The fall and fall of Air Deccan - Orient Aviation

October 2008
The fall
and fall of
Air Deccan
Founder Gopinath looks on as
Kingfisher fails to halt merged
carrier’s mounting losses
Indian carriers face
losses of US$1.5 billion
No turning back
for IndiGo
Airport charges
row to escalate

comment
Chickens coming home to roost
As the director general and CEO of the
International Air Transport Association
(IATA), Giovanni Bisignani, issued a grim
warning for Indian aviation in September, three
carriers announced substantial staff cuts.
Mumbai-based low-cost carrier, Go Air, was the first to take
action. A total of 150 staff have been re-trenched by the airline,
including seven senior level executives, since June this year.
JetLite, the wholly-owned subsidiary of Jet Airways, has
announced intentions of laying off one third of its 2,300 staff,
mostly former Sahara Airlines employees, the carrier Jet
bought in 2006.
Meanwhile, Kingfisher Airlines (KFA), which last year
acquired and merged with Air Deccan has offered severance
packages to 300 of its Deccan employees. Sources say many
more of the 3,100-plus Deccan staff - the carrier has been
renamed Kingfisher Red - are expected to follow in coming
months.
This does not bode well for the future of Indian aviation.
Bisignani said the global crisis, resulting from high oil prices
and declining traffic, was hitting India hard.
He said growth had slowed from 33% in 2007 to 7.5% for
the first six months of this year. The last two months had seen
negative growth. Indian carriers were facing losses of US$1.5
billion in 2008, the largest outside the U.S.
The IATA chief said reducing costs, improving infrastructure
and adopting global standards were priorities for
India. He pointed out it was 58% more expensive to buy fuel
for domestic flights in Mumbai than it was for international
flights in Singapore. “Excise duties, throughput fees charged
by airport operators and state taxes of up to 30% for domestic
flights result in a cost structure that cannot support a competitive
industry,” he said.
These points are well known by the airlines, but up to now
too little has been done elsewhere to redress the balance. Let’s
hope the recently announced US$1 billion rescue package by
government, which could include cuts in airport charges and
excise duty on fuel, is put into operation soon and is not too
little too late.
Bisignani said India’s decision-making is too slow. It’s true.
Our airlines have been demanding cuts in taxes for way too
long. The chickens are now coming home to roost. The question
is: how many more redundancies or failed airlines will it take
before India’s airline industry gets up to speed. ■
ANJULI BHARGAVA
Contributing Editor
CONTENTS
6 Relief, but the red ink still flows
OA INDIA
10 Air Deccan: the lost dream
14 No turning back for IndiGo
18 Airport charges row to escalate
20 At last, some order at Delhi Airport
22 India finds experienced home-grown
pilots in short supply
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Chief Executive
Barry Grindrod
E-mail orientav@netvigator.com
october 2008 ORIENT AVIATION INDIA

main story
As the oil price falls its ….
Relief, but the
red ink still flows
By Anjuli Bhargava
As oi l p r ic e s
climbed down
marginally in
Se ptember f rom t hei r
incredibly high highs, one
could almost hear the collective sigh of relief
heaved by the Indian aviation industry.
Things may not have changed dramatically,
but there is some respite from what
seemed an endless increase in fuel prices
and a relentless rise in their financial losses
week-on-week for the carriers.
While airline CEOs are not yet uncorking
the champagne - domestic carriers face losses
to the tune of US$1.5 billion in the current
financial year - there’s little doubt the arrest
in oil prices has lightened the load on many
a shoulder.
All this, however, is not yet reflecting in
fares on the domestic sectors. “The fall is too
little as yet. I would say for airlines to feel any
sense of real relief, prices must fall consistently
for two or three months,” said Bruce
Ashby, the CEO of IndiGo Airlines, which
according to newspaper reports last week,
overtook erstwhile Air Deccan to become the
largest low-cost carrier in India.
Ashby said that since September is off
peak season anyway, many airlines want
to see what route oil prices take before they
change their pricing strategies. “However, I
don’t think it’s credible to say that fares will
not fall if oil prices stay contained. They
certainly will in due course,” he added.
Not only are fares high, it is not very clear
what kind of pricing strategies airlines have
devised. Said Prasanto K. Roy, a gold card
member on Jet Airways and Kingfisher and
president at CyberMedia: “It’s weird: airlines
are suddenly fine with flying empty rather
than offer flexible fares. I’ve just flown Delhi-
Mumbai on two nearly empty IndiGo flights,
with the fares frozen for weeks at Rs 10,650
(US$230) for the round trip,” he said.
“I am also surprised to find exactly the
Air India: Estimates of the national carrier’s losses have moved from the
sublime to the ridiculous
same fare for round trips to Bangalore,
Chennai and Kolkata from Delhi - Rs 2,000
plus taxes, or Rs 5,325, per flight whether you
fly tomorrow or three months later.”
