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#INTHEAIREVERYWHERE
   Vol. 17 No. 41
Monday July 9, 2018
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Issa BaluchWings & Wheels & Trump Tariff
     “In some respect, United States President Donald Trump has my admiration to pursue a fair tariff deal.
     “The implementation, however, is debatable! However, all said and done, I do not see trade coming to a halt.
     “I see volumes flowing despite the nuances and exchange of fury over the issues!
     “Our lives depend on trade and this talk of tariffs will not change much; there could be a temporary slowdown, but business as usual will return in a short time.
     “No one can afford to close down their doors and windows on trade!
     “So tails keep swimming, wings keep in flight, wheels keep racing!”
Issa Baluch
2017/20 Member of the Dean's Council, Harvard Kennedy School

Rick EliesonInventive Enough To Solve Any Problem
     “While I can’t predict how tariffs will impact our industry, the one thing of which I am certain is that we are a creative and adaptive bunch.
     “This industry works hard to solve whatever problems are thrown its way.
     “For American’s part, we are listening to our customers and will do our very best to meet their needs; however, they may change or materialize.”

Rick Elieson
President
American Airlines Cargo



There has been no let-up in the downs for Air India.
      Caught in a tight-jacketed financial bind and living from day to day on taxpayers’ money, the Narendra Modi-led government took the move to sell Air India.
      Despite the best efforts of the Civil Aviation Ministry, not one bidder showed interest in Air India till May 31, the deadline for the ‘Expression of Interest’ (EOI) bids under AI’s divestment process.


Lukewarm Response To Buyout

      In fact, the government, witnessing only a lukewarm interest in the divestment process, had sweetened the deal in its EOI on May 1 including plans for retaining the 24 percent stake in the divested entity, provision of ESOPs (employee stock ownership plan) and on the total debt and liabilities that were expected to remain with AI.


How Earnest Was Ernst & Young?

      Ernst &Young, the government’s disinvestment adviser for Air India, gave three reasons for the no-show of bidders:
      (a) Government not willing to part with 100 percent of the carrier;
      (b) Keeping the present set of employees; (c) Running the airline by proxy for the first three years.
      A question then that keeps popping up is: Shouldn’t Ernst & Young have advised the government after due diligence?
      Shouldn’t the adviser have given proper warning?
      The fact remains that the conditions attached to the sale scared the potential bidders leaving the government in a Catch-22 situation:
      Keeping the Maharaja alive would drain taxpayers’ money and closing it down would take its toll on its employees, a conundrum that a popular government is unwilling to face.


Keep It Simple

      Aviation consultant CAPA had, in fact, recommended way back in October 2017, that the terms and conditions of the divestment needed to be simple, practical and realistic.
      The conditions, CAPA said, should be more or less in tune with the expectations of investors, while shielding them from political and other risks.
      After the May 31st fiasco, CAPA pointed out: “The government should divest 100 percent even if it means giving up future upside, because if retaining a stake is blocking the entire sale, it is saddling the government with billions of dollars of red ink.”


Privatization Setback

      In its report, Air India Privatization Setback, CAPA India said:
      “Far better to cut losses now and maximize proceeds today, especially as there is no certainty as to where the airline business cycle will be tomorrow.
      “A stronger, restructured Air India, it said “can deliver significant indirect benefits to the Indian economy by stimulating tourism, trade and job creation, that far outweigh any notional future upside on the sale of 24 percent equity in the airline in the future.”
      Emphasizing that it was all for divestment, CAPA asked the Government of India to move ahead to complete the deal before the end of FY2019.
      “Or else,” CAPA said, “the carrier could lose around $1.5 bn to $2 bn in fiscal 2018-19 and fiscal 2019-20.”
      CAPA pointed out that the government had been doling out money to the carrier since 2012 and today, its debt stood at a whopping $7.5 bn.
      “These losses will need to be funded by the Indian taxpayers. And this is in addition to the $4 bn of public funds that have been used to subsidize the airline since 2012,” CAPA said, adding that the carrier has been losing market share in both national and international markets.


