Edits, Columns & Analysis - July 2006

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Indian reservations
Airline Business
Flight International
28/07/06

Derek Sadubin, Centre for Asia Pacific AviationDerek Sadubin, general manager of the Centre for Asia Pacific Aviation, examines the failure of the proposed takeover of Air Sahara by Jet Airways and looks at their prospects given the rapid rise of low-cost carriers in the dynamic Indian market.
The dissolution of the Jet Airways takeover of Air Sahara is typical of the growing pains that emerging markets go through.
The match appeared made in heaven just six months ago, providing Jet with aircraft and human resources plus a roughly 10 percentage point boost to its domestic travel share, to help it defend its market position in the face of rising competition. But airline valuations in India have plummeted about 40% this year, despite rapid market growth, which made Jet’s $500 million deal for Air Sahara, announced back in January 2006, look too expensive.
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The China syndrome
Peter Diekmeyer
Canadian Business, Canada
July17-Aug 13

Prasad Choragudi, managing director of CAE Inc.'s operations in Bangalore, India, proudly surveys the 47 employees hunched over their humming computers. From his glass-panelled central locale, the facility--which lacks visible decorations, accoutrements or hierarchical indications--resembles a low-tech data entry centre. But appearances can be deceiving. "Don't look at the offices," says Choragudi, with a smile. "Look at what's on the computer screens."
The comment is revealing. Although the Canadian flight-simulation company's India operations are tiny relative to its massive Montreal installations, the same images appear on employees' computer screens on both sides of the planet. CAE's Bangalore designers can casually pull on-screen 3-D models of airports in Beijing, Dubai and Toronto. These can then be updated, modified or redesigned from scratch and transmitted via fibre-optic cable, to be integrated in CAE's flight-simulator software.
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When Trade is not only about Economics: Airbus vs Boeing
Pietro De Matteis
Le Taurillon, France
28 July 2006

On 6 October 2004, the European Union requested consultations with the Governments of the Member States participating in the project (namely Germany, France, Spain, and the United Kingdom) concerning measures affecting trade in large civil aircraft construction, as the United States were claiming that the EU was providing subsidies that were not complying with the Agreement on Subsidies and Countervailing Measures and GATT 1994. At the same time the European Union requested consultations with the US concerning prohibited actions on the same matter.
Two types of capitalism
Some market analysts have often assessed how this controversial situation was heuristic in order to understand the two different existing forms of capitalism, the one in the EU (Rhenan Capitalism) and the other in the US (Anglo-Saxon Capitalism). They usually affirm that while in the US there is a real market economy, in the EU state aids are still very important and they name Airbus, as it is a project shared among and financed by different EU Member States, as a prime example.
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Up, up and away
Gaurav Ghose
Gulf News, United Arab Emirates
29 July 2006

It's about 2pm on a Tuesday. In a span of about thirty minutes, just seven cars and vans pull up in front of the departure gate at Sharjah International Airport. Some of the passengers are from Sharjah, others are driving in from Dubai. They are heading for different destinations Mumbai, Doha, Bahrain and Kuwait but all are taking Air Arabia, the budget carrier in the region that began flying in October 2003.
Inside the airport, however, the limited space looks fairly crowded. The two officials at the Air Arabia information counter are busy answering queries from a constant stream of passengers. The airline's logo is displayed on several walls and columns inside, making its dominance felt.
In less than five years, Sharjah airport has come a long way from its previously forlorn look, and a budget carrier such as Air Arabia seems to be making a crucial difference to it. Today, the carrier flies more passengers than any other airline almost 60 per cent in and out of Sharjah airport.
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China and India potential overplayed, says Boston report
Rod Myer
The Age
July 28, 2006
CHINA and India, with growing economies and huge populations, might represent the holy grail for resource exporters and manufacturers, but their effect on the international airline industry is being overplayed, says Boston Consulting Group.
BSG director Ross Love, one of the authors of a report on the issue, said: "It's going to be a long time before China and India become significant drivers of growth for long-haul airlines."
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Limited limo
Financial Express
Friday, July 28, 2006
Log on to the website of famously low-cost Deccan Aviation and up flashes the logo on the top left, proclaiming Deccan to be a “limousine in the sky.” Given that one has to pay for even a bottle of water on Air Deccan, this takes some mental adjusting.
And a “limousine” service shouldn’t be interrupted by delays and cancellations, right, Captain?
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Mixed signals on Asian flight paths
Rod Myer
Sydney Morning Herald
July 28, 2006

