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Ancillary Services Rescue Airlines

Airlines in India are succeeding to some extent in milking a few millions of additional rupees from their customers for “extra” services that are now used to be included in their fare prices. 

The Role of Ancillary Services

Ancillary Services

Airlines all over the world are on their way to rake in nearly $110 billion in revenue this year from the sale of so-called “ancillary services”. These services have nothing to do with the operations of the aircraft: fuel consumption, maintenance, landing, parking or navigation charges. They are simply the extras best described as marketing gimmicks. These extras range from a choice of the seat to the volume of leg-space. Depending upon the way an airline fancies its marketing strategies, these may also include the ability to check one or more bags, chose an aisle seat, select seats together and/or in advance, to get reduced ticket change fees or additional frequent flier mileage points, or to get favoured check-in and security clearance procedures. Airlines clearly have today established the practice of charging more for such ancillaries.

Also ReadSilly Gimmicks Used by IndiGo for Marketing

The latest trend for the airlines has been:

to present a fully-stripped down, seat-only “Basic Economy” fares as well as various higher-priced “branded fares” that include various combinations of additional services.

But in the process, airlines have found in their customer feedback notes that they have disappointed more than half of their customers and left as many as 75% of them unhappy with their airline adventures. Such services historically were included in the price of the air-ticket. The airlines are yet to learn how to use customer data effectively to present fare options specifically tailored to the preferences of individual consumers. The skills required for revenue optimization (how a company dynamically adjusts the prices of its services to get, ideally, the highest revenue from a customer who is ready to pay for a service or product) have not yet been developed.

Also ReadAAI’s Unused Airfields Yet to be Put on Use

More and more evidence is coming up which shows that  a large segment of travellers:
– leisure travellers,
– less frequent travellers,
– high mileage business travellers and/or 
– very frequent fliers

are surely not very happy with the kind and constituents of various fare price options that the airlines offer. There is indeed a visible sense of hopelessness across the spectrum of airline patrons.

Ancillary Services


Despite that impediment, despite the still-not-well-defined way of unbundling and re-bundling service packages in their unpredictably priced fares, airlines’ efforts at raising ancillary revenues are setting new records with every passing year.

Ancillary revenue now signifies 12.2% of global airline revenue. That’s more than double considering the industry’s forecasted 5% operating profit margin in 2019. In other words, ancillary revenues have impacted greatly on airlines’ profitability.

The global industry’s $109.5 billion in ancillary revenue now is more than half of the industry’s total amount spent on fuel. In 2019, the fuel bill is expected to be around $206 billion. This trend reveals that the rapidly evolving ancillary revenues have become a vital hedge against escalating fuel prices.

The Role of ATF Prices


Airlines in India have long rued the high cost operating environment and high fuel prices. On November 20, 2019, the Parliament was informed through a written reply by the Civil Aviation Minister Hardeep Singh Puri in the Rajya Sabha that four domestic airlines including Jet Airways and JetLite, have shut their operations over the last three years for want of funds and unavailability of aircraft. The government has said that it is conscious of the financial difficulties being faced by the airlines and is responding to the industry situation.

The Minister listed out a slew of measures taken by the government to enable growth in the aviation sector. He said that the government was coordinating with all the stakeholders to resolve their issues.

As a result:
– the central excise duty on aviation turbine fuel (ATF) has been reduced,
– 100 per cent FDI has been allowed under the automatic route to ensure modernisation of airports and establish high standards,
– foreign airlines are allowed to invest up to 49 per cent in Indian carriers under the automatic routes and liberalisation of domestic code-share points in India within the framework of the Air Service Agreement (ASA).

However, the Minister made it clear that the government has no role in raising funds for private airline companies as it is an internal matter of the airline and each airline has to prepare its business plan on the basis of its own market assessment and liabilities.

The Aviation Sector Elsewhere.

