100 years of commercial aviation

NEW DELHI: Exactly a hundred years ago, a team of four visionaries joined hands to launch the first scheduled commercial airline flight in the world. 

Percival Fansler, an engineer, organised the funding for the St. Petersburg-Tampa Airboat Line which provided the first scheduled air service across Tampa Bay in Florida (US). 

Automotive businessman Thomas Benoist's airboat conducted the first flight, piloted by Tony Jannus, while Abram Pheil, then mayor of St. Petersburg, paid .. 

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2013, a year of surprises for aviation industry

The year also marked the grant of nearly three times bilateral traffic rights to Abu Dhabi by the Indian Civil Aviation Ministry

Even as the year is drawing to a close, 2013 has been a year of surprises and excitement for an otherwise struggling Indian civil aviation sector.

From a sense of gloom, the sentiment quickly changed to jubilation when foreign airlines lined up to throw a lifeline to troubled domestic carriers or applied for fresh applications to start new airline ventures with strong domestic partners.

Since 2006, India has not seen the launch of a major airline. Rather, three airlines - Kingfisher Airlines, Air Deccan (Kingfisher Red) and Paramount Airways - have shut shop, in the meantime. The last major airline that was launched in India was IndiGo in 2006, which has now grown into be the largest domestic carrier by market share.

Major highlights

The year saw the signing of the Jet Airways-Etihad Airways deal. Under the deal, the Abu Dhabi-based airline picked up 24 per cent stake in financially-strained Jet Airways for Rs. 2,058 crore. Apart from this, Etihad also paid $70 million to buy Jet’s airport slots at London Heathrow Airport. And, it has committed to invest another $150 million to buy out Jet’s frequent flier programme.

Etihad also agreed to procure funding worth $300 million to reduce Jet’s debt burden. This deal has come as a major saviour for Jet’s owner Naresh Goyal, who was always opposed to foreign airlines investing in Indian carriers.

Though it was Vijay Mallya, the owner of the grounded Kingfisher, who had lobbied hard for foreign direct investment (FDI) from overseas airlines in Indian carriers, an arch opponent of this policy Mr. Naresh Goyal turned out to be the first major beneficiary. The year also marked the grant of nearly three times bilateral traffic rights to Abu Dhabi by the Indian civil aviation ministry.

Tata Group

The year also saw AirAsia and the Tata Group queuing up to start two new airlines in India. While AirAsia has expressed its willingness to launch a Channai-based low cost carrier called AirAsia India in association with Tata Group and Arun Bhatia of Telestra, the Tatas surprised everyone by announcing plans to start a full service airline in India with their erstwhile partner Singapore Airlines.

“The easing of FDI norms last year will prove to be a game-changer. We witnessed the creation of two start-ups - Tata–Air Asia joint venture and Tata-SIA joint venture - and also equity investment in Jet Airways by Etihad. Recently, SpiceJet announced an interline agreement with Tiger Airways,” said Amber Dubey, Partner and Head-Aerospace and Defence at KPMG.

“The biggest event in 2014 will be the commencement or expansion of commercial operations by four global airlines — Etihad, AirAsia, Singapore Airlines and Tiger Airways — along with their Indian partners. We also expect one more FDI deal in an existing airline. All these will bring in global best practices, greater competition, better choices for passengers and lower fares,” Mr. Dubey said.

He said that the arrival of AirAsia India and Tata-SIA would shake the domestic market, bringing in more competition. The increased competition would boost regional and international connectivity, improve services and bring down fares.

“The Indian aviation industry has emerged as one of the top in the world with a massive movement not only in domestic and international sectors, but also the freight carriage. The sector has been going through a turbulence facing multiple headwinds which hindered its projected growth. Increase in oil prices, decline in passenger traffic and liquidity constraints jeopardised the finances of some airlines and drained their limited financial resources,” said Ankur Bhatia, Executive Director, Bird Group and Chairman of CII’s Core Committee on ‘Growth Potential of Civil Aviation & Airports.

IndiGo does well

Most airlines continued to suffer losses but IndiGo announced a net profit of Rs. 700 crore, a record in its profitable growth. Air India also sharply improved its financial position following the restructuring of loans and fresh equity infusion from the Government of India. The national carrier improved its on-time performance and market share, a remarkable achievement from a team led by its Chairman Rohit Nandan.

