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Trade Watch (Industry Updates)

Government proposes to build 17 new airports

The government proposes to construct 17 new airports in the country in the 12th Five-Year Plan (2012-17) period.

Minister of State for Civil Aviation K.C. Venugopal informed the Rajya Sabha that 17 airports had been proposed in the 12th Plan period between April 1, 2012 and March 31, 2017.

The airports would be located at Mopa, Goa, Gulbarga, Bijapur, Hassan, Shimoga, Karnataka, Aranmula (Pathanamthitta) and Kannur in Kerala, Sindhudurg, Navi Mumbai and Shirdi in Maharashtra, Darba in Madhya Pradesh, Karaikal in Pudducherry, Kushinagar in Uttar Pradesh, Andal-Faridpur in West Bengal, Itanagar in Arunachal Pradesh, Kishangarh (Ajmer) in Rajasthan and Deoghar in Jharkhand.

The government had earlier stated that it will look to connect more cities apart from metros with airport development.

"We need more connectivity to smaller cities. There is also the need to build low-cost airports at these places. This will surely encourage a growth in passenger traffic," Civil Aviation Minister Ajit Singh had told IANS in an exclusive interview last year.

"Tier-II and Tier-III cities are the ones that are showing rapid economic growth. These are the places where the aviation service must improve," Singh had said.

A FICCI-KPMG report, "India: The Emerging Aviation Hub", last year said the country has a potential of becoming a global aviation hub and the third largest aviation market in the world by 2020 if conducive policies to the growth of the civil aviation sector and focus on quality, cost and passenger interest are pursued.

It suggested that India be promoted as an industrial and tourism hub in order to derive synergistic benefits for the aviation industry.


Airlines under CCI scanner for cargo fuel surcharge

The Competition Commission of India (CCI) is examining a complaint of cartelisation against Jet Airways, SpiceJet, Air India, GoAir and IndiGo, according to an official source. The alleged cartelisation was aimed at levying a uniform fuel surcharge on air cargo, the source added.

The complaint was lodged by Mumbai-based Express Industry Council of India, which represented major express courier and cargo companies such as DTDC, Aramex India, Blue Dart, DHL Express, GATI and First Flight, the source said. “We have received a complaint recently against five airline operators, alleging there is a concerted effort by them to levy a uniform rate of fuel surcharge on air cargo, often on the same day. This is affecting the services of cargo companies and their consumers,” the source, privy to the developments, said.

When contacted, GoAir said so far it hadn’t received any communication from CCI and, therefore, wouldn’t be able to comment. While Jet Airways declined to comment, email queries to SpiceJet and IndiGo didn’t elicit any response. Air India officials were unavailable for comment.

According to official data, last financial year, air cargo traffic in India stood at 2.19 million tonnes (mt). Of this, about 33 per cent was international cargo with foreign carriers with a market share of about 80 per cent. The remaining international cargo was accounted for by the five Indian carriers. Domestic cargo traffic stood at 0.78 mt. According to the source, the complaint said while airline companies bought fuel from oil marketing companies at different prices, when it came to levying fuel surcharges on cargo operators, they fixed a uniform rate. “The allegations are this practice started from 2008, and there are no legal provisions under which fuel surcharge can be imposed,” the source said.

It is likely CCI would seek responses on the allegations from the airlines soon. If it found prima facie evidence against the airlines, the case would be referred for further probe under its director general (investigation), the source said.

According to the Competition Act, 2002, a cartel is said to exist when two or more enterprises enter into an explicit or implicit agreement to fix prices, to limit production and supply, to allocate market share or sales quotas, or to engage in collusive bidding or bid-rigging in one or more markets. So far, the competition watchdog has examined charges of cartelisation across industries. Last year, CCI had imposed a fine of Rs 6,300 crore on 11 cement manufacturers for alleged cartelisation to fix prices.

However, tyre companies, who faced similar charges, were given a clean chit, as there wasn’t enough evidence against them. Recently, the commission ordered an investigation into alleged cartelisation by state-owned oil marketing companies for fixing petrol prices.

Mumbai-based Express Industry Council of India, which represents major express courier and cargo companies such as DTDC and Blue Dart, has complained to the Competition Commission Of India that Jet Airways, SpiceJet, Air India, GoAir and IndiGo have formed a cartel to levy uniform fuel surcharge on air cargo

The complaint points out while airlines buy fuel from oil marketing companies at different prices, they levy fuel surcharge on cargo operators at a uniform rate.


Airline industry upgrades prospects

Lower than expected fuel prices and a jump in the number of passengers flying in its planes have prompted the aviation industry to predict earnings will be 20 per cent higher this year than it was forecasting just three months ago.

