Removal of airfare caps ignites a price war among the airlines to attract fliers

The Indian aviation sector is witnessing one of the toughest competition. The removal of airfare caps by the government has ignited a price war among the airlines to attract fliers.

Just a few days after the government did away with fare caps, domestic airlines Akasa Air, IndiGo, Air Asia, GoFirst and Vistara have cut prices. Lower prices are not only a reflection of airlines looking to grab or retain market share, but are a product of competition, demand, supply, costs, and potential cargo revenues.

A close look at airfare disclosed that a ticket from Mumbai to Ahmedabad is costing INR 1,399 on Go First and INR 1,497 on new entrant Akasa Air for a journey on September 9. IndiGo, the largest domestic airline, is offering tickets on the same route for INR 1,609, reported IANS.

Removal of airfare caps ignites a price war among the airlines to attract fliers

Similar is the case on the Mumbai-Bengaluru route with tickets available in the range of INR 2,000 to INR 2,200. While Akasa Air is offering a ticket for INR 1,997 for a journey on September 9, a ticket on IndiGo is available for INR 2,208.

ALSO READ - DGCA to end the airfare caps on domestic flights

The price war among Indian airlines was expected following the removal of the airfare cap by the Ministry of Civil Aviation from August 31 onwards.

Industry experts said that high competition among the airlines may lead to benefits for the fliers and many airlines may offer discounts as per demand. Interestingly, the prices have slipped mostly on the routes on which the newly-launched Akasa Air has started its operations.

The fare caps were removed with effect from August 31 this year.

An expert said the Aviation Ministry's move has given the flexibility to the airlines in deciding airfares as they can now charge as per their policies. The entry of Akasa Air has increased competition in the aviation sector. To attract fliers, some airlines have already started offering tickets at lower rates.

The fare caps were removed with effect from August 31 this year. The Aviation Ministry had imposed lower and upper limits on airfares after the resumption of services in May 2020 following the initial two-month nationwide lockdown to contain the spread of Covid-19.

Thereafter, the limits were relaxed in a phased manner according to the improvement in air traffic in the country. The move which comes in the middle of a lean traffic season is likely to unleash a fare war which would lead to a lowering of ticket prices, airline executives and industry experts said.

Even with the fare cap capping fares beyond 15 days, airlines had shown pricing discipline for tickets booked 15 days ahead of the journey.

The ministry had imposed lower and upper limits on domestic airfares based on flight durations when services resumed after a lockdown in 2020- the first time since the deregulation of fares in 1994.

While it had tweaked the system multiple times like allowing market-driven pricing for flights beyond 15 days, it had divided the industry with IndiGo and Vistara opposing regulation of fare and SpiceJet and Go First supporting it.

"The decision to remove airfare caps has been taken after careful analysis of daily demand and prices of ATF. Stabilisation has set in and we are certain that the sector is poised for growth in domestic traffic shortly," aviation minister Jyotiraditya Scindia said.

The picture is dramatically different from two years back with jet fuel price doubling and a weaker rupee against the dollar increasing input cost for airlines. However, Akasa Air backed by Rakesh Jhunjhunwala has started operations which would increase the competitive intensity.

Akasa Air backed by Rakesh Jhunjhunwala has started operations which would increase the competitive intensity.

Yet airline executives said that airfare would see a steep fall at least till the end of September when traffic is lower due to the monsoon. “There is an expectation that airlines will maintain pricing discipline in the festival season which starts from October but a few airlines which are in urgent need of liquidity may undercut to raise cash. The industry is such that if anyone drops ticket prices, other airlines will match it,” said an airline executive.

A second airline executive, however, said that even with the fare cap capping fares beyond 15 days, airlines had shown pricing discipline for tickets booked 15 days ahead of the journey. Market leader IndiGo reported a yield of over INR 5 in the last quarter the highest in the airline’s history.

