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BIO-FUEL TECHNOLOGY: FUTURE OF AVIATION p 19

APRIL-MaY 2019

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Sustainable and Green Aero-Engines p 22

INTERVIEW: Govind Nair, Thumby Aviation p 27

AIRBUZ

A n E x c l u s i v e M a g a z i n e o n C i v i l Av i at i o n f r o m I n D I A

PAGE 6 onwaRds

TURBULENT TIMES

for the indian airline industry An SP Guide Publication

OUT OF SIGHT. INSIGHT. In the air and everywhere. Round-the-clock service representatives, a growing global network, full-flight data, and an app that tracks your orders â€“ solutions have never been more clear.

enginewise.com

table of contents

P8 Jet Airways fleet grounded, its slots and aircraft up for grabs

SpiceJet, Air India rush to claim assets, market of grounded airline.

Cover: Jet’s rise from a few aircraft to a 119-aircraft behemoth has lessons for airlines the world over. A clear coherent strategy is as much about ‘what not to do’ as it is about ‘what to do’. Cover Illustration: Anoop Kamath

bIo-FuEL TEChNoLoGy: FuTuRE oF aVIaTIoN p 19

apriL-maY 2019

`100.00 (india-based buyer only) Volume 12 • issue 2 www.spsairbuz.com

RNI NUMBER: DELENG/2008/24198

Airlines / Operations

SuSTaINabLE aNd GREEN aERo-ENGINES p 22

INTERVIEW: GoVINd NaIR, Thumby aVIaTIoN p 27

AIRBUZ

A n E x c l u s i v E M A g A z i n E o n c i v i l Av i At i o n f r o M i n D i A

paGE 6 oNWaRdS

TURBULENT TIMES

foR ThE INdIaN aIRLINE INdUSTRy An SP Guide PublicAtion

SP's AirBuz Cover 2-2019.indd 1

26/04/19 5:14 PM

Airlines / air india P16 Air India — An Asset or A Liability?

The Government is trying to sweeten the deal and hopes to convince prospective buyers to take over the loss-making carrier which is a huge drain on the exchequer.

Interview / Civil Helicopter P27 Helicopter Taxi Service for the Masses

SP’s Special Correspondent Mahesh Acharya in an exclusive interview with Govind Nair, Director-Business Development, Thumby Aviation.

P6 Airlines / Industry Trying Times

P25 MRO / Taxation Impact of GST on the Indian MRO Industry

departments P2 A word from Editor P3 NEWS BRIEFS P32 FInally

P11 Airlines / Viewpoint THE FALL OF JET AIRWAYS. WHAT HAPPENED?

technology / Digitization P30 Giving wings to localized support to drive outstanding customer experience

New technologies and capabilities are consistently being leveraged for delivering exceptional customer experience.

P14 Airlines / Viewpoint An Ominous Shadow on the Indian Airline Industry P19 technology / Bio-Fuel Bio-Fuel Technology: Powering the Future of Aviation P22 Engines / Green Sustainable and Green Aero-Engines

Awards 2017

Special

Contribution to Business Aviation SP’S AIRBUZ • ISSUE 2 • 2019 • 1

A word from

editor

Publisher And Editor-in-Chief

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erhaps the most traumatic development the Indian airline industry has witnessed in recent times has been the financial turmoil one of the leading carriers in the private sector namely Jet Airways, has been going through. Rather unfortunately, this has ultimately led to total bankruptcy compelling the airline to shut down operations altogether. Apparently this is not an overnight development as the airline has been afflicted by a variety of problems for several years. Some of these have been related to the operating environment and others to flawed policies adopted by the management which has largely been a ‘one man show’. Hopefully, the multi-pronged effort by the government and financial institutions does bear fruit and is able to extricate the airline from the morass it has descended into. In this issue of SP’s AirBuz, there is an in-depth analysis by Satyendra Pandey, an experienced professional from the Indian civil aviation industry, on the collapse of Jet Airways. Forecast by renowned analysts invariably paint a rosy picture of the future of the Indian civil aviation industry that is being seen as becoming the third largest in the world by 2025 or so. This issue of the magazine carries an analysis by J Noronha of the state of the Indian airline industry and its prospects for the future. The author is of the view that given the impediments, it may not be possible to meet with the projected growth rate in the expected time frame. The Indian carriers today are definitely burdened with the ever escalating price of Aviation Turbine Fuel which constitutes a very high percentage of their operating costs. What holds promise for the future, apart from innovations in engine and aircraft designs that are aimed at reducing fuel consumption and cutting down emissions that degrade the environment, is the thrust towards development of Bio-fuels technology for aviation. An analysis by Isha and Zorawar Jaiswal on this option that is seen to be powering aviation in the future, has been included in this issue of the magazine. A problem that is afflicting not only the city of Bengaluru, but all the metros across the nation is that of traffic gridlock that results in criminal wastage of productive man hours. In this issue of SP’s AirBuz, there is an interview of Govind Nair who has exercised a bold initiative to launch a Helicopter Taxi service between Kempagowda International Airport in Bengaluru to Electronic City at affordable cost. A journey by road between these two locations on the Northern and Southern fringes of the city, could take more than two and a half hours. Hopefully the other major cities in the country that are currently battling with the problem of traffic congestion, would be blessed with such initiatives by entrepreneurs in the private sector, if not by the government. The Maintenance, Repair and Overhaul (MRO) segment is a vital component of the Indian civil aviation industry. Unfortunately, its growth in India over the years has been slow and now is being stifled by the newly introduced Goods and Services Tax (GST) which is virtually killing the industry. A report on this problem by the undersigned has been included in this issue. All these and more in this issue of SP’s AirBuz. Welcome aboard and we wish you many happy landings! Jai Hind!

B.K. Pandey Editor

Member of:

2 • SP’S AIRBUZ • Issue 2 • 2019

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quently, what elevated the business jet from a luxury toy to what is increasingly seen as a vital corporate tool? In the US, hundreds of Fortune 500 companies now flaunt their own aircraft, with companies arguing that this vital conveyance saves time and boosts productivity. A recent CNN report quoted

NewsBriefs

( AIRLINE NEWS Lufthansa Group orders Boeing 787s and Airbus A350s

The Lufthansa Group has placed an order valued at $12 billion at list prices, for 20 Boeing 787-9 and 20 Airbus A350-900’s. Delivery of aircraft against the newly placed order is scheduled for the period 2022 and 2027. The new aircraft will replace primarily aircraft of the Lufthansa Group which would include the four-engine Airbus A340 airliners of Lufthansa and Swiss as also the Boeing 747-400s of Lufthansa. The distribution of the aircraft amongst the group’s airlines will be announced at a later date. Lufthansa has sold six of its 14 Airbus A380s back to Airbus. The aircraft will retire from the airline’s fleet in 2022 and 2023. As per a statement by the airline, Lufthansa continuously monitors the profitability of its worldwide route network. As a consequence, the group is reducing the size of its Airbus A380 fleet from 14 aircraft to eight for financial reasons. The structure of the network and the long-haul fleet, fundamentally optimised according to strategic aspects, will give the company more flexibility and at the same time, increase its efficiency and competitiveness. This will of course also benefit Lufthansa’s customers. It will be interesting to see if Airbus has already planned homes for these aircraft with British Airways rumoured to be interested in used Airbus A380s or was this just a compromise by the manufacturer to secure the future Airbus A350 order.

Shortage of Pilots in India

As per a report in the media in February this year, cancellation of over 30 flights by IndiGo has bought to the fore the growing shortage of pilots, especially when practically all airlines are embarked on fleet expansion. According to industry estimates, over 100 new airliners will be added in the next 12 months, a bulk of which will be inducted by IndiGo alone. The leading budget carrier IndiGo is currently adding nine aircraft every

month. To meet with the requirement generated by fleet expansion, around 1,500-2,000 additional pilots will be required by 2019 to fly the new aircraft and tide over the existing crisis of pilot shortage. Despite more flights in operation, the number of additional commanders being recruited is slowing down. Aviation industry estimates the number of additional commanders recruited by carriers fell by around ten per cent in 2017-18 over 2016-17. This was despite domestic carriers scrambling for more expatriates to make up for the dwindling pool of qualified homegrown commanders. According to a report by CAPA, the country has over 7,963 pilots and will require an additional 17,000 pilots in the next ten years, of which 9,000 first officers will be upgraded to commanders. The shortage is not just a local malaise. There is a global demand for pilots especially in China and with West Asian airlines such as Emirates and Qatar that are struggling to cope with the increasing demand for pilots. China itself requires over 5,000 pilots a year to fly its burgeoning fleet.

Emirates Orders Airbus A330neos and A350s

Middle Eastern carrier Emirates has placed an order for 70 Airbus aircraft, which includes 40 A330-900 and 30 A350-900 aircraft. The order comes after discussions regarding orders placed earlier by the airline for Airbus A-380 airliners. Airbus has announced the end of its A380 programme with the final delivery of the type in 2021 after which the production line will be shut down. This has resulted in Emirates cancelling its order for 39 of the Airbus A380 and replacing them with the other Airbus twin-jets listed above. Emirates had previously ordered 70 Airbus A350 airliners in 2007 which was cancelled in 2014. The airline then ordered 40 Boeing 787-10 airliners in 2017, a commitment that may now be in jeopardy with the Emirates’ new Airbus order for the same size of aircraft. Tom Enders, CEO, Airbus stated, “As a result of this decision we have no substantial Airbus A380 backlog and hence no basis to sustain production, despite all

our sales efforts with other airlines in recent years. This leads to the end of Airbus A380 deliveries in 2021.” The end of the Airbus A380 line will be a close to Airbus’ ambitious bid to challenge Boeing’s dominance in the Very Large Aircraft market. The Airbus A380 had a total order for 313 airliners of which 234 had been delivered. This number may now fall since lessors may be hesitant to purchase the aircraft which has low value in the second hand market. Emirates, the largest user of the type, has 123 airliners on order of which 109 have been delivered.

Airbus Orders and Deliveries – March 2019

The leading European aircraft manufacturer Airbus has closed out orders for the last month of the quarter with 58 airliners. While the figures are much better than those of the first two months where the company had managed to secure orders only for four of the smallest aircraft in its range of platforms produced. Airbus will still close the quarter with a net order deficit of 58 aircraft. The manufacturer has also not yet accounted for the new orders and large cancellation by Emirates Airlines, following the closure of the Airbus A380 programme. Airbus secured three Airbus A350 orders this month, the first from Lufthansa for 20 aircraft, the second from STARLUX Airlines of Taiwan for 17 Airbus A350 airliners and finally a single Airbus A350 for an undisclosed customer. The lone single-aisle order for the month was for 20 Airbus A320neo airliners from an undisclosed customer. Airbus delivered a total of 74 aircraft in March 2019 to 40 customers, with deliveries from all of its product lines.

( AIRLINE FINANCE IndiGo Q3FY19 Results Analysis

IndiGo reported its third-quarter results that reflected an improving trend compared to the last two quarters with a profit of 190 crore. Overall, the results highlight the core challenges in the Indian market. IndiGo ended the quarter with 208 aircraft becoming the first Indian carrier to have more than 200 aircraft in the fleet. The mix was 66 Airbus A320 NEOs, one A321 NEO, 127 A320 CEOs and 14 ATRs. The Airbus A321 NEO is the most recent addition to their fleet and gives them an instant capacity advantage of 19 per cent while lowers seat-mile costs by ten per cent. SP’S AIRBUZ • Issue 2 • 2019 • 3

NewsBriefs

On the commercial front, IndiGo indicated that in Q3 pricing power in the 0 to 15-day window was picking up. This is critical as the last minute bookings carry with them the highest fares. In terms of sales, October was weak with November and December trending stronger. This coincided with the fact that Diwali was in November last year and that November and December also saw oil prices going down which would have helped margins. In spite of significant capacity addition through Q3 (55 aircraft inducted till date), the load factor decline was only three per cent and came in at 85 per cent which is commendable.

SpiceJet Q3FY19 Results Analysis

SpiceJet, reported its third quarter results of the fiscal year 2018-19 which reflected mixed performance. While a profit of 55.1 crore is definitely good news, when compared to the same period last year, the profit declined by 77 per cent. Performance also cannot be cited as definitive as this came during the strongest quarter of the year. Further, the induction of nine Boeing 737 MAX 8s which delivered strong sale and leaseback gains for the airline and impacted overall profit. SpiceJet saw a revenue increase of 20 per cent against a capacity increase of 16 per cent. Yields were stronger with higher fares for the quarter which were up by eight per cent. Load factors fell compared to the last quarter which indicates that SpiceJet was more aggressive with revenue management and managed to drive yields. Overall costs increased by 33 per cent compared to the same period last year. This was driven by ATF costs that were higher by 38 to 40 per cent and a weaker rupee that was down by 11 per cent. SpiceJet ended the quarter with 27 Bombardier Q400s and 49 Boeing 737s including one freighter. The Bombardier Q400 strategy continues to serve the airline well and its focus on more Udan routes is proof of the same.

( REGULATORY ISSUES Rights of Air Passengers

The Minister of Civil Aviation, Suresh Prabhu and the Minister of State in his department Jayant Sinha, recently released the “Passenger Charter” which codifies the rights of air passengers when they travel with scheduled commercial airlines in India. The newly drafted Charter imposes certain demands and places certain responsibilities on 4 • SP’S AIRBUZ • Issue 2 • 2019

airlines. However, it also provides significant exemptions that airlines may cite to deny air passengers compensation or offer alternatives. Some of the permitted reasons are weather, air traffic congestion, technical failures or force maejure. The Charter also does not specify time limits for action to be taken nor does it provide for penalties should airlines fail to live up to their obligation. Airlines must have nodal officers for filing of complaints. Details will be on their websites. One can also file complaints via the Ministry of Civil Aviation airsewa app, which is available on both Google and Apple.