Loads have been lighter in more ways than
one. Almost all airlines have seen a substantial
fall in loads since they raised fares. With most
carriers, loads are running almost 10%-15%
lower than at the same time last year.
The decline means that fewer passengers
are being carried every month and this is
being clearly reflected in traffic data. Official
data released for August 2008 showed it
was the third consecutive month of negative
growth. The domestic market slumped
17.45% during the month, the sharpest fall
triggered by high fares.
This trend has continued for the entire
calendar year as the Airports Authority of
India data shows. The number of passengers
passing through Indian airports grew at about
‘Civil aviation ministry
sources say some airlines are
losing about Rs5 crore a day
(more than US$1 million) and
collectively they are losing
around US$8 million a day’
11% in the first quarter of the year. This is
against the near 28% growth recorded in the
first three months of 2007.
To counter the dropping load factors
and passengers carried, many airlines have
resorted to promotions when the loads
rendered a flight unviable. For certain weeks
in August, for instance, the Delhi-Mumbai
route – otherwise one of the busiest – had seen
a sharp fall in demand across carriers.
Several flights on the Delhi-Mumbai
sector were flying at 40%-50% and for afternoon
flights (off peak hours), the loads have
been lighter still with just around a third of
the aircraft filled. So for a few days one could
pay one rupee in terms of fare and effectively
be paying just the taxes and surcharges. In
other words, one could fly return to Mumbai
for around Rs7,000, which has now gone up
to roughly Rs10,000-11,000.
Airlines say they believe that at times it is
better to raise fares and see loads fall a little
rather than keep fares very low just to fill up
the aircraft. “It works out to more or less the
same thing, but we found our revenue per seat
kilometre has been higher when we have kept
fares higher even if it means sacrificing some
load,” said an Air India official.
His argument is that sometimes keeping
fares high works better for the airline because
ORIENT AVIATION INDIA october 2008

main story
at least those who must fly have to pay the
higher amount and fly anyway. “What
we tend to lose is the very price sensitive
passenger who may or may not travel by
air depending on the fare. This is a smaller
segment as of now. Company executives
and small businessmen have to fly anyway,
whatever the fare may be,” he said.
Cost increases have also forced a decline
in service levels. Said Gopal Sarma, managing
director of Feedback Ventures, a gold card
member on Kingfisher Airlines (KFA) and
platinum on Jet Airways: “Fares have gone
up very rapidly. I have also seen that loads in
both economy and business are much lower
than even six to eight months back.
“Also, airlines, even full fare/service
ones, are cutting back on the service package.
Kingfisher First today is a very different
product from when it was launched, or even
say 12 -15 months back.”
And although loads may have fallen,
passengers at times complain of no seats.
Said Roy K. Cherian, CEO of Bangalorebased
analysts, Marketelligent: “People
are used to flying certain routes and then
suddenly, because of rationalisation, there
are not enough seats on some of the short-haul
sectors. Recently I tried for a ticket from
Cochin to Bangalore on a Monday afternoon
and there were no tickets available until
Wednesday morning.”
However, many feel that while pruning the
quality of service by not serving a hot meal
or selling products on board does reduce the
‘With most carriers, loads
are running almost 10%-15%
lower than at the same time
last year’
costs marginally, it’s more cosmetic than real.
Said IndiGo’s Ashby: “I find it more amusing
than anything else when airlines say they
will serve one mint instead of two”, making
light of the impact such steps can have on
overall costs.
Yet airlines have resisted cutting fares
possibly with the realization that it was the
fare bloodbath that they were all caught in
that weakened their balance sheets in the
first place. Without exception, all the Indian
airlines have been chalking up impressive
losses. While this has been true since 2005-
06, in most cases the problem has intensified
in the current financial year.
Meanwhile, revenue has risen since many
airlines have stopped unprofitable flights
and given up frequencies to bolster loads.
Domestic airlines scrapped more than 2,000
weekly flights in July alone, nearly one-fifth
the number they operate. More cuts were
introduced in August.
However, it may well be a while before the
red ink on the balance sheet dries up.
Civil aviation ministry sources say some
airlines like KFA are losing about Rs5 crore
a day (over US$1 million) and collectively
they are haemorrhaging around US$8 million
a day.
Estimates of national carrier Air India’s
losses have moved from the sublime to the
ridiculous with company insiders and civil
aviation ministry sources saying that losses
of just under US$1 billion this year cannot
be ruled out. ■
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news backgrounder
The lost
dream
Air Deccan founder Gopinath
helpless as Kingfisher tries to
kick-start the re-invented carrier.
