Friday, December 23, 2016

8 digital trends expected to shape the next-gen experiences in 2017: Survey

2016 has witnessed digital technologies and hyper-connectivity are bringing user friendly solutions to market faster than ever. Successful enterprises today are those who are best adapting and responding to constant change. Accenture has recently released a report that exams the most significant emergent digital trends expected to disrupt organizations and society in 2017.

The rise of the connected cars, smart homes and digital assistants is creating new ecosystems that threaten the smartphone’s dominance. And the rise of social experience will soon be a consideration for any organization wanting to cut through in a post-truth world.

Interfaces are becoming faster, smaller and automated, and organizations will need to adapt to the kind of supercharged, responsive and immersive environments.

Trends 2017 examines eight digital trends expected to shape the next generation of experiences:

Shiny API People: Organizations will need to completely re-wire to inspire creative thinking and become more people-centric. They’ll do this by upscaling the principles and practices of innovation to effect organization-wide transformation.

Hourglass Brands: With a polarized brand landscape, brands sitting in the squeezed middle will need to change their strategies and either lean towards a clear purpose or advocate a ‘we can do anything’ voice.

Blurred Reality: As Mixed Reality moves towards the mainstream, organizations will turn away from single, siloed enhanced reality experiences to focus instead on harnessing and combining all types of reality – both enhanced and real.

World on Wheels: Go slow to go fast. With autonomous vehicles so close to becoming part of everyday life, organizations will focus attention on the car as a connected mobile environment in which things happen via multiple devices. Leaders will explore ways to integrate experiences between car and home.

Homes without Boundaries: Organizations will need to look beyond device-centric strategies to focus instead on designing and serving home experiences that better meet individual householders’ varying wants and needs.

Ephemeral Stories: Brand content is shifting from storytelling to ‘storydoing’ – creating stories by what brands do, rather than what they tell. Brand owners will step back and make room for audiences to shape their own stories through highly personal – often, ephemeral -- content.

Me, Myself and A.I.: Humanizing chatbots. While A.I. has evolved exponentially, in 2017 we will see a shift in organizations’ approaches to developing products and services as emotional intelligence (EQ) becomes a critical A.I. differentiator.

Unintended Consequences: Customer-centric cannibals. Organizations will focus more closely not just on their customer and employee experiences, but on their social experiences to guard against unintended consequences of their activities.

Bharat Financial Inclusion goes digital with Aadhaar- based instant loan approval

Bharat Financial Inclusion, formerly known as SKS Microfinance, has launched an Aadhaar- based instant loan approval system, marking a major step towards digital inclusion of the unbanked population in the rural hinterlands.

The Hyderabad-based firm is among the largest microfinance companies in India with a presence across 18 states covering 1,00,000 villages, catering to its 63.65 lakh women members. It provides collateral-free loans to individuals, usually women, to fund income-generating activities like Kirana shops, poultry farms and tailoring shops. Bharat
Financial Inclusion is the only microfinance entity to have the lowest interest rate of 19.75 % in the industry. It disburses loans of over Rs 15 crores every year.

In an industry-first initiative, the MFI is leveraging Aadhaar which is already the world’s largest biometric database to dole out loans instantly.

In the new system based on Aadhaar-enabled biometric authentication, the members can apply for a loan instantly. At the start of a weekly meeting at the loan center, the Sangam manager/ loan officer announces the names of the members who are eligible to take the loan. He then asks every eligible member if she would like to take the loan on that particular day. If the member is interested, she can apply for the loan instantly.

Her data will be, then, sent to the credit bureau for approval. The status report/ update from the credit bureau is received within 10 seconds and the client is informed about her eligibility status. After taking the member’s consent, her loan is processed for disbursement. If the member has a bank account registered with Bharat Financial Inclusion, then the loan amount is credited to her account on the same day.

The transaction happens on the Sangam manager’s tablet device. The member is asked to place her finger on the biometric device on the tab. The data is sent for verification and the response is received.

After the KYC verification, the data is sent for credit bureau clearance. Once the member has been verified, she is deemed eligible for the loan. All of this happens in just about 15 seconds. If the member is eligible the Sangam manager fills the loan form based on her requirement and takes her signature. He then gives her a carbon copy of the application form, collects the insurance and loan fee. This completes the instant loan disbursement process and the loan gets credited on the same day.

The digital initiative is aimed a providing an abiding competitive advantage and customer delight. It will increase the ease of doing business and will help the MFI take the big tech stride towards cashless transactions.

With the instant loan approval, it will be able to dole out loans easily. “Typically, if a member participates in a center meeting today, she doesn’t know if she will get a loan until next week. Even if she is eligible for the loan by our company standards we still need approval from a credit bureau. The offline procedure would take time. And if she has an immediate need for finance, she will scout the market for a loan during the week-long wait. By giving her instant approval, under the new system, we prevent her from going to the competition,” explains Ritesh ChatterjeeChief Process Officer, Bharat Financial Inclusion.