DGCA on Safety Measures for Boeing 737 MAX 8

The Directorate General of Civil Aviation (DGCA) in India has issued additional measures for Indian operators covering the areas of engineering, maintenance and flight operations. Under the new norms, airlines will have to ensure the captain operating the MAX aircraft has a minimum of 1,000 hours of experience and co-pilot has 500 hours of experience on 737 planes. The engineering departments have also been instructed not to release the MAX planes for operations in case of failure of autopilot and faults in spoiler system. The DGCA said these are interim measures and has been communicated to Boeing and the US Federal Aviation Administration.

( BUSINESS AVIATION Dassault Expands Falcon Presence

Dassault Aviation is acquiring ExecuJet’s maintenance, repair and overhaul (MRO) business at Subang Airport in a move that will considerably reinforce its aftermarket support capability in South-East Asia. ExecuJet Malaysia is part of ExecuJet’s global MRO network, which Dassault agreed to purchase earlier this year. The network includes operations in Africa, Europe and the Middle East as well as the Asia Pacific region. The Subang facility is the largest

www.spsairbuz.com

Events Calendar EBACE 2019

21–23 May Palexpo, Geneva, Switzerland https://ebace.aero/2019

Paris Air Show 2019

17–23 June Exhibition Centre of Le Bourget, Paris www.siae.fr

EAA AirVenture Oshkosh

22–28 July Wittman Regional Airport, Oshkosh, WI, USA www.eaa.org/airventure

business aviation MRO in Malaysia and supports aircraft from a number of different manufacturers, based both within and outside the region. Following its acquisition by Dassault, the facility is in the process of adding Falcons to its already impressive list of supported models. ExecuJet Malaysia will provide Falcon customers a choice of service facilities and complement Dassault’s pre-existing support network in the region, including authorised third party service centres and a regional sales office in Kuala Lumpur.

First Cockpit Assembly of Falcon 2000 from India

The first cockpit front section of Falcon 2000 series produced by Dassault Reliance Aerospace Limited (DRAL) in its manufacturing facility at MIHAN, Nagpur and matching with the highest quality standards, has been delivered to Dassault Aviation’s Falcon final assembly line in France. This is a new step in Dassault Aviation’s setting-up in India, comforting its decision to invest in India for the future and in its commitment to the “Make in India” initiative. It demonstrates the company’s determination to establish in India state-of-the-art manufacturing facilities with cutting edge technologies as well as best-in-class international aeronautical

NewsBriefs

appointments AERION

Aerion, the leader in supersonic travel, has appointed Douglas Coleman as General Counsel and Executive Vice President, Governance and Compliance. Aerion has also announced the appointment of Matthew Cram as Deputy General Counsel, supporting the company in a variety of legal, contractual and corporate governance matters.

AIRBUS

Effective April 11, 2019, Airbus has appointed a new Executive Committee led by Chief Executive Officer Guillaume Faury, following approval from the Board of Directors.

EMBRAER

On April 9, this year, Embraer announced that the nomination of Francisco Gomes Neto, current President of Marcopolo, would be presented to the Board of Directors for the position of President and CEO, succeeding Paulo Cesar de Souza e Silva.

standards in terms of efficiency in production and competitiveness.

( INDUSTRY NEWS MRO Facility at Kempegowda International Airport (KIA)

KIA in Bengaluru will have an aircraft Maintenance, Repair & Overhaul (MRO) facility in its premises by March 2020. Bangalore International Airport Limited (BIAL) has inked a deal with InterGlobe Aviation Ltd, operator of the domestic carrier IndiGo Airlines. The 20-year agreement is to sublease land at the KIA premises. The MRO facility will be housed in a 13,000 sq metre hangar to be built on a five-acre plot of land. The facility will be spacious enough to accommodate two narrow-body airliners. As per BIAL, the facility will be equipped with all the support infrastructure including an engine QEC shop warehouse and engineering offices for all repair and maintenance. IndiGo’s Chief Operating Officer, Wolfgang Prock-Schauer said, “KIA, with its strategic location, will play an even more important role going forward. It is for this reason that IndiGo decided to build a hangar as the core of our maintenance centre in South India. This facility will become operational

GENERAL DYNAMICS

General Dynamics has appointed Robert E Smith as Executive Vice President of the Marine Systems segment, effective July 1, 2019 succeeding John P Casey, who intends to retire on June 30, 2019. David Paddock, Jet Aviation’s Senior Vice President and General Manager of US aircraft services, will succeed Robert E Smith as President of Jet Aviation.

SUKHOI CIVIL AIRCRAFT COMPANY

On April 9, 2019, the Board of Directors of Sukhoi Civil Aircraft Company (SCAC) appointed Ravil Khakimov as its new President with the aim of building up a Commercial Aviation Division.

TERRAFUGIA

On April 8, 2019, Terrafugia Inc announced the appointment of Chao Jing as the new CEO of the company as it expands and strengthens its executive management team.

by 2020.” Hari Marar, the Chief Executive Officer, BIAL said that IndiGo has been one of the fastest growing carriers at KIA. “The outcome of this agreement will create more connectivity and open new markets, further enhancing its growth.”

Airbus Forging Ahead

Airbus has begun construction of company’s American A220 manufacturing facility in Mobile, Alabama in the United States (US). The new assembly line will be located at the Mobile Aeroplex at Brookley adjacent to the company’s existing Airbus A320 family production line and will be used to produce A220-100 and A220-300 aircraft for customers in the US. Aircraft production is planned to begin at the new facility in Q3 2019 and the first delivery of a Mobile-assembled Airbus A220 aircraft is scheduled for 2020. The new facility will be complete by next year.

( REGIONAL AVIATION Air Connectivity from Mysuru under UDAN The Ministry of Civil Aviation has approved plans under the Ude Desh ka Aam Nagarik (UDAN)-3 of the Regional Connectivity Scheme (RCS) to provide air connectivity to five prominent cities from Mysuru Airport, under its. According to sources, three airline operators have come forward to provide the service at affordable prices. Six aircraft will fly between Mysuru and five other cities. While two aircraft will fly to Hyderabad, one flight each to Belagavi, Panaji, Kochi and Bengaluru, will be operated. Airlines operators — Alliance Airline, Turbo Mega and Indigo Airlines have come forward to offer the services. The flights are expected to commence operations in two months. The state government has already announced an aerospace policy to give a boost to the sector. “It has identified investment potential of around $12.5 billion in the sector in the period 2013 to 2023. The government also plans to develop aerospace clusters in various regions in the state. As per the Chief Minister of Karnatak, ‘Compete With China’ is the government’s new initiative which aims to pave the way for large scale industrial investment which will create lakhs of jobs.

Europe’s Largest Regional Airline Flybe on Sale

Flybe, Europe’s largest regional carrier which flies 53 per cent of all fights within mainland Britain excluding London and also the largest scheduled airline by air traffic movements at 13 airports in the United Kingdom, recently announced its sale to a consortium. This in part is driven by the uncertainty emanating from Brexit and also other structural issues. The deal involves a consortium called Connect Airways which will become the new owner of Flybe. The deal is structured as an all cash offer making it very attractive. The combined group will operate independently and the ownership will be 40 per cent by Cyrus Capital Partners, 30 per cent by Stobart Aviation and 30 per cent by Virgin Atlantic. It is likely that Cyrus Capital Partners at some point in the future want an exit whereby Stobart or Virgin will likely be given the opportunity to increase the shareholding. An excerpt from Flybe group PLCs interim management report states, “Brexit remains a major uncertainty for the sector and the wider economy.”. SP SP’S AIRBUZ • Issue 2 • 2019 • 5

Airlines

Industry

Airlines in India need to forget their feverish quest for growth and focus on passenger yields instead

Trying Times

PHOTOGRAPH: Boeing

According to the International Air Transport Association (IATA), India is set to be the world’s third largest aviation market by 2024, behind China and the US, but recent developments may see this forecast pushed back. by Joseph Noronha

ifty-two continuous months of double-digit growth would be a dream run for any industry. Yes, that was the record of Indian commercial aviation as of December 2018. Over 138.9 million passengers caught domestic flights in 2018, up 18.6 per cent from 117.1 million in 2017. Hark back to 2013 when just 61.42 million passengers travelled by air, and the scale of the increase becomes clear. At the start of this year there was no reason to believe the party would end anytime soon. Yet the dream now seems to be turning sour. 6 • SP’S AIRBUZ • Issue 2 • 2019

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Jet Airways which was struggling to survive for almost a year finally ran out of luck in April. The carrier which has been in operation since 1992 and whose 13.8 per cent market share last year placed it second in the pecking order was forced to announce a temporary halt to all operations on April 17 after a consortium of its creditors refused to provide it with emergency funding. Jet’s 22,000 or so employees are pinning their hopes on a bidding process that may find a new owner by May 10. However, even assuming it does, the airline could take years to regain its erstwhile glory.

Airlines

Industry

Other carriers too are experiencing varying degrees of financial distress. Air India, whose market share for 2018 shrank to just 13.3 per cent, is heavily on steroids. In 2012, it was rescued from dire financial straits by the government and provided equity infusion of `30,231 crore till 2021, subject to achieving certain targets. With practically all the money spent, very few of the goals achieved and a debilitating debt of over `55,000 crore, it is firmly on course to seek another bailout from public funds. In September 2018, the Sydney-based Centre for Asia Pacific Aviation (CAPA) estimated that the Indian airline industry as a whole would post losses of $1.65 billion to 1.90 billion in FY 2018-19. What actually ails the airline industry? UNSUSTAINABLE FARES. The carriers insist that high fuel costs, high airport charges and high taxes are responsible for their woes. They have a point, because aviation turbine fuel (ATF) that in India is taxed at possibly the highest rates in the world, spiked sharply in price in 2018. The airlines also suffer when the Rupee depreciates (it fell by almost 8.5 per cent in 2018) because lease payments, fuel and maintenance, among other items, are at least partly paid for in US dollars. However, some of the blame lies with the carriers themselves, because they routinely undercut each other’s seat prices in a desperate effort to grab market share. There are regular howls from passengers that they are being fleeced, and reactive instructions from the Directorate General of Civil Aviation (DGCA) to the airlines to keep fares “competitive”. On the face of it the airlines are indeed profiteering from the departure of Jet Airways from the scene, because average fares have risen by around 30 per cent year-on-year. But what about the years that seats were being sold at 10 to 15 per cent discount on the average? Since all carriers were terrified of losing market share, they could not raise fares to more sustainable levels. Indeed, every stakeholder seemed mesmerized by growth and reluctant to do anything to upset the applecart. The government boasted of the exponential growth in the number of passengers as an achievement. The airlines too argued that it was better to sell seats below cost rather than haul them around empty. The trouble is that passengers have now come to bank on low fares. They scour the internet for “offers” and low-priced seats and if they do not like what they see, they either postpone their travel plans or go by surface transport instead. In addition state-owned Air India, despite being a full-service carrier, feels free to under-price even its low-cost competitors and thus distort the market, secure in the knowledge that a solicitous government will not let it sink. After the attempted disinvestment of Air India in May 2018 by the government failed to elicit any interest, there is talk of turning it around. However, such attempts have failed in the past and there is no reason to believe they will succeed in future. INSUFFICIENT INFRASTRUCTURE. The huge growth in the number of air passengers has also placed tremendous strain on the country’s airports and air services. The metro airports are choking and airports such as Mumbai just cannot accommodate any more flights. The government has plans to enhance airport capacity, but action in this direction is lagging well behind the passenger growth curve. Besides, the capital investment (not including cost of acquiring land) till 2040, is expected to be $40-50 billion and there are no clear indications where this money will come from.

CAPA estimates that latest by 2022, India is likely to exceed the maximum structural capacity of its airports. Thanks to the Regional Connectivity Scheme UDAN, many un-served and underserved airports across the country are being activated. These may decongest the metros to some extent. However, UDAN is itself slow in taking off and very few of the allotted routes are actually operational. Most operators on regional routes believe their profitability lies in connecting smaller airports to the metros. But Delhi and Mumbai airports insist they cannot “sacrifice” any more slots on the altar of regional connectivity, especially since regional operations usually involve small turboprop aircraft that take longer to takeoff and land than the big jets with hundreds of passengers. FOCUS ON YIELDS. Apart from its financial troubles, the industry seems to trigger public dissatisfaction with depressing regularity. In December last year, a parliamentary panel pulled up practically all the airlines for various shortcomings including overcharging, misbehaviour by staff, unsatisfactory check-in facilities and poor baggage handling services. With the carriers trying desperately to reduce operating expenses, it is perhaps inevitable that there will be some short cuts with consequent implications for flight safety too.

