Vistara, which is on track with its fleet expansion plans, received its 8th Airbus A320-232SL at Toulouse. The aircraft, registered VT-TTI and bearing manufacturer serial number (MSN) 6785, is flying from Toulouse to Delhi via Ras Al Khaimah International Airport (UAE), where it will stop for refuelling before continuing to Delhi.
This 8th aircraft, along with the recently accepted 7th aircraft (VT-TTH) will allow the airline to either expand or strengthen its network. The timing of the airplanes is good – allowing the airline to build capacity for the peak season – the months of October, November, December, and part of January.
The airline’s 9th aircraft is expected in the month of November. The airline will close calendar year 2015 with a fleet of 9 aircraft.
Vistara today flies to 11 destinations, with the 12th destination – Varanasi – being added on the 21st of October. All 8 airplanes will be flying 21st October onwards.
The airline, with the 8th aircraft, has the capacity to deploy an additional ~6 flights. Offering a morning BLR-DEL and an evening DEL-BLR is important to raise the appeal of the airline’s network. It will not be surprising if the airline adds a pattern that flies BOM-BLR-DEL-XXX(perhaps VNS?)-DEL-BLR-BOM, to offer its customers better connectivity to BOM and DEL from BLR.
The airline, which has flown nearly 6,50,000 passengers till end September 2015, is expected to cross the 1 million passenger mark by December 31st, 2015, considering the peak season and the addition of capacity with three new airplanes.
Vistara, India’s newest pan-India airline, took the trouble to prepare a report on the aviation sector in India, highlighting the numerous areas in which India can and must improve. The report also concluded that Indian aviation is blessed with undeniably strong fundamentals such as:
A large and fast growing domestic market with potential for sustainability.
A strategic location (geographic) enabling hubs / transit points for key international routes.
An abundance of tourism potential.
A strong technical and skilled workforce that can support aviation in various functions.
A traditionally service-driven culture, which augurs well for the hospitality industry.
The report went on to state that India is not a global aviation power today despite many such favourable characteristics because of poor decisions that have actively hindered the country’s aviation sector’s growth and competitiveness.
Key Take-aways, as summarized by the Vistara communications team:
1. Criticality of Aviation Sector
Aviation contributes to around 5% of GDP in leading global markets
3 billion people or 40% of the global population fly vs. low 1-2% penetration in India
Annual per capita seats in India are a quarter of China, Indonesia, Thailand
Aviation drives 27% of UAE GDP; 5.4% of US GDP
Aviation is growing rapidly in India; incremental passengers this decade was 3 times in previous 50 years
2. Potential of Indian civil aviation sector
Annual contribution of USD 250 billion to Indian economy by 2025
Employment creation to multiply 10 times to 2.3 million by 2050
Number of domestic passengers to grow 17 times to 1.1 billion by 2050
Number of international passengers to grow 10 times to 500 million by 2050
Domestic freight to increase eighteen times , and International freight more than eight times by 2050
Number of aircraft to multiply by 14 times to about 5600 by 2050
3. Policy Measures Required
1. Cost of doing business
Duties make ATF, which can constitute 30-35% of operating costs, 45% more expensive in India
Removal of sales tax will reduce ATF costs by 20% thus reducing operating costs by 7%, and stimulating air travel by around 8-9%
High taxation on MROs makes it cheaper to send aircraft abroad for maintenance, going against “Make in India” vision
Aeronautical charges are amongst the highest in the world
2. Ease of doing business
4 months in US vs. 90 days in UAE vs. more than a year and 10 agencies in India for getting an AOP
Simplification of RDG
3. Liberal Aviation regime
5/20: discriminatory to Indian airlines; impacts airlines’ risk mitigation and operational efficiencies
Indian airlines only use 26% of their bilateral rights
4. Invest in airport infrastructure, airspace management and skill development
Airport capacity shortage looms in 5 years
Additional airport capacity of 90 million passengers will be required each year from 2030 i.e. equivalent of Delhi and Mumbai airports combined
5. Focus on Safety
Access to expert and trained, fit-for-purpose resources are critical for DGCA
Air Pegasus, which started operations mid April and now has a fleet of 2 ATR 72-500s, is impacted by shortage of crew to fly its aircraft.
The Bangalore based airline, which in August announced a second frequency to Hubli, to allow for a day return for passengers from either city, has not yet operated the morning 7:05 Hubli flight since 20th August 2015, effectively serving just one flight either way, each day. The airline isn’t yet accepting bookings for the morning Hubli flight.
The airline has reportedly stopped operating flights to Cuddapah since a significantly long time. The airline is next open for bookings to Cuddapah only on the 11th of October. Air Pegasus inaugurated the Cuddapah airport, and was the only operator flying to the city. It operated the first flight to the city on 7th June, 2015.
Crew shortage is preventing the airline from both operating scheduled flights as well as expanding or strengthening the route network. Cancellation rates at the airline, which started at 0%, started increasing month on month to touch the airline’s high of 5.81% in the month of August.
Air Pegasus presently operates two ATR 72-500 registered VT-APA and VT-APB, both ex-Kingfisher ATR 72s leased from Elix Aero. The airline is presently scheduled to operate 16 flights a day (except Tuesdays), of which it currently operates only 12 – 14 flights a day. The maximum present daily aircraft utilisation is 10:50 hrs, and an average of 8:10 – 9:15 hrs per aircraft per day. Till the 31st of August 2015, the airline had flown 40,930 passengers with an average load factor of 75%. The average distance flown per flight is 435km, and the average block hour duration is 1:20 hrs per flight.
Air Pegasus is one of 5, 70-seat turboprop operators, and one of 4 ATR 72 operators in India. Trujet and Air Pegasus are the only two scheduled airlines in India to operate an all ATR 72 fleet.
Operational exigencies are common and happen to every airline. Last evening, one of AirAsia India’s five aircraft, registered VT-BLR, Airbus A320-216 (bearing serial number 4070 manufactured 6 years ago), while operating I5 1321 – the Goa to Bengaluru flight – returned to Goa immediately after departure, as it reportedly suffered an engine bird strike on departure. The aircraft returned safely to Goa, where it remains grounded at the time of writing.
A second aircraft, VT-ATB presently based out of Delhi, operated I5 2327, the scheduled Delhi-Goa afternoon flight. On landing at Goa, it operated 1321 – the Goa – Bengaluru flight. The aircraft later performed a late night ferry (non-commercial flight) from Bengaluru to Goa, and then carried the Goa-Delhi passengers, landing at Delhi at nearly 3:30am.
VT-BLR’s temporary grounding had affected the airline’s network. The previous night’s Bengaluru-Vishakapatnam-Bengaluru and Bengaluru-Cochin-Bengaluru flights, which were to have been operated by VT-BLR, were delayed by around 3 hours and 1 hour, respectively, as other aircraft (VT-ATF, VT-JRT) had to operate these flights after finishing their usual patterns. The pattern of only one of five aircraft: VT-RED based at Delhi, was not affected.
As a result of VT-BLR’s grounding at Goa, today morning’s Bengaluru-Jaipur-Bengaluru (I5 1720/1721), and the afternoon Bengaluru-Goa-Bengaluru (I5 1320/1321) have been cancelled, while the evening Bengaluru-Jaipur-Bengaluru (I5 1722/1723) flights have been delayed by at least 2 hours.
Training flights on VT-JRT at Bengaluru’s HAL airport, conducted last night, were not affected.
The aim of this entry is to study how the airline handled an incident, and the effects of such an incident on the network, and not to comment on or judge its ability or methodology.
Edit (30th Sept): Edited to include the first flight of the first production A320NEO, which is destined for IndiGo. Edit includes a confirmation of a Space Flex cabin.
Indian domestic market leader IndiGo’s first Airbus A320 NEO (New Engine Option) – part of the July 2011 order for 180 aircraft, has rolled out of the Hamburg (Germany) final assembly line fully painted in the airline colors, but without the Pratt & Whitney Geared Turbo Fan (GTF) Engines. This is the third such airframe of the airline. Two have no engines fitted. The cabin has not been fitted yet.
MSN 6720, destined for IndiGo, first flew on September 25th at Toulouse, France. The aircraft fuselage has however not been painted in the airline’s colors, but the wings are in the airline’s markings. MSN6720 is the 6th NEO to be produced, and the first ‘production’ NEO. The to-be Indian Registration of MSN 6720 is yet unknown, but will likely be the first A320 NEO for IndiGo.
A320-271N MSN 6744, which is expected to be registered VT-ITA, is the 7th NEO produced, and likely the second for IndiGo. A320-271N MSN 6799, to be registred VT-ITC, is likely IndiGo’s third A320 being assembled at the Toulouse (France) final assembly line, and is the 9th NEO to be produced. All Airbus A320 NEOs that IndiGo will accept will be powered by the Pratt & Whitney PW1127G engines.
The same engines had a problem with a clip holding seals inside the engine. This had caused concerns on the NEO program schedule, which has invariably slipped a bit. However, launch customer Qatar Airways expects to receive the first aircraft by the end of the calendar year. Interestingly, Qatar’s A320 NEO is MSN 6772 – the 8th NEO – which means it is later down the assembly line sequence when compared to IndiGo’s 6744 and 6720.
The NEOs rely on the sharklets and new, ultra-high bypass geared turbofan engine technology to together deliver fuel savings of upto around 15% (over and above today’s CEO A320’s without sharklets) . Such high fuel savings will however be realized only on very long flights that approach the maximum range of the airplane.
Airbus’s “Space Flex” concept allows airlines to increase the seating capacity of the Airbus A320 (both current engine options (CEO) and NEO) to 189 seats, without compromising on seat pitch and comfort. This is achieved by moving the two rear lavatories closer to the bulkhead, eating into the galley space. This makes more sense to no frills carriers which do not carry much meals on board. The space for service trolleys in the aft galley of the aircraft reduces from 7 to 3. The space where the aft lavatories were fitted are replaced with 1.5 rows of seats.
