GoAir’s misleadingly worded ‘Winter Offer’

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GoAir_320

When GoAir announced yesterday its intention to offer 17 lakh (1.7 Million) seats for sale for the travel period between Jan 01, 2015 and March 31st 2015, there was something misleading, yet not dishonest about the advertisement.

The advertisement, ‘Winter Offer – 17,00,000 air tickets for travel from January 1 to March 31, 2015 – Fares Rs. 1,469* onwards. Book now!‘, projected the offer as a large volume sale, perhaps on the lines of SpiceJet’s, during the latter’s better days.

The result? The ‘Winter Offer’ attracted many visitors to its website, making the website slow, unresponsive, and at times – not load at all. But the attention it gathered was based on perhaps a misleading wording of the offer.

Go Air is a small sized, Airbus A320 operator. Each aircraft flies just 176 seats, as four middle seats in the first two rows are left vacant as part of the Go Business offering. This airline flies to 22 destinations, on mostly mature routes which the airline claims are ‘profitable’ (in reality, profitable for the capacity of the aircraft). On average, the airline flies 128 flights a day – all domestic – and carries some 20,000 passengers a day. 20,000 passengers translate to 18 lakh (1.8 Million) passengers across three months.

On a lean season to lean season basis, GoAir’s capacity has grown 15%. Based on this, this year’s Q4 FY2014-15 : January, February & March – the period of travel for the ‘Winter Offer’ – may fly close to 21 lakh (2.1 Million) seats, of which 5.8lakh (0.58 Million) seats are expected to fly empty in the absence of a market stimulation.

In short, GoAir offers a sale of ‘17,00,000 air tickets ‘ when the airline can fly a maximum of only 21,00,000 seats, making the number of tickets up for grabs 81% of the expected capacity to be deployed, while only 5,80,000 seats (27% of the expected capacity to be deployed) are expected to fly empty in the Q4 lean season. It’s these empty seats that an airline usually tries to fill via an offer or discount.

The real, discount offers may be available for a maximum of around 5,80,000 seats, while the remaining seats may sell at close to the regular fares, as it still falls under the bracket of ‘Fares Rs. 1,469* onwards‘.

We expect only about 35-40% of the 17 lakh seats to sell abnormally fast in this offer period, as these may represent seats that are priced lower than regular fares. The balance 60% may not witness an abnormal purchase rate, and a large portion may remain unpicked. In the event that the 35-40% target is not met, the airline may perhaps come out with another offer to sell excess inventory in advance. In this sale, the airline has withheld ~20% of its capacity (4 lakh seats), which correspond to about 35 seats a flight, which may include both pre-sold seats as well as seats which may be bought in the last one to two weeks of travel, at high prices. Of these, 8 seats per flight are Go Business, which are priced at between 1.5 – 3 times the regular fares.

The five day sale window is abnormally close to the travel period which starts as soon as six days later – a debatable decision.

GoAir chief executive Giorgio De Roni told PTI ,”The January-March quarter is traditionally a lean quarter… The purpose of introducing these fares is to make air travel affordable during the period”. That statement has proved to be very interesting, considering that in the lean season airfares are usually lower, as capacity is higher than demand. The only time airfares rise is when carriers sell their excess inventory early, thereby not putting any pressure on the pricing as the date of travel approaches.

The best way to read the offer is by separating, “17,00,000 air tickets for travel from January 1 to March 31, 2015″ and “Fares Rs. 1,469* onwards. Book now!”.

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Brand Salvaging – Automated Disruption Management at SpiceJet

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Spice_737_VIDPSpiceJet has automated the process of applying for a refund or modifying the flight booking should the flight be delayed by more than 90 minutes. Rescheduling the flight under these circumstances, as reported by the airline, comes at no charges. The steps are self explanatory and on the airline’s website.

This seems to have been a move taken by the airline in response to unbearably long queues in congested call centre lines. With heavy disruptions in the airline’s flight schedule over the past few days and weeks, prompting action from the DGCA, the airline came under flak from passengers, resulting in a brand image that was spiraling down in the light of poor service (On time performance and flight realization are very large contributors to service quality).

Reportedly, “This is the first time ever an airline has automated disruption management to enable passengers find alternatives”.

The airline has reportedly been flying additional flights to cater to affected passengers. The efforts taken by the management team over calendar year 2014 seem to have been negated by the effects of a lack of funding at the airline which led it to the crisis it is in today.

The management seems confident of a future for the airline with new investors coming on board to fly it out of difficult times. With such hopes, it is necessary to cater to the flyer of today for a loyal base for tomorrow.

About Vistara – the new Full Service Carrier in India

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VistaraThree days after securing its Air Operator Permit (AOP), Vistara opened for bookings, for flights 9th January 2015 onward. This marks the start of commercial operations in Q4 FY2014-15, a period which is traditionally the second weakest season for Indian domestic travel.

The airline places itself as a full service carrier (FSC), with a three class cabin.

Vistara Business ClassUK MealRows 1 – 4 feature a four abreast Business Class Cabin with 16 seats. The seats sport a 42-inch seat pitch, with a 7-inch recline. Business class passengers will be pampered with a meal service with fine linens and bone china tableware. Meal options – for all classes – are shown on the left.  Business class passengers will have a separate check-in counter at airports. Passengers are entitled to 30kgs check in and 7kgs carry-on baggage. Fares are in two categories – Business Flexi and Business Saver, with the expensive former waiving off a change fee while allowing the ticket to be valid for 12 months.

Rows 5 – 10 feature a six abreast Premium Economy Class Cabin with 36 seats. The seats sport a 33-inch seat pitch, with a 4.5-inch recline. This cabin section includes two emergency exits at rows 9 and 10. These rows offer a 36 inch legroom, but the recline is unavailable on row 9 and perhaps restricted on row 10 due to the cabin partition wall right behind. Passengers are entitled to food and beverage. Premier Economy class passengers will have a separate check-in counter at airports. Passengers are entitled to 20kgs check in and 7kgs carry-on baggage Fares are in two categories – Premium Flexi and Premium Saver, with the expensive former waiving off a change fee while allowing the ticket to be valid for 12 months.

