Airline Business

India's airline playboy on why Kingfisher is upmarket

The ever entertaining Dr VJ Mallya, founder and chairman of Kingfisher Airlines, was in London yesterday giving an address to the Aviation Club.
His first task was to explode a misconception about his home country that it is a poor, emerging nation. Not quite true, says Mallya, typically talking without notes. India is "incredible", he says. "India has always been an exceptionally wealthy country," he says, with huge natural resources and a long history of royal dynasties where huge wealth was taken for granted.
Per capita income for millions is also not as low as some might think. There are some 100 million people that have the earning power equivalent to those in Europe or the US, says Mallya.
Now India is forging ahead. "What is new is that we have broken loose of the shackles of our socialist economy to free and global market integration," says Mallya. "This is unleashing a power always resident in that economy but never allowed to flourish."
It is against this background that Mallya launched Kingfisher Airlines 21 months ago. Now it flys 24 aircraft on 156 flights a day, with another 20 arriving in 2007. This Indian entreprenuer, millionaire and member of parliament, did not take the low-cost airline route for his airline. Mallya believes low-cost and India do not sit well. He believes that high fuel taxes and airport parking charges, along with airport and air traffic control congestion that makes short turnarounds difficult, means following a low-cost model in India is tough. “That’s why I say there is no room for a low-cost carrier in India because there is nothing low cost about running an airline in India."
Mallya went for a premium airline brand. There is a two class cabin, business class has a 42in seat pitch, there is television in each seat and passengers are described as guests. "From the beginning we created Kingfisher as a true consumer product and as a true consumer experience," says Mallya. "What I say to my people is that we are not in the airline business, we are in the aviation hospitality business."
Despite what must be a massive call on his time from other parts of his empire, Mallya appears to be extremely hands on at Kingfisher Airlines. He interviews every single guest facing employee personally. He receives an SMS message every time an aircraft takes off from the airport manager. This helps focus staff as they must explain every departure that is late by over five minutes. "That's playing on their mind," he says, as the manager wonders what the chairman's reaction might be to a late departing aircraft. "That's playing on their mind big time."
Mallya is also a great ideas man. After visiting his optician in San Francisco he noticed him using a small bottle of liquid to clean glasses. "How much does that cost?" asked Mallya. "75 cents" was the reply. Mallya bought a box and got them onto his aircraft. Cabin crew offer to clean the glasses of surprised guests.
Mallya also carries a steamer on his private jet to press his creased trousers when arriving at a destination. Hang on, thought Mallya, this is a good thing, so each aircraft has one too. "When guests see this done in front of their eyes it blows their mind. It's a small thing but with such a humongous impression."

Cash bonus for airlines at Copenhagen Airport

2006 was a good year for Copenhagen Airport with overall passenger growth up 4.4% on the previous year. And good news for Copenhagen Airport is good news for the airlines that fly from there.
Copenhagen Airport has just paid the airlines a cash bonus under a deal that rewards passenger growth. The bonus is calculated as one half of the aggregate traffic growth, measured in per cent (i.e. 4.4%), multiplied by the amount that each airline has paid to Copenhagen Airport in passenger charges during the year. Copenhagen Airport would not reveal what that amount was for the airlines.
The majority of airlines at Copenhagen Airport recorded growth in their passenger numbers in 2006, and more than half the 20 largest airlines by passenger number reported double-digit growth rates.
Scandinavian Airlines retained its position as the largest airline at Copenhagen Airport. Half of all the passengers who travelled through Copenhagen Airport last year flew Scandinavian Airlines. Sterling came in second, flying 10% of all passengers through the airport. Of the network carriers, KLM recorded 14% growth and Air France 22%.
With total passenger growth at Copenhagen Airport up 4.4% overall, all airlines that used the airport in 2006 will receive a cash bonus. The scheme was introduced to promote traffic growth at the airport.

A few blunders but overall a success: A380 media flight

Airbus today completed the first media flight on the A380 without any major hitches but the event was not totally blunder free.

Several oxygen masks accidentally became deployed at takeoff and landing, capturing the attention of television crews including CNN. Airbus technicians quickly responded by re-installing the oxygen masks (see picture), explaining the masks had been tested on the previous flight.

