Malaysia Airlines - Orient Aviation

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INDIA With a new livery in hand and legal formalities nearing completion, the new Air India, wh ich br i ngs t he country’s two state-owned carriers Air India and Indian under one roof, is set to fly as a single unit for the first time this month. And within 18 months up to 20% of its shares will be sold to the public, chairman and managing director, Vasudevan Thulasidas, has told Orient Aviation. Speaking in Vancouver, where he was attending the International Air Transport Association’s (IATA) annual general meeting last month, Thulasidas expressed confidence the merged airline would “unleash hidden energies” and present opportunities for significant network expansion. The merger had progressed with little difficulty, he said. “Maybe it has taken a little longer than we would like. There have been some problems with some of the unions, but not about merging. They wanted certain things to be attended to before the merger, such as some wages revision. “The greatest challenge will be integrating the people, the different cultures of the two airlines. But at the end of the day I expect the integration process will go through. “There will be some difficulties here and there, but the sense I get talking to unions for the past year is they are all largely in support of the merger because they feel now that it is very good for the two airlines, for their survival.” Thulasidas explained while the corporate merger was complete, full integration of manpower, fleet, network and schedules would take from 18 months to two years. The company will operate several strategic business units. Air India’s existing low cost carrier, Air India Express, will continue on domestic and regional routes, a new Air India Cargo has been set up and there will be ground handling, as well as maintenance, repair and overhaul (MRO) divisions. He also responded to criticism from some analysts that the merger would fail to produce major benefits because there would be no job losses. “Our object with the merger was not to rationalize manpower, but to drive benefits out of the synergy in combining a domestic network with an international network,” said Thulasidas. “The complementary nature of the merger comes out of that synergy. As far as manpower is concerned, being the Newly merged Air India to sell shares to public The carrier’s chairman and chief executive, Vasudevan Thulasidas, tells TOM BALLANTYNE why the merger with Indian makes sense ‘The greatest challenge will be integrating the people, the different cultures of the two airlines’ Vasudevan Thulasidas Chairman and chief executive Air India sort of companies we were, public sector companies, the reduction of manpower or compulsory retirement is not something that we could hope to do. “But we have been able to achieve quite a bit of reduction by other means such as natural attrition. We also had a voluntary retirement scheme. With the two together we were able to reduce Air India’s manpower by more t h a n 3,0 0 0. Simultaneously we increased the fleet size, almost doubling it, so effective reduction is much more than that. We are adding a large number of new aircraft and we plan to keep the manpower under check.” Between them, Air India and Indian have 111 aircraft on order – 68 and 43 respectively – for delivery through to 2011. The joint entity will receive its first B777-200LR this month, opening the way for non-stop services to New York. The merged carrier is also looking at new services to South Africa, Australia and China. Overall, Thulasidas, who is also chairman of the Federation of Indian Airlines, welcomed the current consolidation occurring in the country’s aviation industry, including the takeover of Sahara Airlines by Jet Airways and the purchase of a major stake in Air Deccan by Kingfisher Airlines. “In India a lot of airlines came into the market and there was a lot of competition, with a lot of money being lost by most airlines. That’s not very desirable. Ultimately the passenger is not going to benefit from this,” he said. “If there is consolidation and you are able to make better use of this new energy that has been unleashed, but in a more controlled or directed fashion, then it is better for all, for the airlines, passengers, the government and the country as whole. What is happening is good.” Next Orient Aviation India October 2007 28 ORIENT AVIATION JULY/AUGUST 2007
AIR TRAFFIC MANAGEMENT As dramatic traffic growth outstrips the state-run systems ... India looks at private options By Tom Ballantyne Faced with the possibility that bullish projections of t raf f ic g row t h could be underestimated, India has asked overseas air navigation service providers (ANSPs) to help it decide whether to commercialise elements of its air traffic control (ATC) operations or leave the system in the government’s hands. The plea came from Raghu Menon, financial adviser to the Ministry of Civil Aviation and one of the country’s most senior civil servants, at a major air traffic control conference in Cochi in Southern India. He told the annual general meeting and chief executives’ conference of the Civil Air Navigation Services Organization (CANSO) that, while long-term forecasts saw Indian aviation growing at 8% annually to 2025 against a world average of 4.8%, “these growth projections, impressive as they are, may have to be all thrown out of the window if India [is] to realise its true potential.” Menon, who has worked in government for 35 years and is a board member of the state-owned Airports Authority of India (AAI) which currently handles ATC operations, was part of the team which started the liberalization process. “We went into liberalization mode some time in 2002-03 and since then we have been witnessing an unprecedented growth in air traffic,” said Menon, who also sits on the board of the newly merged Air India and Indian. “Today domestic passenger traffic is seeing 40% growth and international traffic is growing at around 15%. Air transport services have moved away from public monopolies and today there is fierce competition in the skies. “The reality is that with a country of 1.1 billion people, not even 2% to 3% travel by air. With the Indian economy growing at 8% and a middle class estimated at 300 million people, even if 10% of India’s population use aviation as their preferred means of transport within the next 15 to 20 years, then all the India is expecting a major increase in traffic, putting a strain on airport infrastructure current projections of growth would have to be revised.” Traffic increases provided tremendous opportunities, but it had also exposed infrastructure shortcomings, Menon said. “Airport services, including air navigation services, are fully stretched today. Upgrades in technology and requirements of trained personnel are inevitable. Conditions in the air and on the ground are hitting both ‘Conditions in the air and on the ground are hitting both efficiency and costs’ Raghu Menon Financial adviser, Ministry of Civil Aviation efficiency and costs. These infrastructure constraints, unless quickly addressed and appropriately resolved, [could] become a major impediment to growth,” he warned. The investment required is huge. Working on the assumption that for every US dollar spent on aircraft purchases, 50 cents should be earmarked for airport infrastructure, some US$40 billion to $50 billion would be needed by 2020 to match orders worth $82 billion, said Menon. A committee was being set up to formulate an air services master plan to cope with the expansion. One area of debate was whether to make air navigation a commercial proposition or whether it should continue in the public domain, he said. “Does commercialization reduce costs and does it tangibly enhance safety and efficiency?” asked Menon. “The common perception, whether right or wrong, is that commercialization is a synonym for profit and that everything is measured in terms of the bottom line. What is profitable is good and what is not is bad. “In such a scenario there is a perception that costs may actually rise steeply after commercialization, particularly in a country like India where a large number of airports are unviable due to inadequate traffic. If this happens the airlines would stop operating to such airports owing to unviable ANS [air navigation services] costs and many airports might have to close down ... but we want to enhance air connectivity, not limit it.” Menon invited CANSO members to advise the government on where to go next, stressing that India would consider changes carefully before implementing them. “The point is that financial pressures should not decide policies. It is also worth considering that despite privatization the delivery of ANS in a given air space still remains a national monopoly owing to the nature of the service,” he said. “Of course there are many ancillary services ... like communication that could be commercialized, but air space management is essentially a monopoly and will continue to be so.” JULY/AUGUST 2007 ORIENT AVIATION 29
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