Air India's Low Cost carrier, - Air India Express

Shri Praful Patel*

There has been a growing clamour from passengers travelling on India, Gulf & Middle East, and South East Asia sectors for making air travel more affordable and cheaper, as the passengers profile is mostly working class. Faced with this demand and challenges posed by the advent of low cost carriers (LCCs) and to offset rising costs of operations, Air-India decided to take on the competition head on by starting an LCC of its own—— Air India Express.

April 29, 2005 marked the birth of the new airline. On that day at the festive-looking Thiruvananthapuram Airport, people and passengers saw the flagging-off of a flight from Thiruvananthapuram to Abu Dhabi by the Governor of Kerala, Shri R.L. Bhatia. The aircraft has an attractive livery and design representing the rich Indian heritage, values and ethos. It displays popular Indian festivals with the tail of the aircraft depicting the caparisoned elephant from Kerala on one side and a resplendent camel from the Pushkar Mela of Rajasthan on the other.

Air India Express was launched as the airline industry, beset by increasing cost of operations, galloping fuel prices, economic downturn of major world economies etc., has been ailing for quite some time. A large number of renowned / well – established airlines have been setting up Low Cost subsidiary airlines, which have proved popular and passenger – friendly. Some of these low – cost carriers (LCCs) are:

· South West Airlines and Jet Blue Airways from USA

· Ryan Air, Easy, Jet, BMI Baby from Europe

· Virgin Blue from Australia

· Air Arabia from Sharjah, UAE

· Air Asia & Thai Air Asia from Malaysia and Thailand

· Value Air & Tiger Air from Singapore

· Nok Air from Thailand

· Air Deccan, Alliance Air, Kingfisher from India

A number of them have plans to start their operations to/through India. The ‘No frills’ LCCs are able to reduce their cost of operations by utilizing a single type of aircraft, point-to-point operations, higher aircraft and crew utilization, greater productivity of resources including manpower, increased usage of IT, lower distribution costs, reduced in-flight/passenger amenity costs etc. If Air-India is to lower the fares based on market requirements to face the competition from such LCCs, the operations would be unviable due to the high cost structure of Air-India. Several factors, such as low productivity of resources, including manpower, inflexible work practices, high employee/aircraft ratio etc. contribute to the high cost platform in Air India. Since a LCC needs dynamic work culture and lean organization structure, it was thought fit to start a totally separate subsidiary that will have a newly recruited and committed workforce and sport a different brand image without diluting the parent Company’s brand image.

It was decided to first examine the feasibility of launching a low cost airline and an internal Management Committee was appointed to examine the operating feasibility and economic viability of low cost operations. The report concluded that the market profile, route characteristics and competitive profile presented a strong case for Air-India to urgently pursue setting up a LCC, which was operationally feasible and financially viable. It was felt that the low cost operations can be undertaken by the wholly owned subsidiary of Air-India viz. Air-India Charters Ltd.(AICL), which is a comparatively lean organisation. For this purpose, the Authorised Capital of AICL has been raised from Rs.5 lakhs to Rs.30 crores, commensurate with the future size of business and level of activity. Further, it was also felt that to have the first mover advantage, Air-India should begin its operation sooner than later and therefore, as soon as the Board approved the proposal, action was initiated to lease aircraft to commence operations in the first phase on the Kerala/Gulf Sector. It has been decided to christen the LCC as “Air-India Express”. 3 B737-800 aircraft have been leased for operating the first phase

The LCC envisages:

· Operating single aircraft type resulting in low maintenance and inventory costs.

· Higher seat density

· Reduced distribution costs by promoting alternate channels of distribution

· Better utilization of equipment and manpower

· Reduction in crew costs

· Outsourcing of non-core activities and by controlling other administrative costs

· Lean organizational structure

· Scaled down on-board service, packed snack boxes on short-haul and pre-set meal on medium haul flights

· Tea/Coffee, soft beverages on the house

· Indian/foreign liquor on payment

· Duty free liquor and cigarettes sale on board

· Limited newspapers, blankets etc.

· Channel music with free headsets

· Free Baggage Allowance for Gulf 30 kilos i.e. 10 kilos extra on all sectors

· 50% refund on ticket amount for ‘no show’

· In the case of flight cancellation or Aircraft on Ground (AOG), lower tariff hotel accommodation or transportation charges to grounded passengers.

The features of the aircraft are -

· 181 Economy class seats with 29-32” pitch

· 6 abreast single aisle

· Twin-engined narrow bodied two-man operating crew

In the first phase, it is planned to operate flights from India to certain points in the Gulf, viz-

1. Mumbai/ Delhi/ Thiruvananthapuram/ Kozhikode/ Kochi to Abu Dhabi/ Muscat/ Salalah.

2. Daily frequency on Kochi/ Dubai/ Kochi and Kozhikode/ Dubai/ Kozhikode sectors

3. Thiruvananthapuram/ Dubai/ Thiruvananthapuram sector will be served by Air India’s A-310 aircraft as there is a heavy demand for transshipment of perishable cargo from Thiruvananthapuram to Dubai.