The digital initiative provides the MFI a sure-fire way of enriching its data with the government certified Aadhar scheme. “Bharat Financial Inclusion is targeting a customer base of over 95 lakh customers in the next 18 months. With the new system, we will have the most authentic data coming from Aadhar. This will ensure that we bring the right members on board. For instance, if a member owes an amount of over Rs 1.5 lakh to another MFI or is enrolled with 3 other MFIs then there’s no point bringing her on board. She will provide little in terms of business opportunity. That’s where the Aadhaar- based authentication helps the microlender filter customers based on their credit history,” explains Srinivas Peddada, CIO, Bharat Financial Inclusion.

The system has been piloted successfully in the Bhubaneshwar and Puri branches. And the response has been overwhelming. Over the next one year, Bharat Financial Inclusion aims to provide biometric devices and SIM card for all its 10,000 Sangam managers. In the long run, the cost benefits realized from the initiative will be passed on to the members.

Indian business prepares to tap into Aadhaar, a state-owned fingerprint-identification system

THERE are two ways to sign up to Jio, a new and irresistibly priced mobile-telephony service which Mukesh Ambani, the boss of Reliance Industries, a conglomerate, launched in September 2016 and which is luring tens of millions of new customers each month. One way requires a wad of documents, multiple signatures and plenty of patience, since Jio takes days or weeks to go through “know-your-customer” procedures. The second way is magically simple: the person rests a finger on an inch-wide scanner, and if the print matches the identity the customer is claiming, Jio downloads the information it needs from the Indian authorities and activates the phone line within minutes.
Jio is tapping a database called Aadhaar, after the Hindi word for “foundation”. It is a cloud-based ID system that holds the details of over a billion Indians. The government’s purpose in setting it up in 2009 was to help the state correctly direct welfare payments to those entitled to them. By early 2017 all Indian adults should have provided their fingerprints, iris scans, name, birth date, address and gender in return for a single, crucial, 12-digit number. 

