not having a fleet on the ground hasn’t stopped them from inviting bookings even as they say no to equity infusion.

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Jet Airways has brought out all arsenals to combat cut-throat competition in the market for the lean season that sets in from August. The full service carrier, which has seen its market share and profitability dwindle since the arrival of low cost airlines, is repeating its ‘Superfare’ scheme that was on offer in February-March this year.

Under the scheme, Jet is offering one lakh seats on low-load sectors between August 1 and September 30 for fares that are almost as low as those offered by budget carriers such as Air Deccan, GoAir and SpiceJet.

Jet Airways vice-president - marketing, Gurang Shetty says the scheme will boost its load factors in the lean period. “We have a lot of distress inventory, which go light. This scheme will help us dispense off inventory in advance on sectors which need support so that we can move to higher rates closer to the date of the flight,” he explains.

Going by the ads that the legacy carrier has put out in the media, the fares are a steal for the services on offer. For instance, the air ticket price on the Bangalore-Mumbai route starts at Rs 2,625 and for Bangalore-Delhi, it is just Rs 3,775.

Will this lead to migration of passengers from other carriers to Jet?

Jeh Wadia of GoAir is unperturbed. “Absolutely not. Our fares are around 20-35% lower than the Surperfares being offered by Jet. It all depends on when you book you the ticket. If you book the ticket 30 days in advance, our fares are over 60% lower. For instance, their fares on the Mumbai-Ahmedabad route starts at Rs 1,225 while our’s start at Rs 499.”

Terming it as a desperate bid on the part of Jet, Kingfisher Air general manager - sales, Manoj Chacko, says: “We will never go for such ridiculous fares. We believe in offering competitive fares and, since most of our passengers are from the corporate sector, fares don’t swing our loads as much as the need for comfortable travel.”

Analysts say such fares are common during the lean period, and do not rule out pressure of such fares on no-frills airlines.

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Galileo International has signed an agreement with SpiceJet Airlines, one of India’s fastest growing low cost airlines, to provide SpiceJet’s low fares and inventory exclusively on the Galileo GDS platform.

All SpiceJet fares, including 49 daily flights and periodic promotional fares, will be distributed via Galileo Flight Integrator, a product introduced by Galileo exclusively for low cost airlines to give them access to an extensive network of travel agents from across Asia and the world.

“We are particularly excited about this unique relationship, because SpiceJet is widely acknowledged as one of the most promising low cost carriers in India. Spicejet’s decision to make its fares available to travel agents via our GDS is testament to the value that we provide to airlines and travel agents alike,” said Mr. Brad Holman, Travelport Airline Services Managing Director.

According to Holman, this development is of equal importance to the agreement signed between Galileo and Air Asia earlier this year, since it will have far reaching implications for Galileo’s broader success in the South Asia region.

“We are confident that Galileo Flight Integrator will become the tool of choice for Galileo agents to book low cost carrier flights, especially since it now adds SpiceJet’s flights to exclusive Air Asia content, including their newly announced Malaysia domestic routes” added Holman.

SpiceJet joins over 50 other Low Cost Carriers around the world that are using the Galileo GDS as a distribution channel.

See other recent news regarding: GDS, Galileo, Airlines, SpiceJet Airlines

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Domestic fares on all sectors became costlier by Rs 200 from Friday with the hike in fuel surcharge, imposed by major airlines due to increase in jet fuel prices.
The surcharge, which came into effect on Friday, was hiked from Rs 300 to Rs 500 by almost all the major airlines, including the low-cost Air Deccan and SpiceJet.

The airlines took the decision in view of the rising price of Aviation Turbine Fuel by over Rs 900, taking the ATF prices to over a whopping Rs 41,000 per kilolitre.

The revised fuel surcharge of Rs 500 would be applicable on all classes and tickets purchased within and outside India.

Public sector oil firms raised the ATF prices from July 1 by about Rs 900 per kilolitre, or over two per cent, in step with firming up of international prices.

While the price in Delhi following the hike rose to Rs 41,303.58, in Kolkata it has become Rs 46,564.46. The price in Mumbai was Rs 42,731 and in Chennai Rs 43,940.32 per kl.

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SpiceJet will now provide low fares and inventory on the Galileo GDS platform.

The no-frills airline currently offers over 2,80,000 seats a month on its present network. With the planned capacity increase towards the year-end, the capacity will almost double to 500,000 seats.

The airline joint over 33 other low-cost carriers around the world that are using Galileo GDS as a distribution channel.

With a tie-up with Galileo, SpiceJet expects to have a significant contribution to its sales volumes through a network of Galileo connected agents.

“The strategic move allows us to be more accessible to over 50,000 travel agents throughout the world,” said SpiceJet’s chief executive officer Siddhanta Sharma.

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Nearly half a dozen new airlines that announced plans to start operations last fiscal have failed to take off, raising questions about the profitability of the Indian aviation sector and its potential to accommodate more players than it already has now.
Startups including Magic Air, East West Airlines, Jagson Airlines, Indigo Airlines and Indus Airways had announced their plans to fly early 2006 but are yet to begin commercial operations.
With the current crop of airlines under pressure due to high aviation fuel prices, are the new entrants playing a wait-and-watch game? These airlines, however, beg to differ. They attribute the delay to various approvals required to start operations.

New Delhi-based Jagson Airlines had planned for a launch in July 2006, but is still awaiting the required clearances. “We will be launching by August end,” its chief executive officer U K Bose said. “We changed our plans from being a non-scheduled to a scheduled airline. The airline is now awaiting security clearance for its directors.”