This increase in number of seats reduces unit costs by 5% to 6%. It is not known if IndiGo will adopt the space flex concept yet. No physical changes to the emergency exits are required. However, opting for a mix of 189 seat and 180 seat A320s may reduce operational flexibility for the airline. Opting for a higher capacity however seems inevitable.
IndiGo is believed to have opted for the Space Flex cabin, but details on when it will appear are not known.
Last week, at the same time that I was visiting the Airbus A330 and A380 final assembly lines (FALs) at Toulouse (as part of my Aerospace and Aviation MBA program, which also included a visit to the ATR FAL) , the site “The Flying Engineer” crossed an important milestone.
This milestone is significant considering the audience that the website caters to. It started by catering to serious aviation enthusiasts, pilots, and engineers. Along the way, realisation dawned that it isn’t the aircraft that makes an airline successful. It’s how the aircraft is used that makes the airline successful.
This realisation made The Flying Engineer broaden, and eventually shift focus from pure technical to airline commercials and operations. How is it that in the same country a few airlines are profit making while the rest are loss making? How is it that one aircraft that is profitable for one airline in one part of the world is loss making for another airline?
It boils down to management – the depth of management. Analyses – of airlines’ performance and the mindset of the management and/or promoters is key to understanding the future of the airline.
The audience base has grown to include airline heads, promoters, aircraft manufacturers, and lessors.
With such a niche audience base, and serious insightful content that puts most to sleep, views are limited, and crossing 1 million views in 4 years is a significant milestone. The country generating the highest views are the United States of America and India. UK, Canada, France and Germany make it to the top six.
Weak Unit Revenues at INR 2.88/seat-km (operational) and INR 3,702 per passenger.
INR 1,380 per passenger short of operationally breaking even.
Unit operational costs increased by 12% to INR 3.93/seat-km compared to Q4FY2015.
Increase in Airport Costs due to Delhi operations largest contributor to increased unit costs.
Silently launched its second Bengaluru-Vishakhapatnam frequency on 14th August.
Average utilization goes upto 13hours per aircraft per day.
Highest average stage length and very high average cargo uplift per flight.
Ancillary percentage of revenue increases, on par with IndiGo’s.
Loss in Q2’16 forecasted, hopes of operational break-even only in Q3’16.
AirAsia India, an associate company of AirAsia Berhad, which owns 49% of the joint venture with Tata Sons and Telstra Tradeplace, reported an after tax loss of INR 44.1 crore for the quarter ending June 30th, 2015. The airline realised an operating loss of INR 41.8 crore in the same quarter. The first quarter is traditionally a season of peak domestic travel demand.
The airline realised an operational RASK (Revenue per available seat kilometre) of INR 2.88/seat-km, which is only 5% better than what was realised in Q4FY2015. The fourth quarter is traditionally a season of low domestic travel demand.
The airline realised an operational CASK (Cost per available seat kilometer) of INR 3.93/seat-km, which is 12% higher than what was realised in Q4FY2015.
The largest increases in unit costs were due to increases in unit maintenance costs (an increase by 105%) and unit airport costs (an increase by 175%). Increase in unit airport costs contribute to 65% of the airline’s increase in operational CASK. This is due to the airline operating from Delhi’s T3, where AirAsia India may not enjoy the same cost waivers and benefits it enjoys at Bengaluru airport. Maintenance of the aircraft occurs at Hyderabad Shamshabad’s MAS-GMR facility, which requires empty aircraft (non revenue flights, ferries) to be conducted, which is a source of cost. The opening of Delhi base may have contributed to the increase in maintenance costs.
Fuel expense of INR 1.28/seat-km is similar to what was realised in Q4’15, and similar to the unit fuel costs of SpiceJet in Q1’16.
Due to the larger fleet size and 47% increase in capacity (in ASK) deployed in Q1’16 over Q4’15, unit staff costs have fallen by nearly 10%.
Unit lease costs have very slightly gone up, perhaps due to the two additional A320s in the airline’s fleet not being fully utilised for the first couple of weeks of opening the Delhi base.
Other operating expenses went up 21% on a unit basis.
Overall, starting operations from Delhi has negatively impacted the airline’s costs, largely due to higher airport charges and the absence of benefits at the GMR airport.
In the quarter, the utilisation of aircraft was not to the fullest. Delhi operations started midway into the quarter, and Imphal and Vishakhapatnam operations started later in the quarter. On 14th August, AirAsia in total silence launched its second Bengaluru-Vishakhapatnam frequency (we had talked about this exactly 4 months earlier), increasing the average aircraft utilisation to 13 hours. As utilisation of the assets get better, certain costs are expected to go down. With sales tax on fuel at Vishakhapatnam at only 1%, AirAsia India tankers fuel from Vishakhapatnam to Bengaluru, for the next flight – Bengaluru to Cochin. While these common cost saving measures are good, the increase in unit airport charges may be concern.
Launching of new routes, and launch promotional fares are believed to have impacted unit revenues.
The airline realised an average fare per passenger of INR 3,350 per passenger, which is 16% more than Q4’15. Ancillary revenues have increased to INR 352 per passenger, 60% higher than Q4’15. Ancillary revenue, as part of total operational revenue, has increased from 8% in Q4’15 to 10.6% in Q1’16. 10.6% is similar to IndiGo’s percentage of ancillary revenue to total operational revenue.
AirAsia India’s per passenger revenue was nearly INR 1,380 short of operationally breaking even.
Cargo carried by the airline in the quarter was a very high average of 1,074 kg per flight, which is the second highest for a LCC in India, after Go Air. IndiGo on average carried an average of 615 kg of cargo (freight and mail) per flight.
The average stage length at AirAsia India was 1,150km, which is the highest amongst LCCs in India.
Loss compared to IndiGo
The total loss incurred by AirAsia India, after tax, on Q4’15 and Q1’16 – two consecutive quarters – is INR 63.1 crore. This includes one lean and one peak season, and witness the airline culling one route (Bengaluru-Chennai), and the addition of 5 routes (Delhi – Goa/Bengaluru/Guwahati, Guwahati-Imphal, and Bengaluru-Vishakhapatnam).
In the first financial year of its operations (FY2006-07), in which IndiGo operated for only 7 whole months, IndiGo reported a loss of INR 201.8 crore. This works out to INR 101 crore for 2 quarters.
In the second financial year of operations (FY2007-08), IndiGo reported a loss of INR 234.7 crore, which works out to INR 117.35 for two quarters. While a comparison between an airline that was far more aggressive in its fleet induction and started 9 years ago is both unwise and incomparable, it is used to get a very rough (caution: may be misleading) idea of the kind of losses one may expect in two consecutive quarters.
The airline’s CASK is expected to stabilise at lower levels moving forward. However, the improvements that may be expected are not very significant. Operational CASK may fall by only around 4-5% to around INR 3.75/seat-km (for a fleet of 5 aircraft), but may remain higher than the CASK SpiceJet today enjoys. With such a CASK, AirAsia India may report a loss in Q2’16 (Quarter ending September 30th 2015).
With unit revenues that are yet to pick up, any hope for an operational breakeven rests in Q3’16 (Quarter ending December 2015). Deploying the 6th aircraft for Q3 is necessary to increase the chances of an operational break even.
The airline today flies 34 flights a day to 10 destinations with 5 airplanes.
The airline is expected to receive only one additional A320 in the calendar year. AirAsia India is expected to close the calendar year 2015 with a fleet of 6 airplanes.
A new civil aviation policy (CAP), if favourable to AirAsia India, may see the airline quickly scaling operations. A massive change in policies, however, seems unlikely.
AirAsia India’s cost performance is not bad in the context of a small airline starting a large number of new routes in the quarter. Certain performance indicators in cost and ancillaries show promise. However, unit revenues are very weak. Poor unit revenue performance is expected to continue in Q2’16, with a hope of operational break-even only in Q3’16.
Among all airlines to have started operations with mainline jets (Airbus A320 or Boeing 737 aircraft), AirAsia India’s growth (in terms of passengers flown) has been better than only GoAir’s. While GoAir’s average aircraft fleet in the first year of operations was higher than AirAsia India’s, but flew with poor load factors.
Air Deccan is not considered as the airline started operations in October 2003 with 48 seat ATR-42 aircraft and inducted its first Airbus A320 only in July 2004 – 9 months after starting operations.
Until the issue of flying international is resolved, AirAsia India may induct just one other Airbus A320 into its fleet by the end of the calendar year 2015, taking the total fleet size to 6. Vistara will however induct 3 more to take the total fleet size to 9 aircraft by the end of the calendar year.
Vistara’s total passengers flown at the end of the fifth full month of operations (June) is slightly better than what Kingfisher flew in the corresponding period.
Vistara may have flown close to 450,000 passengers towards the end of July 2015, since start of operations. The airline is expected to fly its 500,000th (half millionth) passenger during the second or third week of August 2015.
In a previous piece, The Flying Engineer had estimated the operational profit of SpiceJet to lie in the INR “around or less than between INR 80 – 110 crore” range. The airline realised an operational profit of INR 70.7 crore. With the results declared exactly a week ago, we shall analyse the actual performance of the airline in Q1 FY 2015-16 (Q1’16).
We first start with costs, as an airline usually has a better grip on costs than revenues. Capacity is measured in seat-kilometres (Available Seat Kilometre – ASK), and costs and revenues, from operations, are referenced to unit capacity. We compare Q1’16 with the same quarter in the last financial year – Q1’15.