In the public sphere Aadhaar helps to distribute subsidies worth about $40bn a year. Around 300m biometric entries are linked to citizens’ bank accounts, so that money can be paid to them direct. Billions of rupees used to be lost each year through “leakage” of benefits—a euphemism for fraud in India’s often corrupt bureaucracy. Aadhaar has already saved perhaps $5bn, says the government.
But the system was designed with more than just the needs of the state in mind. The team of techies behind the project, led by Nandan Nilekani, a founder of Infosys, a champion of Indian IT, from the outset understood the importance of making Aadhaar available to all who might be able to use it, not just official departments. Aadhaar is open-access and can be used by third parties free of charge. By now, fingerprint readers are a common sight in phone shops, insurance offices, banks and other sellers of regulated products.
Some firms, such as Jio, will use Aadhaar to save huge amounts of time for their customers—not to mention a small forest’s worth of paper. The architects of Aadhaar reckon that is just the beginning. On the top of it, India is building a complex public digital infrastructure, called “India Stack”: a series of connected systems that allow people to store and share their data. These could include bank statements, medical records, birth certificates or tax filings. When connected up to a new payments system called the Unified Payments Interface (UPI), the potential is huge.
Already, businesses ranging from Bangalore startups to international banks operating in India are looking to build new businesses on the capabilities of Aadhaar and the coming India Stack. Venture-capital firms are funding hackathons to encourage software developers to come up with new ways to use the technology. 
Any firm can “ping” Aadhaar to see, for example, if a job applicant is who he claims to be. One Bangalore startup, Babajob, does this for the service staff it connects to employers. It can instantly verify if a potential employee’s name and age matches that attached to the phone number he is calling from, that is in the Aadhaar database (or he must supply a code number received by text). It can be done remotely, an advance over card-based ID schemes. A similar, more secure check, using iris scans or fingerprints, can be done with mobile phones or tablets with Aadhaar-compatible iris scanners (at under $200).
This is no small feat: merely establishing someone’s identity is grit in the wheels of commerce. A typical firm in India spends some 1,500 rupees ($22) obtaining and validating client data, be it to bring a taxi driver onto a ride-hailing platform or to accept a new mutual-fund customer. Bringing down the cost can vastly expand a firm’s target market. If a lending outfit, for example, can afford to spend only 0.5% of the value of a loan on such tasks, its smallest credit will be 300,000 rupees, an amount which will limit it to the richest 15m Indians, says Sahil Kini of Aspada, a venture-capital firm. Reduce the validation cost to 10 rupees—the figure many in Aadhaar circles use—and you can viably lend to over 500m people.
The benefits of cheap, secure ID could go further. Mr Nilekani argues that verifying identity, and in turn reputation, is ever more important in business: consider star-rating systems devised by firms such as eBay, an auction giant, or Uber, a ride-hailing firm. Web users now often establish their identity using logins for Facebook, Google or WeChat to access third-party services such as newspaper websites. But none can claim to rest on a person’s real, verified legal identity in the way Aadhaar-accessed services can.
It all stacks up
For now, the Aadhaar system is used chiefly to confirm identity (which has been done 3bn times since 2010) and to share know-your-customer information such as someone’s address (300m times in the past year). But since any information can be linked to a sort of digital “locker” tied to each Aadhaar ID, there are more possibilities. A file of past digital interactions—a sort of eBay star system accumulated over different services—could also be attached. This would most obviously be useful in financial services, particularly among those who have little or no access to them now.
A potential borrower could allow a lender to have access to anything linked to his Aadhaar number: his bank statement, utility-bill payments, life-insurance policy, university diplomas and much else besides. “It increases trust,” says Mr Nilekani. “You can combine proven legal identity with lots of data. You become trustable.” Sean Blagsvedt, the founder of Babajob, compares India Stack to the advent of the social-security number system in America, which paved the way for credit bureaus, credit cards, mail-order services and, later on, e-commerce.
The economic consequences are sizeable. Instead of borrowing against assets, as is currently the norm in India, people could borrow against projected cashflows proven by past tax returns, for example. Better yet, “digitally driven” credit would shift people into the formal economy and away from the informal realm where nine in ten Indians currently work.
Another element of India Stack, the UPI, a payments system, was launched in August. Under pressure from regulators, banks have agreed to let their customers send or receive money not just through their banks’ apps but through third-party ones as well. A client of State Bank of India, for example, can just as easily make payments from his account through PhonePe, a subsidiary of Flipkart, an e-commerce website, or any other of about two dozen UPI-based apps. Mr Nilekani speaks of a “WhatsApp moment” for Indian banking, in which newcomers usurp sleepy banking incumbents, much as the American messaging app deprived telecoms operators of revenues from text messages.
Techno-optimism always warrants some caution. Just because Aadhaar has succeeded in slashing subsidies fraud does not mean the products built atop it will catch on. The UPI apps received a one-off boost from the government’s push forcibly to “demonetise” the economy (it cancelled banknotes representing 86% of all cash on November 8th), but other, private PayPal-like services did much better.
Still, other public technologies have prompted big leaps when opened to private enterprise. Once available to the general public from 2000, the GPS location system (previously reserved for the American military that developed it) did more than merely disrupt map-making firms. In time, GPS spawned Google Maps, which in turn facilitated Uber. Backers of Aadhaar argue that no one can imagine what will be built around the platform in years to come any more than the internet’s pioneers three decades ago could foresee social media or bitcoin, a digital currency.
Privacy campaigners worry that it has Orwellian overtones. In theory it remains voluntary to enroll in Aadhaar. In practice it is compulsory, since it is becoming the only way to gain access to important social services. Wary of relying on a state-backed scheme, American tech giants have treated it cautiously. Google has expressed enthusiasm for its potential, but it and Apple have yet to agree to install Aadhaar-compatible scanners on their phones.
For India’s citizens, who can use Aadhaar and India Stack to mobilise their data for their own benefit, the advantages are clearer, starting with access to cheaper credit. Some of the system’s teething problems—one hurdle has been that the hands of many manual labourers are so worn that Aadhaar cannot register their fingerprints—show just what an advance the technology could be. Indian businesses will have the chance to serve and make sense of legions of new customers. Like the scanners it utilises, the scheme’s potential is not hard to put your finger on.