The Word From Captain Gopi

      CAPA is not alone. Low-cost pioneer Capt. G R Gopinath advised:
      “Exit!
      “Do it without delay.
      “Every day counts.
      “Cut the losses,” Capt. Gopi said, “and run when you are caught in a no-win situation. “The government must show prudence and make the best of the bad bargain to realize the highest value under the circumstances. That is what you would do if your business is bleeding and you see no light at the end of the tunnel.”


Too Little Too Late


      Amidst this indecision, one can only wonder why the Maharaja is keen to revamp its First Class and Business Class cabins over the next couple of months?
      Additionally the menu, staff uniforms, and amenities will also be enhanced.
      This, for an airline that sees only 60 percent occupancy in the front of the plane on flights to North America and Europe.
      Apparently, this was one way of remaining competitive and win back market share. While Air India has not publicized how much it would spend on the exercise, it has worked out that it would earn an additional $150 mn a year in revenue, according to Pradeep Singh Kharola, the Chairman and Managing Director.
      Pradeep also pointed out that the move would boost load factor from 60 to 80 percent.


Left Twisting In The Wind

      Perhaps, what is more worrying is it seems that the government has decided to let Air India wither away.


     Air India's Maharaja has been the carrier’s oldest and best-loved mascot. Bobby Kooka , the carrier's commercial director, and Umesh Rao of J. Walter Thompson, the advertising agency, created the Maharaja back in 1946.
     Kooka always recalled his creation with love.
     In an article, he mentioned that the Maharaja had been so named "for want of a better description.
     “But his blood isn’t blue.
     “He may look like royalty, but he isn’t royal,” wrote Kooka.
     The Maharaja made his first appearance—not as a mascot—but as an appendage to inflight memo pads.
     Along the way as the figure caught on, his creators added some touches toward developing his distinctive personality, including an outsized imperial moustache, the traditional churidar and kurta (narrow trousers and a long tunic), pointed mojris (slip-on shoes), the striped turban, and his aquiline nose.
     He was instantly liked and over a period of time came to be associated with grace and luxury.
     His fancy clothes and the satisfied, contented look in his eyes won a lot of hearts.
     Through the years, the slightly portly Maharaja has not only appeared in a large number of attires but also taken on different personalities—from a Parisian painter, a sumo wrestler, a Spanish matador and even a Texan oil tycoon—to announce and promote Air India's new destinations and flights.
     He has now spanned the centuries, having worked for an airline longer than any man in history.
     He is the most recognized aviation character in history.
     The Maharajah has won numerous national and international awards for originality in publicity.
     Millions of travelers, whose lives have been touched by the welcoming icon, think of the Maharajah with his inimitable style, charm, and wit as a very real person.
     “People just liked him around,” said Ralph Thomas at Liberty Travel in New York.
     “He is a legend who made people feel good about a great airline.”
     In 2015, a new Maharaja mascot was revealed to reflect PM Narendar Modi’s emphasis on making flying within the reach of the common man. The new Aam Aadmi (common man) mascot now boasts a younger version that supplants the turban with spiky hair and trades the traditional garb for jeans and sneakers. Although the outsized imperial moustache remains, it has been cut down to size.
Geoffrey


IPO In The Wings?

      What else can one make of the news that the meeting of the Air India Specific Alternate Mechanism (AISAM) was not held, even for the first time, because the participating ministers did not receive a clear directive. AISAM consists of the Finance Minister, Arun Jaitley, Minister of Commerce & Industry and Civil Aviation, Suresh Prabhu, Minister for Road Transport & Highways, Shipping and Water Resources, River Development & Ganga Rejuvenation, Nitin Gadkari, and the Minister of Railways and Coal, Piyush Goyal.
      Reports have appeared that the government wants to take the carrier to the people with an IPO (Initial Public Offering). The belief is prompted by the response the government received from the initial public offering of five government-owned enterprises: Mishra Dhatu Nigam Ltd., Hindustan Aeronautics Ltd., Bharat Dynamics Ltd., New India Assurance Ltd., and General Reinsurance Corporation Ltd.
      The response to these units’ IPO came from other government-controlled companies. What is important to note is, that unlike Air India, the three defense and two insurance firms were profitable and had no debts. As per data compiled by Bloomberg Quint from exchanges and filings, nearly 62 percent of the $3979 mn raised from the public offers was funded by government-owned entities like Life Insurance Corporation of India and the State Bank of India Ltd. Aviation experts feel that Air India has to be privatized first before it goes for an IPO.
      With no movement on the divestment process, Air India recently asked for $330 mn from the government to meet the working capital requirements including payments of salary that had been delayed for the third month in a row.
      Will the government seize the opportunity and move on to sell Air India, no matter what the ripple effects are?
      Stay tuned . . .
Tirthankar Ghosh