With effect from 25th October, 2005, Air India Express has commenced operations from Kozhikode to Sharjah on a four flight per week basis i.e. on Tuesdays, Thursdays, Saturdays and Sundays. 17 foreign pilots have recently been recruited on contract basis, with the result 25 pilots are available with Air India Express

In the second phase, it is proposed to extend the services to India/SE Asia routes as and when more aircraft are available. Four additional aircraft are expected to join Air India Express fleet between February and April 2006, taking the total number of aircraft in Air India Express to 7. With these additional aircraft, it is proposed to undertake the following operations:-

Chennai-Singapore-Chennai Daily flight

Chennai-Kuala Lumpur-Chennai Daily flight

India-Doha-Bahrain-India 12 flights per week

India-Sharjah-India 12 flights per week

Recently the Government approved the proposal of Air-India Charters Ltd. for purchase of 18 B737-800W aircraft for Air-India Express. With the induction of additional aircraft in its fleet, operations will be extended from Indian points i.e. Chennai, Kolkata Guwahati and even from Hyderabad to various destinations in the Gulf and South East Asia. It is expected that Air India Express will be operating 134 flights from 9 points viz. Kochi, Kozhikode, Thiruvananthapuram, Mumbai, Delhi, Chennai, Kolkata, Guwahati and Hyderabad in India to 12 foreign points viz. Dubai, Abu Dhabi, Muscat, Doha, Bahrain, Al Ain, Salalah, Kuwait, Singapore, Kuala Lumpur, Bangkok and Djakarta.

These initiatives on the part of the Civil Aviation Ministry and Air India fulfill the requirements of our people working in Gulf countries as well as other passengers by making international air travel more economical.

*Union Minister Of State (Independent Charge) For Civil Aviation

Treat Gulf Indians humanely: Kerala chief minister

The Chief Minister of Kerala Shri Oomen Chandi speaking at the 'interactive session with States' at the Pravasi Bharatiya Divas, in Hyderabad on January 8, 2006\

States Try to Lure NRI investors

The Chief Ministers of six States showcased the potential of their respective states to the delegates for their investments at the Pravasi Bharatiya Diwas-2006. The Chief Ministers of Andhra Pradesh, Gujarat, Kerala, Bihar, Maharashtra and J&K were present along with representatives of Karnataka, Rajasthan and Tamil Nadu. Opening the first plenary session of the day, Shri Montek Singh Ahluwalia, Deputy Chairman of Planning Commission said that in the last 10 to 15 years the contribution of non-resident Indians to the nation’s development has been rapidly increasing. He called upon the state governments to introduce reforms in various sectors in order to attract investments.

Making a power-point presentation, Dr. Amit Mitra, Secretary-General of the Federation of Indian Chambers of Commerce and Industry (FICCI), said India figures high on the investor confidence grades globally and is becoming attractive destination for the foreign direct investments. “Around 70 per cent foreign companies in the country are making profits from their Indian operations and about 84 per cent foreign companies are planning further expansion of their activities”, he said. Saying that the demographic dividend is the core competency of our country, he urged the state governments to take up further reforms in the infrastructure and labour laws as they hold the key to a higher and sustainable growth.

Speaking on the occasion, Dr. Y.S. Rajasekhar Reddy, Chief Minister of Andhra Pradesh, said that, recognizing the importance of infrastructure for tapping the outsourcing business both in manufacturing and IT sector, the State is developing the Coastal Corridor between Visakhapatnam and Kakinada by promoting Special Economic Zones. “The State has been very proactive and outgoing in the promotion of IT industry. The software exports from the State have registered a growth of 64 per cent in the year 2004-05 as against the national growth rate of 34 per cent. The State Government is also developing infrastructure for promotion of IT industry in tier-two locations like Visakhapatnam, Vijayawada, Tirupati, Warangal etc.”, he said. Describing Andhra Pradesh as an investor-friendly state, Dr. Reddy said that the government is providing clearances at single point through Industrial Single-Window Clearance Act.

Shri Narendra Modi, Chief Minister of Gujarat, said that the State gets the highest inflows of Foreign Direct Investments. Informing that as many as 11 Special Economic Zones have been approved in Gujarat, Shri Modi said the Government has introduced the Infrastructure Development Act to provide an option of international competitive bidding and provide a level-playing field. Saying that Gujarat is celebrating 2006 as Tourism Year, Shri Modi appealed to each NRI to send at least five foreigners to visit Gujarat during the year.