Interesting observations by Schumpeter in the Economist

IT WAS in 1942 that Joseph Schumpeter published his only bestseller, “Capitalism, Socialism and Democracy”. The book was popular for good reason. It was a tour de force of economics, history and sociology. It coined memorable phrases such as “creative destruction”. But it was a notably dark book. At a time when people were looking for hope during the life-and-death struggle with Nazism, Schumpeter offered only gloom. “Can capitalism survive?” he asked. “No, I do not think it can.”
This column was inspired by the young Schumpeter’s vision of the businessperson as hero—the Übermensch who dreams up a new world and brings it into being through force of intellect and will. On its debut in September 2009, we argued that Schumpeter was a perfect icon for a business column because, unlike other economists, he focused on business leaders rather than abstract forces and factors. But as Schumpeter grew older, his vision darkened. He became increasingly preoccupied not with heroism but with bureaucratisation, and not with change but with decay. The same is true of the outgoing author of this column. 
It would be going too far to echo the master and warn that capitalism cannot survive. The socialist alternative that loomed large back in 1942 has imploded. The emerging world has capitalism to thank for its escape from millennia of poverty. But in the West the problems that led Schumpeter to worry have grown. And to them are appended new difficulties that he never foresaw.
His biggest worry was that capitalism was producing its own gravediggers in the form of an anti-capitalist intelligentsia. Today that very elite, snug in Los Angeles canyons and university departments, has expanded. Hollywood studios denounce the wolves of Wall Street and the environmental vandals at large in the oil industry. The liberal sort of academic (meaning the type that favours big government) far outnumbers the conservative kind, by five to one, according to one recent study.
Another of Schumpeter’s concerns was that the state activism of Roosevelt’s New Deal was undermining the market. But in 1938 the American government was spending only a fifth of GDP. Today it is spending 38%—and that constitutes neoliberalism of the most laissez-faire kind compared with Italy (51% of GDP) or France (57%). Big regulation has advanced more rapidly than big government. Business is getting visibly flabbier, too. European industry has been old and unfit for years and now stodge is spreading to America. The largest firms are expanding and smaller ones are withering on the vine. The share of American companies that are 11 years old or over rose from a third in 1987 to almost half in 2012.
There is nothing necessarily bad about this. One of Schumpeter’s great insights, from his later years, was that big firms can be more innovative than startups if given the right incentives. But today’s incentives favour stasis. Many big firms thrive because of government and regulation. The cost per employee of red tape—endless form-filling and dealing with health-and-safety rules—is multiples higher for companies that have a few dozen staff than for those with hundreds or thousands. Schumpeter called for owner-entrepreneurs to lend dynamism to economies. Today capitalism exists without capitalists—companies are “owned” by millions of shareholders who act through institutions that employ professional managers whose chief aim is to search for safe returns, not risky opportunities.
Some light flickers on the horizon. America’s economy is beginning to stretch its limbs. High-tech companies are overhauling an ever wider slice of the economy, including shopping and transport, which should be good for growth (though it also means power is being concentrated in the hands of fewer big firms). But these are mere flashes in the advancing darkness. The rate of productivity growth across the rich world has been disappointing since the early 1970s, with only a brief respite in 1996-2004 in the case of America. There, and in other rich countries, populations are ageing fast. Meanwhile, the fruits of what growth there is get captured by an ever narrower section of society. And those who succeed on the basis of merit are marrying other winners and hoarding the best educational opportunities.
At the same time democracy is becoming more dysfunctional. Plato’s great worry about representative government was that citizens would “live from day to day, indulging the pleasure of the moment”. He was right: most democracies overspend to give citizens what they want in the short run (whether tax cuts or enhanced entitlements) and neglect long-term investments. On top of that, lobbyists and other vested interests have by now made a science of gaming the system to produce private benefits.
Storm clouds gather
The result of this toxic brew is a wave of populism that is rapidly destroying the foundations of the post-war international order and producing a far more unstable world. One of its many dangers is that it is self-reinforcing. It contains just enough truth to be plausible. It may be nonsense that “the people” are infallible repositories of common sense, but there is no doubt that liberal elites have been smug and self-serving. And populism feeds on its own failures. The more that business copes with uncertainty by delaying investment or moving money abroad, the more politicians will bully or bribe them into doing “the right thing”. As economic stagnation breeds populism, so excessive regard for the popular will reinforces stagnation.

