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Falcon 7X approved for India

Dassault Falcon is expecting a surge of orders from India following announcement that the French manufacturer has received a type certificate for the Falcon 7X from India's civil aviation authority. Falcon 2000 and 900 models are already certificated in India and around 16 large-cabin Falcons are in service in the country. The first Falcon 7X in India will be delivered in January 2010 to Religare Voyages, a charter company based in New Delhi and part of a multi-billion dollar integrated transnational promoter group straddling financial services, diagnostics, health and wellness, and IT services, globally. Religare Voyages operates a Falcon 2000, together with smaller jets and turboprops.

A dozen of other large-cabin Falcons including several 7X aircraft are on order for customers in India. The performance of the Falcons are especially valued in India, where short airfields, elevated runways and high temperatures are common. Dassault has also established in the last few years a spares centre in Mumbai, along with a customer service team based in Mumbai, a liaison office in Delhi, and service centres approved by the Indian civil aviation authority. "India has been one of our strongest markets over several years so Falcon 7X type certification is of real significance," says John Rosanvallon, Dassault Falcon president and chief executive. "As the country's economy continues to strengthen, there will be an increasing need to connect India efficiently with other major centres of trade around the world. For example, the Falcon 7X provides direct, non-stop access from Chennai, India with London City airport."

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Paramount Airways flying in rough weather

Aircraft lessor GE Commercial Aviation Services (Gecas), an arm of General Electric Co. (GE), has asked India’s aviation regulator to de-register three Embraer jets leased to Chennai-based Paramount Airways Pvt. Ltd, after the airline defaulted on payments for the aircraft. Indian carriers have been under financial strain with at least $1 billion (about Rs4,800 crore) in losses in the fiscal year ended March, resulting in defaults on aircraft payments. Simultaneously, the global economic recession has meant that lessors suffering a credit crunch are pushing hard to extract payments. Last year, Gecas confiscated three aircraft from Kingfisher Airlines Ltd, the country’s second largest private airline, owing to non-payment of dues. In a letter dated 25 September to Paramount and the Directorate General of Civil Aviation (DGCA), Gecas says the airline “has failed to remedy the events of default referred in the notice and as at the date of this notice there still remains $215,540.18” in dues. Paramount has informed DGCA that it has already paid 65% of the sum and has a deposit of about $15 million with Gecas, including a $5 million safety deposit and the balance towards maintenance reserve. “As per the contract, Paramount is entitled to refund to the tune of $1.27 million,” it said. A Paramount official said on condition of anonymity that the airline has asked Gecas “to offset the rentals against the reserves”. He added that the matter is being resolved through talks. Paramount, which has a 2% share in the domestic market, runs a fleet of five leased Embraer jets. It has kept its operations limited and manageable so far, unlike other carriers that have outpaced the local industry’s growth. Gecas has sought back three of these aircraft, leased as part of a 29 July 2005 agreement. Gecas said in its letter to DGCA that it has the option to terminate the leases if Paramount continued to default on payments and operate the aircraft in breach of its grounding notice dated 24 September.

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Cleaning aircraft-cabin air

ONE concern of travellers is that flying can make you ill. Despite soothing reassurances from airlines that the air inside an aircraft’s cabin is as clean as it can be, hundreds of people cooped up in a small space for a long time increases the risk of catching an infection. Viral diseases such as swine flu have spread quickly around the world by air. There are also pollutants to worry about: some airline staff claim to have been made seriously ill by engine fumes leaking into the cabin. A new development could help passengers and crew breathe more easily. It can be fitted during a routine overnight service and uses less power than a light bulb, but is capable of zapping just about all the bacteria, viruses and other biohazards in cabin air—as well as destroying chemical contaminants and pollutants. And it also removes nasty smells.