Average fuel price in Q1’16 was 28.4% lower than that in Q1’15. The fleet had also shrunk from a Bombardier Q400 : Boeing 737 ratio of around 1:2 to 1:1.3. This impacted fuel costs positively. Due to this ratio, a larger portion of the fuel burn was realised by the Q400s, which enjoy a flat 4% sales tax on fuel, as against as much as 28% sales tax in some airports, applicable to the Boeings. With operations being dominated more by the Q400s, which fly routes much shorter than the Boeings (upto 85% shorter routes on the domestic network), the average stage length had reduced, leading to an increase in the number of departures per unit capacity. More departures and hence landings per unit capacity translates to a higher fuel burn, but this was offset by the Q400’s lower fuel price and perhaps better fuel saving techniques employed at SpiceJet. Unit fuel costs fell by 30.3% despite fuel prices falling only 28.4%.
The changed turboprop : mainline jet fleet ratio also affected lease costs. The Q400s are owned, and hence no lease is paid for such airplanes. As a result, the lease costs of the Boeings (including the wet leased Boeings and Airbuses) were diluted over a capacity that was generated in a larger part by the Q400s. Unit lease rental costs fell by 12%.
Poor on time performance and increased cycles per unit capacity may have led to increased airport charges, though the Q400s do enjoy landing and navigation charges benefits. It is also possible that there may have been an increase in landing, navigation, other airport charges, in flight & other passenger amenities by authorities. Unit airport charges rose 14.8%.
Aircraft maintenance costs were dominated in larger part by the Q400s, which were also utilised higher. The US Dollar strengthened 6.1% against the rupee, which would have led to increased costs. Maintenance costs for each Boeing are expected to have remained largely unchanged. Unit maintenance costs rose by 14.9%.
The quarter witnessed no significant aircraft re-delivery activity, which dropped unit re-delivery expenses by 90.4%.
Other operating costs rose by 45.7% per unit.
Unit employee expenses were impacted by both having a smaller capacity, and the hike in salaries to crew to stop pilots from leaving the airline. This resulted in unit employee expenses rising by 25.5%.
Depreciation and Amortisation expenses are largely dominated by the Q400s. With lower capacity, this expense was rose on a unit basis. Unit Depreciation and Amortisation costs rose 36.2%.
Other expenses, which include a wide variety of costs including hotel and accommodation expenses for crew, dropped by 16.3% on a unit basis.
Overall, unit costs dropped by 12.8%, aided largely by the absence of significant re-delivery expenses and the steep fall in fuel prices. The airline has scope to further streamline costs in at least three areas, with the other areas being out of the airline’s control. When streamlined, either through practices or scale, unit total operational expenses may further fall by 4.3%. With the present scale of operations and in the present environment, this translates to INR 45 crore.
The cost structure at SpiceJet, Q1’16 v/s Q1’15 is shown below:
SpiceJet’s revenues were adversely impacted by lower airline capacity, poor on-time performance, and increased competition leading to lower prices. The first two factors may have made the airline lost high paying, time-sensitive and last minute (D0-D7) passengers. In the 13 month period June’14 to June’15, SpiceJet had the lowest OTP amongst private airlines for 9 months. Further, the cargo carried by the airline on a unit basis dropped by 4.9%, perhaps on account of Q400s dominating a larger part of the capacity. Unit sales fell by 1.1%.
Other operating income rose by 56%.
In total, operating revenues fell by 1% on a unit basis.
(If the Q1’15 P&L statement was not re-classified, unit revenue would have fallen by 2% during the comparison)
Per passenger Revenues
In Q1’15, the sales per passenger (includes ancillary revenue) was a good INR 5,006 per passenger (at re-classified P&L figures). In Q1’16, the the sales was INR 4,215 per passenger. This represents a drop of 15.8% in the sales per passenger.
Usually, a drop in the sales per passenger should not be a concern if the airline flies more passengers. However, a drop in net sales per passenger per ASK (the first number in the unit revenues and cost graph above) is a cause for worry. The drop was INR 0.05/seat-km). This shows that sales per passenger has dropped to a level that overall leads to lesser revenue despite very high load factors.
To put things in perspective, the below graph shows the per passenger sales required to achieve the same net sales from operations, with varying load factors. For example, flying with load factors of 55% at INR 6,939 sales per passenger will generate the same sales as flying 90% load factor at INR 4,240.
In Q1’16, SpiceJet had load factors of 90.5% (Domestic + International). In Q1’15, SpiceJet had load factors of 79% (Domestic + International). If SpiceJet was to have realised the same revenue in Q1’16 with only 79% load factors,the airline would have needed a per passenger sales of INR 4,833. However, the airline in Q1’15 (same quarter, last year) had a per passenger sale of INR 5,006.
This means that had SpiceJet flown with Q1’15 load factors and per-passenger sales, would have realised an increase in sales of 3.6% or INR 39.53 crore in Q1’16. This shows that increase in load factors does not always imply an increase in either Revenue per seat kilometer (RASK) or total revenues.
To have realised this additional INR 39.53 crore, SpiceJet should have generated sales of INR 4,366 per passenger (+INR 151) in Q1’16 at 90.5% load factors.
Of course, unit revenues (RASK) is the most reliable method of gauging performance. But, in the case where RASK falls, the argument above is used to show that the load factor game must be played carefully.
The above argument does not consider the fact that per passenger sales and/or RASK (RASK and per-passenger sales are not directly comparable) can be safely reduced when per passenger costs and/or CASK also reduce. Ultimately, profit is driven by the difference of revenues and costs, and not determined by either revenues or costs alone.
Unit operating profit rose by 201%, despite a fall in unit revenues, largely due to a fall in costs. Fuel today accounts for 35% of the SpiceJet’s operating expenses. Last year, for the same quarter, fuel accounted for 43% of SpiceJet’s operating expenses. If aircraft fuel prices were at the 2014 April-June levels, the airline would have flown into the red.
Had the airline maintained the unit revenues (RASK) of Q1’15, the airline would have generated an additional INR 11.4 crore over the Q1’16 operating revenue of INR 1,106 crore.
Other income at the airline was INR 26.7 crore, against INR 28.9 crore in Q1’15 (re-classified).
Finance Costs in the airline was INR 25.5 crore, against INR 48.7 crore in Q1’15
Profit before tax
In Q1’16, other income (not from operations) and finance costs are almost equal, cancelling out each other. This makes profit in Q1’16 solely due to operating profits, unlike the Q4’15 quarter (ending March 31st 2015) where the airline stepped into profits due to the insurance payoff. Operating loss in Q4’15 was INR 102 crore. Operating loss before depreciation and amortisation expenses was INR 72 crore.
Hot and Spicy or Red?
The Hot and Spicy part is the reduction in finance costs. The Red part in in the operational costs and revenues. Overall, the airline has the potential to perform much better, and hence we’d consider the performance Red, despite the profit. The turnaround has started, but the airline is not yet ‘there’. Costs have to lean and revenues must grow. Good on time performance (OTP) is key. As seen above, sale per passenger and RASK have taken a hit, perhaps largely due to the poor OTP of SpiceJet, and in part due to competition.
Comparison to Estimate
In the estimate of SpiceJet’s Q1’16 performance (click here to read), our estimate of total operating expenses was lesser by 0.26%, while our estimate of revenue from operations was higher by 1.67%. Changes in accounting practices (re-classification, as declared in the Q1’16 financial results) have also impacted the estimate errors. The lower or our estimate of the airline’s operating profit was higher than the actual by 13%. Below is the comparison:
Hyderabad based TruJet, brand name of Turbo Megha Airways Private Limited, is India’s 9th operational private airline, the country’s third operational regional scheduled domestic airline, and the country’s second all-turboprop, operational airline.
Turbo Megha Airways Private Limited was incorporated in March 2013, by three persons: Vankayalapati Umesh, Ram Charan Tej Konidala, and Ram’s sister, Sushmita Laggishetty.
46 year old Umesh, who serves as the Managing Director (MD) of the airline, rose from a ground-handling technician to running Turbo Aviation, which includes a jet charter company ‘Turbo Charter’ that owns a Cessna CitationCJ2. Turbo Aviation also offers ground handling services, CAMO services, and MRO Services.
30 year old Ram Charan is a Telugu Actor, and a director of MAA TV and reportedly owns Hyderabad Polo Horse Riding club. He and his older sister Sushmita are two of three children to 59 year old actor, producer, and Indian National Congress politician Konidela Siva Sankara Vara Prasad alias ‘Chiranjeevi’.
The company had an authorized share capital of INR 15 crores (INR 150 million), which was 3 Crores more than the minimum paid up capital requirement for an airline operating turboprop aircraft of the likes of ATR 72 and Q400, or regional jets like the Embraer E170, 175 and CRJ 700 and 900. Seating capacity was hence limited to the 70 – 90 seat category.
In May 2013, the airline pumped in INR 7 crores as capital, followed by another 5 crores which took the total paid up capital to 12 crores in July 2013 – sufficient to satisfy the DGCA requirement for the application of a regional permit.
In July 2014 – a year later, the airline received its no objection certificate (NOC) that allowed the airline to start the process towards obtaining an air operator permit (AOP). The formal application meeting for a southern regional AOP was held on 23rd January 2015.
In April 2015, the authorized share capital of the airline was increased to INR 50 crores, which can allow for a paid up capital of the same amount – the amount advised by the DGCA. This also allows the airline to apply for a pan-India license with larger airplanes.
In May 2015, Prem Kumar Pandey, Assistant Vice President at Megha Engineering & Infrastructures Ltd (MEIL), was appointed as a director, with investment from MEIL. 29 year old Prem is the son-in-law of one of the promoters of MEIL. ‘Megha’ in the registered name Turbo Megha Airways Private Limited indicates that investment from MEIL was certain way back in 2013.
Shareholding pattern in the airline is believed to have been restructured to stand as 22%-26%-52% between Umesh – Charan & family – MEIL, with access to around an additional INR 100 crore.