The huge growth in the number of air passengers has also placed tremendous strain on the country’s airports and air services

The airline industry must be hoping that the adage “after the deepest darkness comes the dawn” will apply to it. Indeed, the sector has enormous potential considering that only about three per cent of Indians fly. According to the International Air Transport Association (IATA), India is set to be the world’s third largest aviation market by 2024, behind China and the US. The Ministry of Civil Aviation is more bullish, predicting that this milestone will be achieved by 2022. However, recent developments may see these forecasts pushed back. The woes of Jet Airways and grounding of 12 Boeing 737 Max jets from the SpiceJet fleet following the March 10 crash of an Ethiopian Airlines 737 Max has resulted in a drop of about 10 per cent in the total Indian commercial fleet. Although Jet Airways has ostensibly only suspended operations it is hard to see how it could resume flights in significant measure for months since most of its aircraft have been deregistered and its slots have been handed over to its competitors. Consequently, load factors and yields across the industry are expected to rise. In the short term, traffic growth may be in low single digits (it was just 0.14 per cent in March) or even negative, which is no great cause for alarm. In fact, analysts are practically unanimous in their view that the airlines need to forget their feverish quest for growth that trapped them for years in a deadly race to the bottom and focus on passenger yields instead. All they need to do is keep fares at financially viable levels. Question is will the Indian airline industry bite the bullet? SP SP’S AIRBUZ • Issue 2 • 2019 • 7

Airlines

Operations

Jet Airways pilots pleading at New Delhi’s Jantar Mantar for a bailout to get India’s premier airline back in business

Jet Airways fleet grounded, its slots and aircraft up for grabs

PHOTOGRAPHs: SP Guide Pubns

SpiceJet, Air India rush to claim assets, market of grounded airline By Vishal Thapar

ith the Jet Airways fleet grounded, the slots of this airline at key airports and the lease of its aircraft is up for grabs. Jet pilots, who staged a protest at Jantar Mantar in New Delhi on April 18, pleaded quick intervention by the Government to prevent the dismantling of the airline, complaining that inaction in bailing out Jet would amount to giving undue benefit to its business rivals. Besides at several other airports across the country, the Ministry of Civil Aviation will allot 280 Jet slots at Mumbai and 160 at 8 • SP’S AIRBUZ • Issue 2 • 2019

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Delhi to other Indian carriers for a period of three months. Jet is in provisional lockdown till May 10. If the distressed airline does not revive its operations within three months, the re-allotment of its slots will be extended by one month at a time. It’s pilots too are being aggressively poached. An estimated 300 have already been grabbed by competing carriers. Air India and SpiceJet are also moving quickly to lease aircraft which are available or re-possessed by lessors following the Jet meltdown. According to reports, Air India Chairman Ashwini Lohani wrote to SBI CMD Rajneesh Kumar on April 17, asking the Bank to release five Jet Boeing 777s for long haul flights. Ahead of the peak summer season, Air India intends to start five new

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Operations

flights – Delhi to London, Singapore and Dubai, and Mumbai to London and Dubai. The national carrier is also prospecting the grounded Jet Boeing 737s for its subsidiary, AI Express. “Seventy five planes used on domestic routes have gone out of the system while other Indian carriers have bought in 58 planes in last five months,” Civil Aviation Secretary P.S. Kharola told media. These aircraft have gone out of the system mainly on account of the grounding of Jet and also the Boeing 737 Max 8 fleet (which involves Jet and SpiceJet). “The drop in capacity currently is 17 planes. Other airlines have told us they will induct 31 more planes in May, June and July as per normal induction plans and they may get leases for another 20-plus. We have requested all airlines to expedite induction of aircraft as summer demand for travel is very strong,” Kharola said. The Government’s intention is to ensure that flying capacity is restored ahead of the peak travelling season, and rising fares brought down to near-normal levels. Those airlines which can quickly induct more aircraft tend to gain more slots. To tide over the shortage caused by the grounding of 12 Boeing 737 Max 8 aircraft in its fleet and further beef up numbers, SpiceJet has taken on lease a large number of Boeing 737s that lessors repossessed from Jet. SpiceJet on April 18 declared that it would induct “six more Boeing 737-800 NG aircraft on dry lease in addition to 16 Boeing 737s and 5 (Bombardier) Q400s” and that “the total number of planes to be inducted in the immediate future now stands at 27”. This low-cost carrier also announced 24 new flights connecting major hubs Mumbai and Delhi with other cities. Protesting Jet pilots warned that dispersal of its assets would kill the airline. At a sit-in at Jantar Mantar in the Capital, they reasoned that Government-owned banks which have taken over the estimated `8,500 crore debt from Jet founder Naresh Goel should have a vested interest in reviving the airline so as to recover the debt. “Why are the banks stalling the revival after taking over the debt?” questioned Captain K.J.S. Cheema, a senior A330 commander who has flown for the airline for over 24 years. “Timing is of the essence. If nothing is done in one week, the airline will be over, and the banks can say goodbye to the chances of recovering debt,” he argued, charging that “SpiceJet is a direct beneficiary of the inaction”. “A bailout of `1,500 crore was promised to us by the banks. This is what is required to put the whole operation in the sky again. This interim relief is necessary till the bidding process to find a new promoter is complete. This payout is also necessary for the banks to have a realistic chance of recovering the `8,500 crore debt,” echoed Captain Ashwini Tyagi, a Boeing 777-300 ER commander.

“Seventy-five planes used on domestic routes have gone out of the system while other Indian carriers have bought in 58 planes in last five months,” Civil Aviation Secretary P.S. Kharola told media.

“Why are the banks stalling the revival after taking over the debt?” questioned Captain K.J.S. Cheema, a senior A330 commander who has flown for the airline for over 24 years. “Timing is of the essence. If nothing is done in one week, the airline will be over, and the banks can say goodbye to the chances of recovering debt,” he argued, charging that “SpiceJet is a direct beneficiary of the inaction.”

A Jet crew member in tears at the demonstration at Jantar Mantar in New Delhi. About 23,000 employees of the grounded airline have not been paid for months.

“The airline has to be flying for the bidding process to be meaningful,” shrugged Captain Rohit Chaudhary, also a senior A330 commander. Emotions were palpable. Most of these senior pilots have put in over two decades with Jet. Cheema, a former Mirage-2000 fighter pilot with the Indian Air Force, cannot believe that the April 5 flight from Amsterdam to Delhi was the last time he flew for Jet. “When I joined Jet 24 years ago, it had only four aircraft. I was part of the journey of the airline growing to a fleet of 127,” he said. For Chaudhary, the involvement is even more intense. His wife, Deepa, too is Boeing 777 commander. “Jet is India’s major aviation brand, visible internationally. It’s a national asset,” pleaded Tyagi. The 23,000 Jet employees, on whose behalf representations were made to the President of India and the Government, want a helping hand, urging that the airline they have built with blood, sweat and tears is not pilfered and dismantled. SP SP’S AIRBUZ • Issue 2 • 2019 • 9

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Operations

Jet under bankruptcy peril, Tata likely to revive airline acquisition interest The operational creditors of the debt-laden Jet Airways are likely to take the airline to the bankruptcy tribunal that will give the airline protection from lenders for some time but delay its revival

PHOTOGRAPH: SP Guide Pubns

fter all operations of Jet Airways the longer the company’s operations stay suspended, the dif(India) temporarily came to a halt on April 17, 2019, ficult it will be to recover it. following 25 years of run, the airline is left under Hence experts find selling of Jet to an investor as more of the threat of heading to a bankruptcy court. As the a viable option. Jet is afflicted with the estimated `8,500 crore debt-laden airline was unable to secure emergency debt and its pilots, lessors, technical staff as well as the ground funding from the consortium of lenders led by State Bank of staff have not been paid for the last three months at least. India (SBI), the operations had to be suspended. Since no emerMany experts as well as Jet senior employees stressed that gency funding from the lenders or any other source of funding the only way to save the airline is to act swiftly before it is too was forthcoming, it was therefore not possible for Jet to pay for late. According to media reports, Etihad Airways had even fuel or other critical services to keep the operations going. Con- requested the lenders of the Jet Airways to take an 80 per cent sequently, with immediate effect they were compelled to cancel haircut on their debt to the airline so it could make a bid. all their domestic and international flights. Over the last several weeks and months they tried every means possible to seek fund- The TATA interest. The Tata group is apparently reviving, both interim as well as long term funding, to keep the opera- ing its interest in acquiring Jet Airways but only if the airline tions going but were left with goes to bankruptcy, accordno choice, Jet Airways said in a ing to media reports. Last statement it issued announcyear also in November, the ing the halt of operations. Tatas had taken up prelimiWhile the lenders had nary discussions to invest in earlier stated about not the now cash-stripped airline. approaching the National However, the group withCompany Law Tribunal drew from talks after gaining (NCLT), operational creditors the knowledge that Jet Airlike service providers, airways founder, Naresh Goyal craft lessor, and workers can wanted to retain control over possibly still take the airline the airline. to the bankruptcy tribunal. With the eventually According to media reports, degrading financial situation one of the service providers of once India’s largest airline, to Jet shot a notice last week Goyal and his wife had to quit under the Insolvency and from being the board memBankruptcy Code of 2016, bers of the airlines as well as The future of the airline along with it’s thousands of employees is warning the airline that ‘corfrom the operational respondangling on the ropes of uncertainty porate insolvency resolution sibilities. process’ is likely to commence if the airline fails to pay within The future of the airline along with it’s over 15,000 employ10 days. This will further increase the pressure on banks trying ees is dangling on the ropes of uncertainty with the ongoing to locate a strategic buyer and financial investors for jet. sale process being run by the lenders. With Etihad Airways, National Investment & Infrastructure Some analysts suspect that the larger idea of the Tatas Fund (NIIF), private equity investors TPG Capital and Indigo could be to unify its existing airlines ventures and hope for the Partners having put in ‘expression of interest’, SBI had set 10 acquisition to boost the group’s market share. A combination May as the deadline for submission of ‘binding bids’. could be challenging for the rival airline, however with the presIf the bankruptcy process initiates, it will provide Jet with ent situation, nothing can be said as yet. a protection from lenders (taking over Jet’s assets for non-payAs of now, Tata Sons Ltd holds a presence in aviation ment of dues) for time being but at the cost of further delay through budget airline AirAsia India Pvt Ltd and full-service in the revival as the process of share sale shall be required to carrier Vistara (a joint venture with Singapore Airlines Ltd). begin all over again under the tribunal’s administration and Mukesh Ambani-promoted Reliance Industries Ltd might that might take as long as three months to start, experts say. also join Etihad Airways in its bid later even though it had not Such a delay can prove severely damaging for the airline and submitted an Expression of Interest (EoI) to the lenders for the chances of its restoration may grow negligibly slim. With acquiring Jet Airways. SP —Ayushee Chaudhary the employee count going down, reducing fleet and slots at risk, 10 • SP’S AIRBUZ • Issue 2 • 2019

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Airlines

Viewpoint

Jet’s rise from a few aircraft to a 119-aircraft behemoth has lessons for airlines the world over. A clear coherent strategy is as much about ‘what not to do’ as it is about ‘what to do’. by Satyendra Pandey

PHOTOGRAPH: SP Guide Pubns

THE FALL OF JET AIRWAYS. WHAT HAPPENED?

From 1992 to 2004, the airline had a good cumulative performance with strong growth, cash flows and profits.

ndia’s oldest private airline, Jet Airways, recently announced the suspension of operations. After 26 years of operations, the last flight flown was from Amritsar to Mumbai at 10.30 p.m. on April 17, 2019. The suspension was inevitable given that the cash-flow had dried up and banks were unwilling to extend further credit. An airline, that only three months earlier flew a fleet of 119 aircraft, was down to flying a fleet of five aircraft. Apart from over 16,000 jobs

at stake, hundreds of passengers were impacted with disruptions to their travel plans. Hundreds more are waiting for refunds. How did this come to be? Impacted by changing market dynamics, Jet became a victim of its own success. Markets are dynamic entities and consumer preferences change over time. And for airlines that have witnessed success in the past, changing and adapting is a very tough sell. The usual pattern with successful ventures is that the management starts SP’S AIRBUZ • Issue 2 • 2019 • 11

Airlines

Viewpoint

Impacted by changing market dynamics, Jet became a victim of its own success

to become complacent and believes in its own narrative, costs spiral and hubris sets in. Indeed this was the case with Jet. From 1992 to 2004, the airline had a good cumulative performance with strong growth, cash flows and profits. The capital market listing in 2005 that was over-subscribed at 1.8 times helped the airline raise `1,899 crore. Expansion followed but importantly, at this time the market dynamics were such that the only other competition was the state-run airline. The travel base was much smaller with a total of 1.52 crore domestic passengers taking to the skies. Air travel was largely for the business elite and a luxury at that. A concept of “rail-air” parity was unfathomable. Smaller airlines came and went while Jet continued to soar higher. But then, in 2005, a revolution began by way of arrival of low-cost carriers (LCCs). FAILURE TO RECOGNISE LOW-COST AS A PHILOSOPHY. The LCC revolution began with a number of carriers launching in quick succession. Air Deccan was launched in 2003 to target mainly regional routes. SpiceJet which started as Modiluft, was launched in 2005 and was followed by GoAir. IndiGo followed in 2006. There was no looking back. The Low-Cost Carriers operated on a philosophy which stared squarely in the face of the Jet Airways business model. There was a single aircraft model, route networks were point-to-point, the offering was no-frills, no sales were extending on credit and it was a volume-based strategy. This not only started stimulating additional traffic, but also gradually ate into Jet’s profits and market share. Jet did attempt to respond, but not in a manner that struck at the heart of the disruption. The environment demanded a complete revisit on strategy and costs, but that did not happen. Jet Airways created barriers for the low-cost carriers often influencing policy towards creating a competitive barrier, made a highly questionable acquisition in purchasing Air Sahara for `1,450 crore; failed to focus on its balance sheet; flew a mixed fleet with cost and revenue impacts and continued aggressive international expansion in spite of mounting debt levels. The results showed in the numbers. From having a 44 per cent market share in 2004, Jet Airways ended 2018 with only a 15.5 per cent market share. From a net profit margin of 4.5 per cent in 2004, the losses started in 2008, and never ceased, the exception being 2017 and 2018, where the airline benefitted due to extremely low fuel prices. Debt levels ballooned from `2,631 crore in 2005 to `14,280 crore in 2010, and `8,500 crore in 2018. The net worth of the airline turned negative in 2012, and it never recovered. During this period, the low-cost carriers flourished, registering cumulative profits, growth and strong cash flow. FLYING WITH A COST BASE NOT COVERED BY REVENUES. For any sustainable business, revenues must be higher than costs. This is especially true for airlines in pricesensitive markets like India. For Jet Airways, its Cost per Available Seat Kilometre (CASK) exceeded its Revenue per Available Seat Kilometre (RASK) over a period of time. That is, Jet Airways 12 • SP’S AIRBUZ • Issue 2 • 2019