Subscription Ad

      “Multimodal 2018” was a very worthwhile, really big show and conference. Now in its 11th year, this year’s edition was held at the Birmingham NEC, May 1-3, 2018. In the general sweep of the 2017 first half conference slate, you may have missed it.
      The effects of disruptive new technologies in logistics and developments arising from modal shift were on the agenda.
      For the record, Multimodal 2018 attracted over 9,000 specialists.
      Workshop and seminar programs featured speakers gathered from every mode of transportation alongside hundreds of exhibitors from leading logistics companies.
      One panel featured the always cool and very straight-to-the-point Tristan Koch, Managing Director Cargo – Europe, Africa, Middle East and Indian subcontinent for American Airlines Cargo.
      Here, Tristan shares some additional thoughts with far-reaching global impact from the session titled “Developing Key Performance Indicators (KPI).”

FlyingTypers:  What are your views on the impact and importance of KPIs?
Tristan Koch:   We all agree on the need for what might be termed proper end-to-end data to make decisions. The problem in the past has been the definition of end-to-end. It isn’t enough for these small-scale, vested interests in one part of the supply chain to share data among themselves. Industry standard KPIs—where every part of the chain can benchmark itself against the next in a transparent way—are clearly the way forward. That's the primary reason for supporting CargoIQ.
      CargoIQ members working together to define the processes behind air cargo, measure success, and continuously improve the value of airfreight for customers will drive its success in the future. So for me, it is a hugely important step forward in the ongoing development of this industry simply because it helps level the playing field.
FT:  How broad has the search been in developing KPIs in terms of shippers and service providers?
Tristan Koch:  We at American have been active in the CargoIQ project. It must be driven by a global industry body like IATA in order to achieve its goal and to gain important credibility, which makes all players want to participate. That includes shippers, forwarders, airlines and manufacturers.
      The collaboration between all members has produced these commitment KPIs that will allow us all to speak the same language moving forward—something that has been sorely lacking in this industry. Individual shippers and service providers have long had their own standards and that’s something to be applauded. But overall leadership and commonality for the industry was always lacking. That’s where CargoIQ comes in.
FT:  What value has this initiative added to your overall effort? What is expected value in future?
Tristan Koch:  In real terms, it provides consistency and shows the level of trust apparent within all parts of the end-to-end process. That means we can use CargoIQ as an important benchmarking tool for our day-to-day operations.
      It’s already being used by all of our top forwarder customers and we are encouraging others to get on board. It allows us to compare our performance against what our forwarders ask of us, and also to compare ourselves against our competitors. Our sales team can also use it for reporting purposes, so it has a real practical benefit.
      To continue adding value, we participate in the bi-annual working group meetings and have participants in both the Smart Data working group and the Training Tools and Materials task force to ensure that they can deliver for everyone.
FT:  Do you have some ideas for what should come next?
Tristan Koch:   That’s always a hard one. This industry as a whole has a bit of a reputation for starting projects and then not seeing them through to conclusion. So I think the first thing is to continue supporting CargoIQ in its efforts to create a set of standardized KPIs. As we discussed in our session in Birmingham, there are always going to be some anomalies. But it’s about getting the general principle right, because that's what gives you the base to move onto the next level.
Geoffrey


If You Missed Any Of The Previous 3 Issues Of FlyingTypers
Access complete issue by clicking on issue icon or
Access specific articles by clicking on article title

Vol. 17 No. 38
Toward A Complete Blendship At AA Cargo
Chuckles for June 25, 2018
Serenade for Jessica
Vol. 17 No. 39
Tariff Watch As Deadline Looms
Chuckle for June 28, 2018

Planning For The U.S.-China Dance

Vol. 17 No. 40
Effervescence Of Jean-Claude
Chuckles for July 3, 2018
Update On The East
Dancing As Fast As I Can
Unfolding India Cargo Plan


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