The airline received its first of two ATR 72-500 aircraft on 21st May 2015. The aircraft had earlier flown for the Malaysian airline and charter operator Berjaya Air. The 6 year old aircraft MSN 858 is registered VT-TMK, and the cabin is laid out with 72 seats. A month later, the airline received its second ATR 72-500 (MSN 875). After Berjaya shut turboprop operations, both aircraft were purchased by Singapore based Phoenix Aircraft Leasing, and were sold to Ireland based Elix Aviation Capital Services in December 2014. Elix has dry-leased the airplanes to TruJet. The same lessor has leased airplanes to Bangalore based Air Pegasus, which is a smart move as it helps transfer assets between operators should either shut operations.
The airline received its AOP on 7th July 2015, less than a year since obtaining its NOC, and around one-and-a-half months since receiving its first aircraft, making it the fastest regional Indian airline to obtain its AOP. Turbo Aviation’s experience with running a charter service which resulted in good preparedness, and the airline’s connections in the ministry are believed to have speeded up the process.
Trujet is an interesting name considering the airline operates turboprop aircraft for now. However, it must be borne in mind that a turboprop engine’s core is a jet engine.
According to the airline, ‘Trujet logo is inspired by the national bird of India peacock and represents all that the TruJet service aspires to be— graceful, joyful and luxurious. The logo also conveys attributes of service, professionalism, sophistication and, importantly, the airline’s Indian roots.’
Network, Operations & Competition
Usually, airlines take about a week to open for bookings once the AOP is received. Once bookings open, an airline starts operations usually 2-4 weeks thereafter. This allows sufficient bookings to build up before operations can commence.
In the case of Trujet, the airline wanted to cash in on the Pushkaram festival, an Indian festival dedicated to worshiping of rivers, once every 12 years. The airline started operations with one aircraft on 12th July, flying between Hyderabad, Chennai, Tirupati, and Rajamundry.
On 26th July, the airline commenced its regular, non-seasonal operations with one aircraft, connecting Aurangabad, Tirupati and Rajamundry to Hyderabad. All three destinations are significantly driven by religious tourism. Aurangabad is an airport very close to a religious destination – Shirdi. The airline stopped services to Chennai from 26th July.
Presently, the airline operates a double Hyderabad-Tirupati service, and single Hyderabad- Rajamundry and Hyderabad-Aurangabad services. With this, the airline operates 8 flights a day, clocking 10:20 hours of utilisation with turn-around times of 25 minutes. Average block time is 1:20 hours, and average sector distances are 220NM. With such sectors, the aircraft can be pushed (subject to commercial and operational viability) to fly a maximum of 10 flights a day with a utilisation totaling a little over 13 hours a day. However, the present utilisation is good for a startup airline.
The second aircraft is expected to be operationally ready in a week’s time, and will fly sectors out of Chennai.
At the time of research, Trujet’s frequency between Hyderabad and Tirupati, both ways, is twice daily, against 6 flights onward and 8 flights on the return. Aircraft deployed on the sector are in the 70-80 seat category including Air Costa’s Embraer E170s and SpiceJet’s Q400s. However, Air India deploys 172 seat A321s and 48 seat ATR 42s on that route.
On the Hyderabad-Aurangabad sector, Trujet enjoys a monopoly.
On the Hyderabad – Rajamundry sector, Trujet’s single frequency competes with SpiceJet’s 1 onward and 2 return frequencies, and Jet Airways’ three frequencies either way. While SpiceJet deploys its 78 seat Bombardier Q400s on the route, Jet Airways deploys ATR 72-500s. Difference in speeds between the two types result in only 5-10 minutes of block time difference.
The airline offers a transit (no change of flight) service between Tirupati and Aurangabad via Hyderabad.
A flat 4% sales tax on fuel (in comparison to upto 28%) for aircraft operating scheduled serviced with less than 80 seats, and a waiver of airport charges for aircraft of such weight category will keep direct operating costs at Trujet lean. The operating economics of the ATR 72, which is best suited for such mission lengths, will further contribute to a lean operating structure.
Maintenance of the aircraft is carried out in house at Turbo Aviation’s maintenance facility, which has an approval for the aircraft type.
The airline has a very simple fare model that has 13 active fare buckets. Fares for all sectors in corresponding buckets are the same fare, whether a direct or a hopping flight. There seems to be no discounted one-way fares for return flights. Adaptation to sectors that are higher in demand or longer is achieved by erasing lower fare buckets. The first 9 buckets are in flat INR 500 increments, and the last 4 buckets are in increasing increments. The airline will reportedly offer 10% discount for senior citizens, students below 18 years, members of the South India Artistes’ Association and those from the film fraternity.
Trujet may become the only airline in India to offer a comprehensive travel solution. To cater to passengers whose wish to be connected to cities or towns that do not have an airport, the airline plans of introducing Volvo bus services that pick up passengers to drop them at the airport, and pick up passengers from airports to drop them at their actual destinations such as Shirdi. The airline reportedly plans to assume full responsibility of baggage handling at the bus pick up point, the airport, and the bus drop point.
The airline reportedly offers a complimentary in-flight meal.
The airline has reportedly identified 18 tier-II towns and cities in the south for operations. Most major airport cities in the southern region show promise.
Some of the other destinations, as made public earlier, are Mangalore, Vijayawada, Bangalore, Hubli, Vishakhapatnam, Tuticorin, Coimbatore, Salem, and Kadapa. The airline’s new destinations are expected to be announced when the second aircraft is ready to fly online, as the first aircraft’s rotation has no room to accommodate new flights.
The airline reportedly has plans to increase the fleet to around 5 aircraft by March 2016. The fleet is reportedly expected to touch a size of 4 in January 2016.
The airline is targeting a break even period of 12 – 24 months. This translates to a break even between Q1’17 and Q1’18.
A regional model with turboprops makes for a good feeder model, and may be sustainable in low capacity high demand routes, but may saturate fast without room for growth in connectivity. The ATR 72 is ideal for sectors of upto 1:45 hrs block time. For real growth, an airline must look beyond mere regional connectivity, and will need to offer pan India, inter-regional connectivity, which is commercially and operationally viable with regional jets. The airline is reportedly taking steps towards expanding its operational territory beyond the southern region into neighboring regions, for now with its turboprop aircraft.
The airline may adopt a dual-fleet strategy for a good combination of range, connectivity, and penetration.
It is to be seen if the airline becomes the first regional operator to convert to a pan-India license.
The Flying Engineer offered comments on Trujet to Business Standard, based on this research . Click Here to read.
SpiceJet had a great opportunity to report profits in Q3’15 (the quarter ending December 31st, 2014). It didn’t. Before the quarter could conclude, the airline had stalled.
Then there was a stall-recovery. The Marans got out and Ajay Singh got in. The very next quarter, Q4’15, saw the airline posting a net profit thanks to an insurance claim from a Q400 that was written off at Hubli.
Legacy issues, one time costs, redelivery expenses, economic slowdown, high dollar rates, and high fuel prices were some of the reasons given in the past. This time around, the situation is much better. Ajay is doing a good job renegotiating contracts in manners that benefit the airline.
SpiceJet introduced the Q400s in 2011 as a game changer. The move was not in line with what low cost carriers world over had practiced. After Air Deccan, SpiceJet became the second low cost carrier (which we prefer to call low fare carrier) in India to adopt a dual fleet strategy.
The reasoning was simple enough. First, India is a country where certain routes are saturated while many routes with potential are unexplored. This is largely due to the misconception of a ‘one aircraft fits all’ strategy. Having an oversized airplane (in terms of seats) fly on routes that have insufficient demand only leads to poor control on pricing and revenue management. The hope that some routes will eventually grow to cater to the large jet is unwise. The right sized airplane matters. Second, blindly copying and pasting to India a low cost model that worked wonders overseas is again unwise. Every market is unique, and requires its own study.
But perhaps, SpiceJet wasn’t ready to handle the Q400. Perhaps, SpiceJet did not pull off a good deal with Bombardier. Perhaps, SpiceJet’s study was half baked. Perhaps, SpiceJet was short sighted and the turboprop may have performed better in the hands of a smarter, shrewder operator. But most importantly, perhaps the Q400 fleet and staff were meted with a step-motherly treatment.
Optimisations in the Q400 fleet are only now becoming visible. Ajay Singh is using pressure tactics to squeeze Bombardier to give the airline more. A few Q400s are expected to join the fleet, with the insurance payoff from the Q400 that was written off in a runway excursion at Hubli. The Q400 fleet size reduced to 14 Q400s from 15, and one Q400 that was cannibalised has now been restored and is apparently due for a maintenance test flight. The airline has also started to optimally fly its airplanes, to realise fuel savings and time savings. Time saved can accumulate to fly an additional sector. The airline is also working to better integrate the Q400 network with its Boeing network. After all, the Q400s are intended to primarily serve as feeders. Salaries of the Q400 flight crew have been brought on par with those on the Boeings.
The airline, four years late, has realised that the Q400 cannot play the ATR game. The Q400 must play the Q400 game. The turboprop has been designed to cater to routes that are as thin as the ATR’s, but longer than what the ATR s suited to fly. And that the USP of the Q400 is its speed.
The difference between the games of the Q400s and ATR72s? The Q400 focuses on maximising revenuepotential, while the ATR72 focuses on minimising costs. Those aren’t the same variety of apples to compare.
Simply put, the management wasn’t ready for the Q400.
The Q400s, today
As of today, 13 of the 14 Q400s in the airline’s fleet are active, with the 14th expected to join soon. Effective 16th July, these 13 Q400s will operate 116 flights a day, operating for a total of 149:20 hours each day, and deploying a capacity of 9048 seats on the network, daily.
Each Q400 flies on average almost 9 flights a day, and is utilised to just a minute short of 11:30 hrs per day, per aircraft. A year ago, the utilisation was at 10:20 hrs.