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was operating at a loss per seat. For instance, as of December 2018, the loss per seat kilometre was 77 paise. In other words, the airline lost 0.77 paise per seat per kilometre. So if a flight was 1,000 km, the airline would lose `770 per ticket. And this situation where the airline loses money on every kilometre flown, is not sustainable. A cost comparison adjusted for stage lengths reveals that Jet Airways had a cost base that was 30 to 35 per cent higher than its low-cost competitors. But it was pricing at levels similar to the low-cost airlines. Thus, on the same fare levels, lowcost airlines could make money while Jet could not. Or in cases where Jet made money, the margins for low-cost carriers were much higher. Add to that ancillary streams that were a source of significant revenue such as buy onboard meals, charges for excess baggage, cancellation fees, seat-selection fees and special services. This is a stream that Jet did not have access to due to the nature of its business model. Former CEO of Aer Lingus – a carrier that successfully reinvented itself to compete with the low-cost revolution, once said, “Airline costs are similar to jogging. You have to focus on it regularly else you get fat.” This is exactly what happened to Jet. LACK OF BALANCE SHEET FOCUS: A RECIPE FOR DISASTER. Airlines are capital intensive and are exposed to a variety of risk factors. Thus, airline capitalisation and ensuring balance sheet strength is critical for success. It also positions the airline to withstand black swan events which in the airline business can have significant impact. In the case of Jet, one did not see this discipline. Despite IPO proceeds of `1,899 crore, the airline’s debt doubled and then grew exponentially reaching `14,280 crore by 2010. 2014 brought some respite in that Etihad acquired 24 per cent stake in Jet Airways for `2,060 crore. The infusion was to help Jet bring down debt burden to approximately `9,000 crore. However, only 24 to 26 per cent of the equity infusion was utilised towards debt repayment with the rest being taken up by the enormous working capital requirements of the company. Reasons for this were many including short-term targets, lack of accountability and short management tenures. Additional financial structuring did reduce the debt burden. These measures included sale of redemption points from the freYear Ending

Net Income in `crore

March 2014

4,130

March 2015

2,097

March 2016

1,212

March 2017

1,499

March 2018 December 2018 Year Ending

636 3,319 Net Debt in `crore

March 2014

8.714

March 2015

10,252

March 2016

9,231

March 2017

7,220

March 2018

5,295

December 2018

7,654

Airlines

Viewpoint

In trying to be all things to all people, Jet ended up as just another airline albeit with a much higher cost base

quent flyer programme, secondary lease of aircraft, sale and leaseback, selling of a land parcel and additional credit lines. But the cash-drain continued because operations were not profitable and the balance sheet was weak. Consequently, loan quality, liability structures, liquidity, capital structure and unencumbered assets – all were in question. The airline did not have adequate assets for financing even current operations, let alone for future growth. A shutdown thus became inevitable.

PHOTOGRAPH: SP Guide Pubns

ABSENCE OF A COHERENT STRATEGY AND CLEAR VISION. Until its shut down, Jet was operating in one of the most lucrative aviation markets. With a 300-million strong middle class, low air travel penetration and an increasing propensity to spend, India is targeting 500 million passenger trips in the next 20 years. Forecasts estimate that India will be the third largest aviation by 2025. Yet, the fact that banks refused to lend and that Jet is still waiting for investors, is quite revealing on the size and depth of the challenges. As Jet faced challenges on all fronts,

As Jet faced challenges on all fronts, it was found wanting in a clear coherent strategy and vision

it was found wanting in a clear coherent strategy – whether this was on network, aircraft, financing, value proposition or costs. At various times, Jet positioned itself for various segments. It priced as a low-cost carrier while offering a full-service product. It inducted A-330s while having an all-Boeing fleet. It partnered with Etihad but re-allocated capacity to a competing alliance. It flew on routes to compete with Singapore Airlines and Emirates, but used a Boeing 737 which led to a vastly different product experience. The strategy was confusing to say the least. Jet’s rise from a few aircraft to a 119-aircraft behemoth has lessons for airlines the world over. A clear coherent strategy is as much about ‘what not to do’ as it is about ‘what to do’. And in that, a clear compelling vision aligns stakeholders towards a singular goal. In this case neither took place. In trying to be all things to all people, Jet ended up as just another airline albeit with a much higher cost base. And in doing so, it simply frittered its profits away. SP The Author has served in a variety of positions within the aviation business, most recently, as the Head of Strategy & Planning at Go Airlines (India). Previously he was with CAPA where he worked with the Advisory and Research teams. He joined CAPA after a working through a merger and restructuring at a legacy US carrier. Having worked across four continents, he is an alumnus of the University of New South Wales and London Business School. He is also a certified pilot with Instrument rating. SP’S AIRBUZ • Issue 2 • 2019 • 13

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Viewpoint

Failure of the ongoing efforts to rescue Jet Airways from financial collapse will not only be a disaster for the thousands of employees on the rolls of the airline, it will also cast an ominous shadow on the Indian airline industry itself by B.K. Pandey

PHOTOGRAPH: Boeing

An Ominous Shadow on the Indian Airline Industry

At one point in time, Jet Airways commanded the highest market share in India

ith the dawn of Wednesday April 17 this year, Jet Airways announced the shutting down of its operations on account of total bankruptcy. If the multi-faceted effort by the financial institutions and the Government of India to save the airline from doom does not succeed, there is a strong possibility that Jet Airways will join the long list of 31 Indian carriers that have been declared as defunct over the years since the arrival of pri14 • SP’S AIRBUZ • Issue 2 • 2019

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vate carriers on the scene post liberalisation of the Indian airline industry in the early 1990s. BRIEF HISTORY. One of the earliest carriers in the private sector of the Indian airline industry, Jet Airways was established on April 1, 1992 and commenced functioning as an Air Taxi Operator on May 05 the following year with a fleet of four leased Boeing 737 aircraft. The airline was granted ‘scheduled airline status’ on January 14, 1995 and was the first one in the Indian airline industry to commence operations in April 1994 with Boeing 737-400 aircraft.

Airlines

Viewpoint

The operating environment in India is characterised by cutthroat competition in which the airlines are compelled to operate with razor thin margins often making sustainability an issue In its 27 years of existence, the airline has won several prestigious international awards. As of now, it has one of the youngest aircraft fleets in the world today and at one point in time, Jet Airways even commanded the highest market share, a status that is now enjoyed by IndiGo Airlines that emerged on the scene 14 years after the birth of Jet Airways. In April 2013, Jet Airways, by then India’s fullservice premium international carrier, became a strategic partner of Etihad Airways, the national airline of the United Arab Emirates when the latter acquired 24 per cent stake. The flag of Jet Airways which, as one of the three full service carriers in the country operating around 4000 flights every month, then appeared to be flying high! All said and done, Jet Airways with a fairly good international network and codeshare agreements with other airlines, was regarded as an icon of the Indian airline industry.

PHOTOGRAPH: Airbus

THE INDIAN AIRLINE INDUSTRY. Today, India has the fastest growing civil aviation market in the world and is expected to reach the third slot by 2025 if not by 2020 as predicted by KPMG and the largest by 2030. Passenger traffic has increased from 51 million in 2010 to 138 million last year. There has been significant growth in international traffic as well. Currently, more than 600 airliners are flying with Indian carriers and another around 900 are on order. With all this, the future appears very bright for the Indian airline industry and consequently for the Indian carriers as well. It is in this context that the collapse of Jet Airways, once upon a time one of the most prosperous airlines, appears not only strange by somewhat jarring as well. Despite the rosy picture painted above, airlines in India operate under extremely challenging conditions. The operating environment in India is characterised by cut-throat competition in which the airlines are compelled to operate with razor thin margins often making sustainability an issue. It is for this reason that several airlines in the private sector have had to close down. Among all the stakeholders in the Indian airline industry, it is the airline that generally remain at the receiving end. THE PLIGHT OF JET AIRWAYS. In the case of Jet Airways, the problem of finances has been compounded over the years by flawed management and a series of their decisions that can be questioned. Firstly, management of Jet Airways which ought to have been the responsibility of a Board of Managers, had become virtually a “one man show” with the Chairman at the helm. Over the last ten years, several senior executives did join the airline; but were compelled to resign in the wake of conflict with the Chairman over one issue or another. All decisions were taken by the Chairman himself and some of these do reflect not only a lack of focus; but in fact, a degree of confusion on the aims and objectives of the airline. In 2007, the Chairman acquired Air Sahara, a failed

airline, at unreasonably high price of `1,459 crore to compete with the first low cost carrier Air Deccan as well as with the newly launched IndiGo Airlines. To further complicate the problems, the management decided to enter the low-cost segment and set up Jet Lite and Jet Konnect. As for different types of aircraft, the Chairman purchased ten Airbus A330 and ten Boeing 777 airliners. All these decisions created new problems by way of management of not only different types of aircraft with associated manpower, logistic and maintenance issues, but of the management of different business models as well. The economic slowdown of 2008 and the spike in the price of crude oil created serious problems for the airline industry globally. Even after this painful phase was over, while airlines such as IndiGo made a recovery and began making profits, Jet Airways continued to incur losses. Also, in an effort to compete with the growing tribe of low-cost carriers, Jet Airways had to offer heavy discounts to remain competitive. This finally proved to be the nemesis for the airline as by mid 2018, the company was in serious financial problem with no funds in reserve and huge debts to repay. Also, becoming a strategic partner of Etihad proved to be somewhat counterproductive as the airline lost focus on its network in India and in effect became a feeder airline for Abu Dhabi.

In an effort to compete with the growing tribe of low-cost carriers, Jet Airways had to offer heavy discounts to remain competitive

Jet Airways with a fairly good international network and codeshare agreements with other airlines, was regarded as an icon of the Indian airline industry

Besides, with the entry of Etihad, control of the Chairman over the airline was degraded to some extent. Failure of the ongoing efforts to rescue Jet Airways from financial collapse will not only be a disaster for the thousands of employees on the rolls of the airline, it will also cast an ominous shadow on the Indian airline industry itself, especially the airlines in the private sector. SP SP’S AIRBUZ • Issue 2 • 2019 • 15

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Air India

Air India has two subsidiaries Air India Express and Alliance Air and together, they operate 118 aircraft servicing 94 destinations

Air India — An Asset or A Liability?

