Regional connectivity: AIR India, SpiceJet make the cut; bigger jets don’t
The first set of regional flights may come from Air India and SpiceJet, as the aviation ministry feels these two already have suitable aircraft in their fleet to be the launch airlines for its project to provide air connectivity to towns and small cities. “Bigger jets will not be able to fly these regional routes, but airlines with smaller aircraft can … If Air India increases utilisation of its smaller aircraft, they can surely fly these routes. SpiceJet has also made inquiries about the scheme. Both these airlines will get exclusive rights on that particular route for a period of three years,” aviation minister Ashok Gajapati Raju told ET, when asked about the participation by these carriers. While Alliance Air, the regional subsidiary of Air India, operates a fleet of 70-seat ATRs, SpiceJet has similar-sized Bombardier Q400 aircraft. A need for support from these airlines was felt after the government realised that it would be difficult for any new carrier to lease aircraft due to problems with airlines in India. “Leasing costs for Indian carriers were pushed up due to the Kingfisher Airlines issue (the airline went bust and it took months for lessors to take back aircraft).So, we need to provide a comfort level to these lessors in terms of allowing them to deregister aircraft (and reposes them) when the payments are not coming. They cannot be held at ransom,” said Raju. Analysts, though, don’t agree with the plan to use 70-seat aircraft to make the scheme a success. “Regional connectivity can only be successful with 15 or 20-seater aircraft and it does not make sense for a 70-seater aircraft to be used for regional connectivity ,” said Mark Martin, founder and CEO of Martin Consulting, an aviation consultancy firm. Ryan Miller Jersey
Aviation Ministry may adopt Railways’ model to beat higher fares during festival rush
The aviation ministry is discussing a railways-kind of model to provide relief to flyers from higher fares during festival season and long weekends and is considering allowing airlines to add more capacity for such short periods to bridge the demand-capacity mismatch. “The fares do get high during seasons like Christmas coming and all. For those times, we do not have capacity (aircraft) lying idle that can be used when the demand spikes. The solution could be to bring in more capacity for a brief period to tide over the fare hike. We can ask airlines that we will allow them to bring in aircraft lease for a brief period of time,” Aviation Minister Ashok Gajapathi Raju told ET. The model will be on the lines of Indian Railways, which launches special trains during the festive seasons to accommodate the huge increase in number of people who travel to celebrate these festivals. While the average airfares are lower, they spike during extended weekends and around the festival season, which is traditionally October to December in India. Raju was quick to add that ‘nothing is firmed up now but this could be a solution.’ “It’s a complicated problem and we do not have simplistic answers. If you find a simplistic answer, you will be adding to the problems.” Analysts believe that the idea is logical but the implementation could be tricky. “It’s a great idea and will surely help control the fare surge during such days of the year. I would assume that airlines would also like the idea of bringing in more capacity and getting maximum business during the surge. But the bigger question is the feasibility of such an idea. It will not be easy to ensure that extra capacity in the country gets slots at airports and also excess manpower to make it happen,” said Sharat Dhall, president at Yatra.com, India’s second largest online travel agency. One said wet lease of aircraft as a stop gap arrangement is not a model that is followed anywhere in the world. “How can you control fares by wet leasing aircraft, which itself costs three times higher than dry lease. Wet lease, as it is, is a model for country that does not have enough pilots and crew, which is not the case with us. The government should try to ensure that fuel prices are brought down, as cost of fuel is the largest component on any airline’s balance sheet,” said Mark Martin, CEO at Martin Consulting, an aviation consultancy firm. Raju also said that the competition helps in keeping the fares low. “Competition has ensured it (fares) to come down. What is our problem? Our problem is when the competition is minimal,” he further added. His assertion was seconded by an analysis of fares in the highest band offered by airlines by the Directorate General of Civil Aviation. The analysis shows that airline sell their highest fare band tickets in sectors like Delhi-Leh, Delhi-Dehradun and Chennai-Port Blair — all routes have lesser number of flights, leading to a demand-supply mismatch. Brian Dawkins Womens Jersey
As Indian economy soars, business class flight bookings see a sharp rise