The airlines' main representative body, the International Air Transport Association (Iata), yesterday estimated that airlines would record global net profits of US$12.7 billion this year, up from its March prediction of $10.6bn.

If achieved it would represent a 67 per cent increase in profits compared with $7.6bn last year. But the industry is still beset by wafer-thin profit margins and struggling to generate adequate returns for investors, said Iata's director and chief executive Tony Tyler during the group's annual meeting yesterday in Cape Town, South Africa.

He said airlines are set to carry more than 3 billion people this year, establishing a record with 80.3 per cent of the passenger seats being filled.

"Yet aviation's ability to generate sustainable returns continues to be challenging. This year we expect airlines to make $12.7bn profits. On $71bn in revenues, that's a 1.8 per cent net profit margin. And to put that into perspective, it means that we will earn a $4 profit per passenger carried, less than the price of a sandwich," said Mr Tyler.

"Generating even these small profits under current conditions is a major achievement. The price of fuel, our largest cost item, has increased 55 per cent since 2006. And we continue through the greatest period of economic stress since the 1930s."

An anticipated return on invested capital of about 4.8 per cent for the year will trail the 7 to 8 per cent average cost of capital required, raising doubts about airlines' ability to fund new and more efficient aircraft, Mr Tyler said.

"If airlines are to find the $4 trillion to $5tn needed to finance the projected fleet development over the next 20 years, even more improvements are needed."

Even so, carriers in all regions should post a profit this year, led by airlines in Asia with projected earnings of $4.6bn and North America with $4.4bn, he said.

European airlines should net income of $1.6bn, and Middle Eastern operators generate $1.5bn.

Carriers would continue to benefit from lower than expected fuel prices, with the average price of Brent crude oil this year expected to be $108 per barrel compared with $111.80 in 2012.

Africa is likely to remain the industry's poorest-performing region, with companies there returning a profit of just $100 million, the group predicted.

Mr Tyler said safety concerns were the largest obstacle that needed to be tackled to improve the African market. But with reduced estimates for global economic growth, Iata said the air-cargo market had all but stagnated.


Airlines push new booking platform, IT firms wary

The airline industry is set to allow consumers to see more details of what they are booking using a new online reservation platform, a project that poses a threat to many travel technology firms working with older systems.

Almost two thirds of global tickets sales are made via travel agents, online travel agencies and travel management companies rather than the airlines themselves.

While many airline websites can show customers content such as no-frills or bundled offers, travel agents cannot access the same information and services in most cases because of outdated software that uses a computer language developed 40 years ago.

In many cases, passengers have no way of comparing different packages, meal prices or the size of seats.

An enhanced web platform could be widely available within two years if the world's airlines prevail, with a pilot demonstration with real transactions planned for October 2013 in Dublin at the World Passenger Summit.

The New Distribution Capability (NDC) standard aims to give consumers the same online experience regardless of how or where they do their travel shopping.

Members of IATA, the world airline industry organisation, met in Cape Town this week, viewed a demonstration of the new standard and passed a resolution approving it.

"Airlines offer a rich customer-centric shopping experience on their own websites and we want travel agents to have similar capabilities," said Eric Leopold, a senior IATA official.

But not everyone was happy. Travel information technology companies such as Amadeus IT Group make their money from contracts linking airlines and agents via global distribution systems heavily reliant on the old technology.

They stand to lose business if the NDC standard, which bypasses those older systems, eventually prevails.

"To be completely clear, we have said that we cannot fully support resolution 787, which is effectively NDC in its current form," said Ben Hunt, a spokesman for Amadeus.

Fellow travel technology firms Sabre Holdings and Travelport were also unhappy with IATA's proposals.

Hunt said Amadeus had submitted concerns about NDC to U.S. transport authorities regarding privacy and data ownership and was "cautiously optimistic" about reaching an accord with IATA.



The news provided, herein, is a service to the cargo and logistics industry and has been compiled from various sources, deemed reliable and accurate, but could not be confirmed. Readers are advised to independently verify and confirm the authenticity, veracity and validity of the news. INDUS will neither accept any responsibility or liability for any errors or omissions in the same, nor entertain any claim for losses or damages, whatsoever, caused by reliance upon such information or services. The news provided, herein, is a service to the cargo and logistics industry and has been compiled from various sources, deemed reliable and accurate, but could not be confirmed. Readers are advised to independently verify and confirm the authenticity, veracity and validity of the news. INDUS will neither accept any responsibility or liability for any errors or omissions in the same, nor entertain any claim for losses or damages, whatsoever, caused by reliance upon such information or services.