Staying alive

Air has to be pumped into the fuselage of an aircraft once it flies above 3,000 metres (9,800 feet) because from there the air outside starts to become thin with too little oxygen to keep people alive. In the early days of commercial flight, when piston engines turned propellers, electrical generators were used to provide the power to pressurise the cabin. But with the arrival of faster, higher-flying jets, aircraft-makers found it more efficient to pressurise the fuselage by “bleeding” some of the air entering the compressor stage of the jet turbine (before it is mixed with fuel and ignited). At first only fresh air was taken from the engines. But as jets have become more fuel-efficient, air bled from the engine has been mixed with recycled air from the cabin. This is because the big fans mounted on modern “high bypass” jet engines achieve thrust more efficiently by sending a larger volume of air around the turbine rather than through it. With less air available in the compressor, any that is bled off means the turbine has to work harder, which in turn increases fuel consumption. Typically an airline will strike a balance by using a 50:50 mixture of fresh and recirculated cabin air, although pilots can reduce the amount of fresh air to save fuel. Some are thought to cut it back to only 20%. The mixed air is maintained in the cabin at a pressure which is equivalent to an altitude of 2,500 metres and is passed through what are called high-efficiency particulate arrest (HEPA) filters. Provided they are well maintained, HEPA filters will trap most microscopic particles. But some things can get through, especially tiny viruses. The new AirManager system is said to kill 99.999% of pathogens in a single pass. Even on a short flight of about one hour, the cabin air will pass through the filters around 30 times. David Hallam, inventor of the technology and a director of Quest, says the device works by generating a non-thermal plasma (sometimes called a “cold plasma”) using a high voltage to strip electrons from some of the molecules in a gas. The plasma is confined using an electric field and the cabin air is passed through it. The free electrons disrupt the molecular bonds of any particles in the air, causing them to break up into electrically charged pieces. An electrically charged filter then traps the bits like fly paper. It has tested it with five European airlines that operate BAE’s small regional jet and recently obtained certification for an airline to fit the units to a Boeing 757. “There is a very tangible difference in the quality of air being breathed according to aircrew,” says Sean McGovern, who runs BAE’s regional-aircraft business. The companies will now offer the system to operators of other Boeing and Airbus aircraft. Each unit costs about $16,000. Two are needed on a BAE regional jet and five on an aircraft like the 757. By allowing air to be recycled more safely, the devices could pay for themselves within a year by reducing the amount of engine-bled air that is needed and hence fuel consumption, says Mr McGovern. Another advance that will make flying more comfortable in the coming years is the greater use of carbon fibre, especially by Boeing and Airbus, to make aircraft fuselages. Carbon fibre is stiffer than aluminium, which has long been used to make aircraft, and does not suffer from metal fatigue. One reason cabin pressures are kept low at the moment is to avoid stressing the fuselage too much. The use of carbon fibre will make it possible to pressurise cabins to a higher, more comfortable level. Nor does carbon fibre corrode, so the air inside the cabin will not have to be kept quite so dry—which often leaves passengers with a wrung-out feeling after a long flight. And with recent advances in power electronics, Boeing has decided that it is now more efficient to go back to using electrical generators to pressurise the air in the cabin. This change will start with its forthcoming (and much-delayed) 787, which is supposed to fly for the first time by the end of the year. That will put an end to the trade-off between air quality and fuel consumption. As all these developments start to reach the market, passengers may start checking not just flight schedules and fares before booking a journey but also their airline’s cabin-air quality.

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India's Airline Industry Goes From Boom to Bust...

A few years ago, India's airline industry was flying high. A booming economy made India one of the fastest growing and most competitive aviation markets in the world. Six new carriers launched while established airlines laid on new routes and bought new jets. In the last four years, Indian carriers ordered 400 Boeing and Airbus jetliners worth about $37 billion.

Brace for impact. The global recession has hit air carriers everywhere, but a sharp decline in passenger numbers is especially bad news for India. With oil prices rising to $73 a barrel, Indian airlines — which carry just 2% of the world's passengers — could sustain more than $2.5 billion in losses this year, accounting for one-fourth of the projected $9 billion in losses for the entire industry, according to the International Air Transport Association. Weighed down by overcapacity, debt and the government's refusal to provide bailouts, Indian carriers are being forced to slash their operations and reduce ticket prices. "Indian aviation is undergoing a regime change in just four years," says chief executive officer of the Center for Asia Pacific Aviation.