More wealthy Indians are buying business class seats on international flights, primarily as corporates expand their business interests globally and spend on premium air travel for their senior management. A year-on-year comparison done for every month since January by some travel firms for ET revealed bookings in the segment jumped by up to 75 per cent. The growth in popularity in the front end of the cabin is testimony to India’s economic growth — the fastest among major economies — and increased corporate activity that has directly led to a spurt in corporate travel. “The number of people who travel business class has gone up and this is a reflection of business confidence in the corporate sector,” said John Nair, head of business travel at Cox & Kings. “As a result, companies are more flexible and have permitted more senior management to travel business class. Second, in the past couple of years, the capacity from India has not gone up but the number of people who travel in the premium cabin has and, therefore, there is a supply-demand mismatch,” he added. Nair of Cox & Kings said the mid- and long-haul sectors with travel times of five to nine hours are the most popular for business class travel. India has an annual international air passenger traffic of about 55 million. About 60 domestic and foreign airlines ferry international flyers in and out of the country. Of India’s seven major local carriers, four fly international and only Jet Airways and Air India sell business class seats. Out of all international carriers operating in India, Jet has increased capacity at the fastest clip on overseas routes. Industry data showed that Indian passengers are opting more for foreign carriers that have a wider global air network than their Indian counterparts. Data compiled by MakeMyTrip, India’s biggest online travel portal, showed business class bookings on foreign carriers grew by 37 per cent to 88 per cent year-on-year every month from January to August. For example, bookings in August 2016 grew by 88 per cent over August 2015. For Indian carriers, they declined every month except in March and June. The portal compiled data on the basis of an average of spot and prior bookings. Manoj Samuel, executive director of Riya Travels, one of India’s biggest offline travel portals, said there has been an increase in bookings on carriers such as UAE’s Emirates and Etihad Airways, UK’s flag carrier British Airways and German airline Lufthansa, among others. Foreign carriers gain Data also showed that while foreign carriers have been enticing fliers by cutting fares on business class by up to 24 per cent, their Indian counterparts have increased fares by between 19 per cent and 59 per cent, something that may have led to a decline in demand for the latter. Indian carriers have also been facing slower growth rates on the business class segment in domestic flights, as corporates decide not to spend on premium fares on short distance air travel. Local flights in India take less than three hours. Jet Airways, Air India and Vistara sell business class seats on the domestic sector. That segment for carriers grew in the first three months of the year but fell in the subsequent months, data showed. “Actually, demand for sub-four hour flights is falling as people don’t see enough value. The growth is in longer flights,” said Manoj Chacko, chief executive officer at SOTC Business Travel. Fred VanVleet Jersey
UP polls in sight, Greater Noida airport gets central push
With the UP assembly elections approaching, the Modi administration has fast-tracked the groundwork for NCR’s second airport in Greater Noida’s Jewar district. The UP government is also pushing for early clearance of the airport apart from having international operations at Agra Airport. Aviation secretary R N Choubey told TOI on Thursday that the ministry had asked the state government to submit location maps for the proposed airport as the next step in the clearance process involved giving site approval.”Once that is given, the state will prepare the detailed project report. Then the aviation ministry will give in-principle approval following which the project will be executed,” he said. Execution means acquiring land and then bidding the project out. Choubey clarified that the airport’s construction won’t require amending the `150km rule’. According to this, an airport should not be built in vicinity of an existing one till the latter’s capacity falls short of meeting the requirements of its catchment area. “In Delhi’s case, the only condition is that the airport operator of the existing facility (GMR Group for IGI Airport) will have the right of first refusal (ROFR),” Choubey said, removing all fears over the 150km rule being a stumbling block for the NCR getting a second airport. Under ROFR, the GMR-backed Delhi International Airport Pvt Ltd (DIAL) can bid for any such airport and will get the right to match the highest bid if its own quotation is within 10% of the same. In fact, a Comptroller and Auditor General report in 2012 had criticised the ROFR given to DIAL. “This provision thwarts competition and provides DIAL with a natural advantage on the second airport,” it had said. However, the secretary said the rule was not a blanket one. “In Delhi, it means existing airport operator having ROFR. Under the concessiona ire agreement with operators in Bengaluru and Hyderabad, ROFR means another airport will not be allowed to operate there for 25 years.” In Mumbai, the need for another airport was triggered by the