 
In Thailand, Thai AirAsia, Thai Smile Airways, Thai Airways International, Nok Air, Bangkok Airways, Thai VietJet Air and Thai Lion Air have submitted a request to the government to cut the excise tax on jet fuel to avoid downsizing or shutting down operations. They said they have been badly affected by the weak economy, the local currency’s strength, and intense competition. This has reduced tourist inflows.
 
Ancillary Services
The Excise Department has proposed the seven low-cost and full-service carriers to increase the frequency of flights to second-tier provinces to enhance tourism there in return for a reduction in the excise tax on jet fuel. The Excise Department will cut the excise tax provided the airlines offer proposals that benefit the public, including more frequent flights to second-tier provinces.
”The government support is surely required if airlines are expected to take part in stimulating tourism in particular provinces,” the airlines say. “Promoting travel in second-tier provinces is crucial for Thailand’s tourism.”


The United Arab Emirates’s (UAE) is home to two of the biggest global airlines, Emirates and Etihad. The share of the aviation and tourism sector in UAE economy is set to double to $128 billion; is likely to support 1.4 million jobs in the next 20 years, from 800,000 jobs now as per International Air Transport Association (IATA) observations.


Also Read: ATF Price Cut Is Steepest In Last Two Years





Virgin Atlantic Could Not Grow In India Due to Jet Airways Collapse

New Delhi: The closure of Jet Airways (India) Limited changed the India growth plans of Virgin Atlantic. The British airline, which had a code share partnership with Jet Airways, then started its own services between London and Mumbai, as per the airline’s country manager (India) David Hodges.

“We had a code-share partnership with Jet Airways, and we planned to grow that,” Hodges said adding, “Unfortunately, the grounding of Jet Airways changed our growth plans.”

Also Read : Explainer: Jet Airways crisis

One airline books its passengers on its partner carriers and provide seamless travel to destinations, where it has no presence by virtue of Code-sharing.

Virgin Atlantic will now start its own daily flights between London and Mumbai from 27 October to utilize the space vacated by Jet Airways, which operated three daily flights on this high demand sector. Jet Airways also flew a daily flight between Mumbai and Manchester.

“There was a lot of capacity (between Mumbai and London/Manchester). We were looking to increase our presence in the partnership with Jet Airways and probably fly one Virgin Airways flight between England and India (of the flights flown by Jet Airways),” Hodges said. “We need to be quick and nimble (after Jet’s grounding). So, we decided to start our own services between London and Mumbai.”Virgin Atlantic

Virgin Atlantic currently also has a daily flight between London and New Delhi.

Jet Airways suspended operations in April because of a severe cash crunch. A consortium of 26 banks led by the State Bank of India (SBI) has approached the National Company Law Tribunal (NMCLT) to recover dues worth more than 8,500 crore.

As things stand, Jet Airways has run a loss of more than 13,000 crore in the past few years. Its total liabilities amount to more than 15,000 crore even as lenders have been trying to sell the beleaguered airline as a going concern, but without much success.

Hodges said Virgin Atlantic was looking at forging new partnerships with Indian airlines, which could help the airline get traffic from smaller Indian cities and town. The airline, which already has an interline partnership with Vistara, is looking to forge more such partnerships or code share agreements with other Indian airlines.

“Now, the plan is how we grow in India. Having a code-share with Vistara is definitely an option for us,” Hodges said. “Interline with Vistara has given us great connections from Mumbai and New Delhi. It’s however not very simple. Lots of commercial considerations and decisions will have to be made for this alliance.”

An interline agreement is typically signed between two or more airlines to handle passengers when their itinerary involves travelling on multiple airlines. Such agreements allow passengers to change flights to one on another airline without having to check-in again.

Interlining agreements differ from code-share agreements as the latter usually refers to numbering a flight with the airline’s code even though the flight is operated by another airline.

Meanwhile, going ahead, Virgin Atlantic could look to operate between cities other than New Delhi and Mumbai, and London as the airline plans to tap the number of passengers traveling to England and Europe from other Indian metros.

“I have spoken to a number of Indian airports, and this is an interesting opportunity. There are also other high growth cities across South and North India,” Hodges said. “Bangalore is the next natural city we want to fly from in future, and one that we are currently not flying from.”