That change includes deferring aircraft deliveries, cancelling orders, rationalizing routes and trimming staff to stave off financial collapse. "It's going to be tough, but we mean business," says Praful Patel, India's civil aviation minister. At the same time, three of the country's largest carriers — state-owned Air India, and private players Jet Airways and Kingfisher — are trying to attract more passengers by turning their full-service domestic fleets into budget businesses. In January, India's budget airlines fleet totaled 75 jets, compared with 120 full-service planes. The Center for Asia Pacific Aviation's Kaul reckons that by the end of the year, the skies will be dominated by up to 160 low-fare jets as companies switch to budget operations.

Hardest hit by the economic downturn has been national carrier Air India: It reported annual losses of $1 billion in the fiscal year ending March 31, along with an accumulated debt of $3.5 billion; that debt load is expected to rise to $7 billion by 2012 if it takes delivery of 111 new aircraft already on order. Air India alone accounts for 10% of the total projected losses for the global airline industry this year — even though it carries just 0.35% of global traffic. Air India is suffering from an aging fleet and a bloated staff roster of 31,000 permanent employees and 20,000 contract staff; its labor costs amount to 18% of its total operating expense, the highest ratio in the world, according to Patel.

With no bailout help from New Delhi in sight, Air India is bidding to bring its profitable international budget brand — Air India Express — to Indian turf. Air India Express, which has been flying routes to the Middle East and Southeast Asia for the past five years, will configure 10 of its 57 planes for budget flights by September, says Air India managing director Arvind Jadhav. The company plans to increase the number of budget flights a day from 25 initially to 43 by October. Ticket fares will be down 25% making it attractive for fliers. The logic, says aviation minister Patel, "is to fill up seats and operate at lower costs." Unlike its parent, the profitable Air India Express operates as an independent company with lower overheads. Besides, with no business seats they will be able to pack in more people at a time when the passenger count for all airlines is down 30% since last year.

Following similar logic, private players Jet Airways and Kingfisher, owned by the liquor baron Vijay Mallya, are expanding existing budget operations to try to increase business during the economic downturn. They aren't starting from scratch. Both airlines already had rechristened budget carriers — Jet Lite and Kingfisher Red — acquired in 2007. Now they are transferring capacity to the economy fleets. Kingfisher Red jets are flying more routes; as a result, about 75% of all domestic passengers that now fly with Kingfisher are traveling budget class, up from 50% a year ago. Meanwhile, Jet Airways, India's oldest private player, has converted some of its jets by removing all business-class seats and rebranding them as JetKonnect — giving the company two budget brands. "It gives us the flexibility and speed to deploy capacity and reverse it to meet changing trends," said Sudheer Raghavan, chief commercial officer of Jet. Launched in May, JetKonnect offers 40% lower fares and plans to take the current 130 flights a week to 160 by October.

Officials for both carriers say they hope to resume normal operations once the economy rebounds. But analysts say that may be difficult because the industry has yet to solve a basic problem: too many airlines flying too many flights in a country that, despite its economic growth, is relatively poor. India's airlines are now crowding into the budget market, just as they crowded into regular and premium air travel services a few years ago. "With everybody fighting for the same piece of business, this could once again create overcapacity and fuel fare wars," says Ankur Bhatia, executive director of Bird Group, a New Delhi company that provides technology to the travel industry. Lowering fares may attract more travelers but it may not improve the overall financial health of the industry. "To make profits while shifting business models, the airlines have to think, act, breathe and be low cost," Amitabh Malhotra, managing director of investment bank NM Rothschild & Sons in Mumbai. "That doesn't happen overnight." Adds Patel, India's aviation minister: "This time every airline will learn a lesson the hard way."

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India as Global Aviation hub...