The landing was rough but the captain was quick to blame it on the stiff crosswinds, which were blowing at 20 knots with gusts to 30 knots. The climb out was also bumpy, with winds blowing at 17 knots and a crosswind component of 50 degrees.

Airbus tried its best to focus on the positive. During a briefing prior to the media flight, senior vice president for the A380 programme Mario Heinen refused to reveal how much the aircraft has cost to develop or how long it will take for the programme to break even. “You are privileged to be among the first group to fly the aircraft. Let’s focus on the aircraft,” he told the 200 journalists gathered to fly in the A380 for the first time.

After several months of being battered in the press by delays to the A380, Airbus is eager to get some positive publicity. Despite the hiccups today, the headlines tomorrow are sure to be better than the headlines from last year. Heinen assured journalists the A380 will have “the best entry into service ever” when launch customer Singapore Airlines begins operating the aircraft in October. “That’s what it’s about, that’s why you are here,” he said.

“It’s a game changing airplane,” exclaimed Airbus sales chief John Leahy. “The only minor problem is we didn’t build it on time … This plane is worth the wait.”

Time will tell.

Flying on the A380: like an A340 on top and a 747 below

Journalists descended on Toulouse today as Airbus for the first time took the wraps off an A380 with a completed cabin.

Airbus flew 200 journalists including myself over France for two hours in an A380 test aircraft configured with 519 seats. As I settled into seat 84K, in the back of the economy section on the upper deck, I felt like I was on an A340-500 or -600 with a noticeably better and quieter takeoff performance. The 136 upstairs economy seats were in a 2-4-2 configuration, identical to a standard A330 and A340, with a comfortable 32-inch seat pitch. The only major difference compared with an A330/A340 was small luggage bins at the floor underneath the windows, similar to the floor bins you find in the upstairs of a 747.

At the front of the upstairs cabin were 64 standard business class seats in a 2-2-2 configuration with 60-inch seat pitch. Launch customer Singapore Airlines (SIA) will equip its upstairs business class section in a roomier five-abreast configuration with 30-inch-wide seats that convert into flat beds.

Downstairs there were three economy sections in a 3-4-3 configuration with a total of 307 seats. At the front of the downstairs cabin, right in front of the cockpit, were 12 80-inch-long first-class seats in a six-abreast configuration. SIA plans to offer a roomier first class suite with only four seats abreast.

Downstairs reminded me of a typical 747-400 but noticeably roomier. Airbus says the downstairs cabin is 20 inches wider than a 747-400 or the new 747-8. Each economy seat is about 1 inch wider than a 747 economy seat and both aisles are also about 1 inch wider.

Airbus flew in journalists from around the world for the first media flight. Over the coming months more journalists will have the opportunity to fly in the aircraft, as well as airline employees, and existing and potential customers, as MSN 007 will be used throughout the world as a demonstration aircraft. “The intent is to show the world what this aircraft can do,” says Airbus vice president of marketing customer affairs Colin Stuart.

MSN 007 is one of only two A380s equipped with a full cabin. The other, MSN 002, in September completed four flights carrying a full load of Airbus employees who were selected by a lottery.

MSN 007 will eventually be converted into a production-calibre aircraft and delivered to Etihad Airways. MSN 007 has only flown 10 times before today, carrying exclusively Airbus personnel. Before being equipped with the current 519-seat cabin, the aircraft was equipped in a denser 853-seat configuration and was used last year to conduct an evacuation trial.

While impressive, the aircraft journalists flew in today is not quite a quantum leap over existing aircraft. But it could be if any of the A380 customers opt for some of the unique amenities that are available as options such as lounges and showers. One airline has opted for a small duty free shop but it does not seem anyone has yet opted up for a lounge.

There are two staircases in the A380, one at the front and the other at the tail. Upstairs on MSN 007 is what Airbus calls a “social area” seating about eight in a sofa-like configuration. These seats cannot be used during takeoff and landing. There is also a full-service bar in the main deck and a small self-service bar area at the back of the upstairs economy section. Airbus says all features on MSN007 are not representative of what airlines will offer on the A380, but are designed to inspire airlines to come up with new amenities using the space uniquely available on the A380.

A cabin crew rest area with 12 bunks is provided downstairs in the cargo bay with a ladder from mid-cabin. Airlines not wishing to compromise on cargo capacity can also opt for a crew bunk area upstairs. Pilots have their own bunks near the flight deck.