Virgin Atlantic will operating its Boeing 787-9 (Dreamliner) fleet between London and Mumbai. The airline currently operates Airbus 330 aircraft on its London-Delhi route. The airline hopes to also provide onward connections to destinations in Europe, South America, North America and South Africa from London for its passengers flying from India.

“Ultimately, we want to be able to compete with bigger airlines like British Airways in terms of network and network size,” Hodges added.




Thomas Cook Collapsed, Other European Airlines on Brink

Thomas CookA sad story of Thomas Cook: being reported only for the sake of reporting.

Its official now. By 23 September 2019, the 178-year-old company, Thomas Cook (TCG.L) along with a trio of subsidiary airlines has collapsed. Its stores across Northamptonshire have shut their doors. Thomas Cook branches in Weston Favell and Northampton’s Abington Street have also closed for good. Two travel stores in Kettering in Lower Street and at Asda, stores in Wellingborough’s Swansgate Centre and Corporation Street in Corby have also closed.

Hitherto known as a travel giant, its thousands of employees have been rendered jobless. This includes about 1,000 workers at their nearby Peterborough HQ.

Today, the grand old travel firm finds itself being put into compulsory liquidation. A weekend of frantic talks could not save Thomas Cook. Tens of thousands of its holidaymakers have been left in the lurch around the globe.

The closure of Thomas Cook and the subsequent cancellation of all its flights has forced the launch of an operation by the Government and the Civil Aviation Authority (CAA). It is one of the largest repatriation in recent British history. This has been codenamed Operation Matterhorn.

This repatriation is hugely complex and the CAA and the government are working around the clock to support the Thomas Cook customers. All such passengers currently overseas who are booked to return to the UK over the next two weeks will be brought home as close as possible to their booked return date by providing new flights to return to the UK.

A CAA spokesman clarified:

“The Government and the Civil Aviation Authority are now working together to do everything we can to support passengers due to fly back to the UK with Thomas Cook between September 23 and October 6. Depending on your location, this will be either on CAA-operated flights or by using existing flights with other airlines.

If you are already abroad you will find all the information you need about your arrangements to get home on this website. If you are due to depart from a UK airport with Thomas Cook Airlines, please do not travel to your UK airport as your flight will not be operating and you will not be able to travel.

These repatriation flights will only be operating for the next two weeks (until October 6). After this date you will have to make your own travel arrangements. From a small number of locations, passengers will have to book their own return flights.”

Also ReadJet Airways pushed further to the brink of collapse

Virgin Atlantic is one of the airlines taking part in the CAA scheme. A Virgin Atlantic spokesperson stated: “We’re sorry to learn that Thomas Cook has ceased trading earlier today and recognise the impact on its customers and staff in the UK and abroad. Virgin Atlantic is working closely with the CAA to repatriate Thomas Cook customers impacted in Cuba, Jamaica and the United States, to ensure they will be able to complete their journey as planned. We have allocated available space on our scheduled flights, and are also providing special flights to repatriate Thomas Cook passengers abroad.”

Similarly, a representative for the easyJet airline stated: “We are sorry to see the news about Thomas Cook and appreciate the anxiety that their customers will be facing now. easyJet is working with the CAA to provide a fully crewed A320 aircraft to support the repatriation efforts over the coming days.”

Besides, British Airways is also offering flights for Thomas Cook passengers returning to the UK from destinations like New York, Los Angeles, San Francisco, Las Vegas, and Cancun.

Aviation analysts observe that the strains that sank Thomas Cook weigh on other European airlines as well. Several such companies are struggling with similar problems.

Two small operators, Aigle Azur and XL Airways, are before the French bankruptcy courts today. The list of similar bankruptcies is long: Monarch, Air Berlin and Alitalia failed in 2017, Primera and Cobalt in 2018, and Germania, Flybmi and Iceland’s WOW so far in 2019.