But the losses keep growing
Air Deccan founder,
Capt. G. R. Gopinath:
too much of an idealist
Anjuli Bhargava reports
In 2004, Capt. G. R. Gopinath
launched Air Deccan with one
ATR turboprop and a dream that
he would “give wings to millions
of Indians who had never flown
before”.
By 2007, Bangalore-based Air Deccan
had a fleet of 19 A320s and 23 ATRs and was
“giving wings” to over four million Indians
a year as it became the country’s largest
low-cost carrier with close to 22% market
share in the country.
But it was losing money. Lots of it. The
fact it had two aircraft types and was offering
unrealistically low rates on non-viable routes
simply because he wanted every Indian to
fly, contributed to his downfall. “He was too
much of an idealist,” said one source.
As bankruptcy loomed in stepped the
ambitious founder and chairman of another
Bangalore carrier, Kingfisher Airlines, Vijay
Mallya, and made Gopinath an offer he could
hardly refuse.
He decided to sell. It was hard. For those
who know “Gopi”, as he is known, Air
Deccan was more than a business. It was a
labour of love.
For this reason, he had three wishes
when he agreed to merge Air Deccan with
Kingfisher. He wanted to protect the jobs
of his employees and the low-cost nature
of “the common man’s carrier”. Finally,
he wanted to remain associated with the
airline.
But those wishes are in tatters today.
Times are changing for Deccan. Today,
its known as Kingfisher Red, a move by
Kingfisher to give the airline a new image
and to change people’s poor perception of
the carrier.
Then, in late September, Gopinath’s
worst fears were founded when 300 of the
3,100 employees of the former Air Deccan
were made redundant. Hundreds more are
expected to follow soon.
“Well, things have really come a full
circle,” said a former senior Air Deccan
official “One of the main things the Captain
[Gopinath] had hoped to protect – the
employees - is no longer safe.” He added that
it had been a tense and rather aimless eight
to 10 months for Kingfisher Red/Air Deccan
employees, who often described their carrier
as rudderless.
Today Gopinath remains on the Kingfisher
board and is vice-chairman of the company.
To date he has steadfastly refused to publicly
make his personal feelings known about what
has happened to his beloved airline.
Those close to him say he has found it
hard to take and say his involvement with
Kingfisher has diminished daily.
But Gopinath is not taking defeat
lying down and indeed is working on his
“next revolution”.
While he can still be found at Kingfisher’s
head office in Bangalore’s busy Cunningham
Road, his attention and time is now on his
new venture, Deccan Express Logistics. The
company website calls the cargo company
Gopinath’s “next revolution”.
It already employs close to 150 people and
Gopinath claims the company will change the
way deliveries are made all over the country.
“We have got used to delays and excuses.
There is no way to track what we send and
the situation is even worse in small towns,”
he said.
Just as Air Deccan was to change the
way small towns in India travelled, Deccan
Express will change the way small towns
receive express freight.
Many of his employees, who bought his
dream in the airline, are firmly backing him
in his new venture.
Will he disappoint them Will cargo and
logistics manage to stir the same kind of
passion in a man who believes in giving his
all to what he believes in And has Gopinath
chosen the right moment to move on Time
alone will tell. ■
Next page:
➤ From bad to far worse
➤ Kingfisher losing more than US$1
million a day
10 ORIENT AVIATION INDIA october 2008

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news backgrounder
From bad to far worse
Those who held a large chunk
of Deccan Aviation shares, the
erstwhile parent company of Air
Deccan and now listed under Kingfisher
Airlines (KFA)on the bourses, had better
re-think if they thought a new management
would bring a new lease of life to their
investment.
Aviation experts and analysts in India are
unable to understand the strategy adopted
by KFA, which bought Air Deccan last year
and has now merged the carrier with its own
company.
“As I see it, the airline [Air Deccan] has
been wrecked and well, what can I say - for
us, that’s only good news,” said the CEO of
a competing airline.
In June last year when KFA bought
Deccan (the decision to merge was made in
December), the latter held around 22% of
the domestic market. Today, the figure has
slumped to 10.2%, marginally lower than
IndiGo at 10.3%.
Recently renamed Kingfisher Red,
Deccan has cut routes and flights and is
carrying roughly half the passengers per day
as it was when it was bought by Kingfisher.
“Passenger numbers are down from around
7 lakh (700,000) a day to around 3 to 3.5 lakh
per day,” said a senior airline source, who
wouldn’t be named.
Also, Kingfisher Red/Deccan, which at
one point enjoyed the highest passenger
load factor (PLF) in India, has seen its PLF
plummet to 39%, the lowest in the industry.
The intriguing part is that all this has
been accompanied with a doubling of losses.
According to airline sources, the airline at
the time of sale was losing around Rs1-1.5
crore a day (US$250,000).