Vistara_Capacity_DistributionRows 11 – 27 feature a six abreast Economy Class Cabin with 96 seats. There are only 16 rows in this section, but the row numbering skips the number ’13’, misleading one to believe there are 17 rows. The seats sport a 30-inch seat pitch, with a 3.5-inch recline. The seat thickness will determine the actual legroom available. For example. IndiGo’s 29-inch seat pitch with its ultra slim dragonfly seats are thin enough to offer the equivalent of a 31-inch seat pitch legroom with standard seats. Passengers are entitled to food and beverage. Economy class passengers will have a separate check-in counter at airports. Passengers are entitled to 15kgs check in and 7kgs carry-on baggage Fares are in two categories – Economy Flexi, Economy Saver, and Economy Super Saver, with the expensive first option waiving off a change fee while allowing the ticket to be valid for 12 months.

In addition, passengers who have web-checked in will have a separate counter to drop off check-in baggage. The airline also offers an auto check in service, in which if the passenger has not self checked-in at 4 hours prior to scheduled departure time, the airline will auto check the passenger on the flight and send the boarding pass via SMS or email.

In total, every aircraft is configured with 148 seats.

The lower number of passengers and dedicated counters may check in a smooth experience. Being a FSC, load factors may hover around the 75% range, leading to just 111 passengers per flight, on average – possibly a smooth boarding experience.

Flights

Vistara’s IATA code is ‘UK’. On the first day of Operations – Friday, the 9th, January 2015, the airline will operate only on the Mumbai-Delhi and return sectors. Vistara’s regular flight numbers are expected to start with ‘9’. However, on January 9th, the airline will operate two flights to Mumbai from Delhi and one flight to Delhi from Mumbai, all with special flight numbers – 895, 890, and 228. Flights to and from Ahmadabad will commence the next day, on the 10th of January. With this, one aircraft will be stationed at Mumbai.

The first commercial flight will be operated as UK890, which Departs Delhi at 12:30IST and arrives at Mumbai at 14:45 IST.

The airline will commence operations with two aircraft, both Airbus A320-232SL, registered VT-TTB and VT-TTC. The airline will operate the following patterns from 10th January, with the first pattern for an aircraft out of Mumbai and the second for an aircraft out of Delhi. The pattern holds good for most days, with certain changes on Sunday. Reportedly, the pattern will run till 15th February 2015.

Vistara_PatternThe airline will operate from Terminal 2 of Mumbai’s Chhatrapati Shivaji International Airport, and Terminal 3 of Delhi’s Indira Gandhi International Airport.

AirAsia India starts 3 aircraft operation

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AirAsia 3 aircraft

AirAsia India made two firsts for itself in a span of two days. On 17th December, it started operating to Pune, connecting Pune to Jaipur. The airline operated its first non-immediate base return point to point route, with Bangalore-Pune-Jaipur-Pune-Bangalore. Although AirAsia India CEO Mittu told The Financial Express that “This is the first time we will be having a hopping flight“, the airline does not offer a Bangalore-Jaipur booking with Pune as a stop (hop). The flight number changes from 1424 to 3424 and 3425 to 1425. AirAsia today is the only airline to offer a direct flight between Pune and Jaipur.

VT-REDOn 18th December, the airline started operating with its third aircraft : VT-RED, which is an A320-216SL with MSN 5824. The aircraft is a 1 year old airplane from AirAsia Berhad, which operated the aircraft as 9M-AQW. This is AirAsia India’s second used aircraft, and on account of its age, the oldest aircraft in the fleet. The average fleet age now stands at 10 months.

VT-RED flew in from Hyderabad at 00:40IST on 18th December. VT-RED breaks the VT-AT* series that the airline had hoped to continue. Reportedly, this is in line with AirAsia’s move across the group to focus on a ‘red’ theme. AirAsia Berhad changed its radio call sign from ‘Asian Express’ to ‘Red Cap’ on 16th November, 2014. It is believed that AirAsia India’s radio call sign ‘Ariya’, may be changed to something that includes ‘red’.

On the same day – 18th November- the airline introduced its second direct Jaipur service from Bangalore. Jaipur’s timings now support the business traveller in offering a same day return.

Presently, the airline intends to fly these three patterns, as shown below. However, with three pairs of simultaneous departures out of Bangalore, the airline may swap blocks of flights between the patterns. For example, the 13:15 Goa departure in Pattern 1 (cell in yellow) may be swapped with the 13:15 Pune departure in Pattern 3. Pune’s timings vary on Saturdays and Tuesdays.

 AirAsia 3 acft pattern

Performance and Outlook

AirAsia India seems to have indefinitely dropped its Chennai early morning flight. The airline has been grappling with numerous delays in its operations, believed to have been caused by its shortage of senior cabin crew. The start of Pune operations on the 17th without the third aircraft proved to have heavily disrupted the airline’s schedule on the day, with delays as much as five hours.

For the month of November, the airline had the second highest cancellation rate of 2.65%, which trailed SpiceJet – an airline that was riddled with numerous cancellations. Delays, which were very pronounced in November, and spills into December, resulted in 1,451 passengers being affected last month – the 4th highest in the industry. 225 passengers were affected by the airline’s cancellations. Considering the airline flew 61,000 passengers in November – a drop of 5,000 passengers from October – the percentage of affected passengers are significantly high.

Load factors at AirAsia India rose by 3.6% compared to October, to 79.8% in November. While this may seem encouraging, it must also be borne in mind that the airline deployed a lower capacity in November, due to cancellations. In November, the airline flew 10,173 lesser seats, resulting in a seat capacity drop of 11.7% compared to October. Part of the high load factors may be explained through the servicing of affected passengers by re-booking them on another flight. Clubbing of flights, like at SpiceJet lead to misleadingly high load figures.

Based on AirAsia India’s past behaviour, it seems unlikely that the airline will launch either a new route or induct a new aircraft by the end of calendar year 2014. The year may end with three airplanes and seven destinations.