India’s aviation industry is in a mess.

Pick up any of India’s main papers and stories abound about India’s airlines losing $2 billion in the last financial year. NACIL, the publicly-owned company that runs Air India is in particularly bad shape. The government has rejected a request for a $3 billion bailout package. Instead, the government wants to overhaul AI’s management within a month and has started the hunt for an experienced chief operating officer. With accumulated losses as of March 31 that total a staggering $1.5 billion, for the first time in its history the airline delayed paying its salaries in June. None of the other large carriers, including Jet Airways and Kingfisher, are faring much better. Those two have taken excess capacity out of the market and reduced overheads. Airport operators, oil companies, hotels and others have either threatened to introduce or already are operating cash-and-carry regimes with carriers that have, in some cases, significantly exceeded their credit limits. The spectacular growth rates of 30% to 40% that enticed airlines to ramp up aircraft orders and to devise unsustainable (but until not too long ago universally followed) strategies of buying market share by discounting tickets and adding capacity are now history.

In such a scenario, is there any chance that India will emerge as a global aviation hub?

Looking at its metropolises, including the megacities of Delhi and Mumbai, India should already sport at least one major global aviation hub. Both cities have populations approaching 20 million inhabitants. Delhi is the country’s political capital and arguably its second most important commercial hub. It also does not suffer from the severe space constraints afflicting Mumbai’s Chhatrapati Shivaji International Airport. In fact, the masterplan for Delhi’s Indira Gandhi International Airport envisages a capacity of 100 million passengers at the end of its development. The capital hosts embassies of most of the world’s countries, international schools, good hotels and entertainment facilities, a rapidly growing infrastructure and, if one includes the satellite towns of Gurgaon and Noida, more head offices of multinational companies than any other city in India. Until today, infrastructure has been a major handicap. Lack of efficient connectivity between the domestic and international terminals made transfers from domestic to international flights (and vice versa) an unpredictable nightmare for passengers and airlines. With the airport’s development and the construction of an integrated domestic/international terminal this problem will be resolved by the middle of next year.

“Capacity reduction is still lagging behind demand.”

However, their poor shape and the relatively small size of India’s airlines compared with majors such as Emirates, Lufthansa or Singapore Airlines — all with their already well-established hubs and route networks — will make it difficult for any desi carrier to assert itself. The merger of Air India and Indian Airlines was conceptually the right way forward. It was aimed at giving the state carrier the size and route network to effectively compete with its domestic and international challengers. Unfortunately, the marriage between the two airlines was never properly consummated and hardly any of its envisaged synergies have materialized.

So what should India’s aviation industry do to extricate itself from this mess?

To begin with, the airlines will have to start addressing the problems that they themselves have caused. This process has already started with Jet and Kingfisher deferring orders for new aircraft, mothballing new deliveries or, where possible, leasing or selling them to foreign carriers. In short, with the exception of some of the low cost operators, a significant amount of capacity has been taken out of the market. Jet has transferred much of its remaining capacity to its economy-only Jet Konnect product as well as to its low cost subsidiary JetLite. Kingfisher has followed the same strategy by shifting passengers onto its no frills Kingfisher Red product. On another front, a truce in the price wars has yet to be reached. Yet capacity reduction is still lagging behind demand. With all airlines chasing bums on seats, charging prices that will cover costs and hopefully leave a margin for profit remains difficult in such a hotly-contested market. We will surely see more consolidation or bankruptcies in the medium term. This is precisely an area where the government should step in. Before the elections, the Ministry of Civil Aviation contemplated allowing up to 49% foreign domestic investment in domestic airlines. This would include foreign airlines as potential investors – something that is currently explicitly prohibited. It seems obvious that in an industry where average profit margins do not exceed 1.5%, the most likely investors would be other airlines seeking to strengthen their market position, increase their route network or realize economies of scale. Since the elections, however, nothing more has been heard of this proposal.