PHOTOGRAPH: SP Guide Pubns

The Government is trying to sweeten the deal and hopes to convince prospective buyers to take over the loss-making carrier which is a huge drain on the exchequer by Anil Chopra

he national carrier Air India, was once a Maharaja of the global skies and envy of the world. Today, the loss-making airline is estimated to have a debt burden of over `50,000 crore which is not sustainable and the Government’s efforts for strategic disinvestment of the airline seem to fail repeatedly. The debt burden of Air India Express is approximately `2,600 crore and that of AISATS, its joint venture with Singapore-based SATS Ltd, is around `200 crore. The tax payer’s money needed for more important services such as health and education, is having to sustain a losing airline. The question thus being asked is whether Air India is an asset or a liability? 16 • SP’S AIRBUZ • Issue 2 • 2019

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Brief History. Air India was established in 1932 as Tata Airlines and commenced full-fledged operations in 1946 after it

According to IATA, 75 per cent of world’s airlines are owned by the private sector and over one per cent of the global GDP is spent on air transport

Airlines

Air India

became a public limited company and was renamed Air India. In its first year of operation, the airline flew 260,000 km, carrying 155 passengers and 9.72 tonnes of mail and made a profit of `60,000. During the Second World War, the airline helped the Royal Air Force with troop movements, shipping of supplies, rescue of refugees and maintenance of aircraft. Air India became the first Asian airline to operate freighters when Air India Cargo was set up in 1954. Air India Cargo ended freighter aircraft operations in early 2012. In February 1960, it took delivery of its first Boeing 707 and became the first Asian airline to induct a jet aircraft. In 2007, Air India and Indian Airlines were merged to form Air India Ltd. The combined loss for Air India and Indian Airlines in 2006-07 was `7.7 billion and after the merger, it went up to `72 billion by March 2009. It today has two subsidiaries Air India Express and Alliance Air and together, they operate 118 aircraft servicing 94 destinations. Air India is the largest international carrier out of India with an 18.6 per cent market share. Over 60 international destinations are served by Air India across four continents. Additionally, the carrier is the third largest domestic airline in India in terms of passengers carried after IndiGo and Jet Airways with a market share of 13.5 per cent as of mid 2017. The airline is a member of the Star Alliance since 2014. In 2000-01, attempts were made to privatise Air India and from 2006 onwards, it suffered losses after its merger with Indian Airlines. This behemoth, with nearly 21,000 employees, had a revenue of `222 billion in FY2016-17 and incurred a net loss of `57.65 billion. The Ministry of Finance refuses to waive Air India’s `30,000 crore debt. Turnaround Plan. Till a long term solution is found, Air India has been attempting a turnaround in its finances. Earlier the UPA government had approved a turnaround plan under which the national carrier was to receive equity infusion worth `30.231 crore up to 2012 subject to meeting certain performance criteria. Initiatives have included rationalisation of routes and enhanced utilisation of aircraft measures through which, Air India reportedly registered around 11 per cent growth in revenue since last fiscal year and its performance parameters are better says its Chairman and Managing Director, Pradeep Singh Kharola, an IAS officer from Karnataka cadre. He further stated that the loss-making carrier had recorded 80 per cent load factor in 2017-18 and also claimed improvement in On-Time Performance on year-on-year basis. Teeth-to-Tail Ratio. If at 80 per cent load factor, Air India is incurring losses, then it surely indicates that there are several non-operational expenses that are taking their toll on the balance sheet. The teeth-to-tail ratio is obviously adverse. According to International Air Transport Association (IATA), 75 per cent of world’s airlines are owned by the private sector and over one per cent of the global GDP is spent on air transport. After recent employee reduction, Air India still has employee-to-aircraft ratio at 114 and the employees cost to total cost is now around 11.68 per cent. In an apple-to-apple comparison, the world’s best employee-to-aircraft ratio is of Ireland’s Ryanair at 29.69, with 9500 employees looking after 320 aircraft. Comparing with some other countries, the ratio in Garuda Indonesia is 56.15, Turkish Airlines is 63.36 and Air China 70.39. Some others such as United Airlines have higher ratio at 117 because they employ 84,000 to look after a fleet of 715 aircraft and have much higher revenues implying higher aircraft utilisation rate.

Financial Mess and Disinvestment Plan. In 2000-01, first attempts were made to privatise Air India. In July 2009, the State Bank of India (SBI) was tasked to prepare a road map for the recovery of the airline. The carrier sold three airbus A300 and one Boeing 747-300M aircraft in March 2009 for $18.75 million to finance the debt. The airline shut down the Frankfurt hub on October 30, 2010 because of high operating costs. In 2010, financially less lucrative routes were terminated. By March 2011, Air India had accumulated a debt of `426 billion and an operating loss of `220 billion and was seeking funds to the tune of `429 billion from the government. A report by the Comptroller and Auditor General blamed the decision to buy 111 new aircraft and the illtimed merger with Indian Airlines for the poor financial situation. In August 2011, the invitation to join Star Alliance was suspended as a result of its failure to meet with the minimum standards for the membership. The government pumped `32 billion into Air India in March 2012. In 2012, a study commissioned by the Ministry of Corporate Affairs, recommended that Air India should be partly privatised. In May 2012, the airline was fined $80,000 by the US Transportation Department for failing to post customer service and tarmac delay contingency plans on its website and adequately inform passengers about its optional fees. In January 2013, Air India

Prime Minister Narendra Modi had reasserted his Government’s commitment and ‘sincerity’ towards selling off public-sector enterprises and assets to private parties

cleared a part of its pending dues through funds raised by selling and leasing back the newly acquired Boeing 787 Dreamliner. The airline split its engineering and cargo businesses into two separate subsidiaries, Air India Engineering Services Limited (AIESL) and Air India Transport Services Limited (AITSL) in 2013. As a part of the financial restructuring, Air India sold five of its eight Boeing 777-200LR aircraft to Etihad Airways in December 2013. Plans for introducing ultra-long flights with services to US West Coast were cancelled due to high fuel prices and weak demand. On April 24, 2014, Air India issued a tender for leasing 14 Airbus A320 aircraft for up to six years, to strengthen its domestic network. Air India moved its headquarters from the iconic 23-storey Air India building on Marine Drive, Mumbai to Delhi in 2013 and rented most of the floors in that building. In August 2015, it signed an agreement with Citibank and SBI to raise $300 million in external commercial borrowing to meet working capital requirements. On June 28, 2017, the Government announced its intention to privatise Air India and a committee was been set up to start the process. In March 2018, the Government came out with the preliminary information for the strategic disinvestment of the airline wherein it planned to offload 76 per cent as well as cede management control to private players despite the Ministry of Civil Aviation claiming to have doubled its operating profits. Yet in the same period, the airline’s net loss widened to `5,765 crore. The Centre for Asia Pacific Aviation (CAPA) India estimated the SP’S AIRBUZ • Issue 2 • 2019 • 17

Airlines

Air India

carrier would make losses of $1.5 billion to $2 billion over the next two years. The winning bidder would have to remain invested in the airline for at least three years. The proposed disinvestment was to include Air India Express and AISATS. Contrarian Approach. There are some who feel that the airline has been making operational profits for the past three years and has never defaulted in loan repayment. It is suffering net losses mainly on account of the huge debt. The airline continues to have a market share of around 17 per cent in the overseas services which is the highest among Indian carriers. This share could go up with Jet Airways landing itself in a financial mess and awaiting bailout. Besides, with a fleet of 114 aircraft, Air India has over 6,200 slots for domestic and international flights. These are highly lucrative slots at major airports and traffic rights internationally and likely to be worth billions of rupees. Also, its non-core assets and real estate value in India and abroad could be huge. As per reports, the value of land owned by the airline is more than `8,500 crore. Air India also owns among the largest collections in the country of paintings, artifacts and antique furniture. The airline’s assets are reportedly worth more than its debt burden. Other than the financial part, it is important to have a public sector airline to not only connect the remotest of loss-making routes in the country, where profit-seeking airlines will never venture, but also to keep a check on the practices of private airline companies, which would have a monopoly over Indian skies once AI goes. Could writing off part of the debt help?

PHOTOGRAPH: SP Guide Pubns

The Way Ahead. Prime Minister Narendra Modi had reasserted his Government’s commitment and ‘sincerity’ towards selling off public-sector enterprises and assets to private parties. This government had already sold national assets worth `1.25 lakh crore in first three and a half years of its rule. At the cabinet level, they have cleared the sale of not only Air India, but several other loss-making public sector units. Yet, the government acknowledges the massive criticism flung at them for possibly selling Air India cheaper. Many private players have been demanding that this Central Public Sector Undertaking be sold in parts. There is thus a plan to sell off AI’s iconic erstwhile corporate office building in Mumbai to the country’s largest container cargo terminal Jawaharlal Nehru Port Trust in order to raise funds. There are reports that Air India is going to hand over its priceless artwork collection to the Ministry of Culture as they can’t afford the upkeep. The biggest deterrent is the debt burden of over `50,000 crore, of which the Government had earlier vowed to bear 50 per cent. The private buyer would be left with debt of around `24,600 crore, along with current liabilities of more than `8,800 crore. This means a total burden of debt and liabilities of `33,200 crore will remain with the new owners. This is not lucrative enough. Also, the Government will retain 24 per cent stake. The other choice is to write off the huge `52,000 crore debt. This move could be seen as bad for the public exchequer. Another option is to include the

Other than the financial part, it is important to have a public sector airline to connect the remotest of loss-making routes in the country

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With the forthcoming general elections, any further decision on privatisation may now be left to the new government

real estate held by the national carrier. The original offer excluded its prime land holdings and real estate. The non-core real estate assets and other businesses, not integral to the core airline business of the airline, were to be hived off into a Special Purpose Vehicle (SPV) to be owned by the Government of India. The Government is trying to sweeten the deal and hopes to convince prospective buyers to take over the loss-making carrier, which is a huge drain on the exchequer. A buyer of Air India will also get close to `31,806 crore of unabsorbed depreciation. That may provide benefit of reduced tax liability. It can be carried forward for any number of years. The company buying stake in Air India can offset its profits against the unabsorbed depreciation, thus reducing the tax liability. The benefit will be available as long as Air India stays as a separate entity. Yet Jet Airways, IndiGo and the Tata Group, which has alliances with two carriers — Malaysia’s AirAsia and Singapore Airlines, have expressed their reservations. Despite carrier’s routes being a strength, the employee costs are relatively high. Air India’s per unit employee costs were 1.3 times and other operating costs were 2.4 times that of IndiGo in FY2017. In a recent report, Air India CMD has said that the divestment was ‘temporarily’ on hold. The Centre has now decided to transfer `29,000-30,000 crore debt to a special purpose vehicle so as to reduce the debt on its books. With the forthcoming general elections, any further decision on privatisation may now be left to the new government. Anti-privatisation lobby would have gained ground and time. The situation is complex and the final word is yet to be said. A well run Government-owned airline could have been a national asset, but over 70 years of operations have clearly indicated that it is “not the business of Governments to be in business”. As all attempts to revive the airline have failed, it has now become a liability and needs to be privatised without further delay. SP

technology

Bio-Fuel

Illustration: Vimlesh Yadav

Bio-Fuel Technology: Powering the Future of Aviation Bio-fuels have now become a global necessity due to the international commitment to reduce Green House Gases (GHGs) and emissions in consonance with the Kyoto Protocol by Isha Jaiswal & Zorawar Singh Jaiswal SP’S AIRBUZ • Issue 2 • 2019 • 19

technology

Bio-Fuel

he last century saw a preponderance in the consumption of crude oil derivatives and the development of technologies at a very fast pace. Consequently, all machines including aircraft today are heavily dependent on crude oil products. Crude oil is a diminishing resource. As the consumption of oil escalates, its polluting emissions too will rise along with its price. As a result, a time will come when the supply and demand ratio is going to make petroleum products prohibitively expensive, thus, forcing us to find and adopt alternative, sustainable fuels which have lower emissions, are cheaper and biodegradable; but are especially synthesised for aircraft as per aviation norms of density, freezing points, specific impulse and their ability to be used in the existing fleet of aircraft. FUELS OF THE FUTURE. Scientists the world over are exploring the feasibility of finding a replacement for Aviation Turbine Fuel (ATF). So far, scientific research has permitted up to a 50 per cent blend of bio-fuels with ATF without any loss of efficiency. The major bio-fuels produced include bio-diesel and bio-ethanol blended ATF. Bio-fuels can be defined as flammable liquids that are produced from organic substances or biomass, for example, from plants and organic waste. Usually, only that kind of bio waste is used which is not consumed by humans or domestic animals to avoid demand-based competition. The significant aspect of bio-fuels is that these are easily replenishable viz a viz

The bio-fuel produced by first generation derivatives have already entered the commercialisation phase

conventional fuels. There is no sulphur in them and the emission levels too are lower. Sugar and starch is used to produce ethanol that can be blended safely with ATF. India produces significant amount of sugar that has molasses as a byproduct in the sugarcane industry. Molasses too is used to produce ethanol. Bio-fuels are also produced from oil-based crops and biogas is the product of anaerobic digestion of organic substrate. TYPES OF BIO-FUELS. Ethanol is of first generation and the most commonly used bio-fuel that is produced using sugarcane and molasses. Alternatively, oil-based crops that are inedible by humans and domestic animals too are decomposed to produce bio-gas which in turn produces bio-fuels by bacterial decomposition. The second-generation bio-fuels are derived from the feedstock of animals, forest refuse and non-revenue generating plants which grow on the fringes of human settlement and agricultural areas. These products too are decomposed to produce bio-fuels by the Pyrolysis process which heats the organic substrate to very high temperatures in an inert atmosphere. The exude is then used to produce bio-fuels. In this scenario, the issue of competition for land and water for irrigation to produce such bio-fuels will always be a conflicting requirement. The greater the amount of land and water needed 20 • SP’S AIRBUZ • Issue 2 • 2019

