Indigo Leaves its Passengers in Lurch

Novemeber, 30, 2015.Goa.

A situation had come when the country’s best airline, IndiGo, had to appeal to other agencies to assist its passengers with their luggage. Reason: there were no loaders. They had called a strike. [See Indigo appeals to others]

Indigo is already carrying the dubious label of “Unfair Business Practitioner”. [Seecould have been penalised more].

Now, thanks to  dynamic pricing policies, it has now resorted to the practice of duping passengers on one pretext or the other. Fog being the most common excuse.

The noted Journalist Ms Barkha Dutt being one of the latest victims. Being a celebrity figure herself, she succeeded in getting its Chief to say sorry; other less fortunate passengers were left in the lurch. 

December 9, 2015.

Indigo flight 6E 633 was cancelled. Hundreds of passengers at Goa, Kolkata, Patna and Lucknow were left in the lurch.
The airline accepted its passengers, it duly performed passenger and luggage check-in. After three hours of delay announcements, it announced “Flight Cancelled”!!

The fact of the matter is the ticket price and the working system of dynamic pricing. It should have been a uniform Rs 6100/- for an hour of flight which could justify its actual costing. The airline sold these tickets at as low a price as Rs 1700/-, Rs 4000/- and  as high as Rs 10000/-. But, as was inevitable, this could not generate sufficient revenue, it could not meet its operating expenses, and so it coolly decided to cancel the flight and refund the  money. In the process it gulped all the interest earned while holding the amount for fairly long periods. The airline forced its passengers to buy tickets at the prevailing price which was 5- 10 times higher. By the same token it is to be noted that it has already “sold” its tickets on all its other flights at a far lesser price and intends to hold that money for as long as 6 months time with a clear intention to avail all the interest earned. This policy under the garb of “dynamic pricing” appears very lucrative to the seller since it keeps the cash flow brimming.  The situation becomes precarious when it is cancelling the flight at the last moment due to non availability of the machine itself. It is a known fact that the aircraft can be held up somewhere due either to technical snag or weather. With no stand-by option in place, the airline cuts a sorry figure. In legal parlance this can be construed as “it tried to sell something which it did not have” in the first place. 

This particular incident is being appealed in a consumer court to claim damages by the passengers who were obviously not so amused. This case additionally might be seen with a criminal angle to it: intention of cheating, besides causing inconvenience to its unsuspecting customers. The aviation regulator, the DGCA, will also be in the loop and would be expected to take some action. The Govt. had earlier favored the airlines to fix their own prices. [See …Regulate economy fares]
Aviation analysts believe that more such incidents in future can not be ruled out. The practice of dynamic pricing has several inherent flaws which could prove fatal someday.

Air India Unable to Pay for Spares; 2 Dreamliners Grounded

Air India Ltd, the state-run carrier is trying hard to survive on a Rs 30,000 crore ($4.5 billion) bailout, which is actually funded by the country’s taxpayers. 

Air India received the bailout in 2012. It needs to meet cost, revenue and load-factor targets to keep getting funds from the government every year until 2021.

The Boeing Dreamliner fleet has been the cornerstone of Air India’s turnaround plan. Air India and some other airlines such as Norwegian Air built their dreams around the Dreamliner and its promise of more fuel-efficient operation. 

But, the Dreamliner, Boeing’s marquee jet, has experienced a series of malfunctions since its debut in 2011, including a 3-month grounding of the global fleet in 2013 after battery meltdowns on two planes.

Today, Air India is  still struggling to pay for its spare parts and maintenance. Two Dreamliners have been grounded. 

December 3, 2015.

After the planes were grounded, Minister of state for Civil Aviation, Mahesh Sharma, has stated in the parliament –
  • The aircrafts were not operational for about 10 months each as worldwide demand for parts outpaced supply from Boeing 
  • Air India failed to procure components on credit due to a “financial crunch”
  • One of the aircraft was grounded from April 2014 to February this year, while another has not been operational since January
  • The carrier kept paying rentals of $1 million every month for each of the two planes.
  • It also lost money as they were out of operation
  • Operators of the Dreamliner across the world are facing similar problems due to high rate of failures of components and Boeing could not support the demand of failed units on various 787 aircraft since demand was more than supply.