Shri Oommen Chandy, Chief Minister of Kerala, said that his State is the first one in the country to set up a separate Ministry for the welfare of the non-resident Keralites. Emphasising the need to provide reliable and affordable travel facilities to our people living abroad, he said that the State Government has decided to have its own Airlines. He expressed happiness that the Government of India has responded positively to his plea to provide voting rights to the NRIs of Gulf countries.

Shri Nitish Kumar, Chief Minister of Bihar, said that his government is planning a slew of measures to invite investments from NRIs. Shri Vilasrao Deshmukh, Chief Minister of Maharashtra, called for a coordinated approach by various state governments to attract foreign investments for the country. Shri Gulam Nabi Azad, Chief Minister of Jammu & Kashmir, said that there are great opportunities for setting up more agro and horticulture based industries in the State as the state possesses an abundance of natural resources. He said that the state government is committed to improve the work culture and streamline the procedures with a view to making the State an investor-friendly.

Shri P.G.R. Sindhia, Finance Minister of Karnataka, the Industries Minister of Tamil Nadu and Shri Narpat Singh Rajvi, Industries Minister of Rajasthan also addressed the gathering and highlighted the relative advantages of investing in their respective states.

Gulf Air Promotes Muscat Festival 2006

Manama, Bahrain: Gulf Air will be the Gold Sponsor of Muscat Festival 2006 to be held from 11 January to 10 February 2006.

A regular sponsor of this popular festival, Gulf Air, this year, will take its participation to a higher level by setting up a grand stall in a prime location at the main venue - Al Qurum National Park - and showcasing many of its unique, award-winning products and services."Muscat Festival is, by far, the biggest event that represents Oman's legendary history, culture and tradition attracting thousands of people from within and outside the Sultanate every year," says Gulf Air Vice President Marketing and Sales Danny Barranger.

"Considering the continuous success of the festival, there can't be a better opportunity for Gulf Air to showcase its unique products and services to a potential, captive audience. "Besides, the Government of Oman is a strategic partner of Gulf Air and, as we adopt our two-hub strategy soon, our services in and out of Muscat will increase considerably. Our participation and support to Muscat festival as a premium sponsor reinforces this relationship."

The key products and services Gulf Air will feature at the Muscat Festival 2006 include; • The Gulf Air Bahrain Grand Prix 2006 to be held from 10 to 12 March 2006 for which Gulf Air has already announced irresistible packages. • The Gulf Air Sky Beds – an industry first - offering a ‘private cabin space’, with full-recline, fully-functional bed, complete with sheets and duvets, pillows, silk cushions, pyjamas, eye shades and socks. • The New Year seat sale aimed at customers from the GCC countries, Saudi Arabia and Kuwait.

• Amazing offers from Gulf Air Holidays to some of the exotic destinations of the world. • Other Gulf Air products such as Sky Nanny, Sky Chef, Frequent Flyer Programme (FFP), etc. This edition of Muscat Festival assumes importance as it coincides with the festivities of ‘Muscat — City for the Arab Culture 2006’ that includes a variety of activities in the fields of culture, arts, heritage, sports, entertainment, seminars and performances at different locations in Muscat city.

Pravasi Bandhu Welfare Trust Survey

Pravasi Bandhu Welfare Trust conducted a survey among middle income NRIs from GCC and find that only 5% could manage a confertable life when they return back to India and only 2% save from the remittance from aboruad. Seeing this result Pravasi Bandhu Welfare Trust were demanding government of India to introduce a special savings scheme, an effective insurance and investment scheme and skill up gradation training scheme for the Non Resident Indians working in GCC countries.

We take the opportunity to appreciate Prime Minister Dr. Manmohan Singh for making an announcement on these subjects in the fourth Pravasi Bharatiya Divas. He has announced "on-site welfare measures" including easy-to-use remittance facility and launch more a liberal Pravasi Bharatiya Bima Yojana from February one this year. Besides streamlining and modernising the process of emigration, the Government will support initiatives to develop skills of workers and set up credible mechanisms for certification of those skills and special Mutual Fund to change the saving culture of middle income NRIs form GCC countries who spent most of their earnings. We request the government to implement these announcements at the earliest. If NRIs pressure the authorities very continuesly all our issued could solve, the present announcement is is a classic proof of result of such effort of NRIs.

The Prime Minister Dr. Manmohan Singh presenting the first OCI card to NRI Mr. Iftekhar Shareef at the Pravasi Bharatiya Divas, in Hyderabad on January 7, 2006.

The Prime Minister Dr. Manmohan Singh presenting the first OCI card to NRI Mr. Iftekhar Shareef at the Pravasi Bharatiya Divas, in Hyderabad on January 7, 2006