However, the airline has been the most unpredictable in the country’s history, with ”Anything can happen’ gaining prominence over ‘Now Everyone can Fly’.

Air India Regional gets its first ATR 72-600

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ATR72-600

Air India Regional, better known as Alliance Air, received its first ATR 72-600 at Toulouse. The ATR 72,600 with MSN 1197 is registered VT-AII, and becomes the first ATR 72 for Air India and the fourth ATR 72-600 after VT-JCX/Y/Z that fly for Jet Airways. The aircraft, leased from Singapore-based leasing firm Avation, is the first out of five that the airline will receive until July 2015.

ATR42-320Air India Regional presently has about four ATR 42-320s (see photo on the left), which are all about 20 years old. The brand new and longer fuselage ATR 72-600 brings to Air India’s passengers a leap in cabin noise and comfort. The -320s have a four bladed propeller, while the -500s and -600s have a six bladed propeller.

The new ATR 72-600 is configured with 70 seats, compared to 48 that are fitted in the shorter ATR 42. This will allow Air India to either stimulate the markets which it caters to with this aircraft, or cater to those that have grown beyond 50 seats.

Mr. Rohit Nandan, Chairman, Alliance Air stated that “We are pleased to introduce into our fleet an aircraft which has clearly become the new reference among all regional planes. The ATRs have proven for years their reliability and their ability to bring our passengers to every destination of our regional network”.

Patrick de Castelbajac, ATR Chief Executive Officer, said that “We have partnered with Alliance Air for more than 10 years, and we are honored by this new proof of confidence in the ATR aircraft family. The new ATR 72-600 perfectly fit with the aim of the airline to progressively renew their fleet with more fuel-efficient aircraft, while adding seat-capacity into their main routes.”

According to ATR, the 72-600 has a maximum take-off weight of 23,000kg, and can carry a max payload of 7,500kg over 900NM.

Air India regional joins Jet Airways and Air Pegasus as operators of the ATR 72. Turbo Megha is soon expected to become the 4th operator.

 

Air Vistara conducts first two proving flights, AOP expected on 15th December

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Vistara

Air Vistara, the newest Indian airline working towards an AOP, conducted its first two proving flights on 4th and 5th December, 2014, as officially confirmed by the airline. The first flight took off from Delhi’s Indira Gandhi International Airport at around 22:10IST (16:40UTC) on December 4th and landed at Mumbai’s Chhatrapati Shivaji International Airport at 5 minutes past midnight (00:05IST/18:35UTC) on 5th December. The return flight took off at 01:10IST (19:40UTC) and landed at Delhi at around 02:50IST (21:21UTC).

Proving flights are the last stage of a lengthy process involved in securing an Air Operator Permit (AOP). Considering that the proving flights may wrap up by 7th December, the AOP may be awarded on 15th December, after the completion of the FAA Audit of DGCA, which is hoped to be completed on the 12th December 2014. The airline may start operations early January.

When operations start, it will be the first full service carrier to be launched in a decade. Kingfisher airlines commenced operations in 2005 and no full service, pan-India carrier has since been launched.

The airline was awarded its NOC from the aviation ministry on the 3rd of April, 2014, and applied for an AOP on the 22nd of April, 2014. The eight month period between AOP application and approval is similar to the period taken to award AirAsia India’s AOP.

Vistara has two Airbus A320-232SL aircraft (A320/IAE V2527-A5 engines/Sharklet equipped) in its fleet, of which one is completed in the airline’s livery. The liveried aircraft performed the proving flight.

The airline plans to have six flights between Delhi and Mumbai in the first year of operations. Other destinations planned in the first year of services are Goa, Bangalore, Hyderabad, Ahmedabad, Srinagar, Jammu, Patna and Chandigarh. The DGCA’s Civil Aviation Policy CAP 3100 stipulates that the airline ‘will be required to conduct a minimum of 5 flight sectors on intended routes, with total duration of not less than 10 flight hours’. The Delhi – Mumbai route contributes to around 1hr 40 minutes one way, adding to 3:20hrs for both ways. The airline will have to fly another 6:40hrs. Should the airline fly Delhi-Bangalore and back, it will add around 4:40hrs. The balance 2:00hrs may be picked up by flying either to Ahmedabad or Patna and back.

The liveried aircraft, registered VT-TTB, is the first aircraft that the airline received on the 24th of September, 2014, at Toulouse. The second aircraft, registered VT-TTC, was handed over to the airline five days later, on the 29th of September, 2014. The first aircraft got its livery at Singapore, and landed back at Delhi on the 15th of October, 2014, coinciding with the 82nd anniversary of JRD Tata’s first commercial flight from Karachi to Mumbai.

Three other aircraft, registered VT-TTD, TTE, and TTF are at Toulouse, reportedly not delivered in the light of the uncertainty associated with the DGCA’s delay in granting the new airline company its Air Operator’s Permit. The fifth aircraft recently flew to Hamburg, Germany, where the cabin interiors are fitted.

The airline plans to have a fleet of current engine option (CEO) and new engine option (NEO) A320 aircraft. The first 20 Airbus aircraft are to be leased from BOC Aviation – a Bank of China company that has its origins in Singapore Airlines. The duration of the lease agreement is six years for the A320-200 CEO aircraft and twelve years for the A320-200NEO aircraft.

AirAsia India changes schedules and pattern to tackle operational issues

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Pattern_AAI_Dec_pre-17thAirAsia India, which is believed to be facing a shortage of Senior Flight Attendants, has modified its schedule and pattern to address two problems: shortage of crew, and a poorly performing route.

The airline has cancelled its Bangalore – Chennai return early morning for a long time now. The airline previously had two distinct aircraft patterns – ten short sectors (Goa, Kochi, Chennai) on one, and two long and one short on the other (Goa, Chandigarh, Jaipur). The new, effective pattern does not fly the early morning Chennai and return, while advancing the 15:10 Goa flight to 13:15. The 18:35 BLR-MAA flight has been moved to 16:30, with a corresponding change to the return flight. The late night Bangalore-Kochi flight has been pushed to a departure 25 minutes later.

