Bombardier, manufacturer of the world’s largest western civilian turboprop aircraft, the DHC-8 Q400, today launched the 90 seat variant at the Singapore Airshow, making the largest airplane even larger in terms of capacity, without so much as stretching the airplane by an inch.
The Q400 usually seats 78 passengers in a single class with a 30 inch seat pitch. In 2013, Bombardier had launched the 86 seat variant of the Q400, with Nok Air of Thailand as the launch customer. The 86 seat variant offered a seat pitch of 29 inches, by shifting the aft galley into the aft cargo hold, thereby reducing aft cargo space by 20%, and doing away with the forward baggage hold.
This made the case for Bombardier to announce a 90 seat variant with a seat pitch of 28 inches. To add an extra 4 seats, or one row, Bombardier is, according to Flightglobal, will push back the rear bulkhead and reconfigure the front right hand door. To make the airplane more attractive, Bombardier is increasing the 90 seat variant’s payload by 900 kg, and proposing an escalation of the A-Check and C-Check intervals from 600/6,000 to 800/8,000 flight hours. The 90 seat variant is expected to enter service as early as 2018, provided Bombardier secures a launch customer for the type.
Why at the Singapore Airshow?
There are four reasons why ATR and Bombardier are focusing on South East Asia. First, the geography and infrastructure of countries is such that connectivity within the country is best offered by short haul air transport. Second, the region is comprised of developing nations, where the end customers, the passengers, are very price sensitive. Third, demand for travel is rising. Fourth, the average height of the population is much shorter than the western world.
Turboprops are excellent for short and thin routes. Average ticket prices can only be lowered if the cost per seat falls further. The same airplane packing more seats lowers the cost per seat per flight, which allows airlines to compete better using pricing as a tool. The 90 seat variant may reduce the cost per seat by as much as 11-13% when compared to the 78 seat variant, and by 3-4% when compared to the 86 seat variant. Packing more seats reduces the seat pitch, which would have been a repulsive product to sell to passengers in the western world. But in South East Asia, the lower average height makes a 28 inch seat pitch comfortable. South East Asians are, on average, one of the shortest in the world.
Bombardier had launched the 86 seat variant at Dubai, but the launch airline is from a South East Asian country. Knowing that any demand for ultra high density aircraft variants will only come from Asia, Singapore Airshow 2016, Asia’s biggest commercial aerospace and defense exhibition, had to be the platform of choice.
Excellent work in reducing unit costs in Q2’16, exceeded expectations.
Disappointing revenue performance.
Excellent ancillary revenues.
Accumulated losses around 200 crore, losses since start of operations around INR 150 crore.
Financial & certain performance data reported by AirAsia India is inconsistent, inaccurate, and unreliable.
Before we begin the analysis of AirAsia India’s performance, it must be noted that the quarter reports of AirAsia are unreliable, on at least four counts, as observed:
The quarter report for Q1’16 (“SECOND QUARTER REPORT ENDED 30 JUNE 2015”) states that in Q1’15, AirAsia India reported a net loss of RM 0.4 Million. However, the quarter report for Q1’15 (“SECOND QUARTER REPORT ENDED 30 JUNE 2014”) states that AirAsia India reported a net loss of RM 13.8 Million. This translates to a difference of RM 13.4 Million / INR 25.9 crore.
The quarter report for Q4’15 (“FIRST QUARTER REPORT ENDED 31 MARCH 2015”) states that in Q4’14, AirAsia India reported a net loss of RM 12.4 Million, which, based on the RM-INR conversion rate prevalent then, converts to INR 22.7 crore. However, the P&L statement in the same Q4’15 report states that AirAsia India had a net loss of only INR 8 crore.
The quarter report for both Q2’16 (“THIRD QUARTER REPORT ENDED 30 JUNE 2015”) and Q2’15 (“THIRD QUARTER REPORT ENDED 30 JUNE 2014”) states that in Q2’15, AirAsia India recorded a net loss of RM 15.7 Million, which converts to INR 29 crore based on the RM-INR conversion rate prevalent then. However, in the Q2’16 report, AirAsia India is stated as having incurred a net loss of INR 52.9 crore.