Kingfisher took charge, changed the
identity, look, feel and various other
service parameters of the airline.About
a year ago, Kingfisher’s chief financial
officer, A. Raghunathan, told this reporter
he was expecting the struggling carrier to
break even well before his own airline. He
had said with better revenue management
and improvement in yields, Kingfisher
Red/Deccan should be able to break even
by the last quarter of the financial year
(January-March).
Kingfisher chairman, Vijay Mallya:
achieved merger synergies
He couldn’t have anticipated the rise in
oil prices at that time, but his calculations
certainly appear to have gone haywire in
more ways than one.
When questioned by email by Orient
Aviation India, KFA chairman, Vijay
Mallya, said: “I have spoken to the finance
team and checked with some members of
the leadership team. Your impressions are
exaggerated. In fact, we have achieved
merger synergies of over US$65 million and
the losses are much lower.
“If ATF [aviation turbine fuel] prices had
not spiked up, we would have broken even.”
He added that was all he was willing to say
at the moment. ■
As more Deccan staff face the axe …
Kingfisher ‘losing more than US$1m a day’’
Kingfisher Airlines (KFA) is
reportedly losing more than US$1
million a day. Despite this the carrier
still launched its international services
in September, a move analysts felt would
only multiply its losses several times over.
KFA itself has been reeling from big
losses since it began operations in 2005,
but it has been particularly badly hit since
the rise in the oil price. The airline has cut
flights by about 20%, has deferred deliveries
of 32 A320 aircraft and is hoping to sell two
A340-500s it has on order.
Not only has KFA’s own performance
been a cause for worry, but low-cost carrier
Air Deccan (now renamed Kingfisher Red),
which it bought last year, already had huge
accumulated losses, which have increased
in the last 12 months.
Three hundred of Air Deccan’s 3,100
employees were re-trenched in September as
KFA consolidated its merger with the LCC.
Many more Deccan workers face the axe in
coming months.
Kingfisher Airlines: an A350-500 at the Airbus delivery centre in Toulouse.
A KFA statement read: “We examined
the complete organizational structure of
the airline [Deccan/Kingfisher Red] and
mapped the skill sets of the existing talent
pool with the projected talent requirements
of the company.”
As a result of the exercise, 300 employees,
mostly in areas like security, flight operations
and engineering and maintenance, were
asked to leave. The severance packages are
expected to cost KFA about US$500,000.
According to a senior former Air Deccan
employee, many of the senior executives
have already left the airline. Several of
them have joined Air Deccan founder, G.R.
Gopinath’s new cargo and logistics venture,
Deccan Express Logistics.
The pruning of Deccan/Kingfisher
Red staff follows a similar announcement
by Jet Airways’ fully-owned subsidiary,
JetLite, that it was downsizing its staff by
at least 750. ■
12 ORIENT AVIATION INDIA october 2008

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EXECUTIVE INTERVIEW
No turning back
Times are tough, but IndiGo will take delivery of its 100 A320s
ANJULI BHARGAVA,
in Delhi, reports
Like all the airlines in India,
IndiGo, one of the largest
low-cost carriers today, has
been through its share of pain
during the recent oil crisis. It
has reduced flights, given up some slots and
lowered its expectations about when it may
become profitable.
But unlike many of its rivals, IndiGo
remains stubbornly committed to becoming
the largest (recent news reports say that it has
overtaken what was formerly known as Air
Deccan to become the largest LCC) and most
efficient low-cost carrier in India.
The airline, which started two years
ago, shocked the aviation industry when it
confirmed an order for 100 A320 aircraft,
worth US$6 billion, before it even launched
at the 2005 Paris Air Show. The aircraft will
be introduced over a 10-year-period.
The airline is owned jointly by US-based
Rakesh Gangwal, who has spent more than
20 years in senior management positions at
United Airlines, Air France and US Airways
and Rahul Bhatia, CEO of Delhi-based
Interglobe group, a US$1 billion enterprise
with varied business interests.
The airline is based out of Delhi and operates
on all the major trunk routes; Mumbai,
Hyderabad, Chennai, Bangalore and Kolkata,
and a few second-tier cities. It has built up a
10.3% market share in two years.
Its ambitious aircraft delivery schedule - it
currently has 19 A320s - remains unchanged
and so does its expansion and growth plan. It
is not changing its business model or looking
at merging with anyone.
Its chief executive, Bruce Ashby, who
joined IndiGo in August 2005, has 20 years
experience in aviation and was executive
vice-president, marketing and planning,
of US Airways before he came to India.
Previously, Ashby held executive positions
at Delta Airlines and United Airlines.
Ashby, who leaves at the end of the year
and will return to the U.S., is tight-lipped on
his next project. Meanwhile, IndiGo’s reins
will be passed to president, Aditya Ghosh.
