Indian Aviation Hopes- 2009: A new beginning

by KOUSTAV M.DHAR -Chief Operating Officer & Executive Director, MDLR Airlines

The year that went by: A chaotic year of shattered dreams for the global aviation industry, where players not only relinquished their dreams for fleet expansion, but also had to discontinue and declare bankruptcy or shut shop. This was the year where most players reached the bottom, it can't be lower. From here, anything new would only see growth and progress.

With the global economic conditiond cooling down, business and discretionary travel demand trends turned pointedly downwards in full season of third quarter of 2008. As a result, Indian- full service and low cost airline profit forecast for the year 2008 has progressively deteriorated with each succeeding quarter and losses have surmounted considerably.

The massive additional impact of fuel costs in the past four months is hampering the bottom line. If oil prices do come off significantly like the trend passed by Oil Ministry to the Indian aviation, with ATF prices hitting a 36 month, all time low on 15, December 2008, and airlines do make the service reductions they are talking of, the picture could look much more attractive. In the meantime, however, the rhetoric will continue to fly. Future credibility demands a level of restraint.

Key areas to be looked at to boost growth in 2009 :-

• Improving consultation and co-operation between airport operators and state and local governments on airport and facilities usage planning.
• Integrating investment on airports with improved road and rail links to and from airports.
  Ensuring non-aeronautical developments do not compromise aeronautical requirements of airports. Improving mechanisms for guiding development around airports to ensure aircraft noise issues are fully addressed in planning.
• Passenger redressals and gaining back passenger confidence by relaxed cancellation charges and refund policies.
• Developing mechanisms for effective ongoing dialogue between airport operators and airlines on maximum time-slot utilisation according to the airline need to capture the large mass of Indian air travellers.
• Addressing future airport needs, recognising the importance of airports as an element of the national economic infrastructure and accommodating the safe and effective use by civil aviation of joint user or defence-owned airports. A suggested opening up of larger civil enclaves with defence parameters.
• Allow more intra-Indian carrier interlining and allowing airlines to continue self handling within airport premises.

Ancillary airports need to be upgraded
Alternate airports with 20 minute fly zone to be spruced up to maintain, more hangar space for all airlines, proper passenger terminal to attract Cat II and Cat II enhanced operations. The Government should subsidise such positioning flight to create, develop and encourage more players to park outside metro airports and only fly to same as a hop over.

Trends in 2009
Industry has outgrown its nascent stage and no new addition or start-up of any airline in the last 20 months clearly marks that the optimum level has been derived between all the players. The new trends that would emerge would be:

• Return of low fare flying and with that Tier II and III cities business travel would increase by at least 65 per cent in Q1 and Q2, 2009 .
• The pure bred low cost model would now turn to low fare- low service model.
  B2B and B2C sales trend would now emerge as the handiest, next generation process for booking air travel in the country which could de-stabilise the travel fraternity and their long dominance on Indian traveller mind set.
• Meta-search engines like www.ixigo.com would make knowing and comparing airline timing and fare now a desktop click job and become more popular.
• Freebies like valet service, limousine service, goody bags, etc would be non-existent as the cost for such services would now be passed by airlines to passengers.
• Demand will be much more globally-focused. By the end of the forecast period, Middle East will be responsible for less than one third of new airliner deliveries, while China will be approaching 18 per cent and India would reduce to approximately 3.8 per cent.
• Demand for current-generation regional jets is now down to approximately 256 units through 2011 and even these will be larger 75 - 90 seat models replacing 50-seaters. There are no new-technology lesser than 70 seat jet airliners in the planning stage. Therefore, some projections made elsewhere for 2,000 new small jets are simply not attainable and would be completely relinquished.
• In the US, over 800 regional jets will retire from fleets. The effects on air service levels and airline strategies will be dramatic. Asia, Middle East and Africa would turn out to be dumping ground for the same and with non-supply of pilot demand growing all time high it would be dramatic.
• The consolidation model, which has become more of a PR- exercise or, maybe, a carefully plotted exercise by two big giants of Indian private aviation, would drastically change this year. Singapore maintained after consolidation three brands- Singapore Airlines (a full service wholesome brand), SilkJet (a regional low fare- medium cost - single aisle operations) and Tiger Airways (a true blooded LCC), a great business model. This has proved to be one of the most successful models. But in the Indian scenario, Jet Airways with the confused Jetlite brand or Kingfisher with diminishing Kingfisher Red brand has mixed up the business models, which definitely is not the consolidation business model. In that case, the most successful, yet less spoken about consolidated successful business model from the industry perception is of NACIL -Air India, which has integrated the branding and procedural operation with real finesse, though stages for initial hiccups are far from over.