fact that the existing Chhatrapati Shivaji Airport was no longer able to meet the megapolis’ requirement. Delhi’s IGI Airport, on the other hand, still has the scope for a lot of expansion, including laying of the fourth runway , construction of a new terminal and expansion of the existing Terminal 1. Meanwhile, the UP government is pushing for international operations at Agra Airport, a defence airfield. “The UP chief secretary met me recently and we have okayed that. The defence ministry has also indicated its in-principle approval. It may happen soon,” Choubey said. The assembly elections are due early next year. Both announcements will have to be made before the Election Commission announces polling dates after which any such decision will be banned under the code of conduct. John Stallworth Jersey
Indian Oil Corp to continue importing two LNG cargoes a month
Indian Oil Corp (IOC) will continue importing at least two liquefied natural gas (LNG) cargoes a month after the expansion of the Dahej import terminal on India’s west coast, a top company executive said. Terminal operator Petronet, which is also India’s biggest single LNG importer, expanded the Dahej plant’s import capacity by 50 percent to 15 million tons a year. IOC will use its import capacity in the expanded terminal to continue importing LNG, said D. Sen, the company’s business development director. IOC purchased two LNG cargoes last week in a tender process, traders said. Tom Johnson Authentic Jersey
Prices of gas for power projects may fall further
Power Minister Piyush Goyal expects prices to fall further in the next round of subsidy-based auction of gas for power projects, given the softening of global rates and muted electricity demand in the country. Generators are unable to sell power as distribution companies are buying cheap electricity on a short-term basis from the market, which makes for a strong case for the bids to be even more favourable for the government. In an attempt to kick-start stranded gas-based projects, Prime Minister Narendra Modi’s government had introduced subsidy-based auctions to import gas and supply it to these power units. Lower prices for gas would translate into a lower subsidy burden for the government. “The fourth round of bids will start soon and we are looking at the possibility of even lower prices given that the international gas prices are much lower than what they were one-and-a-half years back when we formulated the scheme. Also, the appetite for expensive power is not there,” Goyal said. In the third round of the bids that concluded earlier this year, none of the nine participants sought subsidy support, resulting into a savings of. Rs. 16 billion to the government. The fourth round is expected to take place in September. He said generators are unable to sell power as discoms are buying cheap electricity from short term market. “We are striving to transform India from a power-deficit nation to a power-surplus nation. Not only that there must be sufficient power, it must be affordable” as well, he said at the Motilal Oswal investor conference here late Tuesday. The minister said the UDAY (Ujwal Discom Assurance Yojana) scheme for reviving beleaguered discoms has been a game-changer. While there is still time before one can see substantial improvement on the ground, the benefits of the scheme are already visible on the financial side, he said. “The results are encouraging and states are serious about implementing it.” If all states implement the scheme efficiently, it will benefit the country by $25-26 billion every year in terms of the savings, he said. Goyal said the government is determined to remove roadblocks to achieve the target of 24×7 power to all and that the units of power generated in the country could double in the next five-six years on the back of better efficiently and capacity addition. “By merely utilising existing capacity efficiently, India can enhance power generation by 50%,” he added. Dion Sims Womens Jersey
ONGC Videsh to set up crude oil trading desk in Singapore
As part of a move to monetise its overseas hydrocarbon production, state-run ONGC Videsh Ltd (OVL) plans to set up a crude oil trading desk in Singapore. This comes in the backdrop of transporting crude oil to the world’s third-largest oil market posing a logistical challenge from some geographies. OVL has been exploring oil trading as a viable route to monetise its produce. Currently, it has been following the tender route, which is time consuming and also proves disadvantageous in terms of flexibility. An OVL spokesperson, in an emailed response, said, “In the long run, we intend to develop our own trading team to market our produced crude to maximise benefit to the company. It might be located in Singapore.” OVL recently signed a pact with SOCAR Trading SA for oil trading aimed at optimising crude price realisation from its portfolio. SOCAR Trading is the international marketing and development arm of the State Oil Company of Azerbaijan Republic (SOCAR), headquartered in Baku. The overseas arm of Oil and Natural Gas Corp. (ONGC) Ltd has built up a significant overseas energy portfolio of 37 projects in 17 countries with an investment of around $23.81 billion. It has also set a target