The grounded planes underline the woes of Air India. It has been unprofitable since its 2007 merger with state-owned domestic operator Indian Airlines Ltd. Its share in the local market has shrunk to 16 percent from 35% a decade back, placing it third in national ranking. Its financial credentials are very unimpressive today. As a result, Air India pays higher interest rates on its overseas loans compared with other Indian companies as lenders are not happy with the airline’s performance. It probably lost $900 million to $920 million in the year through March 2015, according to estimates by CAPA Centre for Aviation, after losing about $810 million in the previous 12 months. Lenders, too, have become very cautious after the infamous Kingfisher episode where the promoter ended up with a “willful defaulter’ tag. (See Mallaya 

Earlier, Air India did come up with some heartening news:

But, all its efforts appear to be not enough because money is still being spent as- 
  • $1 million every month for each of the two planes.
  • Non operation of 2 Dreamliners causes significant revenue loss
Besides, Air India has to bear with several other problems like exodus of its trained staff. Its Chief has to exhort its employees. (See Air India Chief had to exhort its employees and To stop poaching).

Compensation Wanted

Air India had said last year that it was trying to claim compensation from Boeing for delivering Dreamliners that didn’t meet its promised fuel-efficiency standards because the planes were heavier than planned. 

Earlier in 2014, Boeing said Air India was not happy with the reliability of the aircraft and Boeing was upgrading software and changing components on some of Air India’s planes whenever they could be taken out of service. 

Dinesh Keskar, a Boeing senior vice president based in Singapore, said there had been ”some issues” with Air India’s Dreamliners earlier this year but the problems mostly had been ironed out.

“We continue to work with Air India on the challenges of spare parts and all, but we feel that both reliability and availability of the aircraft has reached a good stage in the Air India operation right now,” he said. 

India Stays the Fastest Growing Aviation Market: IATA

According to a recent Industry projection, and reported earlier, India is going to become the world’s 3rd largest aviation market replacing the UK by 2026.
Indian Aviation is growing

December 3, 2015.
Geneva-based IATA representing nearly 260 airlines and comprising 83% of global air traffic has confirmed this. In a statement it revealed the global air traffic statistics, and it has mentioned that India is currently the world’s ninth biggest market. It posted 17.6 per cent growth  as against 12.8 per cent by China and 10.3 per cent by Russia. It has also said that the world air traffic, grew 7.5 per cent year-on-year in the month of October. During this period, the total capacity measured in available seat kilo meters (ASKs) rose 5.7 per cent while flight occupancy was up 1.4 per cent to 80.5 per cent.

“The air travel story is generally a good one. There are some weak spots. For example, the Brazilian air transport sector is caught in perfect storm of a deepening recession, high costs and a weak currency. In most parts of the world, we see strong demand for travel – exceeding the growth in capacity. Load factors are averaging over 80% and consumers are the big winners with fares trending downwards,” said Tony Tyler, IATA’s director general and CEO.

As compared to major aviation markets like Brazil, Australia, Russia and China India has registered higher jump in capacity expansion as well as passenger traffic. Most of the Indian carriers like IndiGo, SpiceJet and Jet Airways have aggressive fleet induction plan in place; even carriers from the Gulf are also keen for equity participation. As reported earlier, Spicejet is the World’s Top-performing Airline. The air traffic picture in India looks rosy at present and is expected to grow on speculated lines in future too.