Today in aviation sector, there is very little left for cheer. Larger European carriers are not immune from the threat of collapse. Regional operator Flybe’s sale to a Virgin Atlantic-led consortium just managed to avoid its closure. Third-ranked low-cost operator Norwegian Air (NWC.OL), which has bled cash while making inroads in the transatlantic market, somehow managed to get a reprieve from creditors last week, postponing repayment on $380 million in debt for up to two years.

Customers can find out how to book on to the repatriation flights through the CAA website: www.thomascook.caa.co.uk.




After Posting Rs 4,600 crore operating loss in 2018-19, Air India Aims Operating Profit This Fiscal

NEW DELHI:

Air India posted an operating loss of around Rs 4,600 crore in the last financial year. The reasons attributed by its management are :

– higher oil prices and

– foreign exchange losses

The debt-laden carrier expects to turn operationally profitable in 2019-20, as per its senior officials.

Reflecting tough business conditions, the airline’s net loss stood at about Rs 8,400 crore while total revenues touched around Rs 26,400 crore in 2018-19.

Another senior official of Air India said the airline is projected to post an operating profit of Rs 700 to 800 crore in 2019-20, provided oil prices do not shoot up significantly and there is no steep fluctuation in foreign exchange rates.

However, the airline incurred an operating loss of Rs 175 to 200 crore in the three months ended June as closure of Pakistan airspace for Indian carriers resulted in higher costs and caused a daily loss of Rs 3 to 4 crore when the restrictions were in place, the official said.

Air India had a loss of Rs 430 crore in the four-month period when Pakistan closed its airspace after the Balakot air strikes.

Last week, state-owned oil marketing companies (OMCs), led by IndianOil, had stopped fuel supply to Air India at six — Ranchi, Mohali, Patna, Vizag, Pune and Cochin — airports over non-payment of dues.

The official noted that load factor and yields are improving for Air India, which currently flies to 41 international and 72 domestic destinations. Load factor is a measure of seat occupancy and yield refers to average fare paid per passenger.

The situation is anticipated to improve further as more wide-body planes would be available for operations in the coming months, the official added. Air India had grounded several of its wide-body aircraft for maintenance and most of them are in the process of being re-inducted into the fleet.

Air India is to start flying to Toronto from September 27 and to Nairobi in November.

The airline has a debt burden of more than Rs 58,000 crore and servicing the loans is a major challenge as the annual outgo is more than Rs 4,000 crore.

The official who was quoted first said the carrier is facing a financial crisis and disinvestment is the option.

Aviation consultancy CAPA South Asia CEO and Director Kapil Kaul said Air India’s financial position is likely to “significantly improve” in the current financial year.

“CAPA expects a closer to break-even in FY 20 excluding increased costs incurred due to closure of Pakistan airspace. With oil prices expected to stay below USD 60, expect a closer to break-even for Air India in FY 20,” he told PTI.

Noting that improved financial performance would be a positive for divestment, Kaul said a fully divested Air India that is well capitalised and with improved governance and management would ensure that the airline has a relevant future.

India needs a stronger Air India which is viable without taxpayers’ support, he added.

The government has decided on disinvestment of Air India as part of efforts to revive its fortunes. Air India, which has been in the red for long, was sanctioned a nearly Rs 30,000 crore bailout package for a 10-year period by the UPA regime in 2012.




Boeing 737 MAX is not expected to return to service until JANUARY 2020

Boeing’s 737 MAX is not expected to return to service until January 2020 as regulators expand safety checks after the jets were grounded in March following two deadly crashes.

Aviation experts and analysts say they expect the lengthy delay as the Federal Aviation Administration pledges to resolve all safety issues before allowing the planes back in the air, The Wall Street Journal reports.

No official timeline has been confirmed by the company but the checks on software has repeatedly delayed their progress with a growing list of issues for them to look over.

Boeing is now said to be looking at other potential problems, including emergency recovery procedures to electronic components. Some checks are said to be looking at earlier 737 models too.

Boeing’s 737 MAX is not expected to return to service until January 2020. A number of the grounded aircraft can be seen parked at Boeing Field in Seattle, Washington.