As a result of these changes, the airline presently operates just 14 daily flights as against its usual 16. Aircraft utilisation has gone up on the first pattern from 10:15hrs to 13:35 thanks to the Jaipur flight, while the second pattern’s utilisation has dropped to 7:35 in considering the early morning Chennai cancellation. The yellow highlighted cells belong to flights that were moved from one pattern to the other.

Most of the re-scheduling may have been done to better match the cabin crew’s flight duty time limitation (FDTL). As a result, the airline’s schedules had become fairly chaotic in November, with a significant number of cancellations and delays.

This month, two Airbus A320s are expected to join AirAsia India’s fleet from parent group AirAsia. The airline will fly to Pune from Bangalore and Jaipur from Pune effective 17th Decmeber, for which the aircraft are expected on Indian soil between the 10th and 15th of December. To cater to the new routes without disturbing the present schedule, just one additional aircraft is required in the airline’s fleet.

The airline was affected by the DGCA’s directive barring management pilots from assuming training positions. One of the airline’s captains, who reportedly has tendered his resignation but is serving his notice period, has been recognized by the DGCA as a Type rating Instructor (TRE). The airline also has a foreign captain from the AirAsia group serving as a training pilot.

Meanwhile, Subramanian Swamy had last evening tweeted about a Delhi High Court Hearing today, concerning both AirAsia India and what he may have meant as Vistara.

SSwamy_genocide

Fly Easy – A possible regional startup

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Fly EasyFly Easy (India), the brand name of a Bangalore based regional airline proposed to be started by ABC Aviation and Training Services Private Limited, has called for applications for positions in ten departments in the company.

The startup-airline company had received its initial NOC (No Objection Certificate) from the aviation ministry on the 18th of January, 2012. This is five days earlier than Air Costa’s first NOC which was issued on the 23rd of January, 2012.

The initial NOC is valid for a period of 18 months, and must be renewed every six months thereafter to maintain its validity. The airline is presently in its third (3rd) renewal, and will have to apply for its fourth (4th) renewal on the 23rd of January 2015.

The airline may apply for its AOP during its 5th renewed NOC period, if all goes as per plan. However, it is uncertain if the airline has sufficient funds to start operations.

The airline reportedly has an authorised capital of INR 12 Crores. This would have been just sufficient (only to meet regulatory requirements, insufficient for operations though) to start an airline with aircraft such as the E170 and E175. However, for an airline that plans to fly the E190s (or heavier aircraft), the regulatory requirement is a minimum paid up capital (not authorized capital) of INR 30 Crores minimum. The airline’s reported authorized capital is not in agreement with the airline’s plans to fly E190 aircraft.

As of today, the airline aims for a regional scheduled operator’s permit for the Southern Region – the most lucrative region for regional operations in the country. Earlier news reports had indicated Guwahati, Amritsar and Surat as ‘priority’ destinations. The airline indicates its plans to have a fleet of Embraer E-190 aircraft. Such  aircraft will help any airline tap long, thin markets that are either underserved or virgin. Aircraft with the range and capacity of an Embraer E190 (a little more than 100 seats – 112 in the case of Air Costa) gain prominence in the light of the saturation and focus of/on mature markets – Tier I routes and certain Tier III routes.

The airline’s website is up, and the brand colours, design and theme are perhaps the best amongst startup regional airlines in the country.

The airline company has an office at Bangalore’s Kempegowda International Airport’s Alpha 3, though the company is  registered at Trivandrum, at an area just south-east of Trivandrum international airport.

The airline company has four directors – Rafi Sainulabdeen Mohammed, Rajesh Ebrahimkutty Majidha Beevi, Sanaulla Zulfiqar Ahmed Khan and a ‘Rajesh’.

As per the airline’s website, the CEO is Finn Thaulow. It is uncertain whether he is the CEO or still a CEO-designate. The approximately 60 year old Norwegian CEO was formerly with FlyMe Europe, and Syrian Pearl Airlines. During his tenure as CEO at FlyMe Sweden, the airline, which operated Boeing 737 Classics (-300 & -500), filed for bankruptcy in March 2007. The sudden closure affected numerous passengers who had purchased tickets from the airline.

In 2011, trial against FlyMe was initiated, in which the CEO, Finn Thaulow, along with three others were charged. Finn Thaulow was charged with ‘serious accounting fraud’, as reported by Gotheborg Daily- a Swedish Daily. Reportedly, the four accused ‘emptied the company of 40 million kronor in the winter of 2006 through a fictitious transaction involving the purchase of shares in River Don Ltd’. At this moment, we have been unable to establish the result of the trial.

Syrian Pearl Airlines, which was founded in 2008, with Finn as the CEO, started operations in May 2009 with a BAe 146-300. The airline had entered into a ACMI (Aircraft, Crew, Maintenance, Insurance) agreement with Orion Air of Spain, concerning two BAe 146 aircraft, one of which it started operations with. According to the US Department of Commerce, the agreement was a breach of US export regulations. Finn had privately appealed against a temporary denial order (TDO), stating that it was Orion Air’s responsibility for ‘obtaining all necessary licenses and governmental approvals on Orion Air before sending the two BAE 146-300 aircraft to Syria’. The airline ceased operations three months after its commencement, when the lessor Orion Air pulled out due to the US sanctions imposed on it.

Finn Thaulow was on the shortlist for Tarom’s board of directors. Tarom is the flag carrier of Romania.

Prior to FlyME, Finn was the Vice President of Alliances and Corporate partners at SAS Scandinavian Airlines – the flag carrier of Sweden, Norway and Denmark. He was also part of Spanair’s management team. Spanair, which ceased operation in 2012, was a Spanish airline, and a subsidiary of the SAS Group during Finn’s engagement.

Finn has over 25 years of aviation experience, and that may benefit the airline, should it take-off.