Tony Tyler, IATA’s director general and CEO.
See also: Aviation in India Starts Looking Up 

The global trade body disclosed in the statement more facts and figures –
  • Growth in air travel has been stimulated by lower fares, particularly for leisure travel. 
  • Data for the first eight months of the year show a 5 per cent fall in average fares in currency-adjusted terms. 
  • The fall in fares has supported approximately 3 percentage points of the rise in traffic year-to-date
  • India, China and Russia have reported growth in double digits
  • India continues to record very strong growth, up 17.6%, 
  • There is an increasing disparity in the pace at which India’s domestic passenger growth is happening as compared to several other countries.
  • In most parts of the world there is a strong demand for travel—exceeding the growth in capacity. Load factors are averaging over 80 per cent
  • Consumers are the big winners with fares trending downwards 
  • Three major economies of Asia comprising India, China and Japan together count for 44% of the region’s operations.
  • Brazil and Australia have shown a negative growth,
  • Australia saw slump in its domestic aviation growth at -0.7% in comparison to October 2014, while Brazil too showed a similar downfall of -6%.

“The Brazil’s domestic traffic fell as the domestic aviation sector struggled under the burden of a deepening recession, sinking local currency and government policies that imposed crushing costs on the industry, while in Australia, there are signs of improvements in the economy with business activity increasing over recent months, but income growth remains relatively subdued and the trend in domestic air travel remains weak.” said the IATA report.

The crowds keep coming
India’s growth is seen in marked increases in service frequencies as well as ongoing economic strength. Supportive monetary policy is expected to help economic growth and that should help to sustain the very strong growth seen so far this year. One of the key factors that have supported double-digit growth in air traffic in India, the key aviation market in Asia-Pacific region, is the significant fall in the price of aviation turbine fuel (ATF). This has resulted into lower operating cost for airlines and therefore lowering of airfares.

ATF or jetfuel accounts for nearly 35-45 per cent of an airline’s operating cost. Since September last year jetfuel price has fallen nearly 36 per cent to Rs 44.32 per litre (as per price charged by IOCL in Delhi). 

No Govt Proposal to Regulate Economy Class Air Fares: Mahesh Sharma

December 1, 2015.

The Civil Aviation Ministry might regulate air fares to prevent predatory pricing. Some parliamentarians have asked the Civil Aviation Ministry to look into the issues of steep hikes in air fares during festival seasons. 

In a report tabled in Parliament, the Department-Related Parliamentary Standing Committee on Transport, Tourism and Culture had suggested a cap on maximum air fares.

The report pertained to action taken by the government on observations/recommendations of the panel on the Ministry’s Demands for Grants (2015-16).

December 3, 2015.

In a written reply to the Lok Sabha, the Minister of State for Civil Aviation Mahesh Sharma said that the air fares are not controlled by the government. There is no proposal before the government to regulate economy class air fares for domestic routes. According to him, airlines are free to fix the ticket rates after they take into account various factors including cost of operation and characteristics of service.

His remarks came against the backdrop of concerns expressed in various quarters about steep fluctuations in air ticket prices. A parliamentary panel had also suggested to put a cap on maximum air fares on domestic routes.

Minister of State for Civil Aviation Mahesh Sharma
A Tariff Monitoring Unit has been set up at the Directorate General of Civil Aviation (DGCA) to monitor air fares on certain routes on a random basis. This is to ensure airlines do not charge fares outside the range declared by them. “The analysis on a random basis has shown that the air fares remained well within the fare bucket uploaded by the airlines on respective websites,” Sharma said.

Effects of Dynamic Pricing.

Dynamic pricing, also known as yield management or revenue management, is a set of pricing strategies aimed only at increasing profits. In case of an airline ticket, the techniques become extremely advantageous because of its special inherent properties that co-exist. 
  • One, the ticket expires at a point in time
  • Two, capacity is fixed well in advance 

The pricing systems used by major airlines are unusually opaque to the consumer, which is not surprising. According to one estimate, American Airlines change half a million prices per day.