Of the 116 departures, the airline flies 76 routes (where the onward and the return are treated separately) between 38 city pairs. This is on average a frequency of 1.5 on each route. The Q400s serve 28 destinations, resulting in an average of 1.3 city pairs from each destination.
Of the 38 city pairs, 10 are monopoly sectors. Of the 38 city pairs, 34 are exclusively operated by the Q400s by SpiceJet. Of the 28 destinations, 15 are exclusively Q400 destinations. Refer the diagram below.
The Q400 flies the longest turboprop sector in India, between Jabalpur and Mumbai. Sectors like this are what the Q400 are better suited for: longer than those of an ATR, shorter than those suited for a jet. Monopoly sectors are in yellow. Nearly 90% of the city pairs are exclusively operated by the Q400 at SpiceJet.
Block times for the sectors do not necessarily match the distances. The sector block times, for the same sectors in the same order, are graphed below:
The most important stations for SpiceJet’s Q400s are, in order of departures, Hyderabad, Chennai, Delhi and Bangalore. Bangalore, despite being a hub, is not a base for the Q400s.
Jabalpur is important to the airline. Q400s from Delhi are swapped with the Q400s from Hyderabad at Jabalpur, necessary for maintenance which is at Hyderabad. Q400s from Chennai swap with the Q400s at Hyderabad through the Goa flights.
53% of the stations served by the Q400 are exclusive Q400 stations for SpiceJet.
Of the above stations, Belgaum and Tuticorin are exclusively served by SpiceJet, and operated to by the Q400s. Belgaum and Tuticorin are examples of airports that are either operationally unfeasible or commercially unviable to operate using a 180 seat jet aircraft. Most of the Q400 sectors listed here are commercially unviable for a 180 seat jet (the market isn’t yet sufficiently big), and atleast 40% of the sectors are not advisable to deploy a jet on, due to short sector lengths.
Typically, a regional jet with similar seats offers better operating economics and greater productivity when sector distances exceed 250 – 300NM. Average sector length for SpiceJet’s Q400s is 260NM, which speaks well about the way in which the asset is being used. 53% of the 38 sectors are below the average of 260NM, and 74% of the 38 sectors are below 300NM.
Flying the Q400 faster to save fuel?
The Q400 can be flown in one of four speed schedules – Long Range Cruise (LRC), High Speed Cruise (HSC), Intermediate Cruise Speed (ISC – between HSC & LRC), and Maximum Cruise rating (MCR). When arranged in order of increasing speeds, this is LRC-ISC-HSC-MCR.
Among 16 techniques in which an operator may realise fuel savings, optimisation of cruise speeds realises the largest potential gain. The Specific Air Range (SAR) curve below shows the distance travelled per pound of fuel. Higher the SAR, the longer the distance that the Q400 can cover for the same quantity of fuel.
While LRC (red line) would be the choice of speed for any operator who considers only fuel costs, SpiceJet used to operate its aircraft at ISC (purple line). This burnt more fuel, but saved time, which results in reduced time-related costs, and higher productivity.
Of late, SpiceJet has been flying its Q400s at HSC, for flights of around 1 hr in flight time (not block time). This translates to flights of sector distances of 300NM and below, which are 74% of all sectors flown by the Q400s at SpiceJet. Flying at HSC should, according to tables, burn more fuel, but pilots do report savings of around 150Kgs of fuel per sector. 150Kgs of fuel saved is around 14% of the trip fuel for a one hour flight time sector, which is a significant amount.
Such high fuel saving percentages with an increase in speed is not possible. The only explanation could be a host of other procedures that have been implemented that impact the overall fuel consumption. Better routing to take advantage of winds can have significant impact on fuel burns. Optimisation of weights, climb and descent profiles, improvised taxi procedures and approaches, use of detailed performance tables, and better APU management are some of the ways which fuel burn can be reduced.
The Q400 is an aircraft that must be used as a high speed aircraft that serves as a compromise between jet-like speeds and turboprop economy. Pushing the airplane to perform to either extreme is a significant deviation from the intended purpose of the aircraft, which leads to inappropriate and poor asset utilization.
Asset utilization seems to be on the increase. The Q400 is deployed on those routes on which a 180 seat jet cannot operate, thereby allowing SpiceJet to grow its roots into untapped markets to feed traffic to the mainline network. It is a gap filler. With more flights a day, the aircraft is being flown to its revenue generating potential. The networks of the two fleets – jet and turboprop are being aligned to cater to a hub and spoke model. However, a good narrow-body jet fleet size is required to allow the airline to make the most of the connectivity offered by its turboprop fleet.
2015 is turning out to be the third boom in Indian civil aviation. The first was around 1995, when the sole aim was to start airlines. The second boom was in and around 2005 (ten years later), when low cost carriers were a fad. The third boom that hovers around 2015 (ten years after 2005), seems to be the birth of disruptive airlines. AirAsia India, Vistara, and a slew of regionals : Air Costa, Air Pegasus, Trujet, and Flyeasy.
Mainline routes have saturated. The 180 seat jet has been used, and perhaps, abused. Many markets are still too small to have either a 180 seat jet deployed, or too long in distance to be flown by a turboprop. Turboprops cater to short and thin routes, while regional jets, such as the Embraer E-jets, Mitsubishi MRJ, the Bombardier CRJ series and the CSeries cater to long and thin routes. 180 seat single aisle jets are best suited to long and denser routes.
With the saturation of the 180 seat market, the real gap left behind in India is the much needed inter-regional connectivity, mostly the long routes between Tier II, Tier III cities and Tier I cities. That is where the gap is, and Air Costa moved in to exercise a first mover advantage to tap that market. With Air Costa’s growth being slower than initially projected, and a market that is big enough with a high growth rate, Flyeasy seems to move in to tap the untapped market.
Based on hiring drives on Flyeasy’s Facebook page, the airline may fly to Tiruchy, Bagdogra, Ranchi, Varanasi, Indore and Bhubaneshwar from Bangalore. The network is yet unknown at this stage, but considering a regional operating permit and its limitations, the airline may fly a point-to-point network between Bangalore and six stations.
Sources reveal that the airline will be leasing two Embraer E190s from Flynas (formerly known as NASair). NASair had six Embraer E190s in its fleet, of which two have been transferred to Borajet and one to AnadoluJet of Turkey. Three other E190LRs seem to be in storage, of which 7 year olds MSN 217 and 233 are expected to join Flyeasy’s fleet, and presently are at Jordan undergoing ‘C’ checks. Both aircraft are powered by GE CF34-10E7 engines and are configured to seat 110 passengers each in a single class configuration.
MSN 217 is out of the paint shop, in Flyeasy colors, and is expected to be flown into Bangalore this month. The aircraft may be registered with the VT-VVx series, with the first two aircraft expected to be registered VT-VVA and VT-VVB. Maintenance of the aircraft has been outsourced to Airworks.
The airline apparently plans to launch operations with 3 aircraft, and grow the fleet to a total of 5 aircraft within the first 6 months of operations, and discussions with lessors for these aircraft are believed to be in advanced stages. The airline has ambitious plans to grow the fleet to 10 aircraft by July 2017, which seem a bit optimistic.
The airline held a formal application meeting with the DGCA on the 6th of July, 2015. Considering that it takes around 90 days from the formal application meeting to receive the AOP, the airline may receive its AOP towards the end of September, or around early October 2015. This may make the airline open for sales around mid-October 2015, and start commercial operations towards the end of October or early November 2015.
Fleet growth plans, when translated to dates, indicate a fleet of 5 aircraft by April 2016, and thereafter on average one aircraft every 3 months till July 2017, when the fleet size is expected to touch 10.
However, AirAsia India, Air Pegasus, and Air Costa have shown that fleet projections tend to be over optimistic, and are seldom adhered to. The airline plans to induct airplanes through both operating and financing leases.
The real promoters or the source(s) of funding are yet unknown, but the funding seems to be from the Middle East. It is uncertain if there exists foreign direct investment (FDI) or investments from non-resident Indians (NRI).
The airline published the management bios of its 15 heads of departments on its website. Besides a CEO, the airline also has a deputy CEO, Lila Singh Aulakh, who formerly was the director of operations at Air Costa.
Although Air Costa and Flyeasy operate the same aircraft type, the network of Air Costa and the possible destinations of Flyeasy do not overlap. Competition in this case is only notional, with both airlines having no true competitors at this stage.
One very important observation about Flyeasy is the importance the airline gives to the organisational culture. The airline calls its employees a ‘family’. CEO Finn Thaulow, who spent a large part of his airline career with SAS, may have been inspired by Jan Carlzon, who was the CEO of the SAS group between 1981 – 1994. Jan Carlzon transformed SAS from a loss making European airline to a profitable one, by emphasising and cultivating a culture that motivated employees to deliver their best through a feeling of ownership and belonging.
The business model, growth plans and the efficiency of the airline will however be put to test in the speed with which the AOP is secured, and the way in which the airline’s revenues and fleet grow. Customer satisfaction will be another key performance indicator. Airlines with discipline across departments are the most likely to succeed, just like market leader IndiGo, which has benefitted all three stakeholders: the board, employees, and passengers.
One of AirAsia India’s aircraft utilisation has increased to one of the highest in the country.
1 millionth passenger expected to be flown around August 5th.
Typical turn around time: 25 -30 minutes.
The airline, which started operations one year ago on June 12th, 2014, now operates a fleet of 5 aircraft from 2 hubs – Bangalore and Delhi. All of the airline’s present flights from Delhi are no less than 2 hours 20 minutes long. Such long flights ensure that the airplanes spend a larger fraction of the flight in air, resulting in higher aircraft utilisation.
One of the airline’s 5 aircraft rotations flies only 2:30hr flights. This rotation covers a Delhi-Bangalore return, and two Delhi-Goa returns. Together, the utilisation on this pattern totals to 15:10 hrs, which is 50 minutes short of the target that the airline had made public, but one of the highest in the country for all domestic operations.