(With Inputs from The Economic Times, MoneyControl)

Rolls-Royce, the engine manufacturer, has ceased its partnership with Boom Supersonic to construct a passenger airliner that travels faster than the speed of sound, adding a new and exceedingly complex challenge to the quest for the new supersonic aircraft to carry on the heritage of the legendary Concorde.

The two had established a contract back in August 2020 to progress the design of Overture's engine programme and collaborate on finding a propulsion system that would go well with Overture's airframe.

Representative | Flipboard

After careful consideration, Rolls-Royce has determined that the supersonic business aviation market is not currently a priority for us and therefore will not continue to work on the program at this time. It has been a pleasure working with the Boom team and we wish them every success in the futureAs reported by AINonline, the engine manufacturer said

However, it is also worth noting the fact that Rolls-Royce equipped the world’s first supersonic airliner, Concorde, with four Olympus 593 engines, almost 50 years ago.

The news wouldn't be surprising, since Jon Ostrower had already stated in July via his publication The Air Current that RR will not be spending its funds to create alternatives to the projects already in progress, namely the Ultrafan and Pearl 10X.

Boom, a Denver-based company, has been working on an Overture supersonic aircraft that it claims can carry up to 80 passengers and travel at Mach 1.7. The overture was originally going to have two engines but was recently switched to a four-engine configuration.

Representative | Make Parts Fast

Although Boom has claimed that Overture will burn sustainable aviation fuel, balancing its carbon footprint to "net zero," supersonic aircraft are less efficient per passenger than subsonic variants. Regarding the accessibility and environmental advantages of such alternative fuels, there is still much ambiguity.

We are appreciative of Rolls-Royce’s work over the last few years, but it became clear that Rolls’ proposed engine design and legacy business model is not the best option for Overture’s future airline operators or passengersBoom said on 7 September

Flight Global

Reportedly, Boom has two choices: to appease investors, to increase the bet, and to look for a courageous engine manufacturer with the courage or recklessness - to develop an engine in less than three years; or to take advantage of the free exit, blame Rolls-Royce, and abandon a project that faces enormous technical challenges.

Later this year, we will announce our selected engine partner and our transformational approach for reliable, cost-effective and sustainable supersonic flightBoom

Overture's first flight and delivery have been slated for 2026 and 2029, respectively, by the company.

SOURCE(s)

COVER: Boom Supersonic

The Ministry of Civil Aviation (MoCA) plans to connect more than 50 wildlife and tourism destinations in the next stage of the regional connectivity initiative Ude Desh ka Aam Naagrik (UDAN).

It has identified 54 new destinations for the next phase of the scheme. The fifth phase of the scheme — is to be called UDAN 5.0. — will aim to add or revive airstrips closer to wildlife sanctuaries, tourist destinations or spiritual places. 

"With UDAN 5.0. we are going from regional to remote connectivity. This will be a demand-driven scheme.We will not decide the routes for airlines to bid for. Airlines know the network better. They will be allowed to select the routes they want to bid for. Of course, we have some priority areas included in the scheme, like in North East states and islands."Usha Padhee, Additional Secretary, Ministry of Civil Aviation

The government has prepared a list of potential airports. Most of these destinations already have either an underserved or unserved airstrip.

The list includes 10 airstrips, which are near wildlife sanctuaries like Ranthambore (Sawai Madhopur) and Bharatpur in Rajasthan, Bishnupur, also cultural destinations in West Bengal, Yavatmal in Maharashtra, Satna, Dhana and Mandla in Madhya Pradesh and  Nagarjuna Sagar in Andhra Pradesh. 

The government has prepared a list of potential airports.

Airstrips near 29 tourist destinations, including Chamba, Sidhi,  Panchmahri, Jogbani, Raichur, Hirakund and Kohima have been proposed to be developed as potential airports.

Religious and spiritual destinations like Konark, Bihar Sharif, Hassan, Dessa and Abu Road will be included in the bidding process for UDAN 5.0. 

Madhya Pradesh and Bihar are likely to be the biggest beneficiaries of this round. Eleven airstrips from Madhya Pradesh and seven from Bihar are included in the list. 