The flown capacity (ASK) reported by AirAsia India in its quarterly reports is 12%, 5% and 3% higher than what the airline has reported to the DGCA in Q2’16, Q1’16, and Q415. However, in teh two sources of data, the number of flights by the airline match perfectly, and the number of passengers flown are reasonably close.
As a result of (3), we will refrain from comparing Q2’16 data with Q2’15 data, but will only compare Q2’16 data with Q1’16 and Q4’15 data.
As a result of (4), we will refrain from using the AirAsia India flown capacity as reported in the quarterly reports, as this leads to very misleading performance numbers. We stick to the DGCA data.
We had already mentioned the first three points, but the discovery of issue (4) made us withdraw our earlier analysis and revise the numbers. This is the revised analysis.
Due to the ambiguity resulting from points (1), (2) and (3) above, the total losses accumulated by AirAsia India including Q2’16 is around INR 200 crore. Total losses since start of commercial operations (ignoring June 2014) stands at INR 150 crore as reported by AirAsia India.
Q2’16 (July 01st – September 30th, 2015) was AirAsia India’s first full quarter of 5 aircraft operations. In this period, the airline flew 416,182 passengers (excluding no shows: 401,905. No shows : 3%), which is a 38% rise compared to Q1’16, though the number of flights increased by 50%. This explains Q2’16’s load factors of 76%, as against Q1’16’s load factors of 83%. The load factors in Q2’16 were lower than the 79% witnessed in the other lean season – Q4’15. Load factors include no show passengers.
The airline operated 34 daily flights as of 30th September 2015, and flew its millionth passenger in the first half of August 2015.
Q2 is historically a lean season. Capacity in Q2’16 grew by 56% over Q1’16, despite flights increasing by only 50%. This is in line with the average stage length of each flight increasing to 1,208 km/flt from 1,146 km/flt. Low load factors, increase in average stage length, and the low pricing power in the lean season have together resulted in the average fare dropping to INR 2,684 in Q2’16 from INR 3,350 in Q1’16. In Q2’16, AirAsia India did not inaugurate any new routes, but added a frequency on the Bengaluru – Vizag sector, and hence, there was no significant effect of low yields due to new routes.
Ancillary revenues at the airline have picked up very well. From being just 8% of total revenue in Q4’15, to 10% in Q1’16, it touched 15% in Q2’16. This has been aided by the increase in cargo per flight, to an average of 1,205 kg per flight in Q2’16 compared to 1,074 kg/flt in Q1’16 and 971 kg/flt in Q4’15.
However, on a unit basis, the airline’s revenue per available seat kilometre (RASK) suffered a 27% drop from Q1’16 figures, to settle at INR 2.22/seat-km, due to the factors mentioned in the preceding paragraphs. The unit revenues are 22% lower than the Q4’15 lean season.
AirAsia India’s cost performance is very good, and has touched record low values in Q2’16.
Unit aircraft fuel expenses fell by 13% in Q2’16 compared to Q1’16, despite fuel prices falling by only 9%. Higher average stage length of 5% can only contribute little to improved fuel consumption. However, tankering and uplifting fuel from stations with low sales tax on fuel may explain a part of the lower fuel expenses. Sales tax at Vishakhapatnam is just 1%, Goa 12.5%, Guwahati 22%, Imphal 20%, and Delhi 20%. Delhi, Guwahati, Imphal and Vishakhapatnam operations, and increased operations to Goa in Q2’16 may have significantly contributed to the drop in fuel costs.
Inexplicably, the staff costs have dropped in Q2’16 compared to Q1’16, from INR 31 crore to INR 29 crore. While there is no obvious explanation for such a drop, it has resulted in the unit staff costs to drop by 41% in Q2’16.
Unit maintenance costs have increased by 2% in Q2’16.
Due to longer flights, capacity has increased by 56% but flights by only 50%, in Q2’16 compared to Q1’16 resulting in the 7% drop in unit user charges and related expenses, which are largely a per-flight expense.
Unit lease expenses have dropped significantly by 29% in Q2’16, attributable to increased aircraft utilisation, higher capacity and no aircraft having to remain on ground in Q2’16. Average lease rental per aircraft per month is INR 2 crore.