Average utilisation is however at 12:19 hrs, and the minimum utilisation is 11:00hrs. The average turn-around time at the airline is 36 minutes, a figure that is 16 minutes higher than the target of 20 minutes. However, turn around periods of 25 minutes and 30 minutes account for 70% of all turnarounds. There are no turnarounds of 20 minutes. Refer graph below.
The airline recently added Imphal as a destination, raising the number of destinations to 10. The airline today flies 32 flights a day, deploying 5,760 seats a day and flying around 4,500 passengers daily. Till end May 2015, the airline had flown 716,000 passengers. The airline may fly its 1 millionth passenger on or around the 5th of August 2015.
The airline may add a third Cochin flight in the morning, to provide a well spread out thrice daily service to Cochin from Bangalore. When added, all airplanes will be flying at near maximum utilisation in their rotations. No further growth is possible with the existing fleet.
Aircraft between hubs may be swapped through the night flight I52227 DEL-BLR and I52228 BLR-DEL. Two rotations sync up at the right times to allow for a swap. Until a third Cochin is launched, the airline may use the morning flight I52221 DEL-BLR to swap airplanes.
Ideally, considering that Delhi base has higher aircraft utilisation, the airline may realise a higher fuel saving by deploying two winglet-equipped aircraft at Delhi rather than just one as is the case today. Winglets help realise greater savings on longer flights.
According to the AirAsia Group, AirAsia India, “Overall performance was better than expected with strong loads but is working on keeping costs under check.”
Vistara, the TATA-SIA joint venture domestic full service airline based out of Delhi will connect Bangalore to Delhi and Mumbai effective 16th June 2015 (tomorrow), with one flight each way, each day. This will coincide with the 159th day of operation of the airline. The airline also doubles the Delhi-Lucknow and back frequency. In the process, the airline will withdraw one service between Mumbai and Ahmedabad (UK968 and UK953), reducing the weekly frequency to 6 from 13.
The Delhi-Lucknow sector is faring well for the airline.
After the addition of the new sectors and withdrawal of flights, Vistara will operate 237 weekly flights with six aircraft connecting 10 cities, deploying a weekly capacity of 35 million ASKs. This is a remarkable growth in just a little over six months of operations.
Of these 35 million ASKs, 21 million are deployed on category 1 (CAT I) routes that connect metros to metros. The remaining are deployed on CAT II routes (connecting ‘neglected’ regions with other cities), CAT IIA routes (connecting cities/towns within neglected regions), and CAT III routes (connecting other cities not included in CAT I, II and IIA). The capacity on CAT II, IIA, III routes are 12%, 2% and 51% of the CAT I capacity, meeting and exceeding the DGCA requirement for capacity deployment on these routes.
The airline’s six aircraft will fly up to 35 flights a day. One of the aircraft rotations fly up to 12:20 hrs, while the Bangalore rotation flies 8:55 hrs. The average aircraft utilisation will settle at 11:14hrs per aircraft per day. Typical turnaround time is 40-45 minutes.
The flight from Bangalore halts at Mumbai for 5:25 hours, sufficient to operate a Mumbai-Goa sector – something the airline isn’t keen on operating now due to the stiff competition on that route. The Delhi-Bangalore flight operates in the morning and the return in the evening, making it very convenient for a Delhi business traveller, but unattractive to a Bangalore based business traveller. For a corporate focussed airline, this sparse service is a surprise. AirAsia India, which caters to the leisure traveller, offers much better frequencies and timings for business travellers based at either city. The airline will increase frequencies on the Bangalore – Delhi sector with the induction of its 7th aircraft.
The airline however offers multiple other connections to Delhi from Bangalore via Mumbai, with the most attractive connection (direct, lowest cost) being featured at the bottom of the list of options. This may need to be corrected to sort by connections, rather than time of departure.
The airline’s target of a 9 aircraft fleet by end of calendar year 2015 still sticks. Two of the aircraft will be fitted with the wireless in-flight entertainment system, which will later be rolled out fleet wide after an evaluation on these two aircraft.
Vistara, which by end of year will be a true full service carrier with the IFE system, is launching a new in-flight menu offering from 1st July. The new menu is derived from the feedback received from customers over the last six months of operation.
The airline is tying up with multiple companies of the TATA group to offer cross-company benefits to customers.
The month of May was the first month of high travel demand (one of the two high domestic demand months in a calendar year) that Vistara witnessed. Load factors at the airline were 69%.
The airline’s relatively low brand awareness may be impacting the airline’s loads and perhaps in part its pricing power. Marketing activities at the airline may need to be stepped up to effectively communicate the benefits of a fairly less known and new product – premium economy, which accounts for 24% of the airline’s seats.
10 year old SpiceJet’s performance in Q4 FY’15 has been promising. SpiceJet as an airline has been promising in certain quarters, profitable in some others, and disappointing in many. One problem that has plagued the airline is impatience. The constant change of top management results in one, big problem: insufficient time for any strategy to bear fruits, no matter how brilliant.
That is because any strategy has a trial and error phase – essential to coarse and fine tune the strategy to the environment – both internal and external to the airline.
In Q4’FY15, SpiceJet changed hands, yet again. The Marans are out, and Ajay Singh is back in. In the quarter, the aircraft lost a Q400 to an accident at Hubli. Active fleet size was down to 17 Boeing 737s and 13 Q400s – a total of 30 airplanes, down 50% from the days of 57.
Things got so complicated at the airline that the one element required to run an airline was missing – Simplicity.
The circumstances surrounding the airline, and the situation it was in Q4’FY15 was very different from what was in Q4’FY14. Yet, comparison is worthy to put things in perspective.
Q4’FY15 saw SpiceJet as a shrunk airline – lesser routes, smaller fleet, lesser departures. The number of flights were lower by 43%, to an average 179 a day from 312 in Q4’FY14. Load factor difference was a positive by 13% – which meant the airline carried more passengers per flight, on average. This had two effects – the number of passengers carried was down only 37% despite 43% lesser flights. This also affected the cargo uplift, which was down 8% due to lesser free cargo space available. The average flight length was 752 km – down 9% from 826km. Capacity was down 52%.
SpiceJet is yet to stabilise its operations. An airline has two aims: safe and convenient flights for passengers, and value for shareholders. Part of convenience are frequency and on time performance, with the latter more important.
SpiceJet’s on time performance isn’t one of the best, and that is something that the airline needs to, and perhaps is, working on. SpiceJet has had the highest number of cancellations among all airlines in the month of January and March, and the second highest among established airlines in the month fo February. Stabilisation of such operational parameters is key to SpiceJet becoming a preferred airline.
Down to the rupee
Unit revenues speak volumes about an airline’s efficiency.
We look only into Income from operations (Net sales), and ignore all other incomes, as this is the real measure of the airline’s core activity’s performance.
Q4’15 had a revenue of INR 4.15/seat-km (or per ASK= RASK), which is 3% higher than what was realised last year. This shows that the increase in load factors had a positive impact on unit revenues, thanks to the strategies employed by the former CCO Kaneswaran Avili and the VP Revenue Management Fares Kilpady. This also reflects network rationalisation.
When an airline shrinks, costs get complicated. There are certain costs that are hard to shrink, such as employee costs, as layoffs are subject to an airline’s culture. Employee costs per ASK shot up 63% to INR 0.57/seat-km. Further, staff salaries were upward revised after Q4’14.
Although the airline shrunk its fleet, it were the leased Boeing 737s that moved out, not the owned Q400s. Capacity dropped, but the depreciation and amortisation costs associated with the aircraft didn’t. This resulted in the associated costs rising by 48% to INR 0.16/seat-km.
Airport charges went up by 18%, in part due to the reduced flight lengths, which means the airline had more take off and landings for the same capacity. This may have also negatively impacted aircraft maintenance. Spares pool policy may have also had an impact. If an aircraft went for a C-check in this period, costs may have been impacted too. Maintenance costs per ASK went up 3%.
Other operating costs went up 17% to INR 0.16/seat-km.
Other expenses, which includes administrative expenses went down by 5%.
Lease rentals per unit went down 18% to INR 0.61/seat-km, owing to higher utilisation of aircraft which diluted this fixed cost.
Aircraft fuel costs went down 31% to INR 1.52/seat-km largely due to the fall of ATF prices.
Fuel, Maintenance, Staff, Lease and amortisation (as Q400s are owned, and is the equivalent of lease costs) and other operating expenses form a chunk of the expenses, and these 5 together account for 92% of expenses. These costs together went down by 12% to INR 3.62/seat-km in Q4’15 against INR 4.13/seat-km in Q4’14.
Redelivery expenses are one-off expenses and went up 626% to INR 0.35/seat-km. Other expenses are arguably not part of the operating expense consideration set.
With this, the operational cost per available seat kilometre (which excludes one-off redelivery costs and administrative ‘other expenses’) is INR 3.98/seat-km, which is 10% lower than the INR 4.44/seat-km in Q4’14.
With an operational RASK of INR 4.15/seat-km, and an arguable operational CASK of INR 3.98/seat-km, the airline was arguably operationally profitable by INR 0.16/seat-km.
Core operating costs and revenues are stressed upon as this is a reflection of the performance and efficiency of an airline’s core activity. However, an airline will need to be efficient throughout the structure. SpiceJet realised a loss of INR 102 Cr due to the total operating RASK and total operating CASK amounting to INR 4.15/seat-km and INR 4.71/seat-km, respectively.
Extraordinary Income and bottom line
Insurance companies paid INR 161 Cr for the Q400 that was written off after an accident at Hubli, Karnataka. SpiceJet received INR 61 Cr. This, along with other income of 91 Cr added INR 153 Cr to the books. Finance costs drained INR 28 Cr. Overall operating loss drained INR 102 Cr.