Eager crowds at airport

In dynamic pricing, the price of a ticket fluctuates frequently based on a number of complicated algorithms. Airline might regularly change the price of an item based on 

  • consumer demand, 
  • price offerings by a competitor,  
  • the time of the day, 
  • day of the week, or
  • season of the year 

Time of Purchase, thus, being the most significant factor.

Some strategies offer customers different prices based on the time when they buy. The price of economy-class seats on a particular flight may fluctuate over time. For example, the airline may try to fill seats by lowering the price as the day of the flight draws closer.

Changing Conditions

Using dynamic pricing strategies airlines boost their profits more under certain market conditions; it works best when there is a lot of uncertainty in the market, for example when the ticket has a very short life span. Airlines can maximize profits by lowering prices as sales fall, then raising prices again as demand increases.

Airline pricing are not transparent. It is common to find one-way fares to exceed round-trip prices. There are always some differences in prices between refundable and non-refundable tickets. 

Happy fliers, Sad fliers.

Obviously, in such a scenario,  there will be a flier who buys the cheapest ticket ; he thanks dynamic pricing. There will also be a flier who misses the window and pays 2-10 times more.

How to Take Advantage of Dynamic Pricing

But the consumers can actually avoid falling into dynamic pricing pitfalls. The best recourse that consumers can have is a well researched 2-fold strategy. First, he must plan his travel well in advance. Second, he must do his research and compare prices, and familiarize himself with the price trends before he buys. 

The bottom line is that airlines also need fliers to stay in business, and ever-changing dynamic pricing strategies can actually benefit both parties. The average dynamic pricing algorithm depends on customer demand and behavior very much. It also makes sense to buy an airline ticket ahead of the others. And this requires scrupulous planning. Invariably, in case of Indian travelers the well thought plans go awry as the travel date draws closer. It is precisely this probable event on which the very economies of the Airlines are based. Every flight sees a number of “no shows”. This is generally due to unforeseen conditions the customer might have faced. Urgent work at the last minute, accident, injury or even death can be the possibilities. The longer the period of purchase, the more probable is such a situation. The cancelled ticket becomes available for resale apart from accruals of cancellation charges. Amounts of non-refundable tickets are happily forfeited. The concerned airline is the ultimate gainer because all such charges add to its sales revenue. 

The airline industry has been using dynamic pricing schemes for years. Any seasoned flier can tell you that getting the lowest airfare often comes down to one factor: buying tickets on the correct day of the week, at the right time of day, and the correct number of days before the scheduled departure date. Did you know the best time to buy airfare is six weeks in advance?

Fliers, have you been victimized by dynamic pricing, or have you become a master at scoring big discounts ? We will like to hear from you.

Civil Aviation Ministry Gives Site Clearance for Airport in Bhiwadi

May 2015. 
India’s First Private Greenfield Airport Begins Operations at West Bengal’s Durgapur. 
A green field airport is built from scratch

September 2015.
The government has estimated a total project cost of Rs 24,000 crore for the development of 14 greenfield airports in the country. All these projects will be undertaken by the Airport Authority of India (AAI), which is responsible for the building, operating and maintaining aviation infrastructure in the country.

December 2, 2015.NEW DELHI

The government’s move to connect airports in smaller towns appears to be gathering momentum. It seems that the Government is aware that operators are looking forward to its plans to put small towns on the map of India’s aviation.

See : Earlier report- Small Cities

“The Union Government had granted “site clearance to DMIDC (project proponent) for setting up of a greenfield airport for public use near Bhiwadi, Rajasthan on November 18, 2015,” said Union Minister Ashok Gajapathi Raju.

Bhiwadi is an Industrial town near the National Capital

In a written reply dated December 1 and released on December 2, 2015 to the Rajya Sabha, the Civil Aviation Minister has said that the Ministry has granted ‘in-principle’ approval to other airport projects –
  • Mopa (Goa), 
  • Navi Mumbai, Sindhudurg and Shirdi (Maharashtra), 
  • Kannur (Kerala), 
  • Dabra, Pakyong, Kariakal (Puducherry), 
  • Bijapur, Gulbarga, Hassan and Shimoga (Karnataka).
  • Kushinagar.(U.P)

Union Minister Ashok Gajapathi Raju
He also informed the Rajya Sabha that a view on setting up a greenfield airport at Jewar would be taken after receiving a complete updated proposal from the Uttar Pradesh government.