Other operating expenses, most of which are fixed, have been diluted by the higher capacity, dropping by 25% in Q2’16.
Other Income, which is treated as part of operations by AirAsia India, increased by 10%, positively impacting the bottom line.
The cumulative effect of increasing frequency, network changes, and increased aircraft utilisation, amongst others, has reduced unit total operational costs at AirAsia India by 21% (including other income which can also be a negative quantity as in Q4’15). This is a brilliant performance, though the drop in staff costs is yet to be clearly identified. One explanation is perhaps the reduction in training expenses due to stagnation of fleet growth, and perhaps the voluntary exit of certain crew.
Break Even Figures
In Q2’16, AirAsia India realised a per-passenger cost of INR 4,621, which is 10% lower than the INR 5,166 cost per passenger in Q1’16, but 15% higher than the INR 4,009 cost per passenger in Q4’15.
In Q1’16, AirAsia India incurred a loss of INR 1,469 per passenger. At the same unit passenger revenue of INR 3,154, AirAsia India would have needed a break-even load factor of 112%.
AirAsia India lost INR 1.04 per seat flown every kilometer, which is 5% lower than INR 1.09/seat-km in Q1’16, but 30% higher than the unit loss incurred in Q4’15.
AirAsia India’s cost structure is depicted in the pie chart. Fuel constitutes 36% of the airline’s expenses.
Cancellations and OTP
Only 6 flights were cancelled by AirAsia India, in Q2’16. The airline operated 3,032 flights, with an average on time performance (OTP) of 87%.
In Q3’16, AirAsia India inducted its 6th aircraft into operations, in the second half of November 2015. Daily flights have gone upto 40, with increase in frequencies and the inauguration of a new route, Delhi – Vishakhapatnam.
Our forecast for AirAsia India’s performance in Q3’16:
Quarter’s Load factors to increase to around 85%.
Capacity to increase by 12% and passengers carried (including no shows) to touch around 520,000.
Average unit passenger revenue may rise by around 20%+ compared to Q2’16.
Certain unit costs to slightly increase due to addition of 6th aircraft and sending one aircraft for half a month for scheduled heavy maintenance.
Certain unit costs to very slightly increase due to weather related delays and diversions.
Ancillary Revenue percentage to drop in light of higher average fare.
For break even, unit passenger revenue must rise by around 45% (compared to Q2’16)
Very slim chance of an operational break-even. More likely in Q1’17 (April – June 2016).
The PW1100G-JM family of engines uses a revolutionary but not new technology that essentially makes the engine a cross between a turboprop and a pure turbofan. This is the largest geared turbofan produced till date. With this engine, Pratt and Whitney marks its return as a single brand powerplant option for narrowbody mainline jets. Boeing 737-300/400/500/600/700/800/900/MAX-7/8/9 are all powered by CFM engines, while the Airbus A320 family of aircraft are powered by either CFM or the IAE consortium’s engines. Pratt and Whitney is part of the IAE consortium.
The “JM" in PW1127G-JM represents partner companies Japanese Aero Engine Corporation (JAEC) and (Motoren- und Turbinen-Union GmbH) MTU. JAEC holds a 23 percent share in the PW1100G program and is responsible for the fan, low pressure compressor (LPC) and combustor/diffuser. MTU holds an 18 percent share and is responsible for the low pressure turbine (LPT), and jointly with Pratt & Whitney the high pressure compressor (HPC). Pratt & Whitney is responsible for the remainder of the engine and systems integration.
The PW1100G-JM family powers the Airbus A320NEO family (A319NEO, A320NEO, and A321NEO) and is available in 5 thrust variants of 22,000/24,000/27,000/30,000/33,000 lbf (pound-force) per engine. The PW1127G-JM that powers the A320NEO is the 27,000 lbf variant.
The CFM powered A320NEO (A320-251N) will be certified in the coming months.
In India, all operators that have placed direct orders for Airbus A320NEO aircraft have chosen the PW1127G-JM as the power plant of choice. IndiGo has 430 Airbus A320NEOs on order, some of which may be converted to A321NEO orders. Go Air has an order for 72 Airbus A320NEO aircraft. Vistara, which is committed to the lease of 20 Airbus A320 aircraft from Bank of China Aviation (BOC Aviation), will receive 7 Airbus A320NEOs from mid 2017 onwards. However, the engine option has not yet been finalised. AirAsia India, which leases aircraft from AirAsia Berhad, will receive Airbus A320NEOs powered by the CFM LEAP engines.