The airline realised a net profit of INR 22 Cr, and the insurance pay off was responsible for the tip over into the black.
Comparison with AirAsia India
While a comparison between a small start-up airline and a larger, older airline is fair to neither airline, a comparison will help show what’s possible.
Unit costs (per seat-km) of staff is leaner at SpiceJet as it is a larger airline, however, this can fall further. SpiceJet cannot escape amortisation & depreciation costs as Q400s are owned, while AirAsia only leases airplanes. Fuel expenses per ASK are higher at SpiceJet due to the higher fuel burn per ASK of the Q400, the possibility of higher burns due to ATC congestion at metros, and higher load factors.
All of AirAsia’s airplanes in Q4 were new, and almost fresh out of maintenance when delivered, needing hardly any maintenance. Such may not have been the case at SpiceJet, which could have taken up the maintenance cost up.
User charges are higher at SpiceJet as AirAsia India does enjoy certain benefits from Bangalore airport – the only airport it used to fly into in Q4. SpiceJet flew into all metros.
Aircraft operating lease expenses appear lower at SpiceJet as of the 30 aircraft in the fleet, only 17 were leased. Q400’s lease costs do not figure in the lease expenses.
Other operating expenses are lower at SpiceJet due to a larger fleet diluting costs. However, ‘other operating costs’ for SpiceJet may not be the same as AirAsia India’s.
Where SpiceJet can trim its cost are in the ‘other expenses’. However, AirAsia India has lower administrative costs as many resources are shared with the AirAsia Group.
The cost structure (see pie charts) of both airlines show the cost structure for both airlines. Generally, a cost structure which has a larger share of fuel cost indicates a leaner structure.
A chance to renew
What the management did in FY 2014-2015 to SpiceJet has been impressive – revenue management and market stimulation has resulted in a positive impact on unit revenues even with higher load factors and promotional fares. Such practice, if continued, may benefit the airline in the current fiscal.
The airline scaled up its fleet in Q1’16 temporarily through the wet-lease of 3 Boeing 737s. Unverified information point to 2 additional Q400s joining the fleet, and an active evaluation of wet-leasing Airbus A320 aircraft. Whatever the aircraft type, and however questionable it may be, the airline is going to, and needs to increase its fleet size.
SpiceJet has another opportunity to keep the system lean as it regrows. Good contracts, scaling up and high asset utilisation will reduce fixed costs. Good market study, prudent and well researched network growth, leveraging the benefits of the Q400 to do what the market leader cannot, and differentiation of in-flight services can allow SpiceJet to realise good unit revenues even in the light of competition.
Revenues aren’t much of a problem at SpiceJet, but can be bettered through better core service – frequency and on time performance. Costs are the biggest problem in the airline, and will need to be trimmed down significantly.
SpiceJet has what it takes to grow to an extent that allows it to compete non-head-on and healthily with the market leader. Focus on basics and differentiation are key.
AirAsia India’s journey so far has been interesting. What was a pleasant surprise was the airline reporting its lowest ever net loss in an operating quarter – of INR 19 Cr. This, despite Q4 being a season of low travel demand, and in the same quarter having had numerous delays and cancellations. It was also the first full quarter of three aircraft operations.
AirAsia India claims to have an attractive cost structure. In this piece, we analyse their figures for Q4 FY’15.
In the months of January, February and March 2015, AirAsia India flew 222,502 passengers. No show passengers were 15,055. These two total to 237,557 seats that were sold. No show accounted for 6% of all sold seats. Total seats flown were 300,240, and flown passenger load factor was 74% for the quarter, while seats sold load factor was 79%.
The airline carried a total of 1,620 tonnes of cargo on 1,668 flights, which averaged to 971 kg of cargo per flight – a very good number.
A total of 2,260 hours were flown in the quarter. With three aircraft, this averaged to a daily average aircraft utilisation of 8:22 hrs per aircraft per day. This low average utilisation reflects the cancellations and delays in the quarter due to crew shortage. While the airline was originally scheduled to fly 22 flights a day, the average flights per day in the three months were lower due to the same reason.
12,155 of the airline’s passengers were affected by cancellations and delays of more than two hours in the quarter.
Market share stood at a constant 1% throughout the quarter.
AirAsia India realised an operating expense of INR 95.3Cr in the quarter.
37% of AirAsia India’s costs are due to fuel. The next biggest is staff salaries which make up 25%. Lease comes next at 19%. These three together make up 80% of the airline’s costs. In this period, the airline had three aircraft: VT-ATF/ATB/RED. All three are new enough to have no maintenance issues or checks, and hence maintenance is only 3%.
Average lease cost per aircraft is INR 2 Cr per month.
AirAsia India realised an operating revenue of INR 74.4Cr in the quarter. Of this, 92% was due to passenger ticket sales, while 8% was due to ancillary revenue.
The average fare per passenger (excluding taxes and fees) for the quarter was at INR 2,884. Revenue per available seat kilometre (RASK) was at INR 2.75/seat-km, while Cost per available seat kilometre (CASK) was at INR 3.53/seat-km.
At the same load factor, average fares could have been increased by INR 878 per passenger to operationally break even.
At the same average fares, operational breakeven load factor stood at 103%.
Both figures above assume constant ancillary revenue. Ancillary revenue per flight was INR 35,320.
Average operating cost per block hour was INR 421,311 (US$ 6,600).
Average cost per kilometer flown was INR 635/km.
AirAsia’s losses are on a steady decrease. With five aircraft operating in Q1’16, better routes, and the strong travel demand, the airline may spring a surprise with its Q1 performance.
A sixth aircraft is expected to join the fleet in June. Q2’16 – a lean season- will be an interesting quarter to watch, with a mild possibility of a break even. The airline may either break even or post profits in Q3’16.
The airline added Imphal to its booking engine on 28th May 2015.
AirAsia India is a wonderful airline, and has got a few things right. Their on board service is one of those.
As an airline, especially a start-up airline, making mistakes is inevitable. Falling short of projected growth plans and heavy flight cancellations and delays in certain months of the first year of operations are acceptable. Both these have happened to AirAsia India, and the industry understands. Of course, there are better examples, such as IndiGo, which has managed to play the game like no other.
The unacceptable part? Factually incorrect statements that can lower the overall credibility of the industry.
Here is an excerpt from the May 20 interview of the AirAsia India CEO, by Ashwini Phadnis, as published in The Hindu Business Line:
How many of the things planned initially have happened and how many have not?
We have done certain things we did not expect. We have flown close to a million passengers. By the time we complete our first year we would have flown more than a million passengers. No other airline in India has done that before in their first year of operations. We have done that with a skeleton fleet, meaning, we have utilised aircraft significantly.
We contest both claims  & , in the interest of factual correctness.
The graph on top (click to enlarge) shows the total number of passengers flown against the first twelve months of operations. All data is from the DGCA.
IndiGo, Kingfisher Airlines, SpiceJet, and Go Air started operations in the 2005-2006 timeframe. Within the first one year of operations, all airlines in consideration, with the exception of Go Air, carried in excess of 1 million passengers. IndiGo crossed the 2 million mark in the first year!
As of 31st March 2015, AirAsia India had carried 550,000 passengers. This means that the airline will need to carry 450,000 passengers to touch the 1 million mark by the end of June (AirAsia India started operations on 12th June, 2014). This means that the airline will need to carry on average 150,000 passengers in the months of April, May and June. Is this achievable?
Data for the month of April and May were not available at the time of writing this piece. Since April had no new flights, but had infact cut 4 – Bangalore- Chennai & back, the airline flew around 97,200 seats in April. With an assumed 82% load factor – their highest so far, the airline could have flown no more than 80,000 passengers in April.
66% of May was flown with 18 flights a day, which totals to approximately 65,000 seats. Effective 21st May, the airline will operate 8 new flights. For 33% of the month this totals to around 47,000 seats. IN total, May can fly only 112,000 seats. At a generous 90% load factor, this is 100,000 passengers.
In June, the airline will fly 28 flights a day, flying approximately 140000 seats a month. At 80% load factor, this will result in around 120,000 passengers being flown.
This means that AirAsia India will close its first year of operations with a maximum of 850,000 passengers, neither meeting nor crossing the 1 million mark.
We wish the airline all the very best for its northern hub operations.
SpiceJet goes loud on some developments, and silent on the rest. What SpiceJet has done in the last few weeks is to unbundle as much of its services as possible, to find multiple ways in which the airline can make money.
Tony Fernandes (Group CEO, AirAsia) and Mittu Chandilya (CEO, AirAsia India), have been fighting for unbundling of services for long. In fact, when AirAsia launched a year ago, it charged passengers for check in baggage. DGCA interference, reportedly driven by pressure from other airlines, ensured that the airline provided a minimum free check in baggage service: 15kgs per passenger. Tony Fernandes regarded this move undemocratic. He had a point: The 15kgs of baggage did not come free, but was included in the airfare, unknown to the passenger. This only meant that every passenger was forced to pay for a baggage service that he or she may not opt for. Business travellers usually have no check-in baggage.
Air Transport Circular 1 of 2015, dated 24th March, 2015, seems to be an outcome of the constant requests AirAsia India has made to the ministry. The DGCA now allows airlines to charge for all seats that are pre-booked. Previously, this was limited to just 25% of the seats and excluded the middle row seats. The new circular also talks about “Check-in baggage charges” being unbundled. Although this was present in the previous circular, upon which AirAsia India acted, DGCA had the final say. Things seem to have now changed.
SpiceJet is the first airline to have stealthily implemented the circular to the fullest. All the seats on SpiceJet’s aircraft – Bombardier Q400 & Boeing 737, are chargeable when pre-booked, which wasn’t the case earlier.