Air India

The biggest achievement for Air India was the move of Star Alliance to reconsider its decision to allow the national carrier to join the grand alliance. This would further strengthen Air India. In 2013, Air India also decided to sell five of its fuel-guzzling Boeing 777s to Etihad for an unspecified amount.

SpiceJet witnessed the exit of its high profile CEO Neil Mills, while Sanjiv Kapoor came on board as its new COO. Go Air inducted more planes into its fleet, and reported higher market share. The year also witnessed the launch of a new airline Air Costa.

The rising cost of aviation fuel continued to pose challenges for the sector in 2013. Despite this, with FDI being allowed, Indian aviation sector could grow at the rate of 120-130 per cent as more international carriers would look at investing in domestic airlines.

The year 2013 was significant in the sense that passenger throughput grew by around 6 to 8 per cent. This growth is commendable given various challenges such as slowdown in the economy, devaluation of the rupee, increase in ATF prices, austerity measures by corporate sector and subdued demand from the tourist sector, said experts.

According to Mr. Dubey, the current times are definitely interesting but also highly challenging for the Indian aviation industry. Indian carriers have already lost about $ 1.6 billion in the financial year ended March 31, 2013. The year also witnessed Kingfisher reporting all time high losses, and reaching a stage of no return.

Sky-high airport fees choking domestic aviation: IATA chief

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Increasingly expensive airports and poor infrastructure are acting as deterrents to the growth of the civil aviation sector in the country, global airlines body IATA has said.

"India's airports are becoming increasingly expensive. We have seen a 346% increase in charges at Delhi, 164% increase in aeronautical charges in Mumbai, 219% in Kolkata, and a 269% hike in Chennai. These are huge increases," IATA director general and chief executive Tony Tyler told PTI at his Geneva headquarters recently.

"But we have had some victories. They have rolled back some charges in Delhi," the International Air TransportAssociation (IATA) chief said.

Stating that the poor infrastructure and high taxes work as a deterrent to the development of the aviation sector, he said aviation is a huge economic enabler of growth.

"Look at Mumbai, which is probably the most important commercial centre of the country. Frankly, its airport is inadequate. We have been talking about the Navi Mumbai airport for years, but where is the progress on that?," he asked.

High taxes on the jet fuel, which goes up as high as 40% in some states, coupled with higher airport charges in the form of user-development and airport development fees jack up air fares. These have had a negative impact on the passenger demand in the country.

Pointing out that sectoral regulator Airports Economic Regulatory Authority (AERA) has been doing a good job, he said, "I think, within the scope of its authority, the AERA has been as tough as it could be. But the system of regulation leaves something to be desired."

He also flayed the government for taking away a larger revenue pie from private airport operators and blamed it as one of the reasons for higher airport charges.

"The share of the government revenue is ridiculously high. I discussed this with the regulator. You cannot blame the airports to make money when the government takes away 46% from the GMR-run Delhi airport," he said.

The Delhi and Mumbai airports were handed over to GMR and GVK, respectively on a 30-year lease in 2006 with an option of extending it by another 30 years.

Under the privatisation agreement, the state-owned Airports Authority gets a revenue share of 45.99% from Delhi and 38.7% from the Mumbai operators on their gross revenue, even though the government agency owns only 26% in these two airports.

Stating that it makes difficult for the private airport operators to generate a return for the investors, Tyler said, "So he is going to have to increase charges wherever he can and as result it is the end-user, the passenger, who pays for it."

However, he said the entry of new players into the aviation space--AirAsia, Singapre Airlines andEtihad- reflects the confidence of investors in the long-term growth of the aviation sector.

Tyler, however, said Singapore Airlines-Tata joint venture, which will cater to the full service space, may pose competition to the other two players in the segment-Air India and Jet in which the gulf carrier Etihad owns 24%.

Aviation Ministry recommends Prabhat Kumar as next DGCA

NEW DELHI: The civil aviation ministry has recommended Prabhat Kumar, a joint secretary in the ministry, as the next Director General of Civil Aviation, two persons familiar with the development said.