Tuesday, December 20, 2016

Latin America is set to become a leader in alternative energy

BESIDE the Pan-American Highway, almost 600km (375 miles) north of Santiago, Chile’s capital, lies El Romero, the largest solar-energy plant in Latin America and among the dozen biggest in the world. Its 775,000 grey solar panels spread out across the undulating plateau of the Atacama desert as if they were sheets of water. Built at a cost of $343m by Acciona Energía, a Spanish company, last month El Romero started to be hooked up to the national grid. By April it should reach full strength, generating 196MW of electricity—enough to power a city of a million people. A third of its output will be bought directly by Google’s Chilean subsidiary, and the rest fed into the grid.
El Romero is evidence of an energy revolution that is spreading across Latin America. The region already leads the world in clean energy. For almost seven months this year, Costa Rica ran purely on renewable power. Uruguay has come close to that, too. In 2014, the latest year for which comparable data exist, Latin America as a whole produced 53% of its electricity from renewable sources, compared with a world average of 22%, according to the International Energy Agency. 
The region’s impressive clean-energy production is boosted by an abundance of hydropower. Big dams are increasingly controversial: in recent years, Brazil and Chile have blocked hydro-electric projects in environmentally sensitive areas. Alternative energy sources, such as wind, solar and geothermal, still only account for around 2% of Latin America’s output, compared with a world average of 6%. Nonetheless, there are several reasons to think this share will grow quickly.
One is the region’s natural endowment. El Romero, for example, enjoys 320 days of sunshine a year. On the horizon, amid the Andean mountaintops, sit two astronomical observatories, testament to the clarity of the air. Much of Latin America is well suited to solar and wind power; volcanic Central America and the Caribbean have geothermal potential.
Worldwide, technological progress and economies of scale have slashed the cost of green energy. Once built, solar plants are much cheaper than thermal power stations to operate. “El Romero is a symbol that alternative energy is no longer alternative. It’s the most commercial now,” says José Ignacio Escobar, Acciona Energía’s boss in Chile.
Countries such as Chile, Brazil, Mexico and recently Argentina have tweaked their regulations to encourage alternative energy without having to offer subsidies. Some have held auctions for generation contracts purely for renewables, points out Lisa Viscidi, an energy specialist at the Inter-American Dialogue, a think-tank in Washington. Chile’s regulatory framework is trusted by investors; it has encouraged renewable generation by auctioning smaller contracts. It has set a target of producing 20% of its electricity from non-hydro renewable sources by 2025. Argentina and Mexico have similar goals.
There are two pitfalls. In Chile, the penalty for failing to fulfil contracts is low, which means the winners of auctions may pull out later if they do not raise financing. Moreover, both solar and wind power are intermittent. That means they need to be paired with baseload generation. In many Latin American countries this tends to come from natural gas, which emits less carbon than oil, though in Chile it is coal. Greater efforts to connect grids between countries might reduce the need for fossil fuels as a backup.
Renewable energy offers big benefits to the region. Chile is short of domestic fossil fuels. As a result of its latest auction of energy contracts, by 2025 prices should be a third lower than they are now, reckons Andrés Velasco, a former finance minister. By promoting renewables, Latin America is helping to curb carbon emissions globally—though it also needs to do more to stop deforestation and encourage public transport.
That matters for political as well as altruistic reasons. Latin Americans worry more than anybody else about climate change, according to polling by the Pew Research Centre, a think-tank. They have good reason. The region is prone to natural disasters and extreme weather. To take one current example, Bolivia last month imposed water rationing in La Paz, the capital. The three reservoirs that serve the city are almost dry. Lake Poopó, once a large freshwater body in the altiplano, has all but dried up, seemingly permanently.
Outside Chile and Colombia, coal deposits are scarce in Latin America. That is one reason why industrialisation came late to the region. In the 21st century, it may turn out to be an advantage in helping Latin America move swiftly to a post-carbon economy.

Oil industry on the cusp of cash flow recovery

The world’s major oil and gas companies will turn cash flow positive for the first time in three years in 2017 if the Opec production cartel succeeds in keeping the oil priceabove $55 a barrel.
That is the conclusion of Wood Mackenzie, the respected energy consultancy, in a new report that portrays an industry on the cusp of recovery from the steep declines in earnings and investment seen since crude prices crashed in 2014.
Deep cost cuts during the downturn, coupled with a gradual rebound in oil prices, were beginning to ease pressure on balance sheets and allow companies to move out of crisis mode, said Tom Ellacott, head of corporate research at WoodMac.
“Most oil and gas companies will start 2017 on a firmer footing, having halved cash flow break-even [point] to survive the past two years,” he said. “Further evidence of a cautious U-shaped recovery in investment should emerge.”
There would be no return to the reckless spending of the $100-per-barrel oil era, WoodMac cautioned; capital discipline would continue to frame corporate strategies in 2017, with much of the benefit from higher prices committed to reducing the heavy debts accumulated during the past two years.
However, the annual report on the outlook for the industry said “2016 will prove to be the low point in the investment cycle” with stronger companies beginning to refocus on growth opportunities, including new exploration and production and mergers and acquisitions.
The industry’s confidence has been bolstered by last month’s agreement by Opec producer nations to curb output. That sent benchmark Brent crude as high as $57 per barrel in recent weeks — more than double the 12-year lows hit last January.
Prices above the $55 level would be enough for the 60 large oil and gas companies covered by the report to collectively generate positive cash flow — earning enough money to cover outgoings — for the first time since 2014 when the oil price started falling.
Recovery would be led by independent US oil and gas companies, which WoodMac said could increase investment by more than 25 per cent if prices averaged above $50 per barrel in 2017. However, investment by large international groups such as ExxonMobil and Royal Dutch Shell would continue to fall — by a further 8 per cent — as capital-intensive projects approved before the price crash wind down. Mr Ellacott said investment would focus on lower-cost resources such as the Permian Basin in the US and the so-called “pre-salt” offshore fields of Brazil.
“Mergers and acquisitions will also offer an attractive value proposition for the financially strong prepared to take a bullish view on long-term prices,” he added. “Low-cost, low-risk discovered resource opportunities will look attractive again. And the larger players will need these to ensure long-term portfolio renewal.”
Oil and gas production from the 60 companies covered by the report — including international majors, national oil companies and independents — would increase by an average 2 per cent in 2017. This signalled improved productivity given that development spending on new resources has fallen more than 40 per cent since 2014.
Further commitments to renewable energy were likely next year as companies begin positioning themselves for a long-term shift away from fossil fuels, the report said. However, scarce capital and improving returns from oil and gas meant these were likely to remain “small steps”.