Carrying journalists from as far away as China and Japan, MSN 007 taxied out shortly after 1pm this afternoon and took off at 1:17pm with a takeoff weight of 364 tonnes. It landed at about 3:30pm with a weight of 340 tonnes, after cruising at 41,000ft and burning an average of 10 tonnes of fuel per hour.

SIA talks up A380 and environment

Singapore Airlines (SIA) has becoming one of the first Asian carriers to join the growing debate over the aviation industry’s impact on the environment.

At SIA’s annual parliamentary reception at the House of Commons in London yesterday, general manager of UK and Ireland Marvin Tan told politicians, reporters and industry partners that SIA advocates “an integrated approach to managing the industry’s impact on the environment”.

“We need to do our bit, but we must also keep the scope of the problem in perspective,” Tan says, pointing out the aviation industry’s contribution to carbon emissions is only about 2% of the world’s total.

He added that in the UK the industry generates 520,000 jobs and contributes £11.4 billion ($6 billion) to the gross domestic product.

“At a time when many countries are just waking up to the dangers of climate change, it is all too easy to lose perspective. It is right that the aviation industry must play its part in reducing carbon emissions. But its contribution should be proportionate; and the financial penalties that we and our passengers incur should go towards protecting the environment.

“Punitive taxes serve only to siphon capital away from much needed investment in new, cleaner aviation technology. So I hope and trust that in their understandable zeal to combat global warning, governments will resist temptation to concentrate on easy targets, at the expense of an industry that has served them so well over the years.”

Tan says the industry is doing its part to reduce its impact on the environment by introducing more fuel efficient aircraft. For example, SIA’s planned replacement of Boeing 747-400s with Airbus A380s on such routes as London-Singapore-Sydney will result in a 20% improvement in fuel efficiency. SIA plans to begin operating A380s between Singapore and Sydney in late 2007 and between Singapore and London Heathrow in early 2008.

“Despite its size the A380 is an environmentally friendly aircraft with new fuel-efficient technology and a noise footprint half that of the Boeing 747. Its deployment also enables us to increase capacity at crowded airports such as Heathrow and satisfy demand, while being 20% more fuel efficient. For us that’s important. We can use the A380 to grow capacity in London without needing to increase the number of flights. Once we convert our three daily London flights to A380s we can offer as many seats as it would take four 747s to provide, while moving to new cleaner, quieter technology.”

Tan suggests governments can help airlines further reduce emissions by improving traffic management, including more direct flight paths and less queuing with engines idling.

SIA says this is the first time it has publicly commented about the environment and believes the timing was ripe as the debate intensifies in Europe. While Asian as well US and Middle Eastern carriers have so far said little to nothing about the environment, as the debate over the aviation industry’s environmental impact heats up in Europe they will no doubt be drawn into the debate.

Ageing pilots, clever administrators

You gotta’ admire Marion Blakey, the FAA chief in the U.S. of A. She’s always been what the call a ‘steel magnolia’, all Southern charm beneath which lies a mind like a steel trap and a firm personality that takes no gruff from nobody.

She wended her way to the National Press Club in Washington the other day, and Airline Business was lucky enough to get a nearby seat to hear Blakey discuss the FAA’s plans to open up the mandatory airline pilot retirement age of 60 to debate and comment with an eye to raising it to age 65 for pilots on the major US-flag carriers.

This has been a hotly debated issue in the States, with most portraying the Age 60 rule as unfair to a generation of pilots who are exercise freaks, pre-dawn joggers and who are like the rest of us, or most of the rest of us, are living longer and healthier. All of which would seem to have near universal acceptance, except by the major pilot union, ALPA. ALPA, which represents about 60,000 pilots at almost every major airline (except American Airlines) opposed any rule change, arguing safety but in reality fearing that the adding five years to pilot careers would upset the apple cart for younger members who make sacrifices early in their ‘back-loaded’ career so they can get promotions over to the left seat and higher paying jobs.

The airlines had been wary since adding five years to what is often a career of just 25 years does weird stuff to actuarial tables and would probably raise the pilot salary ceiling even higher, though they didn’t fight it the way ALPA did. (ALPA actually reversed its position on the issue a few years back after serious internal debate).