One of IndiGo’s Airbus A320NEOs, MSN 6720, is one of the three test aircraft, and has been flying since September 25th, 2015. However, the first production aircraft is destined for Qatar Airways, the launch customer. MSN 6744, to be registered VT-ITA, a Hamburg produced A320NEO already painted in airline colors, may be the first A320NEO for IndiGo, despite being produced after the aircraft that was already flying for the certification program.
The three flight test aircraft powered by Pratt & Whitney engines accumulated over 1,070 flight hours over 350 flights. Of these 1,070 flight test hours, 300 were completed with the same aircraft in an airline like environment to ensure operational maturity at entry into service.
The A320-271N is the 9th sub-variant of the A320-200 family, after A320-211/212/214/215/216/231/232/233. The A321-271N is ‘significantly different’ from the original A320 Type certificate via the modification labelled “MOD 161000”. Pratt and Whitney received FAA certification for the PW1100G-JM engine on December 19th, 2014.
The A320-271N’s operating empty weight is around 3 tonnes heavier than the A320-232 which IndiGo flies today. However, the maximum take-off weight of the highest weight variant of the A320-271N is 79 tonnes, which is just 1 tonne higher than the maximum take-off weight of the highest weight variant of the A320-232. The dry weight of each PW1127G-JM engine is 453kg heavier than the IAE V2527-A5 that powers the -232 variant. This implies that the weight of accessories and structural reinforcements total to around 2 tonnes.
The A320-271N promises a fuel saving of upto 11% over the A320-232SL and 15% over the A320-232 (non winglet). Such savings are however realised only on flights of 3000NM and higher.
There is a strong possibility of IndiGo receiving its first Airbus A320NEO by end of this calendar year. As per our information, IndiGo’s A320NEOs will be fitted with 186 seats – six seats more than what it fits every aircraft cabin with, today.
Thanks to Cyril for the heads up on the certification.
Air Costa, which used to operate 32 daily flights to 9 destinations, will be operating 18 flights to 8 destinations starting today, 16th November, till 26th November, as the airline’s fleet temporarily reduces to just 2 aircraft – one 67 seat Embraer E170 and one 112 seat Embraer E190. No sale of flights on one of the patterns (MAA-HYD-VTZ-BLR-VTZ-HYD-MAA-JAI-MAA) was noticed on the airline’s website. This leads to VTZ not being temporarily served by Air Costa.
VT-LSR, one of the two Embraer E170s, has been pulled out of operations due to the planned return of the aircraft to its lessor. VT-LBR, one of the two Embraer E190s, operated a special Chennai-Bengaluru flight LB709 (the first 7xx flight number for the airline), which is a ferry flight turned commercial flight, before heading off for scheduled maintenance to Jordan via Muscat. This leaves only two airplanes – VT-LNR (E170) and VT-LVR (E190) in the active fleet in the short term.
In contrast to Air Costa cancelling flights, AirAsia India, which presently has one of its Airbus A320 airplanes (VT-BLR) at Hyderabad for scheduled maintenance (Since 1st November), has not allowed operations to be impacted. The airline, which recently received its 6th aircraft (VT-APJ), continues to fly 5 patterns with 5 active aircraft. VT-BLR is expected to return from maintenance today to allow VT-APJ to fly to Delhi to operate additional frequencies on existing routes, from tomorrow. (Edit: VT-BLR flew to Delhi late this morning, and will take on Delhi flights from tomorrow).
The airline, which will end calendar year 2015 with a fleet of six airplanes, is expected to induct atleast one additional aircraft before end March 2016.
The additional aircraft, which will be the 7th airplane for the hitherto 17 month old airline, will be based out of Bengaluru. Presently, three are based at Bengaluru, and two at Delhi, with the 6th aircraft taking the count at Dehi to three. Basing the 7th out of Bengaluru is necessary to ensure that atleast 50% of the airline’s fleet is based out of Bengaluru, as per an agreement AirAsia India has with Kempegowda International Airport, Bengaluru. This agreement, a drive by the airport to increase traffic, gives AirAsia India certain benefits in terms of airport charges.