The move comes four days before incumbent Arun Mishra retires and amid fears of a possible downgrade of the Indian aviation safety oversight system by the US Federal Aviation Administration (FAA).

"The appointment will have to be approv .. 

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Tata-SIA applies to civil aviation ministry for NOC

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The airline joint venture between the Tata Group and Singapore Airlines (SIA) has reached its second stage with the company applying for a No-Objection Certificate (NOC) to the civil aviation ministry on Thursday.

"We have received their proposal seeking an initial NOC for the airline venture. We will send names of all board members to the home ministry for security clearances and go through the proposal," said a senior civil aviation ministry official.

The members on the board are Prasad Menon, also the chairman of the company, and Mukund Rajan, both nominated by Tata Sons, the third, Mak Swee Wah, is the initial director nominated by Singapore Airlines.

Tata Sons will be the majority partner in the airline venture with 51 per cent stake, while SIA will hold 49 per cent. The two companies plan to set up the airline with an initial investment of $100 million.

With the application for NOC, Tata-SIA proposal has reached second stage. Once received, the process will reach its final stage and the company will have to apply to the Directorate General of Civil Aviation (DGCA) for Air Operator's Permit.

The civil aviation ministry, in the recent past, has been quick with clearances and the proposals will now be overlooked by the new aviation secretary Ashok Lavasa, who joins on January 1, 2014.

The Tata-SIA proposal got the clearance of the Foreign Investment Promotion Board in October making it eligible to apply for the NOC.

According to the MoU inked between Tata Sons and SIA,the joint venture company will be incorporated in New Delhi and its principal place of business shall be India at all times.

In the proposal, the joint venture company had assured the government that control of the company would always remain in Indian hands. It has also said in the proposal that the Indian subsidiary of SIA will get access to SIA's international network.

Currently, the government rules do not allow domestic airlines less than five years in operations and with a fleet of less than 20 aircraft to commence international operations. The ministry of civil aviation is drafting a Cabinet note to amend the policy.

With this proposal, the aviation sector in India has seen entry of a third foreign carrier and bringing in equity investments of over Rs 2,800 crore since the time foreign direct investment rules were relaxed in September 2012.

The year in aviation: Major changes afoot

                    2013 was a year of changes and challenges in aviation.

(Photo: Scott Olson, Getty Images)

STORY HIGHLIGHTS

• Mega-merger of American Airlines, US Airways further consolidates industry
• Asiana crash in San Francisco caused first commercial passenger deaths in nearly five years
• Rules for cellphones, other onboard electronics prompted vigorous debate

The airline industry underwent major changes and challenges in 2013, from the creation of a new mega-sized carrier to passengers getting the all-clear to keep their electronics powered up and a crash that caused the first passenger airline fatalities in the U.S. in nearly five years.

The big stories:

NEW MERGER

American Airlines and US Airways officially tied the knot in December, creating the world's largest airline. It was a bumpy road, as the carriers faced a lawsuit filed by the Justice Department and the attorneys general for several states and the District of Columbia that claimed this latest mega-merger would stymie competition and possibly push up fares.

But the carriers reached a settlement, agreeing to give up dozens of takeoff and landing slots at New York City's LaGuardia and Washington's Reagan National airports. They also committed to keeping their various hubs for three years. In 2014, the full-scale integration of the two carriers will begin, as they take on the task of melding flight schedules, frequent-flier programs and reservations systems.

ASIANA CRASH

On July 6, an Asiana Airlines flight crashed in San Francisco, killing three passengers, the first passenger airline fatalities in the U.S. in 4½ years.

In December, a report from the investigator leading the crash inquiry for the National Transportation Safety Board revealed that the flight's trainee pilot believed the autothrottle was working before the jet hit a sea wall, broke apart and burst into flames.

NEW CO-PILOT REQUIREMENTS

It was another crash, of a regional carrier plane near Buffalo four years ago, that led to a significant change in co-pilot training in 2013.

In July, the Federal Aviation Administration boosted to 1,500 hours the amount of time co-pilots must have in the air to be certified to helm passenger and cargo aircraft, the same amount as required for pilots.

Previously, co-pilots, also known as first officers, needed only 250 hours of flight time. The rule change came after the Colgan Air crash in February 2009 that killed 50 people.