The fate of Magic Air, promoted by businesswoman Nira Radia, is also the same. As per civil aviation norms, a scheduled or non-scheduled air transport operator’s permit could be granted only to Indian citizens. Radia is a non-resident Indian. Similarly, East West Airlines, which had shut operations in the mid-1990s was planning to re-start in early 2006. However, the airline is still riddled with problems since it is yet to pay off past debts.

Established airlines like Jet Airways and SpiceJet, meanwhile, find themselves forced to sell and lease back their aircraft to be able to declare profits, while carriers like Air Deccan and Kingfisher Airlines are yet to break even. Jet Airways had posted a net profit of Rs 227.1 crore and SpiceJet Rs 4.3 crore for the first quarter of the current fiscal.

Analysts feel that even if the newcomers get all the required clearances, not all the carriers will be able to take off. “There will be consolidation in the sector. There are too many players already,” says Gautam Sinha Roy of Edelweiss Capital. Aviation experts also believe that the present infrastructure at the airports is inadequate to cater to even the existing carriers leading to parking problems and delays in take-offs and landings.

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Kingfisher Airlines has scrapped the plan for an IPO as of now. The company was planning to raise about USD 200 million through an IPO in 2006, reports Economic Times.

With the volatility in the market, the company would not consider this route for at least another year, said a company official.

Kingfisher Airlines has the paid-up capital of over Rs 370 crore. Group shareholding in the company, a 100% UB group subsidiary, will be diluted only when the company gets a proper valuation.

The IPO was a major success as it was heavily oversubscribed Air Deccan, however, managed to scrape through in a volatile market in March. The other airline listed in the stock exchange is the Delhi-based SpiceJet.
Large players in the civil aviation industry, who have recently opted for the IPO route, include Jet Airways and Air Deccan.

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The ministry has decided to make some of its stations look like model airports.

At a time when the aviation boom and the surge in the number of first-time fliers has turned some of our airports into railway stations, the railways has decided to make some of its stations look like model airports.

The railways has realised that low-cost airlines are its prime competitor, as a huge chunk of its passengers in the air-conditioned coaches have begun to migrate to Air Deccan, SpiceJet and other such players. Revenues for the upper-class segment have been dipping steadily in the last three years.

The ministry has now realised that to retain its well-heeled passengers, it will need to to alter its image. Railway officials are thinking of changing the look of some of the major railway stations.

Railway officials say that the ministry plans to turn some of its largest railway stations into mega terminals. Once modernised, these stations will have separate arrival and departure lounges, shopping malls close to waiting rooms and a high-tech electronic queue management system.

The railways plans to remodel the railway stations in the four metros into mega terminals. The four mega-terminals will come up at (New Delhi) Delhi, (Chatrapati Shivaji Terminal) Mumbai, Kolkata and Chennai by remodelling their existing structures. The plan is to modernise stations in such manner that they can compete with airports in terms of facilities.

A proposal for such an exercise is being prepared and will be presented before the railway board.

One of the main components of the modernisation plan is to build a huge holding space right next to the parking space in each of these stations. There will also be holding spaces or central waiting halls, where passengers, who have to catch a train, can wait. The air-conditioned waiting hall will have an electronic system through which passengers will be informed of the arrival time of their trains.

Only those passengers, who have a train to catch within a short span of time, will be allowed to proceed to the platform.

This will also help streamline security frisking and ticket checking at these stations. So, platforms will be de-congested and passengers will be able to board trains in an organised manner.

An official said in this manner stampedes which had become a problem, especially at the New Delhi railway station, could be avoided. Some of these stations may also be equipped with elevators.

Separate arrival and departure lounges will also be built so that passengers will not have to wedge past people coming from the opposite direction to move ahead.

Another official said the railways also planned to construct additional floors at these railway stations. The idea is to lease out the commercial space, so that revenues generated here can be pumped back into these railway stations.

“Some of the space will be allotted to run mini-theatres, shopping malls, restaurants and food plazas so that the passengers can spend an enjoyable waiting time,” he added.

The department thinks if these mega-terminals succeed, it can think of setting up a chain of such mega-terminals, especially in other large cities where there is constant transfer of passengers from railway stations to airports.

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All major air careers in the country have planned to hike the fuel surcharge on their tickets, owing to the increase in the aviation fuel prices.

The country’s largest domestic airline Jet Airways has hiked its fuel surcharge by Rs 200 per sector from July 7. The state-owned Indian Airlines and other low-cost rivals like SpiceJet and Air Deccan have also planned to increase the ATF within the next two days.

Other air careers are also expected to follow the same trend in hiking the ticket fares. The levy would cover both business and economy class tickets, and also the excursion and discount fares offered by the various airlines.

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Low-cost airline Spicejet today announced the launch of its services from Guwahati.

SpiceJet marketing and planning vice president Sanjay Kumar said the initial Guwahati-Delhi flight would start from July 10 with non-stop services thrice a week.

SpiceJet, he said, was offering a special launch fare of Rs 2,899 till the end of October subject to seat availability. “We are proud to commence operations to Guwahati, the gateway to the North East, with the lowest fare and best on time performance,” he said.

From October, SpiceJet would link Guwahati with Kolkata and other major destinations, Kumar said.

SpiceJet at present operates in 11 destinations in the country, with Guwahati being the 12th.

By the end of 2008, the airline expects to add 23 new aircraft to its fleet, which will operate more than 250 flights in 24 destinations offering more than 35000 seats per day.

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