The 7th aircraft is expected to add a third frequency between Bengaluru and Delhi (both ways), and increase the frequency between Bengaluru and Goa to thrice daily, both ways. The aircraft will enable the opening of a new sector for the airline, a direct flight between Bengaluru and Guwahati.
With the 7th aircraft, the airline will fly 46 daily flights from its two hubs at Bengaluru and Delhi, deploying 8,280 seats a day. Capacity in ASK will increase by 47% over the 34 daily flights flown today, and 19% over the full utilisation of the fleet with 6 aircraft.
The Delhi <> Goa sectors, and the Delhi <> Guwahati sectors will get an additional frequency. The new sector that the airline is expected to operate is Delhi- Vishakhapatnam. Delhi to Vishakhapatnam will depart at 6:05 am as I52551, and will depart Vishakhapatnam at 8:35.
The total number of flights on the Delhi<>Goa sector goes upto thrice daily, and the number on Delhi<>Guwahati goes upto twice daily, from November 17th.
However, the airline now has two flights to Goa from Delhi (and back) spaced just 45 minutes apart, which may lead to cannibalization, pronounced during the off-peak seasons.
The new Delhi – Guwahati flight gives a Delhi passenger the option of a meaningful day return on the same airline.
One of the three aircraft patterns is expected to be dedicated to these new route and frequencies. Aircraft operating the pattern will fly DEL-VTZ-DEL-GOI-DEL-GAU-DEL, accumulating a block time of 14:45 hrs.
With the addition of the new aircraft and the related routes, the airline will increase capacity (measured in available seat kilometres) by 24% over the existing network, and will increase seat capacity by 17% to 7,200 daily seats. Daily flights will increase to 40 from the present 34.
Unlike in the summer peak season when the airline had two airplanes on ground for nearly two months, and incurred setup costs associated with the opening of four new stations (Delhi, Guwahati, Vishakhapatnam, Imphal) the airline in the winter peak season is not opening any new stations, thereby incurring no one time costs related to the network.
Presently, the airline is only selling the new DEL-GOI-DEL and DEL-GAU-DEL flights. The DEL-VTZ-DEL flights are yet to be announced and opened for sale.
AirAsia India, which has been slow in its growth owing to a primarily domestic-international network strategy that was thwarted by the unreasonable delay in lifting the 5/20 rule (a rule requiring an airline to fly international only after flying domestic for 5 years, and a minimum fleet size of 20 airplanes), received its 6th aircraft at Hyderabad’s Shamshabad airport at the MAS-GMR MRO facility.
The aircraft, bearing MSN 4346, previously flew for Indonesia AirAsia as PK-AXL. It is a non-winglet airplane, and is 5 years 4 months old.
It has now been re-registered to VT-APJ, as a tribute to late Dr. A.P.J Abdul Kalam.
This is AirAsia India’s third non-winglet airplane. This is also the fourth airplane to be dedicated to a person (living and dead) or a place. The other three are VT-ATF (Tony Fernandes), VT-JRT (JRD Tata) and VT-BLR (Bengaluru).
This is perhaps the last airplane the airline will induct in this calendar year – something we had mentioned earlier.
With this, AirAsia India will be adding capacity during the winter peak season. The airline may start operating new sectors or additional frequencies only towards mid-late November 2015.
Due to the late announcement of routes, some of the lowest airfares may be found on AirAsia’s network. While this is good for passengers, it may adversely impact the airline’s unit revenues.
The airline has however started offering via flights – Passengers from Delhi can fly to Imphal via Guwahati, something which the airline did not offer earlier. Via flights will help improve revenues at the airline – something we had mentioned earlier.
While total costs in the airline will rise with the induction of the 6th aircraft, unit costs are expected to slightly fall, which is good for the airline.
The 6th aircraft may be based at Delhi, and may connect the national capital to Visakhapatnam, among other frequency/route additions.
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.
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.
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.”
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 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.
In the quarter ending December 2014 (Q3FY’15 – India), AirAsia India, an associate of AirAsia due to the latter’s share of 49% in the India venture, posted a net loss of INR 21.7 Crores.