He has said that the Uttar Pradesh government is responsible for further progress in the project as necessary action for approval from various departments, project development, including financing of the airport project has to be obtained by the respective airport promoter, the Minister noted.

In a separate written reply, Minister of State for Civil Aviation Mahesh Sharma said the government has decided not to award services at  Kolkata and Chennai airports under PPP (Public Private Partnership) mode.

Boeing, Tata to Make Apache Fuselage in Hyderabad

December 2, 2015.


The Aerospace sector is all set to fly high in Telangana. Boeing, Tata are going to develop Apache fuselage in Hyderabad, said to be a big leap forward for Telangana in the aerospace sector.

At the ongoing Defense & Aerosupply Conclave 2015, IT Minister K.T. Rama Rao, top executives of Boeing India and Tata Advanced Systems Limited (TASL) have announced on the sidelines of supplier meet of Boeing that a centre to manufacture aerostructures for AH-64 Apache helicopter will come up in Hyderabad. Secretaries Arvind Kumar (Industries) and Jayesh Ranjan (IT) were also present on the occassion. 

The announcement came as a follow-up to the joint venture the two companies had announced last month.

Pratyush Kumar, president, Boeing India : “We are making a beginning with manufacture of aerostrucures for Apache and will take this partnership forward to develop advanced systems. It is a special day when we have met over 100 Indian buyers and vendors. It marks a special occasion. The JV will initially start with making aero structures, with the Apache fuselage and move on to manufacture of advanced systems in the future.”

Sukaran Singh, CEO and managing director of TASL: “We have been in Telangana State for over 5 years and are very happy with the experience. The JV will truly be a Make in India initiative”

The AH-64 Apache is the world’s most advanced multi-role combat helicopter and is used by the US Army and defence forces of other countries. Boeing has delivered more than 2,100 Apaches to customers around the world since 1984.

The state government has agreed to allocate land and provide all other support required for the unit, which is coming up near aerospace Special Economic Zone (SEZ) at Adibatla on the outskirts of the city. TASL already has four joint ventures with global companies here. The finer details of the extent of land to be made available, the exact location and the timelines are yet to be confirmed. 

Briefing media after participating in the meet, the Minister disclosed: 

  • The beginning of this partnership was made in May when he had met Boeing officials during his visit to the US
  • There is no bigger name than Boeing in aerospace and defence
  • The addition of marquee name like Boeing would be a big value addition for Telangana and would boost the state government’s efforts to make Hyderabad a hub of aerospace and defense.
  • It was a historic occasion to witness the signing of the JV by the two such major companies.
  • This joint venture will be of great help in attracting more companies
  • Boeing setting up a shop would also bring several suppliers to the city and create employment opportunities.
  • We already have several large facilities in the existing aerospace park at Adibhatla
  • We are in the process of setting up three more such exclusive, aerospace and defense sector-specific parks in Nadirgul, Eliminedu and another to the North of Hyderabad. We already have 1,000 SMEs in this sector in and around Hyderabad. 
  • The challenge before us is to expand this SME base and upgrade the tier III suppliers to tier II and tier I. 
  • Three more aerospace and defense parks would come up in the city. 
  • An aviation academy is also proposed to be developed in collaboration with Aerocampus Aquitaine, France

The Minister assured all the support in creating the entire ecosystem for the sector and also promised that if required the state government on behalf of the companies investing in the state will take up their issues with the central government. Pratt & Whitney, a leader in aircraft engine manufacturing, is also looking to expand its base in the city and set up something in human resource and training sectors, he added