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for producing such bio-fuels; the greater will be the conflict for resources required by humans for food viz a viz those needed for the production of bio-fuels for aviation. Hence, it is best to use the fringe areas along plantations or farmlands which are usually not used by the farmers to produce such a substrate. In addition, the organic matter naturally occurring in the jungles and being wasted away by nature through natural decomposition or posing as a forest fire hazard, can also be harnessed within the forest area itself to produce such bio-fuels. This methodology produces aviation bio-fuels without conflicting with human energy and food requirements. As it is, laws relating to forests are so strict in India that human settlements cannot encroach onto forest land. Consequently, an assured acreage of forest area is available to aviation bio-fuel producers. The third generation is a promising method of obtaining biofuels from the use of algae biomass. It requires no land, but some water. In fact, both fresh and saline water bodies can be used to produce bio-fuels from the algal growth. Growing algae requires the least amount of human effort. However, the technology to economically extract bio-fuels is still in a nascent stage. Once the commercial grade technology is developed, it will become the most economical of all bio-fuel producing models. No land, merely some natural water, no additive substrate, but just a harnessing technology is needed for collecting the bio-fuels and its logistics. Photo-biological solar fuels constitute the fourth generation of bio-fuel’s production process. It uses solar photo electric cells and organic matter to produce bio-fuels. It is suitable for places with abundant sunshine, but scarce water such as deserts. However, research is still being done in this aspect to come up with commercially viable technologies and processes. Jatropha seeds produce bio-diesel. However, the quantity of jatropha seeds produced is quite low. Thus, the quantum of bio-diesel produced too is meagre. It takes about three years for jatropha seeds to produce a viable quantum of diesel. Hence, currently, the product life cycle due to the gestation period needed for the maturity jatropha seeds, does not seem promising. Today, bio-technology and agriculture scientists are working to shorten the gestation period of jatropha products. The bio-fuel produced by first generation derivatives have already entered the commercialisation phase. This is the least technology-intensive process for bio-fuel production. The second generation process is also maturing as a concept. This however needs legislative changes in India as the extraction of bio-fuels means commercial activity within the forest. India now has to use this process to produce bio-fuels and reduce its deficit. The third generation bio-fuel production process using algae and saline or waste water, is the next most suitable option when this technology matures. There is a need to invest in these technological concepts now to reap dividends in the foreseeable future. The fourth generation process will also be able to produce sufficient bio-fuels due to the tropical location of India which allows for abundant sunshine. This will be possible in the years to come as the solar technology has yet not matured and is expensive. Financially, as of now, the first generation technology is the most cost-effective today. The price of bio-fuels increases as the generation number increases. However, as technology improves with time, this relationship will reverse itself. OPPORTUNITIES IN INDIA. India is lucky to be located in the tropics to enable production of bio-fuels. The first generation bio-fuels which depend on agro products for raw materials can be

technology

Bio-Fuel

Bio-fuels have now become a global necessity due to the international commitment to reduce Green House Gases (GHGs) and emissions

PHOTOGRAPH: United Airlines

best grown in the states such as Punjab, Haryana, Uttar Pradesh, Maharashtra, Tamil Nadu, and Kerala. The reason is that these states are the bread baskets of India. They produce considerable quantity of agricultural waste from sugarcane, wheat, paddy, vegetables and other crops. Second generation bio-fuels are dependent on forest waste or organic substrate. Hence, the states in the North Eastern Region, Kerala, the riverine delta of West Bengal, Madhya Pradesh, Kerala, Tamil Nadu and to a limited extent, reserved forests such as Gir in Gujarat are best poised to produce quantities of bio-fuels from forests that are financially viable. Third generation bio-fuels can be economically produced along the complete Indian coastline, Bihar, Assam, Meghalaya, Orissa, West Bengal and in the foothills of the Himalayas. These places have abundant fresh and city-based waste water too that can be used to produce bio-fuels.

India is lucky to be located in the tropics to enable production of bio-fuels

Fourth generation bio-fuels are best produced in Rajasthan and the salt plains of Gujarat. These areas have abundant sunshine and vast expanses of land which are required to deploy solar cellbased bio-fuel production infrastructure. These states have sparse population and comparatively less cultivation. Hence, they would be the most suitable for harnessing sunlight to produce bio-fuels. India has got a large number of chemists and engineers. Entrepreneurs can set up Research and Development facilities in these areas and employ trained personnel to devise bio-fuel production processes. This nascent field, if captured by India, can enable the nation to become a net exporter of bio-fuels blended aviation fuels which is the future. CONCLUSION. Bio-fuels have now become a global necessity due to the international commitment to reduce Green House Gases (GHGs) and emissions in consonance with the Kyoto Protocol. The International Civil Aviation Organisation has behaved very responsibly and has, on its own, articulated a target to reduce aviation emissions to the levels of the year 2005 by the time we reach the year 2022. Moreover, it has also planned to achieve lower level emissions by the year 2050. This can only be possible by introducing greener engines and by ushering in financially competitive bio-fuels which will constitute the future of aviation. SP SP’S AIRBUZ • Issue 2 • 2019 • 21

Engines

Green

Rolls-Royce engine

PHOTOGRAPH: Rolls-Royce

Sustainable and Green Aero-Engines New aircraft and engine designs/technologies and alternative materials need addressing by Anil Chopra 22 • SP’S AIRBUZ • Issue 2 • 2019

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Engines

Green

he terms ‘Sustainable Aviation’ or ‘Green Aviation’ are increasingly being used to address the technological and socio-economic issues facing the aviation industry to meet the environmental challenges of the twenty first century. Air travel continues to see very high growth especially in major developing nations and emerging economies. Global aviation contributes two per cent of global GreenHouse Gas (GHG) emissions and supports eight per cent of the world economic activity in terms of GDP. As a result of massive increase in air travel by 2025, it is estimated that the total carbon dioxide (CO2) emission from commercial aviation may reach 1.5 billion tonne. The amount of nitrogen oxides (NOx) around airports may rise from 2.5 million tonne in 2000 to 6.1 million tonne by 2025. Because the majority of aircraft emissions are injected into the upper troposphere and lower stratosphere, the resulting impacts are unique. The impact of burning fossil fuels at altitude is approximately double that due to burning the same fuels at ground level. The number of people who may be seriously affected by aircraft noise may rise from 24 million in 2000 to 30.5 million by 2025. Therefore, there is an urgency to address the problems of emissions and noise abatement through technological innovations. New aircraft and engine designs/technologies and alternative materials need addressing. The most important role in an airplane’s fuel efficiency is of the engines. The two mostwidely used aircraft today - the Boeing 737 and the Airbus A320 have shown that newer models carry more passengers and payload while burning 23 per cent less fuel.

SAGE Initiatives. ‘Sustainable and Green Aero-Engines’ initiatives are being taken both in the European Union and in the United States (US) to develop aero-engine technologies with new engine architectures that offer opportunities for reduction in CO2 emissions relative to current turbofans. Emissions of CO2, H2O, O2 and N2, which are products of hydrocarbon fuel combustion, are all functions of engine fuel burn efficiency. Areas being addressed are lightweight low pressure systems for turbofans, including composite fan blades and high efficiency low pressure turbine; advanced engine externals and installations including novel noise attenuation; high efficiency Low Pressure (LP) spool technology while further advancing high speed turbine design; option of an aggressive mid-turbine inter-duct; high efficiency and lightweight compressor and turbine; and low emission combustion chamber for next generation rotary-craft engine. Developments in controls and electronics, lightweight metallic and composite materials, hydraulic and pneumatic systems, novel manufacturing methods, specific aero-engine parts such as casing, tanks, pipes, high temperature materials such turbine blades and sensors would require attention. SAGE 2 PROJECT. European Union’s SAGE 2 project headed by Rolls-Royce and Safran focuses on demonstrating the technologies such as composite propeller blades with aero-acoustic optimisation, electric de-icing system and equipment. The gas generator used in the SAGE 2 open rotor demonstrator is derived from a Snecma M88 engine. The current status plan is to use the Airbus A340-300 MSN001 test aircraft as a flight test vehicle, with one full size Contra Rotating Open Rotor (CROR) pusher engine attached to a representative pylon and engine mount. Open rotor technologies offer the potential for significant reductions in fuel burn and CO2 emissions relative to turbofan engines of equivalent thrust.

Open rotor engines remove the limitation by operating the propeller blades without a surrounding nacelle, thus enabling ultrahigh bypass ratios to be achieved. Installation of the open rotor engine on the airframe has its complexities, as the airflow through the propellers interacts with the supporting airframe structure in a different manner. The trend to Very High Bypass Ratio (VHBR) engines requires technology developments across a broad range of complex gas turbine systems, from fan inlet through the complete compression, combustion and turbine to exhaust. CAEP TARGETS. Aircraft engines account for most of the noise and fuel consumption characteristics of airplanes. The International Civil Aviation Organization (ICAO) has a Committee on Aviation Environmental Protection (CAEP) since 1983. Aircraft are required to meet the engine certification standards adopted by ICAO. Of particular relevance is the Standard for NOx, a precursor for ozone, which at altitude is a GHG. The standard for NOx was first adopted in 1981, and was made more stringent in 1993, 1999, 2005 and 2011. The CAEP/8 standard was set in 2010, in which the medium and long-term NOx technology goals were to target reduction by 45 per cent of CAEP/6 standard by 2016 and 60 per cent by 2026. These targets have yet to be met fully. Novel cycles that

A ‘green’ design change can be seen in the blended wing and body of the subscale, flying X-48B aircraft prototype

increase bypass ratios, incorporation of lean burn technology are evolving. ICAO is developing the first non-volatile PM (nvPM) standards (covering soot or black carbon particles) for turbofan/turbojet engines. Similarly for turboprops, helicopter turbo-shaft, and APU engines, the nvPM standard will help better assess impact. DESIGN CONSIDERATIONS. Changes in engine design or operation might include ultra-high bypass turbofans; open rotor engines; use of alternative fuels and relocating engines on the body of the aircraft such that engine noise gets deflected upwards. An example of a ‘green’ design change can be seen in the blended wing and body of the subscale, flying X-48B aircraft prototype. Other concepts may include capitalising on the potential of advanced electrical power technologies such as batteries or fuel cells to reduce the amount of fuel needed. Using high-tech engines, propeller efficiency, advanced aerodynamics and low-drag airframe can result in higher fuel saving and less gaseous emissions. Improvement in performance can be achieved by moving from a component-based design to a fully integrated design by including wing, tail, belly fairing, pylon, engine and high lift devices into the solution. At the April 2018 ILA Berlin Air Show, a high-efficiency composite cycle piston-turbofan hybrid engine for 2050, combining a geared turbofan with a piston engine core was presented. The 2.87-metre diameter, 16-blade fan gives a 33.7 ultra-high bypass ratio. The 11,200 lb engine could power a 50-seat regional jet. Although the engine weight increases by 30 per cent, the overall aircraft fuel consumption reduced by 15 per cent. SP’S AIRBUZ • Issue 2 • 2019 • 23

Engines

Green

GE Aviation’s revolutionary adaptive cycle engine

ELECTRIC AND SOLAR ENGINES. A number of electrically powered aircraft such as the QinetiQ Zephyr have been designed since the 1960s. In 2007, France flew a conventional light aircraft powered by an 18kW electric motor using lithium polymer batteries and became the first electric aircraft to receive an airworthiness certificate. Solar-powered manned aircraft designed to fly both day and night without the need for fuel, are already under development. Solar electric propulsion has been performed through the manned ‘Solar Impulse’ and the unmanned NASA ‘Pathfinder’ aircraft. Several big companies such as Siemens are developing high performance electric engines for aircraft. Small multi-copter UAVs are almost always powered by electric motors.

PHOTOGRAPH: GE Aviation

NEW ENGINE CONCEPTS. Two new engine concepts currently under investigation include the ‘Combined Brayton Cycle Aero Engine’ and ‘Multi-Fuel Hybrid Engine’. Even though modern engines are supposedly very efficient, over 50 per cent of the energy input is ejected as waste heat. Improving performance by heat recovery is the requirement. A heat exchanger integrated in a turbofan core can convert recovered heat into useful power which can be used for onboard systems or to power an electrically driven fan to produce auxiliary thrust. A dual combustion chamber, with first stage between HP Compressor and HP Turbine burning Hydrogen/Methane cryogenic fuel or liquid natural gas and the second combustor at an inter-stage uses kerosene/ bio-fuel in the flameless combustion mode, is being considered. High temperature generated in the first stage, allows flameless combustion in the inter stage thus reducing CO2 and NOx emissions. Cryogenic bleed air cooling can enhance the engine thermodynamic efficiency by cooling the bleed air thus allowing increase in temperature of the fuel. Contra-Rotating Fans can use boundary layer ingestion to reduce both noise emission and improve propulsive efficiency.

Solar-powered manned aircraft designed to fly both day and night without the need for fuel are already under development

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NEXT GENERATION INNOVATIONS. Developed under the US Department of Defense’s Adaptive Versatile Engine Technology (ADVENT) and Adaptive Engine Technology Development (AETD) programme is the GE Adaptive Cycle Engine (ACE). Unlike traditional engines with fixed airflow, the GE ACE is a variable cycle engine that will automatically alternate between a high-thrust mode for maximum power and a high-efficiency mode for optimum fuel savings. ACE is designed to increase combat aircraft thrust by up to 20 per cent, improve fuel consumption by 25 per cent to extend range by more than 30 per cent and provide significantly more aircraft heat dissipation capacity. These adaptive features are coupled with an additional stream of cooling air to improve fuel efficiency and dissipate aircraft heat load. With a joint GE/US Government investment of over $1 billion, the ACE engine will incorporate both heat-resistant materials and additive manufactured components. In the ADVENT programme, GE reached the highest combined compressor and turbine temperatures ever. The Adaptive Engine Transition Programme (AETP) is underway. The challenge remains in going to higher overall pressure ratio engines due to increasing cooling air temperatures, constraints imposed by developing new material technologies and detrimental weight and drag impact on ultra-high bypass ratio engines. GE Aviation’s Passport engines feature a higher pressure ratio and a compressor made of new – and unnamed – advanced materials. GE predicts that the engines will achieve eight per cent lower fuel consumption and considerably lower NOx emissions. The Pulse Detonation Engine (PDE), which has the potential to radically increase thermal efficiency, is one of the more exciting propulsion technologies being researched. PDE uses detonation waves to combust the fuel and oxidizer mixture. Instead of burning it, it explodes it. In theory, it can be used up to Mach 5.0. Some of these statistics around aero-engines can explain the challenges. Each wide-chord fan blade exerts a centrifugal force of around 70 tonne - equivalent to the weight of a modern locomotive; each high-pressure turbine blade generates the same amount of power as a Formula-1 car; and the turbine discs will now have a ‘dual microstructure’ to give different mechanical properties at the centre and at the edge of the disc. Each kilogramme of fuel saved reduces carbon dioxide (CO2) emissions by 3.16 kg. Modern aircraft are 40 per cent more efficient than those of 15 years ago. Fixed electrical ground power can reduce the amount of fuel burn used on ground by up to 85 per cent. Aero-engines of the future will be more and more fuel efficient and environment friendly. SP

