Cargo the lone bright spot in India's aviation crisis

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FACING AN UNCERTAIN FUTURE: Sacked Jet Airways trainees wait to hear whether they will be reinstated after the aviation crisis hit both the state-owned and private sector.

October saw considerable angst in the Indian aviation markets, as the fuel crisis, combined with a worrying fall in capacity, at last bit home to put a considerable dent in what had previously been regarded as one of the country's most gilded industries.

Air India led the downturn in sentiment, with Raghu Menon, chairman of NACIL, the operator's owner, stating that the company was proposing to introduce a scheme whereby employees can voluntarily decide to take a leave of absence from between two and five years.

The interview with Menon, which took place at India Aviation 2008, was read by some parts of the Indian press as meaning that 15,000 employees would face dismissal.

In any event, as this magazine went to press, Indian media reports alleged that Menon had been censured for this proposal to company employees by Oil Minister Murli Deora. One bright spot for Air India and other airlines was the government decision to spread fuel debt repayments over a six-month period.

Jet Airways went one step further by sacking and then reinstating 1900 employees, in a move that has, at best, portrayed the carrier's executive board as confused.

This move followed a pruning of the company's long-haul expansion and a double-digit decline in domestic market figures in the last few months, a Jet Airways press release stated.

As a result of the domestic difficulties, Jet and competitor Kingfisher Airlines announced a widespread alliance that would allow both carriers to rationalise and reduce costs.

Although there will be no mutual equity investments between the two companies, both are examining co-branding initiatives under a committee formed of executives from both firms.

From a cargo perspective, Air India has decided to lease out its freighters, in what is a clear move to focus on the passenger sector as a result of a backlog in fuel bill repayments and aircraft financing.

While the carrier may argue that circumstances have left it with no alternative, the decision will delay still further the long-awaited launch of freight services at the Nagpur hub.

It is not yet clear how the current crisis will affect Jet and Kingfisher's plans to develop their cargo business, but the figures at various Indian airports have shown freight throughput to remain robust.

As for Quikjet, Aryan Cargo Express, Flyington Freighters and Avicore Aviation - all new operators that have been threatening to launch services throughout 2008 - they have again been conspicuous by their silence.

However, the fact remains that India currently moves only 1% of its freight by air, as opposed to a global average of 2% - according to a recent report from management consultants Ernst & Young - and the potential in the industry thus remains substantial.

"The bottom line is bleeding," said Giovanni Bisignani, IATA director general and CEO at the Confederation of Indian Industry at the end of September. "India will post the largest losses outside the US - potentially US$1.5 billion this year. Action on external issues is also required to bring the industry back to health. Let me highlight three: reducing costs, improving infrastructure and following global standards."

Neither Boeing nor Airbus won a single new plane order at India Aviation 2008 in Hyderabad.

"The simultaneous downturn in the financial sector and the aviation industry would not affect our sales in India as we already have firm commitments from carriers in the country," argued Dinesh Keskar, senior vice president, Boeing.

"Aviation is a cyclic business and following the downturn there is always bound to be an upswing. I don't think there will be a significant dip or cancellation in aircraft orders."

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