Another deterrent: The cost of fuel, which in India is among the highest in the world. At current prices, fuel accounts for 45% to 50% of operating costs in India. While the central government has instructed the public-sector oil companies to provide generous credit terms to the airlines, it could do more by naming fuel a declared good which attracts a uniform 4% sales tax.

At present, it is up to individual states to charge fuel taxes as they see fit. Some of them are charging well over 30% – a figure that keeps on rising in absolute terms as fuel prices go up. Internationally, aviation fuel does not attract any levies in many major markets. For India, this means a distorted market, putting its carriers at a relative disadvantage especially on international routes and making technical or fuelling stops in India for international carriers non-viable.

Furthermore, service tax and other levies have been a bone of contention between the airline industry and the government. A review and streamlining of the entire tax regime would surely be a sensible thing. Getting the fundamentals right is obviously a prerequisite for the establishment of a successful hub. To date, India has been fairly liberal in its approach to so-called bilateral agreements which regulate how many flights and/or to which points carriers from two contracting countries can serve. This is a good thing. An open bilateral regime stimulates competition and traffic growth as the examples of Singapore and Dubai have shown. It is also instrumental in bringing down the cost of travel and promoting economic growth.

For the sake of its national economy, the current plight of the national carrier should not discourage India from keeping its aviation market open. Instead, liberalization should be used as a tool to make its industry more competitive and its national carrier a leaner, more focussed and especially a more customer-centric organization.

Air India has taken a couple of encouraging steps. It has selected a European hub at Frankfurt, its first outside India. It is phasing out its unreliable fleet of old B777s and B747s. It has been selected as a member of the Star Alliance and is in the process of joining. That will give Air India a greater reach into the coveted U.S. market in addition to its flights from India. It is through its alliance membership that Air India could widen its appeal and route network from India to the rest of the world.

Overall, India either has or is building the necessary ingredients for establishing a successful aviation hub, most likely in Delhi. But to fulfil that promise will require a broader partnership involving alliance partners, regulators, airport operators and local authorities to overcome the many hurdles that remain.

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BJETS delays aircraft deliveries as economic crisis bites

Asian fractional ownership firm BJETS has asked manufacturers to slow the delivery of the business aircraft it has on order due to the ongoing economic crisis.

The company, which is backed by USA-based investment firm Briley Group and Indian Hotels, operator of the Taj brand of luxury hotels in India and part of the Tata Group conglomerate, ordered 20 Cessna Citation CJ2+s, nine Hawker 850XPs, 11Hawker 900XPs, and 10Hawker 4000s last year. It had planned to take delivery of all the aircraft within five years.

However, it had only five aircraft in its fleet at the end of 2008, down from the seven it envisaged, says chief executive Mark Baier. BJETS will have 11-12 aircraft by the end of 2009, below the 15 it originally targeted. Several will be managed aircraft, he adds.

"Clearly, it is a smaller business than what we envisioned a year ago. But that is expected given the economic climate and tight credit situation," says Baier. "We began to talk to the manufacturers about delaying deliveries just before the stock markets crashed and as demand faltered. That was a good move as we can now manage the delivery schedules better."

The company, which places jets in Singapore for the South-East Asian market and Mumbai in India for south Asia, has attracted some fractions since it began operations last September. While its block charter and traditional charter businesses are slowly growing as well, BJETS is also moving into the aircraft management business.

"We did not expect so many owners to turn to us for quality management services. We will begin to manage several aircraft this year," says Baier. "The charter business is holding up. Some companies and top executives are shelving or delaying plans to buy business jets, but they still keen to on the idea and so turn their interest to the charter market."

BJETS is also trying to offer value added services. In India, for example, it has an agreement with helicopter operator Global Vectra Helicorp - which has seven helicopters available for charter - to provide access to destinations in the country without a landing strip.

"This association will strengthen our product offering in terms of accessing more destinations that do not have a landing strip but offer a helipad. While BJETS can access over 120 airstrips in India already, our partnership with Global Vectra will enable our customers to fly to all those destinations that cannot be reached by other aircraft," says Baier.

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