An industry panel that was supposed to tell Blakey if it was a good idea to raise the retirement age broke down in a stalemate late last year, sending her not a recommendation but study. So for Blakey, now in the final year of a fixed five-year term, it was risky to make any decision. To come out for raising it would seem to be a brave decision, but here she had political cover; after all the advisory committee punted, giving Blakey no political cover, one way or the other.

She could however find justification in the ICAO position. “I’m a big fan of international co-operation and we’re going to do what ICAO recommends”, she told the Press Club. When people asked about individual waivers, about retroactivity or about the guys who will be caught in the gap during the year of two of debate that is bound to follow, Blakey’s response was the same: “we’re following ICAO”. Discretion is after all a part of valour. Read the advisory committee’s pros and cons and the FAA’s reasoning: http://dms.dot.gov, search for docket 26139.

It’s cheaper to land at Vancouver

The bigger and heavier you are (or at least, the aircraft you are operating) the greater the savings you are going to make from Vancouver International Airport Authority’s decision to cut landing fees for international passenger and cargo flights to match charges for domestic services.

Vancouver is bucking the general trend of airport fee increases, which have received so much criticism from airline bodies in recent years.
The new rates, effective since the beginning of the year, mean that cargo operators flying Boeing 747 freighters into the airport will pay 32% less in landing fees this year than they did in 2006.
The annoucement chimes with stipulations in open skies agreements such as that between Canada and the USA that require international and domestic landing fees to be the same.
The unusual thing is that the authority feels that it is a sufficiently strong financial position to be able to reduce international fees rather than increase domestic ones to even them out.
“This is a strategic move to help increase Vancouver’s competitive advantage and stimulate related growth and economic benefits for the region,” says chief executive Larry Berg.

Merger madness: US Airways' sobering withdrawal

‘Coincidence? You be the judge’, the announcer would boom in conspiratorial tones on the radio or television programs heralding the latest unidentified flying objected or other phenomenon.

Two flash headlines from the other day brought this to mind: ‘US Airways Ordered to Stop Serving Alcoholic Drinks’ and ‘US Airways Withdraws Bid for Delta’. Not to put too fine a point on it, but the bosses at US Airways seemed to have sobered up, and quickly, after they ran into roadblocks from the Delta creditors who were the deciders of the Airways $10 billion bid for the number three Delta.

A “disappointed” US Airways Chairman and Chief Executive Officer Doug Parker said, “We would have created a better and more financially stable airline that offered more choice to consumers and increased job security to its employees”.

Parker was much more mellow about the alcohol problem; it seems state liquor authorities in New Mexico found that the airline did not have a licence to serve booze there, and until it gets said state permission, the carrier may not serve or sell beer, wine, or hard stuff to people on any of its flights that take off or land there.

But seriously, folks, as the announcer might say, does this mean an end to consolidation? Some observers think that the legacy carriers will just breathe a sigh of relief and go back to their restructurings now that they don’t have to pursue merger negotiations begun largely as defence manoeuvres in response to ‘Deltaways’, as some dubbed the hypothetical US Airways/Delta combination.

Meanwhile the ever-reliable Ray Neidl of Calyon Securities says big deals are probably off for the next six months but after that “consolidation will occur”. Neidl notes that Parker and the US Airways management team have clearly established themselves as credible with the financial powers-that-be and would probably be an acquirer.

But Parker’s entire rationale for going after Delta was that it was easier to do a deal within the context of bankruptcy, so one has to ask if US Airways will abandon this strategy. On the other hand, they’re making so much money at US Airways that they can afford champagne when other carriers are still on a beer budget.

Stay tuned.

EasyJet boss gets into fancy dress

Normally reserved easyJet chief executive Andy Harrison does not usually go for the sort of publicity stunt favoured by Virgin’s Richard Branson or Ryanair’s Michael O’Leary. Such is the strength of his carrier’s antipathy to the doubling of the UK’s air passenger duty, however, that he is obviously prepared to ham it up to make a point.
Passengers arriving at London’s Gatwick Airport today would have seen the head of easyJet dressed as a “Man from the Ministry” and clutching a briefcase labelled “Tax Collector”.

Travellers at airports all over the UK have been faced with demands for payment for the additional tax - levied without Parliamentary approval to boost Chancellor Gordon Brown’s treasury coffers in the guise of a “Green tax” on flights that they had already booked and paid for.
“As the government has, in effect, made easyJet the tax collector, this is exactly what the airline has done today,” says easyJet.
So well done Andy, for letting your hair down and getting stuck into the publicity merry-go-round.