‘We are not deferring,
selling, merging, changing,
renovating, re-doing,
undoing, re-scheduling
– nothing’
Bruce Ashby
Chief Executive
IndiGo
Why do the Indian carriers seem to
be having a particularly bad time right
now, more so than other carriers in the
region
Ashby: I’m not sure that Indian carriers
are doing worse than others. But we do have
some distinct disadvantages here. Taxation
on fuel in India is very high. Unlike the U.S.
and [other countries] where the majority
of taxes are on income, in India there are
service taxes, customs and other duties that
add up and make input costs very high. So,
the input costs to the airlines [outside India]
are much less. [For example], they buy fuel
for 30% less than it costs in India.
Here we pay a service tax on insurance.
We pay service tax for many other services
we buy. In the U.S. if you don’t make money,
you don’t pay tax so it’s less revenue for the
government, but it’s better for the airline. In
India, if the government started charging
income tax instead of other taxes, the
industry would look that much healthier.
Airport costs here, too, are kind of high for
the value you get.
And many airports want to increase
charges
Ashby: Private airports run by private
developers are now seeking to charge fees
for all kinds of services and, in many cases,
we feel the proposed fees are exorbitant;
overpriced services that cost 10 times
what they ought to cost and, in some cases,
unwarranted services we see no value
in. We are pretty unhappy about it. For
instance, Internet connectivity costs far
more than it should. It is a small thing, but
they add up.
[Delhi Airport] wants to install a
terminal system that many international
airlines [would] use, but the airport wants
to charge all the airlines a high price to use
this special kind of terminal connected to a
special network. If you are British Airways
it could be of value to you, but we don’t
need it. Our customers will get no value
from it.
Passengers might be willing to pay for
something that allowed them to check in 10
times faster or reach the airport quicker, but
these services [being offered] don’t provide
any kind of visible value and they cost more
than the old ones.
Have your loads fallen substantially,
like your rivals
Ashby: Loads of all the airlines have
fallen because we have raised prices. But
the revenue per seat kilometre is better as
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EXECUTIVE INTERVIEW
a result of that move. The revenue per seat
kilometre has increased substantially since
we took the summer actions of raising fares
and reducing capacity.
This is an off peak time and this time
last year we would have had a 70%-72%
load factor. Currently, it’s around 61%-62%.
We have also reduced flights and given
up some slots. We tried to hold on to the
scarcer ones.
We went from 120 flights to 95 flights
between July 20th and September 30th.
We put four flights back in service in
mid-September and we may put a few back
in winter now that the price of fuel has
fallen a bit.
Is your aircraft delivery schedule on
course or will you make changes to your
expansion plans
Ashby: No, we haven’t rescheduled
anything. We are not deferring, selling,
merging, changing, renovating, re-doing,
undoing, re-scheduling – nothing. We are
boringly committed to our plan.
One of our goals was to have a larger
number of aircraft than cities covered. We
achieved that earlier this year. We now
have 19 aircraft flying to 17 cities. We want
to increase frequencies to the same cities
rather than having fewer aircraft flying all
over the place. We feel it’s wiser to have
more flights to the same airport rather than
fewer flights to a lot of airports. Once we
have around 20-25 aircraft, economies of
scale begin to kick in and our costs per ask
(available seat kilometre) will come down
substantially. That is what we are working
towards. So, we are in no hurry to expand
and add cities. We are exploring one or two
new cities but there’s no rush.
There’s been talk that fares won’t
come down despite oil prices doing so
Ashby: It really depends on how much
oil prices come down. We held back on
raising fares, but when we did we held our
surcharges down quite a bit.
The fuel price has fallen but it’s too early
to say whether prices will come down. But
it’s not credible to say that fares will not
fall henceforth.
Airlines - all of us - reduced capacity to
some extent, more than we had originally
planned. IndiGo and SpiceJet probably cut
back slightly more than the full service
airlines like Jet and Kingfisher. So, if you
look at passenger numbers, you will see the
full service carriers reduced fewer seats
and therefore fewer passengers. This meant
the media concluded the passenger share
had shifted to the full service carriers and
LCCs in India were dead, which was rather
premature.
We are not particularly bothered about
market share in a period of a couple of
months. We are more interested in making
money. The price of fuel was so high that the
flights that used to be marginally profitable
became unprofitable. What we the LCCs did
was smart. It saved us a lot of money and
didn’t hurt the passenger. We didn’t cut out
cities. We just said for the summer let’s fly a
little less and save ourselves some money.
Some companies have told their
executives they must take the lower fare
when they fly if there is a difference of Rs
1,000 (US$22) or more.
Ashby: Yes, economic downturns can
be good for low-cost carriers.