The scene of the Ethiopian Airlines crash near Addis Ababa on March 10 was horrific. The crash set off one of the widest inquiries in aviation history and cast a shadow over the Boeing 737 MAX model intended to be a standard for decades.

The specific software fix to automated system MCAS is said to have been completed and waiting for approval.

But additional concerns have now been raised from studies and tests on the jet in the interim.

And even once the fixes are completed Boeing will need both the FAA to approve them and airlines to carry out their own maintenance procedures, according to experts.

PROBLEMS ON BOARD THE BOEING 737 MAX

The 737 MAX was grounded worldwide in March after an Ethiopian Airlines plane plunged to the ground soon after take-off, five months after a similar Lion Air fatal crash off the coast of Indonesia.

Concerns were initially raised after a system called MCAS overpowered pilot commands, pushing down the noses of both jets that crashed.

Experts then raised concern over pilots being able to manually move a flight-control wheel in extreme circumstances amid more testing.

Then in in June further a new flaw was uncovered that is estimated it will take until at least September to fix.

American Airlines Group Inc said on Sunday it is extending for a fourth time cancellations of about 115 daily flights into early November due to the ongoing grounding of the jets.

The airline’s decision was expected after the FAA, which must reapprove the jets for flight following two fatal crashes, last month uncovered a new flaw that Boeing had estimated will take until at least September to fix.

Boeing has said it will ‘provide the FAA and the global regulators whatever information they need,’ and will not offer the 737 MAX ‘for certification by the FAA until we have satisfied all requirements’.

The 737 MAX, which had been Boeing’s fastest-selling aircraft thanks to its fuel-efficient engines and longer ranger, was grounded worldwide in March after an Ethiopian Airlines plane plunged to the ground soon after take-off, five months after a similar Lion Air fatal crash off the coast of Indonesia.

Boeing hopes a software upgrade and new pilot training will add layers of protection to prevent erroneous data from triggering a system called MCAS, which was activated in both the planes before they crashed.

American, the world’s largest airline and the second largest MAX operator in the United States, most recently had planned to keep the MAX, which it used on most flights between New York’s LaGuardia airport and Miami, off its schedule through September 3.

Boeing is now looking at other potential problems including emergency recovery procedures to electronic components, with some checks looking at cover earlier 737 models

American, with 24 737 MAX aircraft and dozens more on order, is scheduling without the jets through Nov. 2.

‘American Airlines remains confident that impending software updates to the Boeing 737 MAX, along with the new training elements Boeing is developing in coordination with our union partners, will lead to recertification of the aircraft this year,’ the airline said in a statement on Sunday.

It has been substituting other aircraft for its busiest flights while cancelling others and temporarily suspending direct flights between Oakland, California, and Dallas-Fort Worth.

Among other U.S. MAX carriers, Southwest Airlines Co has removed the aircraft from its scheduling through Oct. 1, and United Airlines Holdings until Nov. 3. Southwest is the world’s largest MAX operator.




Royal Brunei Airlines back on Brisbane route – Australian Aviation

A file image of Royal Brunei Airlines Airbus A320neo V8-RBD, which features a special Visit Brunei livery. (Masakatsu Ukon/Wikimedia Commons)


Royal Brunei Airlines (RBA) has resumed nonstop flights to Brisbane for the first time since 2011 with the arrival of BI9 early on Thursday morning, July 11 2019.

Flight BI9, operated by Airbus A320neo V8-RBD featuring a special Visit Brunei livery, landed at about 0330 local time on Thursday, following its six and a half hour journey from RBA’s Bandar Seri Begawan hub.

The aircraft was on the ground at Brisbane Airport for about 13 hours before taking off as the reciprocal BI10 a little after 1600 local time.

RBA chief executive Karam Chand said the airline was delighted to be back in Brisbane after an eight-year absence.

Further, Chand said the new Brisbane service would strategically position the airline as a key player on the Kangaroo route between Australia and the united Kingdom.