Every Seat Pays
On the Boeing 737-800s (The airline flies 16 B737-800s and 1 737-900, besides three wet-leased Boeing 737-800s which have no SpiceMax extra legroom rows), the middle seats on rows 6 to 13 are charges at INR 100. The window and aisle seats are charges INR 300. Seats on the first five rows are charged INR 1,000. Emergency exit rows are charged INR 600. From rows 16 to 31, middle seats are charges INR 50, while the aisle and window seats are charged INR 100.
This allows SpiceJet to potentially generate an additional INR 56,400 per Boeing flight. Assuming a flight with 80% load factor has 25% of its passengers pre-booking their seats, this is INR 11,300 per flight. With this assumption, and a maximum of 129 Boeing flights in a day, SpiceJet may realise around INR 14,50,000 revenue per day from selling seats on Boeings alone.
On the Q400s, (The airline flies 12 -13), there are no middle seats. Row 1 (two seats) and Row 2 (right two seats) are SpiceMax seats, charged at INR 500. All other seats upto and including row 6 are charged INR 200. The rest of the seats in the cabin are charged INR 100.
This allows SpiceJet to potentially generate an additional INR 11,200 per Q400 flight. Assuming a flight with 90% load factor has 25% of its passengers pre-booking their seats, this is INR 2,520 per flight. With this assumption, and a maximum of 162 Q400 flights in a day, SpiceJet may realise around INR 4,10,000 revenue per day from selling seats on Q400s alone.
Together, the airline may, on average, generate 18,66,000 per day from selling seats. Over a month, this will be sufficient to pay almost two Boeing 737s’ dry lease.
No free check-in baggage
With SpiceJet’s “#Travel Light, Save More” offer, announced on April 27th, SpiceJet offered 1,50,000 seats on sale. The tickets for these seats were on the condition that a passenger did not travel with a check-in baggage. The offer was extended, adding an additional 100,000 seats. In total, SpiceJet offered 250,000 seats for sale with high confidence that these passengers would not have check in baggage.
With 15Kg per passenger not occupying the cargo hold, the airline has saved 3,750 tonnes of cargo hold weight. At an assumed average cargo rate of INR 20,000 per tonne (we’ve earlier determined this average to be slightly higher), this allows the airline to ‘sell’ INR 7.5 Crore worth cargo space/weight to its cargo handler, Sovika.
If however any passenger chooses to check in their baggage on these tickets, the airline’s T&C requires a flat fee of INR 750 to be paid for upto 15kg. This is the first example in India where a passenger is not granted complimentary 15kg check in service, but has to pay for “any” check in baggage.
This may be SpiceJet’s move in evaluating demand for such tickets. Perhaps, if proved successful, the airline may implement a policy of paying for every check-in baggage.
Other unbundled services
SpiceJet also charges for priority check in, Meal (hot meals – 737s and cold sandwiches – Q400s), excess baggage slabs, a ‘Meet and Assist’ service, and “SpiceAssurance”.
Priority Check-in charges a passenger INR 200. Hot Meals on Boeings are charged at INR 315 when pre-booked and INR 350 when bought on board. On Q400s, pre-booked Sandwiches are available for INR 200, and INR 220 when bought on board (the illustration for the Q400 meal is misleading as it shows steam coming from the plate that has the sandwich, which is not true. The sandwiches are cold). The SpiceAssist service comes at INR 500 per passenger (assistance from the SpiceJet staff at the airport).
All these services are ‘opt-in’ services, as mandated in the DGCA circular (a passenger needs to check the box associated with the service. By default, there must be no service pre-selected). However one service, the SpiceAssurance which charges INR 35 per passenger is pre-checked, which may not be the right thing to do. By paying INR 35, SpiceJet offers passengers a voucher of INR 500 is the flight is delayed by 1 to 2 hours, and INR 1000 if beyond 2 hours. This also offers limited baggage loss reimbursement.
This, in our personal opinion, is a poor move. Firstly, this is an opt out service. Secondly, a passenger has to pay for his own compensation for a delayed or cancelled flight. Previously, the airline offered this compensation for free, more. Third, the compensation is in the form of a voucher, which forces the passenger to book on SpiceJet to avail the compensation as a deductible from the next travel fare. Fourth – the voucher is valid for 90 days only.
Passengers who miss this INR 35 on the SpiceJet website (not offered through OTAs) will together contribute INR 19,30,000 to the airline, per month (assuming 10% bookings are through the website, and all these passengers miss or choose to ignore the INR 35 charge).
For a limited period, opting for a SpiceMax seats entitles a passenger to a complimentary meal. However, the airline allows for a meal to be chosen as well. This means that a passenger pays for a meal that he is entitled to. This seems to be a glitch in the system.
These small little things add up to big money! SpiceJet, we hope, corrects the ‘hot sandwich’ and SpiceAssurance.
Moving towards absolute no-frills
SpiceJet is the first to act like a ‘true LCC’ in India. IndiGo, Go Air, and surprisingly – AirAsia India, are yet to follow with seat selection and no-free check in baggage. On one hand, these moves pitch SpiceJet as a LCC (we now don’t believe in the term, we prefer no frills carrier), and on the other hand, the SpiceMax seats with good legroom and complimentary meals lend it a different image: of good premium economy luxury. Same brand, two images. Does it lead to brand confusion? We think so.
AirAsia India announced today Delhi as its second hub, after Bangalore. Delhi will also serve as a base for the airline, while Bangalore will remain the home base.
Assuming that the airline will start flying between Bangalore and Delhi, the airline will for the first time begin flying on a Category I (Cat I) route, as defined by the prevalent route dispersal guidelines (RDG). Flying on a Cat I route will now oblige the airline to deploy a minimum percentage of the Cat I route capacity on Category II, IIA and III routes. Capacity is measured on an available seat kilometer (ASKM) basis. Every 180 seat flight between Bangalore and Delhi adds approximately 3,42,000 ASKM.
This makes the choice of Delhi as a base very important.
The importance of Delhi
Category II (Cat II) routes are routes which were traditionally looked upon as ‘loss making’ routes. These are routes that connect the mainland to the ‘neglected’ north-east, far north, and the islands that make up Lakshadweep and the Andaman and Nicobar Islands. (Please note that ‘neglected’ is a harsh word, but that’s how the ministry looks upon these regions as far as air connectivity is concerned). 10% of the Cat I capacity must be deployed on Cat II routes (To be soon revised to 20%). Had AirAsia India flown to Port Blair from Chennai or Bangalore, this requirement could have easily been met. AirAsia’s Airbus A320s cannot operate into and out of Agatti’s short strip.
Category IIA (Cat IIA) routes are routes which connect airports within a ‘neglected’ region. Examples are Jammu-Srinagar, and Guwahati-Bagdogra. Unfortunately, the southern portion of India – where AirAsia India is based- has no such Cat IIA routes. 1% of the Cat I capacity must be deployed on Cat II routes (to be soon revised to 1.5%)
To cater to a Cat I route and Cat II & IIA routes, the northern part of India is a wiser hub.
All the routes AirAsia India flies today are Cat III routes, as per prevalent RDGs.
Establish the route
By having a hub at Delhi, AirAsia India can fly early morning flights from Delhi to Bangalore, which can be mirrored by early morning Bangalore – Delhi flights. Similar flights from either destinations may be flown in the evening. This requires one A320 to be based at Delhi, to start with.
If such a strategy is followed, each aircraft will fly a minimum of 2 flights on the Bangalore – Delhi/vv route. Each flight is planned for 2:45 hrs, which will total upto 5:30 hours of utilisation per aircraft on this city-pair, leaving a maximum of around 7hrs of utilisation for other stations.
We feel that the airline may fly a 3x Bangalore-Delhi one way, per day, of which at least 2 shall be direct flights.
Flights to Delhi are not expected before May 2015, and perhaps not before mid-May 2015.
Deploy Cat II & IIA capacity.
Flights between Delhi-Jammu-Srinagar or Delhi-Guwahati-Bagdogra or Delhi-Guwahati-Agartala may be flown for Cat II and Cat IIA capacity. Delhi-Jammu-Srinagar seems to be the most likely set of cities to be flown first.
If the airline is innovative enough, it may make the most of its patterns to fly underserved routes. I am obliged to not exercise my creativity in suggesting routes.
Open Vishakhapatnam as a destination
AirAsia India presently flies three aircraft, and one of the three patterns flown everyday has a poor utilisation of just 7:50 hrs (see above). It is in this pattern – the third pattern, that two flights to Vishakhapatnam may easily fit in (as published in the DGCA’s Summer Schedule), with perhaps slight schedule changes.
The necessity – 5th aircraft
Opening the Delhi-Bangalore route will require two additional aircraft: one based at Bangalore, and the other at Delhi.
Further, as per CAR Sec 3 AT series C Part II, operators “will be given one year’s time from the date of securing operator’s permit, to have the fleet size of five aircraft”. AirAsia India secured its AOP on May 7th, 2015, and a 5th aircraft is necessary to meet regulatory requirements.
Today, at around 11:00hrs IST, AirAsia India’s 5th aircraft flew into Hyderabad from Kuala Lumpur. The aircraft is a used Malaysia AirAsia A320-216 (9M-AHU) without winglets, and is around 5.5 years old. The aircraft is AirAsia India’s second, non-winglet A320, after the 7 year old A320 which was unveiled to the public on 21st March in the JRD Tata livery (see image on top). Both aircraft are yet to start flying commercially for the airline.
The first three aircraft have winglets. If the airline is prudent with its fuel burn, only the winglet equipped aircraft (VT-RED/ATF/ATB) will be deployed on the BLR-DEL vv route.
Thank you to @ATCBLR on Twitter for posting the 5th aircraft’s arrival.
Marked shift in strategy
Last year, Mittu Chandilya, CEO AirAsia India had announced Goa as the second hub, with the induction of the 4th aircraft. He had also mentioned that the airline will keep off Delhi and Mumbai.
The airline last operated flights on the Bangalore – Chennai route on 31st March 2015.