But when they do that they can find the low-cost carrier
flights are cancelled without any explanation and they begin
to rethink.
Ashby: We rarely, rarely cancel flights suddenly. But I won’t
deny that it has happened a couple of times this year. All the airlines
have been seeing a lot of bird activity near the runways. As a result,
things like this may have happened.
Maybe 0.02% of flights since we started two years ago have
been cancelled at such short notice. We almost always offer some
kind of back-up.
At one point you had the lowest costs per ask. How does
that stand now
Ashby: Well, the cost per ASK has changed significantly
because the cost of fuel is so high. Fuel is close to 57% of our operating
expenses. It is higher than most airlines because everything else
we do is pretty efficient. Our non-fuel costs per ASK are running a
little better than we had hoped when we planned the airline.
For those airlines with fuel at 40% of their costs, it is because
the rest of their costs are high. There are a lot of stories in the Indian
press about olives being taken off the airplane or an airline giving
only one mint instead of three. This is not going to make up for
the price of fuel. We have no choice but to lower capacity, reduce
flights and minimize the damage while we wait for fuel to come
down. Then we will find a new equilibrium.
We were committed to being the lowest cost airline in India,
but not in a cheap way. We have brand new planes. They are very
clean. They have whatever a passenger needs. We run on time and
we offer an efficient service.
But your fares are not much lower than other airlines.
Ashby: We have raised fares. But our fares have never been
higher than any of our competitors. ■
16 ORIENT AVIATION INDIA october 2008

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airports
At last, some order at Delhi
By Anjuli Bhargava
Ever since the Indira Ghandi
International Airport (IGIA)
in Delhi was handed over to
private parties of the developing
consor tium, DIAL,
in May-June 2006, it has been receiving
more complaints than passengers. Airport
Authority of India’s management of the
facility left a lot to be desired in any case, but
what really compounded the problem was an
unprecedented surge in air traffic fuelled by
low fares and new carriers.
For the last year, the management and
public relations department of the private
firm that took on the task of managing the
airport has been fire-fighting with furious,
harried and helpless passengers, surly staff,
exhausted air traffic controllers, frustrated
airline staff, fed-up service providers, a hostile
press, wandering stray dogs, stubborn birds
and countless mishaps and problems on a
daily basis.
Finally, however, some semblance of order
is beginning to creep into the daily running
of the airport, as some of the actions taken by
the management begin to finally show results,
of which the most visible are, so far, at the
international terminal of the airport.
The airport is still a far cry from what
passengers take for granted in most countries
in the Asia-Pacific region, but it’s a marked
improvement over the pathetic services
Indians are used to. Flying in and out of India
from most cities in the last two and a half
years has been a harrowing experience for
foreigners and Indians, but Delhi was by far
amongst the most dreaded spots.
For one, desperately needed space has
been provided at the international terminal.
In the departure check-in area, an additional
2,500 sq. metres of floor space has been added
to increase the number of check-in counters.
The terminal now has 100 check-in counters,
up from 78, easing some of the endless queues
of passengers.
A new baggage handling system has eliminated
another huge headache for travellers; the
torture of standing in interminable queues for
check-in baggage to be X-rayed by machines
which, more often than not, did not work.
At the more crowded airports of Delhi,
Hyderabad, Bangalore and Mumbai the
queues would often wind their way outside
the entry gates of the airports.
The remaining airports in the country
still use the old, antiquated machines, but
at the private airports at least things have
improved.
Only a few months ago, entry into the
international terminal for night flights used to
be a challenge. At times it could take over 60
minutes to enter the terminal building at Delhi,
so the increase in entry gates from four to eight
is likely to be met with frenzied joy, especially
by travellers with small children.
Leaving Indian shores promises to be
an even happier event with counters in the
departure area up from 28 to 52. And even
returning to the capital promises to be a
International
cooperation
DIAL is a consortium led by the
GMR Group – one of India’s
leading infrastructure developers.
Other partners in the consortium
include German company Fraport AG,
Eraman Malaysia, India Development
Fund and Airports Authority of India.
DIAL was awarded the mandate for the
modernization and restructuring of IGI
Airport after an international competitive
bid in January 2006.
The airport, with traffic throughput
of 24 million passengers last year, is the
second busiest airport in the country.
Currently, it is served by nearly 70
domestic and international airlines
connecting more than 110 destinations
locally and internationally. ■
New third runway
at Delhi Airport
more joyful occasion with more space, more
immigration counters (from 28 to 38 and
another 10 on the way) and slightly more alert
officers manning them.
Security and baggage reclaim have also
improved with an increase in the number of
security lanes, additional X-ray machines for
hand baggage inspection and a lengthening of
the baggage reclaim belts.
In August, the Delhi airport also inaugurated
its third runway, making it India’s first
and among the very few civilian airports in
Asia to have three runways. The new runway
became fully operational in September.