Italian teacher makes to buy Alitalia

As the bidders lined up for Alitalia on Monday - there were 11 in total - an intrepid journalist at Reuters digging into their backgrounds found to his surprise that a humble Italian school teacher had sneaked his way onto the shortlist.
The teacher, Fabio Scaccia, described his fake plan to buy Alitalia as a "citizen's protest". "I've followed the Alitalia crisis for the past 20 years," the 46-year-old told Reuters. "I wanted to show that a company like Alitalia should not be allowed to remain in a state of crisis for so long," he said.
Scaccia joined the list with bidders like Texas Pacific and leading Italian bank UniCredit.

I think it is safe to predict that this will not be the last left field story to emerge from the Alitalia sale process. Some would say the entire Alitalia saga has more than a touch of a Feydeau farce about it.

The pursuit of Delta: US Airways falters

Going? Gone? The US Airways hostile pursuit of Delta Air Lines seems to be losing altitude.

Chief Executive Officer Doug Parker said on a conference call that US Airways would drop its $10 billion bid for Atlanta-based Delta on 1 February if the Delta creditors committee does not move to force the bankrupt carrier’s executives into merger talks. “They know exactly what they have to do and they know that if they don’t do it, our proposal is gone”, he said. But if the Delta creditors are not ready to play ball, “we’re not willing to pursue this transaction anymore.”

Parker was telling securities analysts about the airline’s better-than-expected fourth-quarter profits of $86 million after specials, one-time charges and gains. This is the sort of conversation in which observers will want to weigh every syllable and nuance, and you can too, by listening to Parker’s comments through this link.

Parker says more than once that US Airways’ deadline is firm, buts seems truly surprised that anyone would not take the cash-and-stock offer and “make the right decision.” He spoke just hours after Delta revealed that it had $2.5 billion in financing lined up to support its emergence from reorganisation as a stand-alone airline - an airline that hasn’t merged with anyone.

Is this what T.S. Eliot meant with the line in the poem about ending “not with a bang but a whimper”?

Jet2 enters in-flight entertainment fray

UK-based Jet2’s claim that its roll out of Mezzo Movies’ hand-held in-flight entertainment system is “a first for the low-cost industry” will be met with some surprise by fellow carriers that have been providing a similar service for some time.
Airlines currently offering rival Digecor’s portable video device include Australia’s low-cost Virgin Blue, and European no-frills giants easyJet and Ryanair both trialled the Digecor system for a period in 2005, but decided not to roll the service out due to a disappointing level of passenger take-up.
Jet2 thinks its offering will be better received by travellers because it will offer TV shows, music videos and CDs, which are better suited to ultra-short flight times of an hour or two – rather than the full-length movies previously trialled that had not finished by the time the equipment had to be turned off for landing.
At the other end of the market, rival transatlantic premium startups MaxJet (Digecor) and Silverjet (Mezzo) are both offering hand-held IFE systems. Most recent sign-ups to the Digecor system are Aeroflot and Kenya Airways, joining carriers from as far afield as Alaska Airlines and Singaporean low-cost JetStar Asia.
Clearly the cost of investment of such systems is considerably less than the installation of seat-back screens and so appeals to low-cost carriers looking to add a frill or two. But live television in flight is gaining ground with a number of carriers - from low-cost JetBlue to fast-growing Etihad. You pays your money and you takes your choice.

Class act: Japan Airlines takes premium economy plunge

Japan Airlines has joined the slowly swelling ranks of carriers offering a premium economy class. From the autumn, the new seats will be available on its international services.

The seats will be in a 2-4-2 configuration with a 38in pitch, which is 20% more than its regular economy seats. They will feature on JAL's Boeing 777s operating from Japan to Europe and the US.

JAL is several years behind its main rival All Nippon Airways in bringing in a premium economy section. ANA launched its take on this class back in early 2002. It must be doing something right for JAL to finally follow suit.
Unlike in Europe, where the UK market is particularly active in offering an enhanced economy product, Asian carriers have not seen a great customer demand for this class. Taiwan's EVA Air was one of the first to bring in this super economy class, while Vietnam Airlines, Garuda Indonesia and China Airlines, also of Taiwan, offer it too.