World's Fastest-Growing Airline Market Is Cutting Fares as Oil Prices Rise

Air travelers globally are bracing for higher fares after OPEC decided last month to cut output. Not in India, the world’s fastest-growing major aviation market.
Carriers cut fares in November, selling tickets about 12 percent cheaper on average for Mumbai-New Delhi flights from a year ago, according to, India’s No. 2 online travel agency. The steepest discounts were as much as 30 percent for the world’s seventh-busiest local route.
The slashing of fares during the peak holiday travel season threatens to wipe out gains accrued from cheap oil and push some of the operators back to losses. Carriers in China and India are expanding capacity with orders for hundreds of planes and luring passengers with discounts. Excess capacity combined with tickets offering base fares as low as 2 cents to first-time fliers have constrained the ability of Indian carriers to translate an increase in passenger traffic to profits.
“If capacity excess continues, airlines continue to lack pricing power, and they will be unable to efficiently and promptly recover supply-cost increases like fuel or labor,” said Robert Mann, head of aviation consultancy R.W. Mann & Co. in New York. “If fares remain below full economic costs, re-investment in the business is not warranted, and slow decline occurs over a period of years as equipment is retired.”
IndiGo sold a ticket for New Delhi to Mumbai at an average of 3,784 rupees ($56) mid-November, a 30 percent drop from a year earlier, while Vistara, the local unit of Singapore Airlines that offers free food and on-board Wi-Fi streaming, slashed prices 24 percent to 4,917 rupees. Jet Airways India Ltd.and SpiceJet Ltd. also cut prices by 6 percent and 9 percent, according to For the same month, retail jet fuel prices jumped 17 percent in New Delhi.
Vistara’s Chief Commercial Officer Sanjiv Kapoor said in an e-mail that “lower fare buckets” were available after demand slowed down following a surprise government move in November to scrap high-value rupee bills from circulation. Domestic passenger traffic grew a record 22.4 percent in the month from a year ago despite the demonetization, according to Aviation Minister Ashok Gajapathi Raju.
Kapoor said fares tend to remain lower “to stimulate demand as seats are a perishable commodity, and filling seats is the best way to generating revenue.” Jet Airways said in an e-mail that it offers promotions to fill more seats early and boost revenue. A spokesman for IndiGo declined to comment while a representative for SpiceJet did not respond to requests for comments.
An increase in capacity coupled with the ban on old currency notes led to a short-term dip in ticket sales in November, Sharat Dhall, chief operating officer of, said in an e-mail. To offset that, airlines came up with promotional fares to fill seats, driving airfares to “their lowest in November,” he said.
India is one of the costliest aviation markets in the world, with provincial taxes of as much as 30 percent. 
Despite more than a 20 percent growth in passenger traffic and a decline of 1.3 percent in jet fuel prices in the first six months of 2016, passenger yields -- a key measure of industry profitability -- at the nation’s three listed carriers fell as much as 11.6 percent, according to ICRA Ltd., the local unit of Moody’s Investors Service. Sustainability will depend on their ability to reduce a combined debt of 650 billion rupees, analysts including Subrata Ray wrote in a Dec. 8 note.

Indian carriers, which typically refrain from hedging jet fuel, benefit most when oil prices fall. Had crude not slumped in the previous two years, the Indian aviation industry would have posted losses of 67 billion rupees before interest, tax, depreciation and amortization for the year ended March 31, according to Sydney-based CAPA Centre for Aviation. Instead, the windfall from cheaper oil was a combined 45 billion rupees in Ebitda earnings. 
As recently as four years ago, a confluence of circumstances including rising fuel prices and competition for passengers did not end well for some of the local carriers. Kingfisher Airlines Ltd., which was owned by liquor baron Vijay Mallya, was grounded after defaulting on payments to staff, banks, lessors and airports. Budget carrier SpiceJet Ltd. failed to find an investor and ran out of cash in 2014 before a co-founder bailed it out.
The fares this year are not yet "alarmingly low," and not of the same magnitude, Amber Dubey, head of aerospace and defense at KPMG in New Delhi, said in an e-mail. The government may jump in to cut "excessive taxes" to ensure that jet-fuel prices stay below 60 rupees a liter, Dubey said.
The OPEC deal may bring more pain. Brent prices may average $60 a barrel next year and $70 in 2018, versus $49 this year, according to Nomura Holdings Inc.
"The profitless growth in 2004-2008 was exposed as soon as the industry was faced with the fuel price spike and the global financial crisis,” said Kapil Kaul, South Asia CEO at CAPA. “If India’s airlines experience another phase of rapid growth without sufficient capital, the euphoria could come crashing down when the next external shock hits."