DGCA responds to The Flying Engineer

On 14th November 2014, the Flying Engineer had pointed out discrepancies between airline’s reported data and DGCA published data. The Director of Statistics at the DGCA – R Savithri – responded with the following statement:

The issue of mismatch between the passenger numbers published under passengers carried as per the ICAO Form ‘A’ for the said months and the passenger numbers published on page 14 of Domestic Traffic Reports had already been noticed by DGCA. ln order to resolve this problem a meeting was held in the month July and it was found that the main reason of the mismatch lies in the fact that the airlines were not including the number of passengers carried on the domestic leg of the international routes while reporting data as per Form ‘A’ of ICAO. While passengers carried published on page 14 of Domestic Traffic Reports includes this number. There is still a small difference in the number of passengers carried shown under the two tabs from the month of August onwards. This difference still persists due to the fact that the passengers carried published on page14 of Domestic Traffic Reports also includes charter or non scheduled flights data which is not a requirement for ICAO Form ‘A’“.

The implications of this is that the market share of various airlines, as calculated and published by the DGCA, is not truly indicative of an airline’s market share. The variations are, admittedly, small.

The director also clearly stated that the hours under ‘Aircraft flown’ correspond to Block Hours. Some airlines, in an attempt to make their aircraft utilization numbers appear good, had stated that those were flight hours. The director clarified that ‘no airline is reporting flight hours instead of block hours’.

The Flying Engineer has also learnt that the statistics for AirAsia India and Air Costa will be available in the statistics publication January 2015 onwards. Air Costa’s data has been included in the Total Traffic Statistics of Scheduled lndian Carriers for the month of October, which was published a few days ago.

How SpiceJet rattled IndiGo’s performance

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LF VS MONTH ALL 8 YEARS INDIGO

In an interesting observation, IndiGo’s load factors for Q2 FY2014-15 were found to be consistently below the average domestic load factors for the first time in its entire operational history.

The chart above (click to expand) captures IndiGo’s domestic load factors as reported to the DGCA. Plotting this against the average domestic load factors reveals 13 months out of 98 when the load factors of IndiGo have dipped below the average. Most of these below-average loads were in the first seven months of operations at IndiGo. In the last six financial years – the same years when the airline has been reporting profits – this has occurred just thrice. However, in this financial year alone, it has occurred thrice – in Q2 FY’15.

It what appears a challenge of supremacy, SpiceJet’s market stimulation was able to distort usual market dynamics in the lean season. For instance, September, which is historically – from the last three years – the weakest month for domestic travel as indicated through the lowest load factors – has this year matched the load factors as seen in May 2014. While demand still remained low, the market stimulation drive  created demand, at the expense of yields but to the benefit of RASK – revenue per available seat kilometer.

While SpiceJet brainchilded and executed this, not every airline could follow its footsteps. IndiGo was unable to match SpiceJet’s market stimulation effects, which positively impacted SpiceJet in Q2, and positively impacted other airlines as well. IndiGo’s load factors also rose in sync with the average domestic load factors, but however, underperformed with below average loads.

Indigo, by following what SpiceJet did, salvaged its September. However, its loads in July and August this year were lower than its loads in the same months the previous year. This performance explains in part the Q2 loss of 100Cr incurred at IndiGo.

In short, market stimulation both surprised and helped the blue airline.

India didn’t seem ready for a taste of South East Asian proven low cost strategy. At the same time, IndiGo is ready to make a killing in the months of November and December, lapping up the excess demand due to SpiceJet’s cancellations and planned temporary capacity reduction.

SpiceJet stimulated the market with great effort, only to hand it on a platter to IndiGo in the peak season.

IndiGo posts a loss of INR 100Cr for Q2’15, expands fleet with Tigerair aircraft

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IndiGo acft

IndiGo, the airline known to consistently post annual profits, realised a net loss of INR 100Cr in Q2 FY2014-15, covering the months of July, August and September (see footnote). In this period, the airline added a capacity of 15%, compared to Q2’14, but flew 21% more passengers – a total of 5.7 Million.

The airline ended Q2’15 with 10 aircraft more than Q2’14, with the fleet strength standing at 82 as of September 30th 2015. This is an increase of 14% in fleet strength compared to Q2’14. The disproportionately higher increase in capacity compared to fleet increase is explained through a 3% increase in average aircraft utilisation, up to an average of around 11.5hrs in Q2’15.

The increase in passengers in Q2 is partly due to an increase in capacity, and partly due to market stimulation efforts that IndiGo adopted, to keep up with SpiceJet’s initiatives. On April 4th, IndiGo launched fares between INR 1,499 and 2,199 for travel between 1st July 2014 and 30th September 2014. The period of travel was exclusively in Q2’15. This was followed by few other promos, most of which were for travel in September 2015. This resulted in September recording the highest growth in passenger, Year-on-Year, as seen in the graph below.

Cost and Rev Indicators Trend

IndiGo’s capacity increased in the three months of Q2: July, August and September. However, compared to Q2’14, the number of passengers per ASK dropped in July, picked up in August, and shot up in September due to numerous sales that targeted September: historically the weakest month for domestic travel. The airline’s cargo performance recorded a growth in July and September. The increase is partly due to the fact that IndiGo has started carrying mail in addition to freight, since May 2014.

Average flight hours per departure have reduced, indicating on average shorter flights flown by the airline, due to increase in domestic flights. International flights, which comprised 6.6% of all flights in Q2’14, has halved to 3.4% in Q2’15, indicating a strengthening on the domestic front and a reduction on the international front (International flights dropped by almost 40%).

IndiGo load factorsHowever, a lack of vigour and success in market stimulation may have been responsible for the domestic load factors (LF) of the airline to consistently trail the average domestic load factors (see graph above). It may be possible that since IndiGo responded to sales, especially those by stimulation leader SpiceJet, but didn’t initiate them, the efficacy of the sales drives may have been severely limited (a lot of planning and analysis goes into each sale. Responding to others may rob the respondent the time to perform sufficient due diligence). See the comparison between SpiceJet’s and IndiGo’s load factors, below – IndiGo can do a lot better. This could have had an adverse impact on the airline’s RASK (Revenue per available seat kilometre). We consider only the domestic LF, as International forms just 11% of the airline’s deployed capacity.