MRO

Taxation

The single factor that has had an extremely deleterious impact on the growth and well being of the MRO industry in India is the introduction of the Goods and Service Tax (GST)

Impact of GST on the Indian MRO Industry Unless appropriate steps are taken urgently by the Government to rationalise the tax structure, it would sound the death knell for the entire domestic MRO industry in India

PHOTOGRAPHs: Air Works

by B.K. Pandey

aintenance, Repair and Overhaul (MRO) of aircraft taken together as a combined support activity, constitutes an essential and indispensable component of the system that is necessary for the upkeep of the fleet of civil aircraft, be it an airliner or a fixed wing or a rotary wing platform in the domain of business and general aviation. It is a system and a process inherent to the civil aviation industry that ensures airworthiness of an aircraft and provides for high levels of air safety. Any short coming or deficiency in the MRO industry in the domain of civil aviation in the country, can lead to disastrous consequences for the aircraft as well as for those on board. The Government has taken a number of steps in the recent years to introduce reforms in the Indian civil aviation industry, one significant one being the launch of the Regional Connectivity Scheme called UDAN. This scheme will lead to operationalising a

large number of regional airports in the interior and remote areas of the country to enhance regional connectivity. With the implementation of this scheme, the Indian civil aviation industry as a whole has received the much needed impetus. MRO Industry in India. India is the fastest growing civil aviation market in the world. As per Ravi Menon, Vice President, MAOI, “The Indian civil aviation industry is in the midst of a boom with a consistent annual growth rate at 20 per cent for the last few years. Based on data from the original equipment manufacturers (OEMs), the current fleet of 550 airliners is expected to grow to 1,000 by 2023.” The high rate of growth in the Indian civil aviation industry in turn, is expected to have a positive impact on the MRO industry in India. Currently, the MRO industry in the country constitutes just one per cent of the global market in this regime and is valued at around `31,500 crore. The assessed value of the market for MRO in India which in the year 2011, SP’S AIRBUZ • Issue 2 • 2019 • 25

MRO

Taxation

stood at approximately `5,600 crore, as per forecast by analysts, is expected to nearly double by 2020. However, rather unfortunately, it appears that this highly optimistic prediction of the target for 2020 is unlikely to be achieved in the time frame stated on account of some developments in the recent past. The single factor that has had an extremely deleterious impact on the growth and well being of the MRO industry in India and threatens even its survival in the future, is the introduction by the Government of India of the Goods and Service Tax (GST) on September 8, 2016. Establishing an MRO facility is no simple task. First of all, the exercise requires heavy capital investment and the return on the investment made is not available quickly as it takes a long time to start flowing in. Apart from the problems in setting up the infrastructure itself, an MRO facility requires highly qualified manpower with the appropriate knowledge, skills and expertise that needs constant updating through regular training. An MRO facility is not only required to meet with demands of time lines, but requires continuous investment in tooling and upgrades. The MRO venture needs to have a strong focus on the quality of work output, is required to achieve and maintain global standards of excellence as also aim to achieve the ultimate objective of air safety. But perhaps the most challenging as well as daunting task before those who own and operate the MRO venture, is to obtain certification from the concerned regulatory authority as well as to maintain its validity through periodic inspection and renewal.

As per Bharat Malkani, the President of MAOI, MRO services by the Indian companies are required to shell out GST at the rate of 18 per cent on domestic MRO services whereas imported MRO services were levied a mere five per cent of customs duty and are not required to pay GST. Indian domestic carriers prefer to fly their aircraft to avail of MRO services to countries in the region such as Singapore, Sri Lanka, Malaysia, Dubai and China where MRO services are available without the burden of heavy taxation. In Singapore and Malaysia, GST is levied at seven per cent whereas in Sri Lanka there is no such tax levied on the MRO industry. The tax regime imposed by the Government of India is clearly illogical and highly discriminatory rendering the domestic MRO companies incapable of competing against their foreign rivals. As per the President MAOI, “On Account of the highly discriminatory tax regime after the introduction of GST, Indian MRO companies are shutting down because they are finding it difficult if not impossible to compete with overseas players as they have been pushed into a situation of serious cost disadvantage”. The net effect of the discriminatory tax regime is that India is losing close to 90 per cent of MRO business to the firms in this business located overseas. Also, even though the Government of India had increased the limit of foreign direct investment to 100 per cent in the MRO segment of the civil aviation industry, there were no takers of this offer amongst the companies abroad. This is not surprising as foreign companies operating into India from abroad stand to gain on account of the substantially lower tax rates applicable to them than they would have to bear if these companies invested in India and operated as Indian domestic carriers prefer to fly their Indian MRO service providers. aircraft to avail of MRO services to countries

An Escalating Crisis. Unable to reconcile with the disturbing slowdown in the MRO industry in India, towards the end of November 2018, the MRO Association of India (MAOI) despatched a written communication to the Ministry of Civil Aviation (MoCA) where MRO services are available without the highlighting the critical state the MRO Urgent Need for Correcburden of heavy taxation industry in India has descended into tive Action. The MRO industry in today. As per the letter from the MAOI India is still trying to find its feet. With to the MoCA, troubles for the MRO industry in India began soon around 550 aircraft being operated by the airline industry in India, after the introduction of GST and thereafter, the problem has rap- the value of the MRO industry currently is estimated to be around idly escalated into a crisis situation. In his letter to the MoCA, `6300 crore. And with the fleet of airliners expected to increase to Bharat Malkani, the President of MAOI stated, “The Indian MRO more than 1000 in a few years as also the significant increase in the business has been on a gradual decline and for the first time in size of the fleet of business aviation aircraft, the value of the MRO history, it has registered negative growth this year. We cannot industry has the potential to grow substantially. However, faced stress enough on the plight of our industry and are hoping for with the possibility of complete failure of the MRO industry staring intervention by the Government before it is too late.” in their face, the major players on the scene have approached the Government with a desperate plea to create a level playing field to give them a chance to compete against their rivals from abroad and enable them to survive. They have suggested that as a first step, the Government of India consider waiver of GST for up to The Indian MRO business has ten years to allow the MRO industry in India to stabilise so that it been on a gradual decline and becomes sustainable for the future. Over the past one year, more than 35 per cent of the firms in for the first time in history, it the domestic MRO industry have had to shut down operations. has registered negative growth Unless appropriate steps are taken urgently by the Government to rationalise the tax structure, it would sound the death knell for this year the entire domestic MRO industry in India. SP 26 • SP’S AIRBUZ • Issue 2 • 2019

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Interview

Civil Helicopter

Helicopter Taxi Service for the Masses Four years ago, he missed his flight out of Bengaluru due to the city’s unpredictable traffic jam. In March 2018, young Govind Nair offered the city, Asia’s first helicopter taxi service from Bangalore International Airport to Electronics City. In an exclusive interview with Mahesh Acharya, Special Correspondent of SP’s AirBuz, Govind Nair, Director-Business Development, Thumby Aviation, shares what started as non-serious suggestion to his aviator father, that he should start Heli-Taxi service, is a reality.

PHOTOGRAPHs: Thumby Aviation

Mahesh Acharya (SP’s): Tell us about yourself please. Govind Nair (Govind): I am from sales background. After my graduation in Mechanical Engineering, I pursued MBA in Sales & Marketing. I worked with Colgate Palmolive for three years after which I decided to join my aviator dad, Group Captain K.N.G. Nair (Retd) who heads the helicopter charter company, Thumby Aviation. SP’s: What inspired you to start Heli Tourism Project? Govind: In early 2015, I was travelling from Electronics City in Bengaluru to the airport to catch a flight and I missed it due to the traffic woes of the city. So I joked with my dad that he should start Heli-Taxi service in Bengaluru so that people can reach the airport in time and not get stuck in traffic jams. My dad, an aviator of 40 years experience, inspired me to join him. I was clueless about the Non-Scheduled Operations initially; but eventually acquired the skill and capabilities. We were catering primarily to movement of VIP’s for different State Governments. When we revisited our vision, we figured that we should make Heli-Taxi services affordable and accessible to the common man and explored the means to achieve this vision. We started by offering joy rides as part of Heli-tourism at comfortable prices to test the waters. SP’s: How long did it take for the project to fructify ? Govind: My father liked the idea of launching Heli-Taxi service in Bengaluru and we started seriously planning it. By the end of 2015, the project was ready on paper; but it took to the skies only in March 2018.

SP’s: Why was Bengaluru as your choice to start the HeliTaxi service? Govind: There are more reasons than one. Alongside the rapid growth of Information Technology (IT) industry in late 1990s, the city’s public transport infrastructure did not expand in proportion to the growth of the city. This leads to a daily traffic gridlock in peak hours in its main IT hubs. The problem is further aggravated by road resurfacing, metro or flyover works, diversions and even rain spells. The city draws workforce from across India to support IT industry, manufacturing, construction and hotel industry, eventually taxing public transport infrastructure. Add to this, the fact that the new international airport moved out from the heart of the city in 2008. From Electronics City to the airport, it takes two and a half hours by road during peak traf-

The Government’s draft policy has a provision for blanket clearance for all flights for a day below 1,000 ft, for intracity travel/fixed route travels with just a single flight approval number

SP’S AIRBUZ • Issue 2 • 2019 • 27

Interview

Civil Helicopter

fic. I discovered that people here need to spend more money on travel to airport compared to Mumbaikars, as the Mumbai airport is within the city even though the average spending capacity of Mumbaikers is more. They prefer utilising public transport to reach the airport. To identify major pain points affecting airport commuters in Bengaluru, we conducted a study and concluded that Electronics City to Airport or vice-versa took the highest commuting time. We also discovered that productive man-hours wasted in Bengaluru was higher than Mumbai or Delhi as the public transport in those cities is good and traffic for different times of the day is predictable unlike here. SP’s: Please tell us more about the feasibility study. Govind: We conducted market research and took inputs on various elements of the projects from corporates and non-corporate business travellers. It took us two years to get the desired data. We talked to air travellers at Bengaluru airport to gauge their expectations on elements of the project such as preferred location of helipads, facilities at waiting lounges, expected price and so forth. SP’s: Now that you are ten months into operations, has your operations met the desired expectations? If not, why? Govind: Yes and no. We expected that local residents would utilise the service more than outsiders, but surprisingly, it is the outstation travellers who are subscribing to our service

Heli-Taxi Operations have the potential to be a $100 million business opportunity per annum across India

more than the local populace. We did not expect this. Maybe it is because locals are used to the traffic and plan their travel accordingly. We would like more locals to utilise the service. We will continue to serve as we believe there would be tipping point after which the service will grow exponentially and more locals will utilise the service. SP’s: What is the kind of infrastructure you have in place and what are the different services offered? Govind: We have two operational helipads, one at the international airport and other at Electronics City. We currently operate Bell 407 and 412 helicopters and are likely to induct more as the demand increase. We offer four types of Heli-Taxi services for the public – shared shuttles, private shuttles – which is exclusive booking by customer for Bengaluru Airport-Electronics City-Bengaluru Airport. The third service is the Heli-Taxi outstation and the fourth are HeliJoy rides. We also offer aero-medical transport, but this is rare. SP’s: What is your costing structure for the main services? Govind: For shared shuttles we charge `4,000 and exclusive shuttle is between `30,000 to `35,000. SP’s: A typical day at Heli-Taxi? Govind: Every day, navigating through airspaces controlled by four different agencies is a very complicated exercise. The con28 • SP’S AIRBUZ • Issue 2 • 2019

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trolling agencies are Bangalore International Airport which is North of the city and our operating base, the Yelahanka Air Force Station, the Government flying training centre at Jakkur and the airspace of the HAL airport. Preparation of a flight to ferry passengers from the Kempagowda International Airport (KIA) to Electronics City, which is in South of Bengaluru, begins with filing of the flight plan with Air Traffic Control. We are grateful to the Air Traffic Control of the four agencies as they facilitate seamless navigation through their respective airspaces and it takes around 12-13 minutes to reach Electronics City. SP’s: What in your view will ease the process of filing the flight plan for each flight? Govind: Thankfully, the Government of India is already working on this and is likely to ease this element of day-to-day operations tremendously if the Government’s proposed draft policy on intracity travel by helicopters is finalised and implemented. The draft policy has a provision for blanket clearance for all flights for a day below 1,000 ft, for intra-city travel/fixed route travels with just a single flight approval number. This will enable me to conduct seamless dawn-to-dusk flight operations. SP’s: Tell us more about average passenger traffic ferried in a month. Govind: On a lean day, we conduct three to four trips a day and ferry 20-24 passengers. On good day, we ferry 50-60 passengers. A good day is usually the weekend or if there are corporate events in Electronics City on non-weekend days. We get about two to three corporate event days in a month. We do about 10-12 exclusive shuttles and this service is picking up from the earlier two to three trips in a month to more trips now. The outstation HeliTaxi caters to customers who travel to nearby tourist spots such as Coorg, Chikamangluru and other destinations in Karnataka which is about 10-15, and increasing month-on-month, flight hours a month. SP’s: What are the challenges that you faced in terms of permissions from Bangalore International Airport (BIAL)? Govind: None. BIAL has been very supportive in all fronts. Our discussions with BIAL started in early 2016, and they have been very receptive about the idea of Heli-Taxi. I would say they are very much one of the stakeholders, not in commercial sense, but in terms of concept and service. We are fortunate that they gave us a location of helipad close to the airport terminal for the convenience of inbound and outbound passengers. SP’s: What has been your experience with authorities such as Director General of Civil Aviation and Airport Authorities of India? Govind: There were few challenges, but nothing to do with regulations. The challenges were related to adjusting to a new concept of Heli-Taxi for coordination and permissions with authorities which are routine and mandatory for everybody. Compliances were time-bound and our project could have been launched earlier. Their compliances were rightfully strict so that safety is not compromised. After we complied with all the requirements, there was no problem. For example, after the first helipad was approved, there was no delay in getting the approval for second one as the compliance processes were in place. Now that the concept is established, we are ready to replicate the model elsewhere.