to achieve 20 million tons (MT) by 2017-18 from the current 8.36 MT of oil and oil-equivalent gas. “We will be coming up with an oil trading desk at our subsidiary office in Singapore,” said a person aware of the development, requesting anonymity. “The subsidiary office in Singapore was initially set up for Vankorneft transactions,” added the person quoted above. OVL acquired a 15% equity stake in Russia’s JSC Vankorneft from Rosneft Oil Co. in 2015 for $1.27 billion. In addition, OVL also plans to acquire another 11% stake in Russia’s second-largest field by production. This also comes in the backdrop of a fall in international crude prices, which has made oil-producing countries financially vulnerable. Russia is particularly at risk because it has to additionally cope with the impact of the sanctions imposed by Western nations. Another state-run firm GAIL (India) Ltd opened a liquefied natural gas trading desk in Singapore in November 2011. “ONGC Videsh Ltd and SOCAR Trading SA signed a memorandum of understanding (MoU) on 27 May 2016 at Geneva. The objective of the MoU is to explore possibilities of joint marketing of ONGC Videsh’s crude oil portfolio by leveraging SOCAR Trading’s experience in oil trading,” OVL said in a 31 May statement. Experts think this is a prudent step as OVL can leverage Singapore’s advantage as a location. “Singapore is the trading hub and an established place for oil trading where the company can hire local experts and employ Indian experts as well. It is an apt place for setting up an oil trading desk because of its protected and transparent nature. Oil prices keep varying every minute; therefore, it is better to set this up at a place where both buyers and sellers are present,” said Ranbir Singh Butola, OVL’s former chairman and managing director. Butola added that he was unaware of any such development. From its 14 producing assets, OVL has produced 4.137 MT of oil and 2.558 billion cu. metres of gas for the first nine months of financial year 2015-16. India imports one-third of its energy requirements. The country imported 202.85 MT of crude oil in 2015-16 for Rs.4.16 trillion. For 2014-15, India imported 189 MT of crude oil at a cost of Rs.6.87 trillion. Kwon Alexander Jersey
Lanka IOC mulls expanding Trinco bunkering operations
Sri Lanka’s IOC, a subsidiary of Indian Oil Corporation, is to expand their existing bunkering operations at Trinco port as the prospects for this business line are promising, particularly given the strategic positioning of the port and its significant potential for growth, the company said. Trincomalee is the world’s 5th best natural harbour and provides an excellent opportunity to meet the bunker need of the vessels operating on the Bay of Bengal – Western Countries shipping route. LIOC commenced bunkering operations in Trincomalee in June last year and to optimize the storage and operating costs the company commissioned storage of bunker fuels at its Trincomalee Terminal in February 2016. The company currently operates one bunker barge with capacity for 400 MT of 380cst fuel and 400 MT of MGO. The forex income generated from this business line has enabled the LIOC to hedge against its foreign currency payments in the purchase of oil imports. During the 2015/16 financial year, bunkering has achieved a volume growth of 20 percent although revenue declined by 31 percent due to the reduction in international prices, the company’s annual report showed. Operating from Colombo and Trincomalee harbour, LIOC is the 2nd largest operator for bunkering in the island’s bunkering market supplying fuel oil and diesel for vessels at berth and anchorage at the Colombo and Trincomalee ports, which accounted for 13 percent of company’s revenue. During the Indian PM’s visit to Sri Lanka, Ceylon Petroleum Corporation and LIOC agreed to jointly develop the upper tank farm of the China Bay installation in Trinco. Lanka IOC, already operates 15 oil storage tanks out of 99 tank farm in Trinco and each storage tank has a capacity of around 12,000 tons. Meanwhile, petroleum sector unions recently charged the government for trying what they called ‘to privatize’ the Trincomalee tank farm to India and Hambanthota oil and bunkering business to China. Convener for Petroleum Union Collective D J Rajakaruna said the government allows other countries to make profits out of promising bunkering business in Trinco and Hambanthota without letting the business to the state owned CPC. He further charged that the government is also planning to form a separate company under CPC for aviation business with a view to ‘privatize’. Corey Graham Authentic Jersey
Mukesh Ambani says RIL, BP will not drop cost recovery arbitration for KG-D6