Interestingly, Rakesh Gangwal and Sanjiv Kapoor have both earned a Master of Business Administration degree from the Wharton School of Business of the University of Pennsylvania. However, a true low cost airline experience (and proven market stimulation strategy) is brought to the table by SpiceJet CCO Kaneswaran Avili. His experience at AirAsia and Tigerair have resulted in the graph below.

A comparison with SpiceJet

6E vs SG lfA comparison with SpiceJet becomes inevitable – the two largest low cost carriers with seemingly different strategies today.

Sources within IndiGo reveal that the airline’s CASK (cost per available seat kilometre) is at around INR 3.6. Compared to its next biggest LCC competitor – SpiceJet’s CASK of INR 4.07, this is INR 47 paise lower. IndiGo lost INR 175 for every passenger flown in Q2.

The CASK at IndiGo seems to be INR 3.6, and the RASK for Q2 may hover around INR 3.4-3.5. This may be higher than SpiceJet’s Q2 RASK of INR 3.26, which was impacted by cancellations and clubbing of flights.

Here are two interesting scenarios:

One – where IndiGo could have stimulated the market like SpiceJet. An aggressive market stimulation may have narrowed the loss for IndiGo, or it could have perhaps reported a profit. The airline could have flown fuller airplanes (in the light of its disappointing load factors) and brought in more revenue, resulting in a higher RASK. SpiceJet in 2014-15 is undoubtedly the Indian market leader in stimulation. IndiGo on the other hand didn’t respond too well to this. It will be interesting if this figures in their next year’s strategy.

Two: Where SpiceJet could have had the CASK that IndiGo enjoys. If SpiceJet’s CASK was INR 3.6 against its INR 4.07, its loss would have narrowed to around just INR 120Cr. Despite its high RASK, SpiceJet was able to salvage the situation to a level where the loss was arrested at INR 310Cr.

If IndiGo starts behaving like a true low cost carrier, perhaps emulating, and not merely responding to the kind of market stimulation that SpiceJet was able to execute, it may become an untouchable. The only way for other airlines to survive will be through differentiation: Vistara as full service, with favourable connections to the world through Singapore; Jet as a full service, with favourable connections to the world through the middle least; and SpiceJet through its well differentiated in flight services and Tier II/III connectivity. AirAsia and GoAir may face the highest heat as they yet do not have an offering that IndiGo doesn’t. While AirAsia may have the backing to grow to a scale to take on IndiGo with scale and lower costs, GoAir will be the loner.

Fleet and network expansion

A strategy that IndiGo seems to be applying is market dominance through excess capacity, frequency and network. The airline, however, is yet to make the most of its ‘overcapacity’.

IndiGo received its 100th aircraft on the 3rd of November, 2014, completing an order that was placed in 2005. With this 100th aircraft, the fleet size rose to 84 (16 A320s were sent off as per the old lease contract that lasted six years).

To fill the gap between November and last next year – when its NEOs from its second, 180 aircraft order placed in 2011, are expected to be delivered, IndiGo has ‘short term’ leased around 12 Airbus A320 aircraft used by Tigerair or its now defunct subsidiary at Indonesia – Tigerair Mandala. The first aircraft, a non-sharklet A320 that flew at Indonesia, joined IndiGo’s fleet on 21st November as VT-IDB.

IndiGo today (26th Nov 14) announced Kozikhode as its newest, 37th destination, which will be connected 2nd January onwards. With this, the airline’s daily flight count will rise to 554.

Footnote: Source of loss: Airline internal sources.

AirAsia India’s performance in Q2

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AirAsia_ATB

AirAsia India completed its first full quarter of operations. The airline, which took off on June 12th 2014, carried 128,089 passengers in 946 flights to 5 destinations, in the Q2 period. It posted a net loss of approximately INR 29 Crore.

The airline had had an interesting performance. To know more about how it performed, and get a glimpse on the outlook of the airline, click here: AirAsia India – Q2FY15 performance and outlook.

It’s Friday! And we call upon the CIA.

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Art00_sIt’s been a long, tiring week, both in the offices and on twitter. The best way to unwind is to look at certain things from a light – very light angle. Wait, we’re taking something totally irrelevant.

CIA – Comical Indian Aviation – brainchilded by The Flying Engineer and encouraged, fed, and moulded by Dr. DSL, is an attempt to elicit a laugh at the end of a stressful week. We can’t promise you a frequency of CIA strips. Nor can we say if we’re dedicated to the CIA strip. Enjoy it as it comes.

Don’t mistake us, we’re not taking sides. We’re not stating facts. We’re not breaking news. We don’t know whom we’re talking about, and we are certain that any and all interpretations that you may arrive at are purely the figments of your imagination based on the creativity of our comic ‘strip’.

By the way, we had thought of FIA – Funny Indian Aviation, but dropped it knowing how nasty the FIA can be to some.

So, enjoy ACT – 1! (Click to enlarge)

Art01_s

Q2 with Professor Sanjiv Kapoor

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Sanjiv_funny_faceSpiceJet’s COO Sanjiv Kapoor conducted a class on introductory airline economics. He also dived, to some depth, into the Q2 results, and shared views on the airline’s performance.

The Flying Engineer also did his homework, and analyses, together with what was said in the class, SpiceJet’s performance.

Also talked about is a bit beyond Q2: October. Load factors at the airline dipped. In November, the airline’s fleet size has shrunk. The why, and what next of these and more, here: Q2 results and Prof. Sanjiv Kapoor’s introductory class on Airline Economics.

You may also want to later read our pre-Q2 results analysis, here: SpiceJet in Q(2) – Great Performance in Testing Times

DGCA: Disappoints even when reporting data

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DGCA Data Error

The DGCA’s capabilities (or the lack of it) have come under question both before and after the FAA downgrade. What is further disappointing is that the data published by the DGCA is not accurate enough to be used for serious academic or analytical purposes. When thumbing through the data for Jet Airways, it was brought to light that the data reported by the DGCA in its Traffic Reports and Traffic Data differ, and both differ from the data reported by the airline.