UDAN 5.0 to air connect 54 wildlife and tourism destinations

The airlines bidding under the scheme will be allowed to propose the routes. Airlines will have to go through a two-stage bidding process before the route is awarded. The scheme's draft is ready and the bidding process is likely to commence in the next three months.

The UDAN scheme was started in October 2016 to provide air connectivity in tier II and tier III cities and make flying affordable for common citizens. It was launched to enhance regional air connectivity from unserved and underserved airports in the country.

Under this scheme, RCS was created, which funds the scheme's viability gap funding (VGF) requirements through a levy on certain domestic flights. A total of 70 airstrips and 433 routes have been operationalised in the previous four phases of the scheme. 

UDAN was launched to enhance regional air connectivity from unserved and underserved airports in the country.

Under UDAN, the government invites proposals for under-served and unserved airports. A Viability Gap Funding is also provided to the Selected Airline Operators for the operation of the Udan flights as per the provisions of the scheme document. Prime Minister Narendra Modi inaugurated the first Udan flight from Shimla to Delhi in April 2017.

ALSO READ - At the halfway point, Government’s UDAN – RCS is still in the works

As of July 2022, a total of 425 routes have commenced under the scheme, connecting 68 unserved and underserved airports including eight heliports and two water aerodromes.

As of July 2022, a total of 425 routes have commenced under the scheme, connecting 68 unserved and underserved airports including eight heliports and two water aerodromes.

ALSO READ - Udan 4.2 scheme receives more than 100 bids

According to a recent report by the Ministry of Civil Aviation, more than one crore of passengers has flown in the last five years while benefitting from the Ministry of Civil Aviation's flagship programme Regional Connectivity Scheme UDAN (Ude Desh ka Aam Nagrik).

There were 74 operational airports in 2014. Because of the UDAN scheme, this number has increased to 141. 68 underserved/unserved destinations which include 58 Airports, 8 Heliports and 2 Water Aerodromes have been connected under the UDAN scheme.

Aeroflot Group, the parent company of Russian flag carrier Aeroflot, has signed an agreement with the local aerospace manufacturer United Aircraft Corporation (UAC) for the purchase of 339 domestically made planes.

The agreement, which was signed on September 7, 2022, consists of 210 Irkut MC-21 single-aisle passenger aircraft, 89 Sukhoi Superjet New and 40 Tupolev Tu-214 medium-range narrow-body airliners.

Russia's reliance on Airbus and Boeing for new aircraft looks like becoming a thing of the past. The country's flag carrier, Aeroflot, has finally confirmed it is turning inwards by placing an order for 339 locally built aircraft.

Boeing and Airbus aircraft, which are unlikely ever to be delivered to Russia again, will be replaced by Russian-made passenger aircraft.

ALSO READ - Russia considers increasing the production of commercial aircraft in response to sanctions

Delivery is expected to commence in 2023, with the last plane joining the group in 2030, Aeroflot said in a statement.

"Today we signed the largest agreement on the acquisition of domestic aircraft in the recent history of Aeroflot. This is an important step that sets the stimulus and influences the prospects for the development of civil aviation in Russia."Sergey Alexandrovsky, General Director, Aeroflot

Sergey Chemezov, the general director of Rostec, the parent company of UAC, said that Boeing and Airbus planes “are unlikely” to ever be delivered to any Russian air carriers again. As a result, the local market will be replaced with domestically produced aircraft.

For instance, Chemezov believes that the MC-21 will soon “become the flagship aircraft” of the Aeroflot fleet. “I note that all aircraft will be delivered in an import-substituted form: with Russian-made on-board systems and units,” Chemezov said.

Aeroflot has a fleet of 305 aircraft, which includes 127 wet-leased in.

Following the delivery schedule, Aeroflot Group is expected to receive the first two Superjet New passenger planes in 2023. Meanwhile, delivery of the first six MS-21s and the first seven Tu-214s is expected to take place in 2024.

