Friday, January 22, 2010

Air India Reviews Decision To Shift Frankfurt Hub


Aviation Daily Jan 22 , 2010 , p. 14
Neelam Mathews

Barely nine months after announcing Frankfurt as a hub for flights to the west, national carrier Air India (AI) is reviewing its decision on the premise that Frankfurt Airport has become one of the costliest hubs in Europe.

While not denying the review, Air India Chairman Arvind Jadhav told The DAILY, “All our decisions need to consider cost effectiveness.”

An agreement was signed last December between airport operator Fraport and airline representatives that stipulates charges will increase progressively to 12.5% over the next two years.

AI is now looking at various other airports in Europe. One option being discussed is Zagreb. Another likely contender is Dublin Airport, where passengers can pre-clear immigration for the U.S., which is seen as an advantage for transatlantic passengers, an airline official said.

This facility may cost more for Air India’s passengers who are price-sensitive, said a former CEO of a Star Alliance airline. He added Dublin is not aligned; however, as long as AI does not rely on other airlines for feed, it might work for them.

AI added 29 aircraft in 2009 and will receive the first of 27 Boeing 787s on order in the first quarter of 2011 (April) and 15 787s by the end of 2012, all of which will need to be used.

The rationale for AI’s decision to leave Frankfurt is that Fraport did not offer it a good deal. However, Ansgar Sickert, managing director-Fraport India, said, “Fraport does not negotiate nor give discounts. Our aeronautical charges are based on weight and passenger numbers.

Frankfurt is also the hub for Lufthansa, with which AI has 350 code shares, including many on its 52 weekly frequencies to India and around 10 destinations in the U.S. and Europe. Lufthansa is also looking at Air India to expedite its already delayed entry — by two years — into Star Alliance to achieve seamless domestic connectivity.

India is one of the main partners for Lufthansa and holds big potential. We believe in cooperation. Without partners, our network will not be so successful, said Karl Ulrich Garnadt, member of the Lufthansa board.

As Fraport moves on its master plan, investing about €1 billion annually in its modernization and expansion, each billion euro Fraport spends requires about €100 million in additional expenditures per year for interest and depreciation. These expenditures must first be earned through the expected traffic growth, additional airport charges and increasing proceeds from retailing,” Fraport Executive Board Chairman Stefan Schulte said.

Sickert said Ireland, unlike Frankfurt, is a peripheral country with no geographic advantage and a poor distribution network to Europe. Also, the costs involved in relocating would be high at a time when the carrier is struggling with losses.

Dublin increased passenger charges by 13% this year as a result of a decline in traffic to about 20 million in 2009 from 23.5 million in 2008. The Dublin Airport Authority said recently its $13-per-passenger charge is highly competitive with other European airports that charge $17.60 per passenger.

No comments:

Post a Comment