Interestingly, the errors reported in the ‘Traffic Data’ for Jet Airways as published on its site are at places huge. The ‘Traffic Reports’, released around the 15th of every month, are more accurate, but lack sufficient data for an analysis. Certain data with have an error less than 1% may be ignored on a case basis. But the question still lingers: how two publications from the DGCA can have largely differing data between them – an error that may not be attributed to rounding-off-error.

This discrepancy was brought to light only through Jet Airways’ published data. Since other airlines do not publish such data, the extent of errors and deviations are uncertain.

Further, in the month of November, two airlines, both flying with red colours, have had numerous cancellations and delays. Delays and cancellations are reported by airports. In the case of Bangalore’s Kempegowda International Airport, the airport has been using the term ‘rescheduled’ for one particular carrier (and interestingly not for any other carrier), which effectively masks both delays and cancellations. In such a case, a delayed flight, operating ‘on time’ in accordance with a ‘rescheduled’ departure timing will prevent true OTP data (though the DGCA does not yet list the OTP for the airline in question) and ‘Cancellation Rate’ from being published in Traffic Reports, making comparisons between airlines both difficult and unfair.

AirAsia India’s pattern (or a part of it) effective November 17th

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New Pattern WS DGCA

AirAsia India, in its winter schedule filed and approved with/by the DGCA, has listed a slew of new flights, most notably the doubling of its Jaipur (JAI) and Chandigarh (IXC) frequency, introducing a double Vishakhapatnam (VTZ) frequency, and adding another frequency to Cochin (COK). The new schedule will require four patterns (four aircraft), but the fourth pattern is evidently incomplete. AirAsia India is expected to announce further new routes soon – an announcement delayed by at least two weeks now.

In the new pattern, the airline seems to focus on a mix of business and casual travellers. Early morning / morning departures to & from Goa, Cochin, Jaipur and Vishakhapatnam, followed by evening/late evening returns from these destinations. The Bangalore-Chandigarh sector’s plan is baffling (though the route records very good loads), as it seems to deploy two flights within two and a half (2:30) hrs of each other. The airline does this with its late morning Cochin flight, as well. The airline still seems to have an unfavorable slot for Chennai.

The aircraft utilization in the third pattern will touch an all time high of 14 hours.

The airline, to fly the new pattern (if it still holds – most of the airline’s forward looking statements haven’t fructified) will need two additional aircraft by November 17th. This fleet of four aircraft will require between 16 – 20 sets of crew, which at the highest requirement is 20 Captains, 20 First Officers, 20 Senior Flight Attendants, and 60 Flight Attendants (which may also include trainee cabin crew). The airline will need to go on a hiring spree for experienced cabin crew. Since the start of operations, the airline has held 11 walk-in cabin crew recruitment drives (including one tomorrow and another on Thursday), targeted mostly at fresh (inexperienced) applicants.

The airline was supposed to have received A320 MSN 6262, registered as VT-ATD, from Toulouse, but the aircraft was re-registered to 9M-AJT and delivered to Malaysia AirAsia. It is very likely that the next two Airbus A320 aircraft will be used airplanes from the AirAsia group. The question is not which, but when.

Opinion: Incomplete updates to employees may do more harm

Airline_concealed

Recently, the pilots of an Indian airline received an email from one of their c-level officers, stating that the Boeing 737-900s in the fleet are on their way out. The email reportedly did not include details concerning the fleet size.

Considering that the airline in discussion has six Boeing 737-900s in the fleet, of which one has entered storage, but the remaining five are still flying for the airline, speculations were rife in the airline, among its Boeing flight crew, that the fleet will drop from the present strength of 33 to around 26. If the Boeing 737-900 that entered storage is to be discounted, the Boeing fleet strength drops to 28. Some flight crew believed the fleet size will drop to 26, considering six 737-900s and one Boeing 737-800 that, according to their observations, has been on ground for long.

No, there were no rival airlines that were spreading rumours. Rather, it was the lack of information in the email that had led to speculation. Very evidently, any flight crew who receives such information will do the fleet math to come to a conclusion – perhaps based on incomplete information but definitely not baseless- about further fleet downsizing. While the c-level officer may have sent out the email to keep his employees informed – a commendable practice – apparently one key aspect was missed out – to think of the consequences of such information – generation of rumours about the health of the airline, and a loss of confidence in the future of the airline, among the very people whose morale he intends to boost.

What he stated was fact. However, sources reveal that the airline may be leasing Boeing 737-800s from an overseas carrier. The 737-900s don’t fit in well in the airline, and replacing them with the lower capacity -800s is a wise thing to do, to standardise the fleet. This key piece of information, for employees to realise that the fleet size will remain unaffected, and that the airline was further optimising and streamlining, was missed out.

Did the chief officer err by not mentioning the induction of -800 aircraft? No. Was the email well intended? Yes- there is no reason to believe otherwise. There may be no need to share forward looking information, as failure to acquire the assets on time will again raise a question on the health of the airline. What he possibly could have done was to add a line stating that the airline will be taking measures to ensure the fleet size remains unchanged. The ambiguous line, surprisingly, will have just sufficient information to answer more questions than raise doubts.

IndiGo receives its 100th aircraft, fleet size touches 84

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A320_IFH_first_sharkPlease read the edit footnote.

IndiGo today received its 100th Airbus A320 from Hamburg, Germany – one of Airbus’s three presently operational assembly lines. The aircraft, bearing manufacturer serial number 6336, and registered as VT-IAY, was ‘delivered’ to IndiGo yesterday (3-Nov), at around 2300HRS IST (1730 UTC). IndiGo flew the aircraft from Hamburg (Germany) to Istanbul (Turkey), and after a brief tech stop (for refuelling), continued to Delhi. The aircraft landed at 0900 HRS IST (033UTC).

This aircraft marks the completion of the first order of airplanes IndiGo had placed with Airbus, on 16th June 2005, during the Paris Airshow. Back then, IndiGo was just a name.

However, even as far back as in 2005, IndiGo had done its homework well. Not many times does Airbus praise a yet-to start airline with words such as, “IndiGo is the result of extensive analysis and planning by very experienced airline executives and we are convinced it will be a successful new player in a market that is both large and fast growing”. These words were spoken by the then Airbus President and CEO, Noël Forgeard.