Although the stray dogs managed to access
it before most of the airlines, the 75 metre
wide runway is among the longest in Asia at
4, 430 metres. It is capable of handling new
generation large aircraft such as the Airbus
A380 and will increase the airport’s ability to
handle aircraft movements.
It will allow aircraft to land when visibility
is as low as 50 metres and will have a sensor
system to track the movement of the aircraft
along the runway. The latter is quite a critical
feature at Indian airports where pilots need
to be more alert on the ground than in the
air and where all manner of life - stray dogs,
blue bulls, jackals and even peacocks - have
been known to surface within the operational
premises and are a force to contend with.
On the anvil are better arrival and
departure terminals for domestic flights,
but the changes here are not very visible
as yet. Eventually, the DIAL management
dangles the carrot of a world-class integrated
passenger terminal building in time for the
2010 Commonwealth Games to be held in the
city, but cynical passengers are unwilling to
believe it unless they see it. ■
18 ORIENT AVIATION INDIA october 2008

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airports
Airlines versus airports
Charges row to escalate
By Anjuli Bhargava
Airlines in India are finding
the going tough in more
ways than one. Not only
have they been reeling
under the shock of high oil
prices, but now airport charges in India are
threatening to escalate.
The government-run Airport Authority
of India (AAI) controlled all airports for
several years and fees remained steady. But
that has changed.
Private airports in India are a new
phenomenon and as services improve
the airports are threatening to impose
ever-higher charges on the airlines for the
improved services they are offering.
Not only do the airports want to increase
landing, parking and navigation charges,
they also want to impose higher rentals for
various improved terminal facilities, which
have been upgraded by the new airport
developers.
Said Ashok Chawla, secretary, civil
aviation for the government of India: “It
is a matter of timing really. Already, the
airlines are reeling under high fuel costs.
So this is not the ideal time to increase
airport and other charges.”
The government has, in fact, recently
rejected a demand by Delhi and Mumbai
airports to increase charges by 10% across
the board.
However, in the last few weeks, as oil
prices fell marginally, airport operators
have been raising their demands again.
“We feel we should now be allowed to
increase airport charges as we have to
raise up to Rs3,500 crore (US$770 million)
from the market for further development
and modernisation of the airport,” said
an official of Mumbai’s development
company, GVK. A 10% increase in airport
charges would add about Rs30 crore a year
to the airport’s total revenue.
As per the agreement between the
government and developers at Mumbai
and Delhi, the airport operator is allowed
to increase airport charges after two years,
provided it has completed the first phase of
expansion ending March 2010.
Airports such as Mumbai typically
charge about Rs31,000 (US$680) for
route navigation facility charges, terminal
navigation landing charges and landing
and parking charges for an A320 plane,
besides a Rs225 airport usage fee per
passenger. Delhi airport, which is being
extensively upgraded by private developer,
‘We feel we should now be
allowed to increase airport
charges as we have to raise
up to Rs3,500 crore (US$770
million) from the market’
Mumbai Airport developer, GVK
GMR Infrastructure, has also been seeking
permission to raise charges.
In addition, airports in cities like
Hyderabad and Bangalore are charging a
passenger user development fee (UDF).
Airlines in India have refused to collect
the UDF arguing that airports must collect
their own fees as passengers perceive the
extra charge as a fare hike.
In recent months, the Bangalore and
Hyderabad airports have been allowed to
levy a UDF from departing international
passengers of Rs1,070 and Rs1,000, respectively;
domestic passengers in Hyderabad
are levied Rs375 each.
But the battle between airlines and
airports is not only related to UDF fees
and user charges for services like landing
and parking. Airlines say that airports
like Delhi and Mumbai want to charge
exorbitant amounts for services that are
not necessary to the carriers.
Low-cost airline officials argue the
same services could be sourced very
cheaply from outside sources. Said a JetLite
official: “For example, the airports want
to charge five or 10 times the amount for,
say, a wheel chair or for ramp handling
than I can get it done from the market. We
don’t see any reason to pay these unfair
amounts.”
Internet connectivity is another issue
where new private airports are proposing to
charge at higher rates than what is generally
available.
Said Bruce Ashby, chief executive
officer of IndiGo, one of India’s largest
low-cost carriers: “The airlines want to
charge high prices for services from which
we don’t get any value. Or they want to
charge 10 times what a service ought to cost
for services where we do get value.”
Battles and confrontations between
airlines and airports that have taken place
in the past few months could have been
avoided if the government had had the
foresight to put in place a regulator for the
sector, an issue much discussed, but not
acted upon.
The Federation of Indian Airlines has
stressed to government the importance of
having a regulator and one with teeth so
that tussles like these can be prevented.