CHINA and India, with growing economies and huge populations might represent the holy grail for resource exporters and manufacturers, but their effect on the international airline industry is being greatly overplayed, says Boston Consulting Group.
BCG director Ross Love, one of the authors of a new report on the issue, said "it's going to be a long time before China and India become significant drivers of growth for long-haul airlines".
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The sky is now of, for, and by the people
ATREYEE DEV ROY AND SAGAR MALVIYA
Financial Express 24/07/06

Indian aviation has taken time to get off the ground. Unlike other sectors where reforms began soon after liberalisation started in 1991, major reforms hit the aviation sector very recently, in 2002, when low-cost carriers were allowed. This happened nearly a decade after 1994.
Though aviation still remains largely under state control, the opening up of the skies for private carriers to fly in both domestic and international sectors, and the entry of low-cost carries, have led to quick growth in traffic. Overall passenger traffic grew by over 20% in 2004-05 and 2005-06. But domestic traffic registered almost 25% growth in 2005-06.Low-cost carriers debuted with Air Deccan starting operations in 2003. With government approval, 2005 alone saw the entry of four new carriers in the domestic segment—SpiceJet, Kingfisher Airlines, GoAir and Paramount Airways. The last year also sawAir-India launching its low-cost Air-India Express.
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Can Microjets Save Us From Being Alone?
World Hum, CA
24/07/06

Walter Kirn has some serious issues with modern air travel. “A passenger on a great commercial airline is like the subject of a tyrant who rules through humiliation and conflict,” he writes in an interesting essay called Flying Alone in Sunday’s New York Times magazine. “Resources are kept perpetually scarce, while the procedures for obtaining them (achieving ‘platinum status,’ for example) are kept infernally confusing. Even the architecture of airliners seems designed to encourage sullen withdrawal. The seats not only don’t face each other; they recline in the fashion of falling dominos, creating a chain reaction of resentment every time someone up front decides to stretch. And the windows aren’t windows. They’re demoralizing peepholes, reminding the flier that there’s a world out there from which he is, for the moment, wholly cut off.” Kirn makes his points in the context of arguing that modern air travel has become socially isolating and that “a sense of debilitating entrapment” pervades.
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Ease constraints to sustain low-cost airlines
Financial Express, 24/07/06

That the group of five start-ups, Air Deccan, Kingfisher, SpiceJet, GoAir and Paramount, have together cornered 38.5% of the domestic air travel market in June is no surprise, as the underlying trend has been visible since last year.
And it is the low-cost airlines (LCCs) that are leading the way, even as passenger carriage for full service carriers is still high. For the industry in a demand-led expansionary mode, price competition is the key strategy. But with an estimated two-thirds of its operating expenses (fuel, landing & navigation charges, lease and maintenance) external to the business, the pressure from these fronts must be checked proactively, else the low-cost model may start crumbling.
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Cancellations ground airlines’ dream flight
Munish Shekhavat
Expressindia.com, 23/07/06

Chandigarh: A few years ago, Air Deccan gave the middle class of India a dream. A dream that made it possible for an average-earning person to travel by air. Cities and small towns were linked. But still a lot needs to be done by the airlines if it still wants to reign in passengers.
One look at the number of cancellations the airlines has made in the last month and this is enough to substantiate that all is not well with the airlines on the New Delhi-Chandigarh-Jammu route.
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Aerospace industry eyeing India
BOB COX,
Fort Worth Star Telegram, US, 23/07/06

FARNBOROUGH, UK - Orville Prins, a top Lockheed Martin salesman, left London late last week for India on a mission aimed at selling F-16 fighter jets. It's his 10th trip to the South Asian nation in 12 months.
Prins is one of many aerospace industry representatives and executives spending a lot of time in New Delhi lately. Counterparts from nearly all of the world's handful of major defense and aerospace companies are assiduously courting Indian government and private industry, seeking to tap a vast and ripe market.
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