IndiGo today has survived as the only airline in India to consistently report profits over the last six years, and stands to witness the completion of a massive order of aircraft. The airline firmed up an order for 180 Airbus A320s on 22nd June 2011, for 150 A320NEO and 30 A320CEO (current engine option) aircraft, making it one of the NEO’s launch customers. On 15th October 2014, IndiGo signed an MoU for 250 A320NEO aircraft. As covered first by The Flying Engineer, IndiGo will short term lease A320 aircraft from ailing Tiger Airways.

IndiGo’s fleet

Almost one year after placing an order for 100 aircraft – in June 2005 – IndiGo received its first A320 on 28th July 2006. The airline commenced operations on 04th August 2006 – 11 days before the completion of India’s 59th year of Independence, and just 6 days after receiving its first aircraft.

All the aircraft since day one have been directly delivered to the airline from Airbus. Till date, the airline has not flown an aircraft that was previously used by another operator. The airline has engaged in sale-leaseback deals for each of its aircraft. The early lease agreements were for about six years (see adjacent graph) – a period just long enough to make the most of a brand new, efficient Airbus A320, while escaping the costly ‘D’ check. Lease agreements have been revised this year to extend the lease to 10 years, in view of IndiGo’s plans to aggressively add capacity to take on the Indian market.

IndiGo Returned Aircraft AgeAnomalies have existed in the airline’s aircraft lease. Of the 16 aircraft that have been returned, five flew for the airline for a period ranging from as low as three months to 1 year 5 months (see adjacent graph). Three of these aircraft are today being flown by Etihad, the same airline IndiGo is losing a large number of pilots to.

IndiGo Present Aircraft Age

Of the 84 aircraft in operation, almost quarter the fleet size is between two to three years old, and another quarter between two to one year old (see graph). This shows that nearly half the fleet size was inducted in the last two years. Interestingly, it is two years since Kingfisher airlines stopped all operations, and nearly 60% of the fleet – almost 50 aircraft- was inducted since then. IndiGo expanded fast enough to grab the void in the market that Kingfisher left behind, to today command the largest domestic market share, which is upwards of 30%.

Distribution FrequencyOn average, every 35th Airbus A320 produced since 2006 has been delivered to IndiGo. On average, the airline has received one Airbus A320 every month.

Yearly DistributionInterestingly, though, the airline, for 120 days – between 1st April 2014 and 30th July 2014 – did not receive any aircraft (see graph above – red arrow). It is the longest gap between aircraft deliveries in the history of the airline. The yearly frequency of aircraft joining the airline has not been consistent. (See adjacent graph).

The graphs also show that the 6 year lease, which was in effect earlier, has been extended since early this year.

Registration Series

Registrations

IndiGo had to adopt five different registration series to cater to its 100 aircraft. Of these five series, only three – the IN, IE, and IF series have had all the English alphabets as the third letter.

All 16 aircraft that have left IndiGo’s fleet were from the IN series. Sharklet equipped A320 aircraft at IndiGo started in the IF series, with VT-IFH. VT-IFH was the first shraklet equipped A320 in India.

With Airbus’s continuous improvement to the A320, every series has something unique, with some changes that may not be noticeable from the outside. For example, VT-IAP onwards, all A320s have a smooth nose, with the lightning strips now embedded in the nose cone (see image comparison below). This helps reduce aerodynamic drag.

IndiGo_nose_differences

With 30 Airbus A320CEOs still in the order book, IndiGo may sustain the induction of 1 A320 a month for the next 2.5 years atleast. Tigerair’s 12 A320s may be used to boost capacity till such time IndiGo’s target fleet size with its own aircraft is reached. With Airbus’s initial A320NEO production rate set to be slow, deliveries of a mixture of A320CEOs and A320NEOs may start late next year, with mixed deliveries running perhaps into 1.5 years, as Airbus gradually boosts production rate (with its new FAL at Mobile, Alabama) and transitions to an A320NEO line from the A320NEO and CEO mix line. However, conversion of some of IndiGo’s A320CEO to NEOs is expected.

Thanks to Oscar Victor for certain info.

Edit, thanks to Cyril Roy: As per Flightglobal, the 30 A320CEOs have been converted to A320NEOs. No CEOs exist on Airbus’s order book for IndiGo. In the light of this, it may seem that Tigerair’s 12 A320 will fill the gap for exactly a year before NEO deliveries begin

Edit, thanks to Shakti Lumba: Airline’s first aircraft delivery changed to July from June, 2006. Start of operations corrected to 4th August, 2006 from 15th August.

 

SpiceJet – Impressive Performance amidst Serious Challenges

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Spice737_DELSpiceJet is a unique airline. The airline had a massive management reshuffle, and the new management is actually working hard – very hard towards turning around the airline. In a record period – of around nine months, the airline has actually effected so many changes that it is an all new SpiceJet – in terms of appeal, service, and performance indicators. Symbolically, its the phoenix of the Indian airline industry.

Load factors, one of the strongest indicators of revenue, have been consistently up in the airline from the last few months. In Q2 FY2014-15 – comprising the months July, August and September, the airline recorded the airline industry’s highest ever domestic load factor in recent history, of 85.9%. What makes this achievement more remarkable is the fact that it was achieved in a lean season. The average Q2 domestic load factor stands at 82.5% – the best performance in the last 15 quarters of SpiceJet, and the highest among all Q2s in the entire history of SpiceJet.

Yet, the Q2 results will report a loss, and profitability in Q3 is somewhat threatened.

The market stimulation, and ancillary revenues have brought SpiceJet impressive revenues, but unfortunately these revenues are overshadowed by high costs in the airline. The high cost structure at SpiceJet – higher than the other two prominent LCCs – IndiGo and Go Air, is due to funding issues. The airline, which is now finding it difficult to sustain purely on cash flows from advance sales, badly needs a fund infusion. Without a cash problem, SpiceJet can make more money, and lower costs. How? Find out about this, and more, in further detail through our analysis, by clicking here.