The long delayed Aera (Airports
Economic Regulator y Authority of
India) bill is likely to be introduced in the
forthcoming session of Parliament, but
experts predict the regulator will not be in
place before early next year.
So, the dust raised about charges
between the airlines and the airport operators
may take a while to settle. ■
Orient Aviation is available on
www.orientaviation.com
20 ORIENT AVIATION INDIA october 2008

training
By Anjuli Bhargava
The four years from 2004 to 2008
were a god-send for Indian
pilots. Ever since the low-cost
airline boom started in India
(spurred by Air Deccan and
then the launch of Go Air, Indigo and SpiceJet,
among others), pilots saw their salaries double
and even triple compared with the late 1990s.
They were in demand like never before and
were raking it in like never before.
However, with the launch of Kingfisher
Airlines and Jet Airways international services,
an acute shortage of experienced pilots
has developed and subsequently almost all the
airlines have started “importing” their pilots.
The aviation ministry had earlier increased
the maximum age of pilots from 60 to 65 and
given permission to employ expatriate pilots,
something previously not permitted.
Kingfisher, which started international
flights in September has hired primarily
international pilots and hostesses for its foray
overseas.
Although the popular perception is that
pilots, in general, are in short supply, this
is not true. There is a severe shortage of
experienced pilots, particularly commanders.
Said Ishan Kalsia, a senior captain with Air
India: “The shortage is not at the entry level.
It’s experience that is short.”
In keeping with the closed environment
in the country and the previous fairly low
demand for pilots, pilot training had never
developed as one of India’s strengths. The
Indra Gandhi Rashtriya Udaan Academy
(IGRUA), the main government-run academy,
trained only around 30 pilots a year. Now this
has been increased to 50 and is expected to
double by next year. IGRUA is buying new
planes (six Czech Zlins), simulators and
building new classrooms.
India finds experienced
home-grown pilots
in short supply
Air India: recruiting and training
cockpit crews from the colleges
Aware that this was just a drop in the
ocean, the government announced the opening
of a new academy in Gondia near Nagpur
in Maharashtra.
The academy – a joint venture between
the government-run Airport Authority of
India (AAI) and a private foreign partner
(three have been short listed) – will be set
up at a cost of around Rs125 crore (US$30
million). In addition to the AAI and the
foreign private partner, who will be a trainer
and will organize the syllabus and provide the
equipment, private airlines could take a stake
in the academy.
There is an abandoned airfield in Gondia,
which the ministry is resurfacing to make
it operational and will then add the training
facilities. To start, the new academy will
train 50 pilots with the yearly capacity to be
increased to 100.
The ministry has also roped in the Aero
Club of India to identify a number of private
flying schools, several of which had fallen
into disuse. Ten to12 of these schools will be
given trainer aircraft and some assistance to
reinvent themselves.
Air India has started an initiative to
recruit fresh graduates out of colleges and
train them at the airline’s expense. The pilots
would then be employed with the airline for
the period it takes for them to pay back the
cost of training.
Similarly, the airlines that contribute equity
to the new Gondia pilot academy will be given
the right to recruit from the academy as and
when the pilots complete their training.
The ministry has also gone on a drive to
increase the number of air traffic controllers
(ATCs) – a very contentious issue in
India for the last few years and one where
the public began to feel safety was being
compromised.
In 2005, 70 new ATCs were recruited.
In 2006-07, another 100 were taken on for
training at the institute in Allahabad, the main
government-run training facility in India.
The ministry is hoping private institutions
can supply basic training before sending them
to Allahabad for equipment and hands-on
training. Some ATCs are being sent overseas
to work at busy airports like Sydney and
Amsterdam’s Schipol Airport. ■
The learning centres of false hope
Aviation may be going through a slump here in India, but the
number of cabin crew training academies springing up – quite
independent of airlines - would have you believe otherwise.
Even in many small towns there are branches or franchisees of
such institutes offering young aspirants incredible career options
in aviation. How credible these options are is, however, less than
certain since many of the institutes are charging hopeful young men
and women high fees, but are unable to provide them with jobs at the
end of the courses.
With the present slump there’s a total freeze on hiring at most
carriers, with some of them severely downsizing their staff numbers.
In late 2007 and 2008 alone, close to six new cabin crew training
academies have emerged, most of which are independent entities.
The institutes are usually affiliated to foreign academies, but the
quality of programmes offered is dubious as there is no regulation
or standardization.
However, government officials say they are unable to regulate the
quality of programmes offered by such institutes. Said a senior civil
aviation ministry official, who did not wish to be named: “We have
not managed to put in place a regulator who can oversee airline and
airport practices here in India. Crew training academies are not even
on our radar as of now.” ■
22 ORIENT AVIATION INDIA october 2008

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