In the same quarter, spanning the months of October, November, and December 2014, the airline faced a significant challenge. The airline was faced with a shortage of senior cabin crew, effects of which were largely seen in November and December – very significant delays of many flights (up to 5 hours and more) and the cancellation of some. The airline was forced to play around with its schedules to match the flight duty time limitations (FDTL) of its senior crew, which resulted in the delays and cancellations.
Cancellations at AirAsia India rose from 0% in October to 2.65% in November, and dipped to 1.92% in December. In the quarter, a total of 4,019 passengers were affected by delays more than two hours (2% of the passengers carried in the quarter), and 513 passengers were affected by cancellations (0.2% of the passengers carried in the quarter), as per DGCA data.
In the quarter, the airline flew a total of 201,000 passengers, out of 253,852 seats, resulting in a load factor of 79.2% for the quarter. In the month of November, passengers carried dropped to 61,000, down 5,000 passengers compared to October, while load factors increased to 79.8%, up from 76.2% in October, perhaps indicating that the loads in November were driven by servicing affected passengers.
December is a month of high domestic travel demand. December 2014 was AirAsia India’s first month of operations in a high demand season, which resulted in domestic load factors rising to 81.5% – its highest since start of operations. Considering that the target customers for AirAsia India are leisure travellers, AirAisa India was expected to have recorded higher load factors. This figure was the lowest among all airlines in India for the month, either due to the airline’s limited network or an image that was impacted by the high number of cancellations and delays that continued into December.
AirAsia India ended the quarter with a fleet of 3 Airbus A320 aircraft, of which two are used (from AirAsia Malaysia), and one is new (directly received from Toulouse). The third aircraft entered commercial operations on 18th December 2014.
In the quarter, the airline added only one destination to its network – Pune, on the 17th of December 2014, while doubling the frequency on the Bangalore-Jaipur sector, and halving the Bangalore-Chennai frequency. The airline presently services Chennai, Cochin, Goa, Chandigarh, Jaipur, and Pune from Bangalore, and Jaipur from Pune.
As per AirAsia, AirAsia India will receive just three additional aircraft in the year 2015, raising its total fleet to just six (6) aircraft by the close of calendar year 2015. All three aircraft will be used (older) airplanes from AirAsia Malaysia. In the same year, the group will receive only five new airplanes from Airbus, of which one will be for Malaysia AirAsia, two for Phillipines AirAsia, and two for Japan AirAsia which presently has no aircraft.
AirAsia India is forecasted to have a load factor of 81% in Q4 FY’15 (Q1 CY 2015). This may seem difficult considering the airline is entering another lean season, and its past performance in both lean and peak seasons hasn’t been encouraging enough to support this forecast.
However, one tactic that the group may resort to is to feed traffic from Malaysia AirAsia and Thai AirAsia into Bangalore, which can then be picked up by AirAsia India to offer more connections in India, such as Jaipur, Chandigarh and Goa to passengers of the other two AirAsia associate airlines.
Says Tony Fernandes, AirAsia Group CEO, “For a new airline, the AirAsia brand is strong in India and the load factor of 80% recorded in 4Q14 speaks for itself. Looking at the growth potential there, an additional aircraft was added in India during the reported quarter hence it ended the year with a total of 3 aircraft. Though the associate, due to the local regulations, is only allowed to operate domestic routes in its first five years of operations, AAI has the advantage of getting traffic feed from MAA and TAA which also flies in to AAI’s hub in Bangalore. This differentiates AAI from its competitors."
AirAsia’s A320NEOs will be delivered only at the end of calendar year 2016. Further, in 2015 and the next few years, the group will not be taking in large number of aircraft every year like before, in an attempt to preserve cash.
For the quarter, Thai AirAsia was the only associate to record a net profit. Indonesia AirAsia, Malaysia AirAsia, Philippines AirAsia, AirAsia Japan and AirAsia India recorded net losses. Indonesia AirAsia and Malaysia AirAsia however recorded operating profits.
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.
On 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.
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’.
AirAsia 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.
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.
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.