Irrational Despondency Now Passé as World Economy Risks Tilt Up

Say goodbye to irrational despondency.

It came to a head in 2016 as investors -- seeing nothing but bad times ahead -- piled into government bonds that yielded less than they cost.
“It was the opposite of irrational exuberance,” said Joachim Fels, global economic adviser for Pacific Investment Management Co., referring to the phrase coined by then Federal Reserve Chairman Alan Greenspan in the late 1990s boom years. “Everyone was worshiping at the secular stagnation church” with its belief in scant economic growth.
Now, as 2017 approaches, investors, economists and policy makers are starting to focus more on what could go right with the global economy rather than just fretting about all the things that might go wrong.
Behind the lifting of the gloom: Hopes that a combination of easier fiscal policies, bigger wage gains and stepped-up business investment will break the world free of the slow-growth trap it’s been caught in for the last five years.
“The surprise going forward may well be far better times than anybody had expected,” said Allen Sinai, chief executive officer of Decision Economics Inc. in New York.
It starts with the U.S., where Donald Trump’s presidential election victory and a Republican sweep in Congress has raised expectations of big tax cuts and less regulation.
“The U.S. economy is going to be very strong,” said Kenneth Rogoff, the former chief economist at the International Monetary Fund who is now a Harvard University professor. “There will be a huge boost to business confidence.”

Wage Growth

With the unemployment rate at a nine-year low, workers should also benefit, as companies are forced to pay more for the labor they need. “There are some signs that the pace of wage growth has stepped up,” Fed Chair Janet Yellen told lawmakers on Nov. 17.
The tight jobs market could prompt the U.S. central bank to raise interest rates more quickly if a Trump-induced budgetary boost leads to faster growth and higher inflation. But that wouldn’t be all bad for rest of the world economy as it would also likely lead to an appreciation of the dollar.
“The shift to a more balanced fiscal monetary policy mix in the U.S. is actually quite good for Europe and Japan because it weakens their currencies, improves their financial conditions and reduces pressure on their central banks to take further easing measures,” said Charles Collyns, chief economist for the Institute of International Finance in Washington.
The result: “Some of the additional demand being generated by the U.S. is going to flow to foreign producers” made more competitive by the stronger greenback, said David Stockton, a former Fed official now at the Peterson Institute for International Economics in Washington.
The biggest winner could be Japan, which has already seen the yen drop around 11 percent against the dollar since Trump won the presidency on Nov. 8.
Combine that with the country’s own expansionary fiscal policy, a tight labor market and a new monetary regime of capping bond yields and Japan may face what Bank of America Corp. economists call an “historic moment” to emerge from decades of distress.
“The deep pessimism about Japan is overdone,” said Ethan Harris, Bank of America Merrill Lynch’s head of global economics in New York.
The euro area, another long-term source of investor angst, is closing the year stronger than it started as consumption and investment firm, European Central Bank President Mario Draghi told the region’s finance ministers on Dec. 15.
With unemployment in the 19-nation currency zone falling faster than expected and fiscal policy gently supportive, there’s room for upside surprises on wages and inflation in 2017.
Hanging over the region though is a series of elections in France, the Netherlands and Germany that will test its resiliency after Britain voted in June to leave the European Union.
“The big concern is France,” where far right leader Marine Le Pen has gained popularity with her attacks on the EU, Collyns said.

Trump Benefits

While Europe and Japan should benefit from a Trump-fueled dollar rally, the picture is more mixed for emerging markets. Yes, companies in those countries will be more competitive on world markets. But many will also find it harder to service their dollar-denominated debts as the greenback and U.S. interest rates rise.
Two potential bright spots: Brazil and Argentina, South America’s largest economies, where reforms pushed through this year could result in stronger gross domestic product in 2017.
The biggest question mark is what will happen in China, which confounded pessimists’ predictions of an economic crash with a surprisingly steady expansion in 2016.
The world’s second-largest economy faces what senior economic official Yang Weimin has called a “flurry of risks,” including excessive corporate leverage and a bloated property market.
Yet “Beijing’s got a big arsenal of weapons to throw at the economy,” including possible interest rate cuts and an easier fiscal stance, Philip Shaw, chief economist at Investec Bank PLC in London, told Bloomberg Television on Dec. 16. He sees GDP growing at about 6.5 percent next year, in line with this year’s expected outcome.
Of course, there’s a lot that could go wrong with the world economy in 2017, not least of which is the possible outbreak of a trade war between China and the U.S. if Trump follows through on his campaign threats against the Asian nation.
And it’s also the case that most economists haven’t marked up their projections for next year and beyond by nearly as much as many investors are seemingly betting on. The number-crunchers at JPMorgan Chase & Co., for instance, see global growth strengthening to 2.8 percent in 2017 and 2018, from 2.5 percent this year.
What’s changed though is the balance of probabilities surrounding the forecasts.
“We’ve been living in a world for most of this year where we’ve been feeling maybe the risks were a little skewed to the downside,” JPMorgan Chase Chief Economist Bruce Kasman said in a Dec. 16 video distributed by the bank. Now “growth risks have shifted to the upside.”