Virgin Atlantic Airways is another focusing on premium economy. It has introduced its second generation product.

You want a stake in Alitalia - are you mad?

In every interview they conduct at the moment, airline chiefs are being asked with monotonous regularity who they would like to buy, team up with, or be acquired by. But the ever thoughtful Wolfgang Mayrhuber, head of Germany's Lufthansa, has sounded a cautious word: "The damage a wrong decision can cause is greater than the damage of a missed opportunity," he told the Financial Times.
Such thinking is not uncommon among senior industry figures. And such wise words will be being heeded by those peering into the murky books of Italy's flag carrier Alitalia.
The country's government is searching for a white-knight for its beleagured airline. Now that is a tough job. Saddled with debt, terrible labour relations and antiquated working practices, as well as a fiercely competitive domestic market, Alitalia has all the makings of Europe's next network carrier failure. It expects to make a huge loss of €380 million ($490 million) in 2006.
Rome is determined not to let Alitalia collapse, and has backed it up with state cash in the past. It is asked for bidders interested in a taking a 30% stake in Alitalia. They have until today (Monday 29th January) to make an offer
But recent calls by potential suitors to have a free hand in restructuring the airline will fall on deaf ears. Government will to allow any management team over the past decade to take the drastic action needed to reshape Alitalia for the 21st Century has been sorely lacking. What is different now I wonder?

Power and prerogative: US Airways' hard day on Capitol Hill

US Airways chairman Doug Parker may well be glad that the Senate doesn't get to decide airline mergers, given the buzz-saw of hostility that Parker ran into in defending his $10-billion unsolicited bid for Delta Air Lines. It’s easy to stack a congressional panel for or against whatever pleases or displeases a committee chair, given the prerogatives of power, but the Senate Commerce Committee's Delta defence and 'love-in' should also carries a serious warning: rural and small town America, hurt more by airline service cutbacks than it can bear, is against this or any merger. All of which would be the stuff of jokes, along the lines of "Ma and Pa Kettle can't get to the big city no more", but for a serious fact: farm states and rural states have senators and members of Congress, and they tend to have the same senators and representatives for years and years, giving the much-derided ‘flyover country’ of Mid-America unusual seniority and clout.

So Parker was listening closely when Senator Byron Dorgan, the North Dakota Democrat, denounced the proposed merger as the first domino to fall in a chain reaction that would starve farm states like his. “Inevitably, what's going to happen is the other network carriers are going to decide, 'we've got to merge'.” Dorgan is the chairman of the powerful appropriations subcommittee that sets the Transportation Department's budget, and even though DoT does not have the final say in mergers, its findings carry great weight with the decider, the antitrust and competition regulators at Justice.

Even though Parker tried repeatedly to assuage senators, other senior Democrats including Jay Rockefeller of West Virginia said that this or indeed almost any merger would reduce service to small and rural communities. Rockefeller's worries matter: he now chairs the committee’s aviation subcommittee. You can listen to the entire Senate Commerce Committee hearing through this link: http://commerce.senate.gov/public/, click on hearings.

Parker got cold comfort from Republicans, who are supposed to be pro-business. The gentle-lady from Maine, Olympia Snowe, was downright outraged that some of the major towns in her rural state would be “down to one carrier” after a merger. And Mississippi's Trent Lott, now the Senate's number two Republican, said, “This merger causes me concerns and I just want to get that on the record”. Noting that Delta is based in Atlanta, Lott told Parker, “you're an aggressive suitor, but the lady from the South doesn't want to be forced into this shotgun wedding”. Delta chief executive Jerry Grinstein played up this fear, telling the committee that small communities would be “the major losers in this proposed takeover”. Grinstein was in his element in the hearing room, having served as the chief of staff and lawyer for the committee's legendary deal-making, power-wielding chairman, Sen. Warren Magnusson of Washington, back in the 1960s.

The only DoT representative at the hearing, assistant secretary for aviation and transportation affairs Andrew Steinberg, offered some hope for the folks down home , saying the new generation of very light jets such as the Eclipse and the planned ‘air-taxi’ services they have spurred would fill in the lacunae. He said he could “envisage at some time in the future a much more vibrant market of on-demand service that can be operated profitably”. But Steinberg conceded that airline deregulation and mergers since 1978 had hit rural routes the hardest and that subsidised service had not made up the difference.