“We are delighted to offer our Bruneian, UK and other guests from our expanding route network an additional Australia travel destination where they will find many and attractions and activities of offer in Brisbane city and its surrounds,” Chand said in a statement.

In addition to Brisbane, RBA flies nonstop to Melbourne daily with Boeing 787-8s.

Both its Australian routes were expected to support RBA’s nonstop Bandar Seri Begawan-London services.

A file image of a Boeing 787-8 in Royal Brunei Airlines livery. (Wikimedia Commons/Jahurz)

A file image of a Boeing 787-8 in Royal Brunei Airlines livery. (Wikimedia Commons/Jahurz)

The Brisbane route will will operate as an overnight flight from from Bandar Seri Begawan on Tuesdays, Wednesdays, Fridays and Sundays. Meanwhile, the return service takes off from Brisbane in the late afternoon on Mondays, Wednesdays, Thursdays and Saturdays.

The schedule, which is similar to RBA’s Melbourne service, has been optimised for convenient connections on the London route.

CAPA – Centre for Aviation chief analyst Brendan Sobie said while the new RBA service represented less than two per cent of total capacity between Brisbane and Asia, it was strategically important as the flights would stimulate demand in the Brisbane-Brunei and Brisbane-Uk markets.

“Brunei is a tiny source market for Queensland and there is also limited outbound demand in the Brisbane-Brunei market. However, these segments will grow (from a very low base) as nonstop services are resumed,” Sobie said in a research note from February.

“Of more significance is the impact the new Brunei service will have in the Brisbane-UK market. The UK is the fourth largest source market for Queensland and London is also a very popular destination for Brisbane area residents.”

“However, making the Brisbane-Bandar Seri Begawan route work will not be easy because Brisbane-London – which Royal Brunei will need to rely on for a large proportion of its Brisbane passengers – is a very competitive and low yielding market.”

Sobie noted return fares of less than US$1,000 were available on many carriers for Brisbane-London itineraries, while RBA had some sub-US$800 fares in the market for travel during the second half of calendar 2019.

“With the offer of such low fares it will be hard for the new Brisbane-Brunei route to deliver sustained profitability – even with incentives from Brisbane Airport and Queensland,” Sobie said.

At the time the Brisbane flight was launched, RBA has targeted a start date of June 11. However, aircraft availability issues due to engine maintenance requirements on its Boeing 787 fleet forced the flight to be pushed back a month.

RBA has seven A320neos powered by CFM LEAP-1A engines. The airline has configured the next-generation narrowbody to carry 150 passengers, with 12 seats in business class and 138 seats in economy.

Airbus lists the A320neo as having a range of 3,400nm in a typical two-class configuration of 165 seats. Bandar Seri Begawan-Melbourne is 2,940nm.

RBA was the first to fly the A320neo to Australia when it used the aircraft temporarily on the Bandar Seri Begawan-Melbourne route in August 2018 while its Boeing 787-8s were unavailable due to engine inspection requirements.

To celebrate the new route, the airline planned to host an event at the Brisbane City Hall on Thursday evening.

The airline recently began flying nonstop between Bandar Seri Begawan and London Heathrow, having previously served the United Kingdom capital with a one-stop routing via Dubai.

Brisbane may also prove a source market for RBA’s new regional services with ATR 72-600s due to kick off in October. The turboprops on lease from Malaysia-based Malindo Air will be used to serve seven destinations on Borneo – six in the Malaysian states of Sabah and Sarawak and one on the Indonesian part of the island.

RBA Airbus A320neo V8-RBA at Melbourne on August 1 2018. (Brian Wilkes)

RBA Airbus A320neo V8-RBA at Melbourne on August 1 2018. (Brian Wilkes)

Flight Number/Routing
Days of operation
Time of departure
Time of arrival

BI9 Bandar Seri Begawan-Brisbane

Tuesday, Wednesday, Friday, Sunday

18:50

03:45+1

BI10 Brisbane-Bandar Seri Begawan

Monday, Wednesday, Thursday, Saturday

16:10

21:30