The SSJ-100/95NEW is not yet certified, given its engines were previously made by PowerJet, a France-Russia joint venture between Safran and NPO Saturn. That formality will no doubt be quickly taken care of, and the aircraft will start delivering to Aeroflot in 2023.

ALSO READ - The Russian rival to the Airbus 320 and Boeing 737 completes rigorous testing under sub-zero temperatures

The new narrowbody MC-21 is also not yet certified, with the first deliveries of six aircraft expected in 2024.

The new narrowbody MC-21 is also not yet certified, with the first deliveries of six aircraft expected in 2024. The Tu-214 is a variant of the Tu-204, which was first flown in 1996 but has undergone various upgrades since then. The Tu-214 is in production, and it's made for special customers, which in Russia's case means the government and military.

When Aeroflot takes the keys to the first seven in 2024, it will become the first commercial operator of the type. The total order is due for delivery by the end of 2030.

Aeroflot has a fleet of 305 aircraft, which includes 127 wet-leased in. The only Russian-built aircraft in the current fleet are 76 SSJ-100/95Bs, of which 72 are wet-leased and the other four shown as inactive. The bulk of Aeroflot's fleet is 130 Airbus A320-family, 47 Boeing B737-800 and 29 B777-300 aircraft, some of which are also wet-leased.

Despite the recovery in passenger traffic, the rating agency, ICRA expects the Indian aviation industry to report a loss between INR 150-170 billion in 2022-23 due to high ATF prices and a depreciating rupee.

Domestic air passenger traffic in India is likely to grow 52-54% on the year and is likely to reach pre-COVID levels in 2022-23, rating agency ICRA said in its report.

The rating agency said that domestic airlines in India are still reporting an unfavourable spread in their revenue per available seat kilometre–cost per available seat kilometre due to the significant surge in costs and the limited ability of the airlines to pass on the same to the customers.

The Indian aviation industry can report a loss between INR 150-170 billion in FY23; air traffic to grow 52-54%

In the current fiscal, the cost headwinds increased airfares, with domestic yield in the first quarter expected to have increased by 25-30% over pre-Covid levels.

ICRA said that despite the government removing fare caps from August 31, airlines in India will struggle to increase the costs of tickets in the country due to very high competition.

“Despite an expected improvement in passenger traffic, the industry is estimated to report a net loss of INR 150-170 billion in FY2023 (as against an estimated net loss of INR 230 billion in FY2022), due to elevated aviation turbine fuel (ATF) prices and the recent depreciation of INR against the US dollar, both of which have a major bearing on the cost structure of airlines." Suprio Banerjee, Vice President & Sector Head, ICRA

While the civil aviation ministry has discontinued the fare restrictions, a sharp hike in airfares will be deterred by the intense competition and airlines' endeavours to maintain and/or expand their market shares.

However, the rating agency expects that the international passenger traffic for Indian carriers is likely to reach or marginally surpass pre-Covid levels in FY2023.

In the June quarter, IndiGo and SpiceJet booked losses of INR 1,064 crore and INR 789 crore, respectively, primarily because of a weak rupee and costlier ATF.

ALSO READ – IndiGo reports net loss of INR 1,064 crore in Q1

In the June quarter, IndiGo and SpiceJet booked losses of INR 1,064 crore and INR 789 crore, respectively, primarily because of a weak rupee and costlier ATF.

ALSO READ – Worst nightmare of SpiceJet – From financial losses widening to the CFO resigning to non-payment of salaries

In Q1 FY23, domestic passenger traffic was higher by 2.04 times at 32.5 million YoY. It fell short of the pre-Covid level (Q1 FY20) by about 7%. With normalcy back, domestic passenger traffic is expected to grow 52-54 per cent YoY in FY23, Icra said. Domestic traffic is expected to touch pre-Covid levels by FY24.

According to Christchurch-based Kea Aerospace, the final design of New Zealand's first stratospheric aircraft has been completed, and production is well underway.