Amazon plots new course for package deliveries

Christmas is always Amazon’s busiest period and this year it is gearing up to deliver an estimated 220m packages in the US alone. This time, however, the logistical challenge will be helped by something new: a huge cargo jet dubbed “Amazon One” that is painted in its trademark blue and gold colours and bears the tail number “N1997A”, a reference to the year Jeff Bezos founded the ecommerce company. 
Chartering its own planes is a sign of the lengths to which the company is going as it seeks more control over its logistics network.
An FT analysis of flight data shows that Amazon has ramped up the use of its new fleet of 767 cargo jets extremely quickly. The company has more than doubled flight activity in the past six months through its largest subcontractor, Air Transport International.
Perfecting its shipping network is key to the company’s ecommerce business, which has never generated much profit. Amazon spent a record $4.2bn on shipping in the fourth quarter of last year, and that figure is expected to grow this year. 
Partly in response, Amazon signed long-term agreements earlier this year to lease as many as 40 jets. Some 15 of those planes are already in operation, with more set to be delivered next year.
The FT’s analysis of data from FlightAware found that Amazon’s ATI flights grew from an average of eight daily flights in June to 19 a day over the past week. ATI owns eight of the 15 planes that are currently in the Amazon fleet. 
While these flights are mostly moving goods from one Amazon warehouse to another — and the company still relies on other carriers such as UPS, FedEx and the US Postal Service — the growth of its new cargo fleet underscores that Amazon is serious about becoming a big presence in air freight.
Over the past several years Amazon has expanded its logistics capabilities and taken more hands-on control, adding not only planes but also truck trailers and fleets of urban drivers. This is a costly strategy, and one that carries fresh risks if things go wrong. 
David Vernon, analyst at Bernstein, says that for Amazon, this holiday period “will be a test of new systems, new process, new relationships, and a test of the labour markets”. In previous years delayed packages could be blamed on the carriers, but that will apply less as Amazon takes matters into its own hands, he points out. 
The threat of pilot strikes has already loomed over Amazon’s plans to get presents under the tree by Christmas Eve. A strike last month at a subsidiary of parent Air Transport Services Group, which currently operates 14 planes for Amazon — including the eight of its other subsidiary ATI — saw flights suspended for several days, just ahead of Cyber Monday. 
Although that strike has ended, the Teamsters Union recently launched a fresh assault with an advertising campaign aimed at Amazon customers, warning them their orders might be delayed due to further pilot action. On a union-funded website called “Can Amazon deliver?”, the Teamsters say that the two airline companies with which Amazon has contracted are treating pilots poorly. 
“These contracted Prime Air airlines are facing significant operational disruptions,” says the website, referring to the two contractors. “The airlines don’t have enough pilots to meet the demands of Amazon because their experienced pilots are leaving for better jobs.”
A spokeswoman for Amazon said the company had “rebalanced capacity” across its network several weeks ago following the strike. “We are confident in our ability to serve customers,” she said. 
Improving its logistics network is crucial for Amazon’s profitability. In the past 12 months, Amazon’s net losses from shipping alone came to $6.4bn, and those losses have been growing faster than sales. 
In the US Amazon will ship more than 7m packages daily during the pre-Christmas rush this year, according to Satish Jindel, president of ShipMatrix, a shipping consultancy. The expected 220m packages it will move between Black Friday and Christmas Eve represent a 27 per cent increase from 2015, says Mr Jindel. 
Amazon’s package volume is growing twice as fast as US package shipments on the whole, which is one reason why it took the unusual step this year of signing long-term charter agreements for cargo jets.  Matt Castle, head of air freight at CH Robinson, a shipping company, says that part of the rationale for Amazon could be to avoid surging holiday prices for air freight. 
“There is a fixed expense to operate that aircraft, but Amazon would not be subject to the peaks and valleys of the general market,” he explains. Demand for air freight over the past six weeks has been “pretty heavy”, he noted. 
The rise of ecommerce has led to a surge in mailed packages — something that all carriers will be struggling to deal with this season, from UPS to FedEx to the US postal system. 
For the carriers, the holiday season is “giving people nightmares”, says Brandon Stanton, consultant at Transportation Impact. “They don’t yet know what volume will look like, simply because there is not enough historical evidence. We are still at the front end of a dramatic shift in the way consumers behave.”
Faced with that uncertainty, Amazon is betting that its own networks will eventually prove cheaper and more reliable than the alternatives.