DREAMLINER GETS BACK IN THE AIR

The Boeing 787 Dreamliner, the first commercial jet to be made mostly of lightweight carbon composites rather than aluminum and steel, started the year grounded across the globe. But by May, the innovative Boeing plane was flying again in U.S. skies.

The plane was heralded because its unique design would enable airlines to pare costs while adding more long-distance routes. But when the jet finally began flying after numerous delays, it was hindered by a faulty battery system.

In January, a battery caught fire in a 787 on the ground at Boston's Logan Airport. Another 787 had to make an emergency landing in Japan because of a smoldering battery. On Jan. 16, the entire Dreamliner fleet flying worldwide was grounded.

Boeing responded by creating a new battery design that will make a blaze less likely and easier to douse if one is sparked.

PORTABLE ELECTRONICS

In October, fliers learned that they would be able to keep their portable electronics powered up from the time they take their seat until their flight touches down. The FAA decided to allow passengers to watch movies or read e-books for the duration of their flight as long as the carrier showed that the plane wouldn't be at risk because of possible interference from the gadgets.

IN-FLIGHT PHONE CALLS

Next up? The Federal Communications Commission decided in December to let the public weigh in on whether to scrap a 22-year-old ban on cellular service in flight. The Department of Transportation will separately look at its own prohibition on voice calls, texts and data. Delta Air Lines CEO Richard Anderson has said that whatever the agencies decide, Delta won't allow phone chatter in flight.

Aviation industry to fly through 2014 with less turbulence

KUALA LUMPUR: The local aviation industry is set to fly at cursing altitude next year, with great growth prospects ahead, after having gone through some minor turbulence this year.

Local airlines can make 2014, a year to remember as Malaysia Airlines, AirAsia and Malindo look set to go head-to-head in the battle to win customers and keep them.

Malaysia Airlines will replace old aircraft to make way for the arrival of new planes to help further improve product offering.

The national carrier will use the additional capacity to increase frequencies to meet passenger demand and fly to new destinations. 

Its solid business model includes aggressive marketing and promotions, better capacity management, optimising asset utilisation and driving productivity.

Meanwhile, low-cost carrier AirAsia's positive growth is set to continue into the New Year while its long-haul service, AirAsia X, is aggressively expanding capacity from time to time.

The group has placed the largest single airline orders with Airbus for an additional 25 A330-300s valued at US$6 billion.

New aircraft will provide the carrier with the ability to offer non-stop services to destinations in Europe or one-stop services to the United States.

Malaysian-based hybrid airline, Malindo Air, will spread its wings in India by aggressively adding six more destinations by the end of next year.

It will start the Kuala Lumpur-New Delhi sector at the end of this month, followed by Trichy, Tamil Nadu, on Jan 2, 2014 and Mumbai, Maharashtra, on Feb 15, 2014.

The government also pledged to transform Malaysia into a regional aviation hub which would have a multiplier effect on the economy.

Prime Minister Datuk Seri Najib Tun Razak tabled the 2014 budget with the promise to formulate a National Aviation Policy, aimed at strengthening the ecosystem and services network in the aviation industry.

2014 will also usher in Visit Malaysia Year, the nation's biggest and grandest tourism celebration aimed at luring a record 28 million international tourist arrivals.

This programme will bode well for the overall aviation sector including, airport operator, Malaysia Airports Holdings Bhd, as it will boost passenger arrivals.

RHB Research Institute expects competition between AirAsia and Malaysia Airlines to remain challenging but less severe. "However, Malindo will be less aggressive due to its high-cost structure," said analyst Ahmad Maghfur Usman.

He said this bode well for the two dominating local carriers, AirAsia and Malaysian Airline, if they play their cards right in maximising yields and loads. 

"Intense competition has resulted in airlines luring travellers with big discounts, which will help boost demand for air travel," he said, adding that this would benefit Malaysia Airports.

New budget terminal, KLIA2 which is scheduled for May 2, will also give a massive boost to the industry.

Ahmad Maghfur said high jet fuel prices, volatile exchange rates and stiff competition were among factors that affected airlines' earnings this year.