Keaaerospace

Test flights at high altitudes will be conducted using the solar-powered "Kea Atmos Mk 1." It weighs less than 40 kilogrammes and has a wingspan of 12.5 metres. The Kea Atmos is intended to fly test flights lasting up to 16 hours at a height of 65,000 feet (20 kilometres), which is almost twice that of commercial aircraft. Later versions will be created to operate constantly for several months at a time, according to Mark Rocket, CEO of Kea Aerospace.

Mark Rocket | Kea Aerospace

This is the first stratospheric aircraft built in New Zealand. We started construction in July, and we’re planning for the first stratospheric flight to take-off in early 2023. At that height it will be flying in extreme conditions – at about -65 degrees Celsius, and in less than 10% of the air density we have at sea level. The aircraft needs to be extremely light, but also be incredibly robust to operate successfully in those conditionsMark Rocket says

The Kea Atmos

Kea Aerospace

The Kea Atmos (UAV) falls under the category of a fixed-wing High Altitude Platform (HAP) and a High Altitude Long Endurance (HALE) airborne vehicle. It can also be referred to as an atmospheric satellite, an atmosat, a high altitude platform station, or a high altitude pseudo-satellite (HAPS).

Apparently, satellites, crewed aircraft, and drones are currently unable to fill the existing significant aerial data gap. It is currently expensive and challenging to gather high-quality, regular aerial data to detect changes in our surroundings. Only manned planes and satellites can access large-scale imaging, yet both have major limits.

Aerospace Christchurch

The incorporation of onboard components like the power supply and telemetry options significantly increases the Kea Atmos's 10 kg cargo capacity. Thus, a 100-kilogramme payload for space hardware would be more appropriate for this weight. Furthermore, the aircraft's 20x closer altitude offers further weight, size, and power advantages, such as in the case of payloads for sensor systems.

Only low- to medium-resolution images can be obtained from satellites over specified orbits and developing, launching, and operating satellites is extremely expensive. High-resolution aerial photographs are available from crewed aircraft, but they are also more expensive to operate and can only provide patchy coverage.

Representative | Kea Aerospace

The Kea Atmos will function in a "sweet spot" for high-resolution, low-cost aerial imaging in the stratosphere. According to the company, they will oversee every step of the process, including data collection, storage, analysis, and distribution.

Commercial aircraft normally fly between 33,000 and 42,000 feet (10 to 14 kilometres) in the air, however, the Kea Atmos flies at 65,000 feet, above the weather, strong winds, and jet stream (20 kilometres).

The Kea Atmos can take 20 times better images with a similar camera since satellites operate at least 20 times higher above the Earth's surface at a distance of 400 kilometres. Furthermore, with significantly fewer technical difficulties, data flow to the ground is also considerably more effective.

Fostering Knowledge-Based Decision-Making

Massive data loads from the fleet of Kea Atmos aircraft are managed by a completely automated data pipeline, which also reduces resource waste, processing bottlenecks, and interference removal.

The company says:

Their antenna ground station network will guarantee successful real-time imagery transmission as well as effective mission operations.After being post-processed and combined, the downlinked imagery will be uploaded to the business' cloud infrastructure.Data will then be added to the pipeline for data analysis and distribution at Kea Aerospace, where it will be distributed to stakeholders.

Keaaerospace

Evidently, the customers will have amazing, quick access to the business analytics they need to make faster, more informed decisions thanks to customised subscriptions to Kea's data platform.

About Kea Aerospace

Kea Aerospace is on a mission to increase access to aerial images, led by industry visionaries with a history of world-leading innovation. It is an early member of the New Zealand Airspace Integration Trials programme operated by the Ministry of Business, Innovation & Employment.

The company was established in Christchurch, New Zealand, in 2018. They are the founding members of the industry organisation Aerospace Christchurch and a research partner with the University of Canterbury.

https://www.youtube.com/watch?v=vE3DlVTNd64

SOURCE: Kea Aerospace

COVER: Otago Daily Times