Interview

Civil Helicopter

Bell 407 of Thumby Aviation

SP’s: Any plans to utilise rooftop helipads in the city? Govind: In the city, there are 92 unutilised helipads which may or may not be as per DGCA compliances. The main criteria is that rooftop helipad should have load-bearing capacity of the helicopter intended for landing, safety nets, fire dousing facilities, wind direction indicator and trained staff. We will try to utilise some of the helipads if these are activated hopefully before the end of this year. SP’s: In which non-developed countries is Heli-Taxi popular? Govind: Sao Paulo in Brazil is one city that is the mother of HeliTaxi operations in the world. The city is as big as Bengaluru and operates 300 helicopters. Some cities in Asia that have traffic problem are exploring this option. SP’s: Any wishlist that you think if promoted by aviation regulators will add value to the Heli-Taxi service? Govind: Indeed! We would be happy if night operations are permitted. Currently, night flying is permitted for VIP movement and AeroMedical service, but not for commercial operations. I wish singleengine helicopter are allowed for night operations in India. The US and Canada permit night flying across all categories of operations. Traditional navigation aids facilitating night operations and landing are very expensive for small operators like us if we were to install such facilities at our helipads under the current regulatory compliances for night operations. But there are ways to make night operations more economical and cost effective. My other wish is that authorities in India approve night landing navigation aids that are not expensive, of course without compromising safety. If approved, this

Sao Paulo in Brazil is one city that is the mother of Heli-Taxi operations in the world

will be a game-changer for helicopter operations in India including for Regional Connectivity Scheme. US Federal Aviation Regulations allows night landing by single-engine helicopter. I also wish that Class II helicopters be allowed to operate out of rooftop helipads. For operations out of rooftop helipads in India, helicopter need to be Class-I performance helicopter – twin-engine so that in case of one engine failure, the other engine can provide the power to handle the situation. So, rooftop landing by single-engine helicopter and permission to use alternate navigation aids such as beacons and GPSbased navigations systems that are economical, should be approved by Indian regulators. Such a system is already being used in the US. SP’s: What is the profile of the travellers utilising Heli-Taxi? Govind: Eight out of 10 passengers are corporate travellers who want to spend less time on the road, while other travellers are mix of family and individuals who share the shuttle like the concept of shared taxi. SP’s: What is the experience of travellers? Govind: Our service is a boon for the executives as they spend less time on travel to meet their clients. Corporates can save money as outstations executives finish off their meeting at Electronics City or Hosur and return to their home station on the same day. Executives are pleased with the service. Post Script. Traffic jams result not only in the loss of productive man-hours, but also affect individuals at personal and professional levels. A report by Boston Consulting Group for Uber last year estimated that traffic gridlocks in Delhi, Kolkata, Bengaluru and Mumbai costs the economy `1.5 lakh crore annually. Kolkata tops the chart of traffic congestion followed by Bengaluru. It is high time that the Ministry of Civil Aviation implements single-window clearance for future Heli-Taxi operators, online submission of applications, operations below 1,000 ft in well-defined safe heli-corridors, single-engine helicopter operations from roof-top helipads and night landing facilities through low-cost navigational aids. SP SP’S AIRBUZ • Issue 2 • 2019 • 29

technology

Digitization

Giving wings to localized support to drive outstanding customer experience While global presence and cultural alignment play a major role in consolidating support for airline customers, technology plays the role of a catalyst. New technologies and capabilities are consistently being leveraged for delivering exceptional customer experience.

by Mark Felsinger Global Head of Travel Transportation & Hospitality Vertical, Digital Operations & Platforms, Wipro Limited

PHOTOGRAPHs: Wipro

ustomer experience (CX) is the new battlefield for organizations in the digital world. For global airlines, among others, local language contact centers are the key to delivering great customer experience. However, these centers are, by nature, fragmented and mostly supported by their ticketing offices. This significantly increases costs and operational challenges. Fortunately, non-English customer support has witnessed dramatic changes in the recent years. Today, airlines have the ability to match the most exacting standards set by any industry without adding to costs, thanks to the emergence of new platforms, advanced technologies and innovative processes. Among the toughest challenges that global airlines face today is consolidating their customer services. Over the years, as airlines have expanded their footprint globally, they have acquired local customer support centers in different countries and cities. According to a report published by the IATA in October 2018, current trends in air transport suggest passenger numbers could double to 8.2 billion by 2037. Of this, the Asia-Pacific region will account for more than half of the new flyers. These trends necessitate a global contact center strategy for major airlines. The belief that localization of contact centers with language and cultural sensitivity develops customer comfort is true—but the fragmentation of support translates into spiraling property and operational costs, management complexity, inconsistencies in service delivery and the inability to leverage economies of scale. 30 • SP’S AIRBUZ • Issue 2 • 2019

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by Veerender Shukla Global Delivery Head for Travel Transportation & Hospitality Vertical, Digital Operations & Platforms, Wipro Limited

In contrast, English language contact centres in North America, Australia and New Zealand have been considerably simpler to consolidate and centralize. These efforts have resulted in standardization and simplification of systems and processes. The upside of centralization has been consistent service delivery, reduced call volumes and the introduction of new tools and technologies for payments and data protection. Now, Airlines are also forced to match the high bar of customer service being set by other rapidly digitizing industries such as retail, banking and telecom. Many airlines have embraced technologies, such as big data, machine learning, analytics, automation, robotics, blockchain and voice recognition or have them on the roadmap. But deploying them across multiple contact centers can be expensive as well as a painfully slow process. As a result, adoption of these technologies for faster turnaround, reduction in agent errors, extending support across channels, and hyper personalization for improved customer experience remains tantalizingly out of grasp. Fortunately, this needn’t always be the case. Partnerships that drive customer experience. Airlines wanting to consolidate non-English support and transform their customer experience needn’t build everything up from scratch. Instead, they can leap frog by focusing on partners that exhibit three key traits: l Industry Experience: Identify a partner with significant domain strength, consistent delivery and the ability to scale up. l Cultural Capability: Ensure that the partner has gained sub-

technology

Digitization

stantial experience in managing cultural nuances in providing customer services (across multiple industries, such as telecom, financial services and retail) in European and South East Asian regions. l Technological Expertise: Examine the experience of the technology partner in deploying new technologies across industries and in being able to leverage best-in-class practices from these implementations. This includes examples, such as left shift, AI, chat bots, ML, RPA, block-chain, etc. While global presence and cultural alignment play a major role in consolidating support for airline customers, technology plays the role of a catalyst. New technologies and capabilities are consistently being leveraged for delivering exceptional customer experience. These must be made central to the blueprint of today’s support systems: New Distribution Capability (NDC): NDC’s new standards are heralding an almost retail-like experience for airline customers by introducing new ways to bundle third party products, distribute products, manage a dynamic product/services cata-

Among the toughest challenges that global airlines face today is consolidating their customer services

logue and deliver a transparent and seamless travel experience. This has enabled airlines to enhance their ancillary revenues to approximately $90 billion in 2018. Personalization and customization: Acquiring data from global distribution systems (GDS), CRM, social media, loyalty programs, partner programs, etc., and using them to cross-sell and upsell ancillary services (airport pickups and drops, seat upgrades, instant check in, VIP services, gourmet meals, co-branded hotel rooms, mobile phone rentals, etc.) will lead to increased revenues. Better data analytics to create contextualized and personalized responses can elevate consumer experience and retention too. Voice-based assistants: Chatbots, widely used in the banking and insurance industry to offer financial advice at scale, make the perfect technology to provide language assistance to customers 24 x 7 at scale. Chatbots now leverage natural language processing (NLP), artificial intelligence (AI) and machine learning (ML) to answer complex queries—often faster and better than humans. Social Media Management: There is greater emphasis today to listen to customer problems raised across social media. Tools in this area enable better damage control, brand and reputation management. As digital-first disruptors reshape the business landscape, the demand for digital services and operational expertise are on the rise. Executives have recognized that this requires a more ambitious effort—a transformation of the entire customer experience. This calls for a new operating model that puts the customer’s needs and wants at the center of a digital transformation strategy, enabled by redesigned customer experiences and agile delivery of services. SP SP’S AIRBUZ • Issue 2 • 2019 • 31

Finally

Privatisation of Airports The Indian civil aviation sector has been on an impressive growth trajectory over the last few years and is moving forward to become the third largest globally by 2025

PHOTOGRAPH: AERA

rivatisation of airports in India was initiated airports currently operational in the country, the government has in September 2003 under the rule of the then National put construction of airports on fast track with no fewer than 31 Democratic Alliance government headed by Prime Minis- new airports expected to be completed in the next 12 months. ter Atal Bihari Vajpayee. The first airports that were taken The government was keen to privatise 15 airports that are up for privatisation were those at Delhi and Mumbai, the two larg- being operated by the AAI that were making profits. Unfortuest in the country. As per a directive issued by the government, pri- nately, for a variety of reasons, efforts by the government at privavatisation of airports was to be based on the public-private-part- tisation of airports after those at Delhi, Mumbai, Bengaluru and nership (PPP) model and in the Joint Venture (JV) set up for this Hyderabad, have not moved forward at all. The powerful business purpose, the Airports Authority of India (AAI) would hold 26 per houses both national and international, who have the potential cent stake and the remaining 74 per cent stake would be held by to invest in airports in India, have not come forward to invest as the private company in the JV who would be selected through an they perceive a lack of a clear vision on the part of the government open and transparent competitive bidding process. The two major regarding a master plan for development of airports in India. One metro airports at the political and financial capitals of the country of the major concerns of potential investors is that while the govwere privatised only in 2006 after a long and complex privatisa- ernment expects heavy investments by the private sector, the AAI tion process during which several that holds minority stake, contininternational companies pulled ues to exercise overwhelming conout as the goalposts were shifted trol. At the end of the tenure of the frequently. However, privatisation United Progressive Alliance govof Delhi and Mumbai airports has ernment, privatisation of airports proved to be successful models as in Chennai, Kolkata, Ahmedabad, evident from the very high rate of Lucknow and Jaipur were under growth in passenger traffic at these active consideration, but the protwo airports. Subsequently, new posal never came to fruition. In Greenfield airports were developed some cases, the employees unions in the private sector at Bengaalso proved to be a major hurdle luru and Hyderabad that over the to efforts at privatisation of airyears, have also registered impresports. Besides, the procedures are sive growth in passenger traffic. In extremely complex and the whole fact, the second runway with a new exercise is highly bureaucratic terminal at Kempegowda Internawith terms and conditions rather tional Airport at Bengaluru is curlabile and are revised frequently. Chennai Airport rently under construction as the In mid-June 2018, the governinfrastructure currently available ment initiated a proposal to prithere at present is totally saturated. vatise airports such as Lucknow, Ahmedabad, Chennai, Jaipur, The Indian civil aviation sector has been on an impressive Kolkata, Guwahati and Pune. After a period of inactivity, this was growth trajectory over the last few years and is moving forward indeed a step forward in the airport privatisation process. In the resolutely to become the third largest in the world by 2025. In order last week of February this year, in the midst of the confrontation to cope with the rapid growth in passenger traffic and the need to with Pakistan following the air strike against Balakot, the AAI provide enhanced connectivity under the Regional Connectivity declared that the company owned by the business tycoon GauScheme, the government has initiated a massive project to upgrade tam Adani had won the bids to upgrade and operate six airports existing airports as also build new airports. This would entail a total located in Ahmedabad, Jaipur, Thiruvananthapuram, Lucknow, expenditure of about `2 trillion over the next ten years, the bulk of Mangalore and Guwahati. With a prosperous Indian business which as per the expectations of the government, will be contrib- house stepping in, it appears that finally the airport privatisation uted by the private sector. In an interview in the recent past, Jayant process in India is set to take off ! SP Sinha, the Minister of State for Civil Aviation stated “India should — B.K. Pandey have 150 to 200 airports in the next 15 to 20 years”. With about 100 32 • SP’S AIRBUZ • Issue 2 • 2019

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SP’s

Civil Aviation

Yearbook 2017-18 AN INDISPENSABLE REFERENCE DOCUMENT FOR THE FIRST TIME IN THE REGION

Union Minister for Civil Aviation, Suresh Prabhu receiving a copy of SP’s Civil Aviation Yearbook from Publisher and Editor-in-Chief of SP Guide Publications Jayant Baranwal.

Minister of State for Civil Aviation Jayant Sinha receiving a copy of SP’s Civil Aviation Yearbook from Publisher and Editor-in-Chief of SP Guide Publications Jayant Baranwal.

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