The fate of AirAsia and Malaysia Airlines over the fine imposed by the Malaysian Competition Commission in September for allegedly breaching competition laws was likely to be known in January.

On September 6, 2013, the commission announced that the companies would be fined up to RM10mil each for infringing section 4(2)(b) of the Competition Act 2010 by entering into an agreement which saw the two airlines sharing markets within Malaysia. - Bernam

Indian civil aviation finds comfort in overseas investment deals

  India's civil aviation industry, which  faced turbulence due to high operating costs in 2012, found some comfort this past year due to a slew of overseas investment deals that helped restore confidence in the sector.

"This has been a flat year with minimum growth. However, with the intent of the Tatas and AirAsia on entering the Indian market has definitely paved the way for future growth in the sector," Ankur Bhatia, executive director, Bird Group, told IANS.

"In 2014, we are looking forward for establishment of a civil aviation policy, rationalisation of taxes on jet fuel and growth in the regional aviation space," said Bhatia, who is also a member of the Confederation of Indian Industry's panel on civil aviation.

Abu Dhabi-based Etihad Airways became the first foreign carrier to invest in the Indian sector. It bought a 24% stake in Jet Airways for Rs.2,069 crore ($380 million).

Etihad doubled its services to Mumbai and New Delhi with plans for making Abu Dhabi a global hub connecting Indian passengers and freight to different parts of the world.

Another major announcement came from AirAsia's Tony Fernandes, who partnered with Tata Sons and industrialist Arun Bhatia to set up a budget airline - AirAsia India - proposed to be based out of Chennai.

The venture, which will focus on the tier-II and III cities, is awaiting its air operator's permit from the aviation regulator.

The third big ticket joint venture in the sector came from Tata Sons and Singapore Airlines. They plan to launch a new full-service private carrier based in New Delhi. The proposal of the $100 million joint venture was approved by the FIPB in October. Officials of the proposed airline hope to launch services by May-June 2014.

"The biggest event in 2014 will be the commencement or expansion of commercial operations by four global airlines - Etihad, AirAsia, Singapore Airlines and Tiger Airways - along with their Indian partners," Amber Dubey, partner and head - aerospace and defense at global consultancy KPMG, told IANS.

"We also expect one more FDI deal in an existing airline. All this will bring in global best practices, greater competition, better choices for passengers and lower fares."

Another major milestone in the sector was the government's decision to privatise six airports, apart from developing and managing 20 airports under the public private partnership (PPP) model.

"Government envisages an investment of $12.1 billion for airports during the 12th Five Year Plan (2012-17). This will help in connecting tier II, III cities and increase passenger traffic, thus giving airlines a chance to fully exploit the domestic opportunities," Rajiv Chib, associate director, aerospace and defence at PricewaterhouseCoopers (PwC), told IANS

Passengers carried by domestic airlines during January-November was up 4.52% at 55.83 million from 53.42 million in the corresponding period of last year.

Air India too had some good news towards the end of 2013, as it was finally allowed to join the global Star Alliance inter-line pact. The flag carrier's earnings before interest depreciation taxes and amortization (EBIDTA) seem positive this fiscal end and profit making-plans in the near future seem to be on track.

For the ensuing year, the government is planning to focus on providing greater connectivity to smaller cities setting up of a Civil Aviation Authority (CAA) and trying to rationalise state taxes on jet fuel.

Currently, there are seven domestic passenger carriers in the country.

The largest amongst them is IndiGo, which had a market share of 28.6% in November, followed by Air India's domestic operations (19.3), SpiceJet (19%), Jet Airways (18.5), GoAir (8.8), JetLite (5.6%) and newly-started Air Costa (0.2%).

As of August 2013, 81 scheduled foreign airlines were operating to India with over 1,700 flights per week to and from 25 Indian airports. Of these, 72 were passenger carriers, while nine are cargo operators.

Highlights of 2013:

* High fuel prices, interest costs, taxes hurt profitability

* Etihad buys 24% stake in Jet Airways

* AirAsia, Tata Sons and industrialist Arun Bhatia join hands to start a budget carrier

* Tata Group also ties up with Singapore Airlines

* Government plans to give a major boost to regional airlines, increase connectivity.

* Air India allowed to join Star Alliance