TATA-SIA’s A320-232SL (SL=sharklets), was spotted flying for the first time at Toulouse, France yesterday. The aircraft was flown with a test registration F-WWDT, and the airframe is serial number 6223.
The aircraft is to be registered as VT-TTB. The aircraft will next fly to Hamburg where it will have its cabin fitted in accordance with TATA-SIA’s preferences.
The aircraft is expected in Delhi, India by August 15th, but no later than August 20th.
The airline received its no objection certificate (NOC) from the ministry on April 2nd 2014, and applied for an air operator permit (AOP) on 22nd April 2014. On 9th July 2014, the DGCA decided to consider the AOP application of TATA-SIA, after inviting and reviewing objections and suggestions from the public.
Judging by the pace of developments and clearances at the airline, the AOP is expected by the first half of September. Considering that the Delhi High Court today adjourned the hearing of petitions filed by the Federation of Indian Airlines (FIA) and Subramanian Swamy against TATA-SIA and AirAsia India to September 12th, TATA-SIA may secure its AOP before the court hearing.
Once the AOP is secured, the airline may open for sales in September, and begin operations by end September / early October, subject to timely clearance of flight schedules by the DGCA.
Choice of Power.
Although TATAs have a stake in both TATA-SIA and AirAsia India, the engine chosen by the full service airline is the IAE V2527-A5, unlike the CFM56-5B6 flown by AirAsia. This particular IAE engine is similar to what IndiGo uses on its Airbus A320 aircraft, and has a higher thrust but lower bypass ratio when compared to the CFM56-5B6. As a result, the IAE engines are noisier.
Take off Thrust
*Based on FAA data. Quantified comparison omitted here as it’s too exhaustive.
IAE V2527-A5 on an IndiGo A320-232SL
Pratt and Whitney holds majority stake in the IAE venture, which was originally formed between Pratt and Whitney, Rolls Royce, MTU Aero Engines and Japanese Aero Engine Corp now has Pratt and Whitney as the major stakeholder when the United Technologies Corporation engine unit bought out Rolls Royce’s stake in October 2011.
TATA-SIA’s choice of engine was very natural. Singapore Airlines flies Boeing 777s, A380s, and A330s-all powered by Rolls Royce Engines. Singapore Airlines’ subsidiary-Silk Air-flies A320 and A319 aircraft fitted with IAE engines. Tigerair, in which Singapore Airlines has a stake, flies A320s and A319s with IAE engines.
AirAsia’s fleet mostly comprises of the A320-216 (CFM56-5B6 powered).
According to Amit Singh, Director Flight Operations at AirAsia India, the low thrust of the 5B6 translates to maintenance savings. Worldwide, CFM engines have a reputation for reliability and robustness, reportedly better than IAE’s. The CFMs are reported to offer better economics on the A320 and A319.
Although CFM has more than 55% of the classic engine market that powers the A320 aircraft, it has a lower market share in Asia Pacific. In India, presently, 93 Airbus A320 family aircraft are powered by IAE Engines, while 66 are powered by CFM engines. Of the 93 IAE powered A320 aircraft, 78 comprise IndiGo’s fleet.
Edit: Thrust ratings changed to reflect take off thrust as published by EASA.
AirAsia India , which opened for sales on May 30th, sold out the entire seats on the first flight in nine minutes, according to the Indian venture’s chief executive officer Mrithyunjaya Chandilya better known as Mittu, which according to him, “must be a record somewhere”.
Loads on the airline have been very encouraging. Reportedly, the Bangalore-Goa flights fly almost full, while the Bangalore-Chennai flights fly with about 80% load factor (occupancy), bringing the average to around 90% plus. The CEO is smiling, albeit with a hint of nervousness, and the big boss: AirAsia group CEO Tony Fernandes is very optimistic about India.
Underneath the show, excitement, and optimism, are the currents of cautiousness, and disagreement within the airline. The head of investor relations at AirAsia did not seem to mince words when talking about the airline’s break even: What Mittu had told the whole world: a break even in four months, seems to be far fetched for the head of investor relations who now says it’s not before eight months.
AirAsia India is probably the most dynamic airline in the country, today. Which is very good (and much needed), and at the same time paints a picture of an airline that wasn’t fully prepared for India. In parallel, the airl