Reliance Industries Chairman Mukesh Ambani has said that the company will not withdraw the cost recovery arbitration over the Krishna-Godavari (KG) asset, dismissing speculations that the company and its joint venture partner are close to dropping arbitration so that they are eligible for higher pricing as per the government’s policy. Ambani refrained from commenting on the report by the panel headed by former chief justice of Delhi High court AP Shah detailed Tuesday, which said that the company made “unjust” gains by pumping natural gas that flowed from ONGC’s adjoining block. “Our upstream business is in partnership with BP and we want to constructively make sure that we are not going to withdraw the cost recovery arbitration. We are confident of constructively finding a solution,” Ambani said in response to shareholders’ query at the company’s Annual General Meet on Thursday. Ambani’s statement comes at a time when speculations are rife that RIL, BP and their partner Canada’s Niko Resources are contemplating pulling out of the multiple arbitration they have against the government relating to the KG-D6 asset. Prime Minister Narendra Modi-led government announced policy changes in March this year that requires them to drop the arbitration in case they want to get the higher gas prices being offered. The RIL-led consortium has formally started the process of developing their deep sea fields, which the industry saw as precursor to them withdrawing arbitration so that they can charge market price for natural gas. “We will work with BP and we will not give up our legal rights. We expect the results in consultation with our partner as we have to respect our partner,” he said. In March, the government detailed a new policy linking the price of gas from undeveloped difficult fields such as deep sea and high pressure-high temperature areas to alternative fuels, effectively doubling the prices. While the maximum price available to domestic natural gas is $3.06 per unit, difficult fields can avail $6.61 per unit as gas price. The same policy states that any operator engaged in litigation against the government can not avail these prices. “Our KG-D6 block has produced 2.6 TCF of gas and 29 million barrels of crude oil since commencement of output. We are making our best efforts to sustain production from this complex deep water basin,” Ambani said. “We are also evaluating, along with our partner BP, development plans to monetize the remaining resources of 4-5 TCF from this block, in the framework of the new gas pricing policy.” The government disallowed $2.756 billion cost incurred by RIL and its partners in the KG-D6 block, citing that they missed the gas production target for five consecutive years beginning April 1, 2010. As per the Production Sharing Contract, RIL and partners deduct all capital and operating expenses from the sale of gas before sharing profit with the government but the disallowed amount changes the calculation and thus the government has claimed additional profit petroleum of $246.9 million. RIL and partners challenged this, citing that the output fall is a natural phenomenon and they cannot be held responsible for it. Darius Slay Womens Jersey
Making efforts to sustain production in the KG basin: Mukesh Ambani
A day after the A.P. Shah Committee opined that Reliance Industries Ltd (RIL) drew gas from the adjacent block belonging to state-run Oil and Natural Gas Corp. Ltd (ONGC) in the Krishna-Godavari (KG) basin, RIL’s chairman and managing director Mukesh Ambani said the private explorer is making best efforts to sustain production in the complex deepwater basin. Ambani was addressing the company’s annual general meeting on Thursday in Mumbai, wherein he announced the launch of Reliance Jio telecom service starting 5 September. The one-man Committee submitted a report late on 31 August to petroleum minister Dharmendra Pradhan alleging that RIL has produced 9 billion cu. metre (bcm) of gas out of the 11 bcm that flowed from the ONGC block to that of RIL from the deepwater field off the coast of Andhra Pradesh between 1 April 2009 and 31 March 2015. “Our KG D6 block has produced 2.6 tcf (trillion cu. feet) of gas and 29 million barrels of crude oil since commencement of output. We are making our best efforts to sustain production from this complex deepwater basin,” Ambani said on Thursday. The Shah Committee report concluded that RIL should pay the government for the natural gas it has drawn from the adjacent block in the past seven years. “The Committee also notes that the question of quantification of unfair enrichment is to be decided by the government of India, with the principle that whatever benefit RIL received in terms of the migrated gas is liable to be returned to the government of India. The Committee faced significant limitations in giving a figure to the final value of the migrated gas produced by RIL during the term of its lease, due to the lack of data and the Committee’s inherent technical limitations,” the report available on the petroleum and natural gas ministry’s website said. India imports one-third of its energy requirements. The country imported 202.85 MT of crude oil in 2015-16 for Rs.4.16 trillion. For 2014-15, India imported 189 MT of crude oil at a cost of Rs.6.87 trillion. “We are also evaluating, along with our partner BP, development plans to monetise the remaining resources of 4-5 tcf from this block, in the framework of the new gas pricing policy,” Ambani said. RIL has 60% interest in KG-D6 block while Niko Resources Ltd of Canada holds 10%. BP Plc of the UK holds the remaining 30%. Ambani also announced that RIL’s over 1,050 fuel retail outlets are operational across India and another 200 are at advanced stages of being re-commissioned. Phil Esposito Jersey